{"chunk": "## IC - 38 **CORPORATE AGENTS** **LIFE****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## CORPORATE AGENTS **LIFE** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nInsurance Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION**|**LIFE INSURANCE **|**LIFE INSURANCE **|\n|L-01|What Life Insurance Involves|2|\n|L-02|Financial Planning|8|\n|L-03|Life Insurance Products: Traditional|22|\n|L-04|Life insurance products: Non-Traditional|32|\n|L-05|Applications of Life Insurance|38|\n|L-06|Pricing and Valuation in Life Insurance|43|\n|L-07|Life Insurance Documentation|52|\n|L-08|Life Insurance Underwriting|65|\n|L-09|Life Insurance Claims <br>|78|iv## SECTION## LIFE INSURANCE1## CHAPTER L-01## WHAT LIFE INSURANCE INVOLVES**Chapter Introduction**We have seen some aspects related to Insurance in the common chapters. However,\nwhen it comes to Life insurance, we need to look at them more deeply. An asset\n The risk insured against\n The principle of pooling\n The contractLet us now examine the features of life insurance. This chapter will take a brief\nlook at the various components of life insurance mentioned above.**Learning Outcomes**2**A.** **Life insurance business – Components, human life value, mutuality****a)** **The Asset – Human Life Value (HLV)**We have already seen that an asset is a kind of property that yields value or a return.\nFor most kinds of property both the value and loss of value amounts can be measured", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "C-46", "section": "CORPORATE AGENTS", "chunk_id": "Final IC 38 - CA_Life - English_000", "metadata": {"file_size": 4771, "chunk_index": 0, "chunk_tokens": 999, "has_examples": false, "has_tables": true, "key_concepts": ["The Asset – Human Life Value (HLV)", "IC - 38", "Chapter Introduction", "LIFE", "India, Mumbai."]}}
{"chunk": "|L-05|Applications of Life Insurance|38|\n|L-06|Pricing and Valuation in Life Insurance|43|\n|L-07|Life Insurance Documentation|52|\n|L-08|Life Insurance Underwriting|65|\n|L-09|Life Insurance Claims <br>|78|iv## SECTION## LIFE INSURANCE1## CHAPTER L-01## WHAT LIFE INSURANCE INVOLVES**Chapter Introduction**We have seen some aspects related to Insurance in the common chapters. However,\nwhen it comes to Life insurance, we need to look at them more deeply. An asset\n The risk insured against\n The principle of pooling\n The contractLet us now examine the features of life insurance. This chapter will take a brief\nlook at the various components of life insurance mentioned above.**Learning Outcomes**2**A.** **Life insurance business – Components, human life value, mutuality****a)** **The Asset – Human Life Value (HLV)**We have already seen that an asset is a kind of property that yields value or a return.\nFor most kinds of property both the value and loss of value amounts can be measured\nin precise monetary terms.**Example**If the estimated damage of a car meeting an accident is Rs 50000, the insurer will\ncompensate the owner for this loss.How do we estimate the amount of loss when a person dies?Is he worth Rs. 50,000 or Rs. 5,00,000?An Agent must be able to answer the above question when meeting a customer.\nBased on this the agent can determine how much insurance to recommend to the\ncustomer. It is in fact the first lesson a life insurance agent must learn.Luckily we have a measure, developed almost seventy years ago by Prof. Hubener.\nIt is known as **Human Life Value (HLV)** and is used worldwide.The HLV concept considers human life as a kind of property or asset that earns an\nincome. It thus measures the value of human life based on an individual’s expected\nnet future earnings. Net earnings means the income a person expects to earn each\nyear in the future, less the amount he would spend on himself. It thus indicates the\neconomic loss a family would suffer if the wage earner were to die prematurely.\nThese earnings are capitalised, using an appropriate interest rate to discount them.Although there are multiple parameters used to calculate HLV including taking into\naccount inflation, wage rise, future earning capacity etc., a simple thumb rule to\ncalculate HLV is to determine the amount that would generate the annual income\nthe family would be needing by way of interest. In other words HLV is the annual\ncontribution for the family by the breadwinner divided by the prevailing rate of\ninterest.**Example**Mr. Rajan earns Rs. 1,20,000 a year and spends Rs. 24,000 on himself. The net\nearnings his family would lose, were he to die prematurely, would be Rs. 96,000 per\nyear. Suppose the rate of interest is 8% (expressed as 0.08).**Human-Life-Value (HLV) = Annual Contribution for Dependents ÷ Rate of****Interest**HLV = 96000/ 0.08 = Rs. 12,00,000HLV helps to determine how much insurance one should have for full protection. It\nalso tells us the upper limit beyond which providing life insurance may not be\nreasonable.3In general, the amount of insurance should be around 10 to 15 times one’s annual\nincome. Thus one should grow suspicious if Mr. Rajan was to ask insurance of Rs. 2\ncrores, while earning only Rs. 1.2 lakhs a year. The actual amount of insurance\npurchased would depend on factors like how much insurance one can afford and\nwould like to buy.**B.** **Risk and Life Insurance**As we have seen above, life insurance provides protection against those risk events\nthat can destroy or reduce the value of human life as an asset. There are three kinds\nof situations where such loss can occur. They are typical concerns which ordinary\npeople face.**Diagram 1:** Typical concerns faced by ordinary peopleGeneral insurance on the other hand typically deals with risks that affect property\n– like fire, loss of cargo while at sea, theft and burglary and motor accidents. They\nalso cover events leading to loss of name and goodwill. These are covered by liability\ninsurance.Finally there are risks that can affect the person. Termed as personal risks, these\nmay also be covered by general insurance.**Example**Accident insurance which protects against losses suffered due to an accident.**a)** **How exactly does life insurance differ from general insurance?**|General Insurance|Life Insurance|", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "L-05", "section": "Chapter Introduction", "chunk_id": "Final IC 38 - CA_Life - English_001", "metadata": {"file_size": 4771, "chunk_index": 1, "chunk_tokens": 1009, "has_examples": true, "has_tables": true, "key_concepts": ["The Asset – Human Life Value (HLV)", "Interest", "Diagram 1:", "Example", "Chapter Introduction"]}}
{"chunk": "income. Thus one should grow suspicious if Mr. Rajan was to ask insurance of Rs. 2\ncrores, while earning only Rs. 1.2 lakhs a year. The actual amount of insurance\npurchased would depend on factors like how much insurance one can afford and\nwould like to buy.**B.** **Risk and Life Insurance**As we have seen above, life insurance provides protection against those risk events\nthat can destroy or reduce the value of human life as an asset. There are three kinds\nof situations where such loss can occur. They are typical concerns which ordinary\npeople face.**Diagram 1:** Typical concerns faced by ordinary peopleGeneral insurance on the other hand typically deals with risks that affect property\n– like fire, loss of cargo while at sea, theft and burglary and motor accidents. They\nalso cover events leading to loss of name and goodwill. These are covered by liability\ninsurance.Finally there are risks that can affect the person. Termed as personal risks, these\nmay also be covered by general insurance.**Example**Accident insurance which protects against losses suffered due to an accident.**a)** **How exactly does life insurance differ from general insurance?**|General Insurance|Life Insurance|\n|---|---|\n| Indemnity: General insurance policies,<br>with the exception of Personal Accident<br>Insurance, are usually contracts of<br>indemnity i.e. after an event like fire, the<br>insurer assesses the exact amount of loss<br>that has occurred and compensates only<br>that amount of loss – no more, no less.| **Assurance:** Life insurance policies are<br>contracts of assurance.<br> The amount of benefit to be paid in<br>the event of death is fixed at the<br>beginning of the contract.<br> An assured sum is paid to the<br>nominees or beneficiaries of the<br>insured when he dies.|\n| Duration: The contract is generally short<br>period or for one year renewable basis| The contract is generally long term<br>though some one year renewable<br>contracts are also prevalent|\n| Uncertainty: In general insurance<br>contracts, the concerned risk event is| There is no such question Death is<br>certain once a person is born. What is|4|uncertain. No one can be certain about<br>whether a house would catch fire or a car<br>meet an accident.|uncertain is the time of death. Life<br>insurance offers protection against<br>the risk of premature death.|\n|---|---|\n| Increase in probability: In case of General<br>insurance perils like fire or earthquake,<br>the probability of happening of the event<br>does not increase with time.| In life insurance the probability of<br>death increases with age.|**b)** **Nature of life insurance risk**Since probability of death increases with age, lower premiums are charged for those\nwho are young and higher premiums for older people. One result was that old\nindividuals who were in good health, tended to withdraw while unhealthy members\nremained in the scheme. Insurance companies faced serious problems as a result.\nTheir attempts to develop life insurance policies that people could afford led to the\ndevelopment of level premiums.**c)** **Level premiums**The level premium is fixed such that it does not increase with age but remains\nconstant throughout the contract period. This means premiums collected in early\nyears is more than the amount needed to cover death claims of those dying when\nyoung, while premiums collected in later years are less than what is needed to meet\nclaims of those dying at higher ages. The level premium is an average of both. The\nexcess premiums of earlier ages compensate for the deficit of premiums in later\nages. The level premium feature is illustrated below.**Diagram 2:** **Level Premium**Level premiums are required because life insurance contracts are long term\ninsurance contracts that run for 10, 20 or many more years. The concept of level\npremiums, do not arise for general insurance policies, which are typically short term\nand expire annually.5**Example**The level premium rate is arrived at by the insurers based on the mortality\n(probability of death) during the term of the policy as the age of the insured would\nincrease every year. The rate once decided shall be constant for the entire term of\nthe policy.**d)** **The Principle of Risk Pooling and Life Insurance**We have already discussed the Principle of Pooling and Mutuality earlier. The\npooling principle plays two specific roles in life insurance.i. It **provides protection against the economic loss arising as a result of one’s****untimely death** . This is done by creating a fund that pools the contributions of", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "B.", "chunk_id": "Final IC 38 - CA_Life - English_002", "metadata": {"file_size": 4771, "chunk_index": 2, "chunk_tokens": 1005, "has_examples": true, "has_tables": true, "key_concepts": ["Nature of life insurance risk", "Level premiums", "Diagram 1:", "Example", "Assurance:"]}}
{"chunk": "claims of those dying at higher ages. The level premium is an average of both. The\nexcess premiums of earlier ages compensate for the deficit of premiums in later\nages. The level premium feature is illustrated below.**Diagram 2:** **Level Premium**Level premiums are required because life insurance contracts are long term\ninsurance contracts that run for 10, 20 or many more years. The concept of level\npremiums, do not arise for general insurance policies, which are typically short term\nand expire annually.5**Example**The level premium rate is arrived at by the insurers based on the mortality\n(probability of death) during the term of the policy as the age of the insured would\nincrease every year. The rate once decided shall be constant for the entire term of\nthe policy.**d)** **The Principle of Risk Pooling and Life Insurance**We have already discussed the Principle of Pooling and Mutuality earlier. The\npooling principle plays two specific roles in life insurance.i. It **provides protection against the economic loss arising as a result of one’s****untimely death** . This is done by creating a fund that pools the contributions of\nmany who have purchased a life insurance contract.**e)** **The Life Insurance Contract**The Policy document is the **evidence of the insurance contract** which a details all\nthe terms and conditions of the **insurance** .The contract states the sum assured of the life insurance policy. Life insurance is\nregarded a **financial security** as the sum Insured is guaranteed by the contract. The\nguarantee implies that life insurance is managed efficiently and conservatively;\nstrongly regulated and strictly supervised.Since Life insurance contracts involve both risk cover and savings, they are often\ncompared with financial products. They are also seen as a way of holding wealth\nthan as protection. Indeed, many life insurance products have a large cash value or\nsavings component which can form a significant part of an individual’s savings. Some\ndo argue that it may be better to buy only Term Insurance from an insurance\ncompany and invest the balance premiums in instruments that yield higher returns.Let us consider the arguments for and against traditional cash value insurance\ncontracts.**a)** **Advantages**i. Insurance has historically been proven as a **safe and secure investment**\n**offering** a minimum guaranteed rate of return, which may increase with\ncontract duration.ii. Regularity of premium payments requires compulsory planning of one’s\nsavings and results in savings **discipline** .iii. The Insurer takes care of professional investment management and **frees** the**individual** of this responsibilityiv. Insurance **provides liquidity** . The insured can take a loan on or surrenderthe policy and convert it into cash.v. Both cash value type life insurance and annuities may enjoy some **income**\n**tax advantages.**vi. Insurance may be **safe from creditors’ claims**, generally in the event of theinsured’s bankruptcy or death.6**b)** **Disadvantages**i. As insurance gives relatively fixed and stable returns, it can be seriously\naffected by inflation.ii. High marketing and other initial costs reduces the amount of cash value\naccumulated in earlier years of life insurance policies.iii. The guaranteed yield may be below that of other financial instruments**Test Yourself 1**How does diversification reduce risks in financial markets?I. Collecting funds from multiple sources and investing them in one placeII. Investing funds across various asset classesIII. Maintaining time difference between investmentsIV. Investing in safe assets**Summary**a) Asset is a kind of property that yields value or a return.b) The HLV concept considers human life as a kind of property or asset that earnsan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings.c) The level premium is a premium fixed such that it does not increase with agebut remains constant throughout the contract period.d) Mutuality is one of the important ways to reduce risk in financial markets, theother being diversification.e) The element of guarantee in a life insurance contract implies that life insuranceis subject to stringent regulation and strict supervision.**Key Terms**1. Asset2. Human Life Value3. Level premium4. Mutuality5. Diversification**Answers to Test Yourself****Answer 1** - The correct answer is II.7## CHAPTER L-02## FINANCIAL PLANNING**Chapter Introduction**In previous chapters we discussed life insurance and its role in providing financial\nprotection. Security is only one of the concerns of individuals who seek to allocate\ntheir income and wealth to meet various needs of the present and the future. Life\ninsurance must be understood in the wider context of “Personal Financial Planning”.", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "t2", "section": "Diagram 2:", "chunk_id": "Final IC 38 - CA_Life - English_003", "metadata": {"file_size": 4771, "chunk_index": 3, "chunk_tokens": 982, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Diagram 2:", "Test Yourself 1", "Example", "Chapter Introduction"]}}
{"chunk": "expected net future earnings.c) The level premium is a premium fixed such that it does not increase with agebut remains constant throughout the contract period.d) Mutuality is one of the important ways to reduce risk in financial markets, theother being diversification.e) The element of guarantee in a life insurance contract implies that life insuranceis subject to stringent regulation and strict supervision.**Key Terms**1. Asset2. Human Life Value3. Level premium4. Mutuality5. Diversification**Answers to Test Yourself****Answer 1** - The correct answer is II.7## CHAPTER L-02## FINANCIAL PLANNING**Chapter Introduction**In previous chapters we discussed life insurance and its role in providing financial\nprotection. Security is only one of the concerns of individuals who seek to allocate\ntheir income and wealth to meet various needs of the present and the future. Life\ninsurance must be understood in the wider context of “Personal Financial Planning”.\nThe purpose of this chapter is to introduce the subject of financial planning.**Learning Outcomes**8**A.** **Financial planning and the individual life cycle****1.** **What is financial planning?**Most of us spend a major part of our lives working to make money. Financial planning\nis a smart way to make money work for us.**Definition**Financial planning is a process of identifying one’s life’s goals, translating these\ngoals into financial goals and managing one’s finances to achieve those goals.Financial planning involves preparing a roadmap to meet both current and future\nneeds, which may be unforeseen. It plays a crucial role in building a life with less\nworry. Careful planning can help to set one’s priorities and work to achieve your\nvarious goals.**Diagram 1:** **Types of Goals**i. Goals may be **short term** : Buying an LCD TV set or a family vacationii. They could be **medium term** : Buying a house or a vacation abroadiii. The **long term** goals may include: Education or marriage of one’s child orpost retirement provision**2.** **Individual’s life cycle**From the day a person is born till the day of his/ her death, he/ she goes through\nvarious stages in life, during which he/ she is expected to play a series of roles\nThese stages are illustrated in the diagram given below.**Diagram 2:** **The Economic Life Cycle**9**Life Stages and Priorities****a)** **Learner (till say age 20 -25)** :The stage when one is preparing for hisfuture byimproving his or her knowledge and skills. Funds are required\nfor financing one’s education. For instance, meeting the high cost of\nfees for Medical or Management Education.**b)** **Earner (from 25 onwards)** :When one has found employment andperhaps earns enough to meet his or her needs and has some surplus to\nspare.There are family responsibilities and one may also save and invest\nin order to have money to meet the needs that may arise in the\nimmediate future.For instance, a young man takes a housing loan and\ninvests in a house.**c)** **Partner(on getting marriage at say 28 - 30)** : The stage when one ismarried and has a family of one’s own.This creates new needs like\nhaving a house of one’s own, perhaps a car, consumer durables,\nplanning for children’s future etc.**d)** **Parent(say 28 to 35)** : The years when one becomes the parent of oneor more children.One now has to worry about their health and\neducation - getting them into good schools etc.**e)** **Provider(say age 35 to 55)** : The stage when children have grown intoteenagers, and includes their high school and college years. One is\nconcerned about the high cost of education to make the child qualified\nto face the challenges of life.For instance, consider the amount that\nneeds to be set up to finance a medical course that runs for five years.In\nmany Indian homes, making provision for marriage and settlement of\ngirl children is a critical area of concern.Indeed, marriage and\neducation of children is a prime motive for savings for most Indian\nfamilies today.**f)** **Empty Nester(age 55 to 65):** The term ‘empty nester’ implies that theoffspring have flown away leaving the nest [the household] empty.This\nis the period when children have married and sometimes have migrated\nto other places for work, leaving the parents.Hopefully by this stage,\none has liquidated one’sliabilities [like housing loan and other\nmortgages] and has built up a fund for reirement.It is also the period\nwhen ailments like BP and Diabetes begin to manifest and plague one’s\nlife.Health care,financial independence and security of income become", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "t2", "section": "Key Terms", "chunk_id": "Final IC 38 - CA_Life - English_004", "metadata": {"file_size": 4771, "chunk_index": 4, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Financial planning and the individual life cycle", "Empty Nester(age 55 to 65):", "Key Terms", "What is financial planning?", "The Economic Life Cycle"]}}
{"chunk": "concerned about the high cost of education to make the child qualified\nto face the challenges of life.For instance, consider the amount that\nneeds to be set up to finance a medical course that runs for five years.In\nmany Indian homes, making provision for marriage and settlement of\ngirl children is a critical area of concern.Indeed, marriage and\neducation of children is a prime motive for savings for most Indian\nfamilies today.**f)** **Empty Nester(age 55 to 65):** The term ‘empty nester’ implies that theoffspring have flown away leaving the nest [the household] empty.This\nis the period when children have married and sometimes have migrated\nto other places for work, leaving the parents.Hopefully by this stage,\none has liquidated one’sliabilities [like housing loan and other\nmortgages] and has built up a fund for reirement.It is also the period\nwhen ailments like BP and Diabetes begin to manifest and plague one’s\nlife.Health care,financial independence and security of income become\nvery important at this stage.**g)** **Retirement – the twilight years (age 60 and beyond):** The age whenone has retired from active work and spends one’s savings to meet the\nneeds of life.The living needs of the husband and wife as long as both\nare alive is the focus.One is concerned abouthealth\nissues,adequateincome and loneliness.This is also the period when one\nwould seek to enhance the quality of life and enjoy many of the things\nthat one had dreamt of but could not achieve – like pursuing a hobby or\ngoing on a vacation or a pilgrimage.Whether one ages gracefully or in\npoverty would depend on how much one has provided for these years.10As we can see above, the economic life cycle has three phases: a student or Pre –\njob phase; the working phase that begins between ages 18 to 25 and lasts for 35 to\n40 years; and the retirement years that begin after one has stopped working.**3.** **Why does one need to save and purchase various financial assets?**The reason is that during each stage in an individual’s life, when one performs a\nparticular role, a number of needs come up for which funds have to be provided.**Example**When a person gets married and starts a family of his own, he may need to have his\nown house. As children grow older, funds are needed for their higher education. As\nan individual goes well past middle age, the concern is for having money to meet\nhealth costs and post retirement savings so that one does not need to depend on\none’s children and become a burden. Living with independence and dignity becomes\nimportant.The Savings – Investment process may be considered as being made of two decisions.**i.** **Postponement of consumption:** an allocation of resources between present andfuture consumption.**ii.** **Parting with liquidity** (or ready purchasing power) in exchange for less liquidassets. For instance, purchase of a life insurance policy would mean exchanging\nmoney for a contract which is less liquid.Financial planning includes both kinds of decisions. One needs to plan in order to\nsave for the future and also must invest wisely in appropriate assets to meet the\nvarious needs that will arise in future.**4.** **Individual needs**If we look at the stages of the life cycle that has been discussed above, we would\nsee that three types of needs can arise. These give rise to three types of financial\nproducts.a) **Enabling future transactions**The first set of needs arise from funds for meeting a range of anticipated\nexpenditures that are expected to arise at different stages of the life cycle.\nThere are two types of such needs:**i.** **Specific transaction needs** : that are linked to specific life events whichrequire a commitment of resources. For instance making a provision for\nhigher education/ marriage of dependents; or purchase of a house or\nconsumer durables**ii.** **General transaction needs:** Amounts set aside from current consumptionwithout being earmarked for any specific purposes – these are popularly\ntermed as ‘future provisions’**b)** **Meeting contingencies**Contingencies are unforeseen life events that may call for large funds. These\ncannot met from current income and need to be pre-funded. Some of these11events, like death and disability or unemployment, lead to a loss of income.\nOthers, like a fire, may result in a loss of wealth.Such needs may be addressed through insurance, if the probability of their\noccurrence is low but cost impact is high. One may alternatively meet them by\nsetting aside a large amount of liquid assets as a reserve.**c)** **Wealth accumulation**The accumulation motive refers to an individual’s desire to invest for\naccumulating wealth, taking advantage of favourable market opportunities.", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "e11", "section": "Empty Nester(age 55 to 65):", "chunk_id": "Final IC 38 - CA_Life - English_005", "metadata": {"file_size": 4771, "chunk_index": 5, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Wealth accumulation", "Individual needs", "Empty Nester(age 55 to 65):", "Parting with liquidity", "Example"]}}
{"chunk": "There are two types of such needs:**i.** **Specific transaction needs** : that are linked to specific life events whichrequire a commitment of resources. For instance making a provision for\nhigher education/ marriage of dependents; or purchase of a house or\nconsumer durables**ii.** **General transaction needs:** Amounts set aside from current consumptionwithout being earmarked for any specific purposes – these are popularly\ntermed as ‘future provisions’**b)** **Meeting contingencies**Contingencies are unforeseen life events that may call for large funds. These\ncannot met from current income and need to be pre-funded. Some of these11events, like death and disability or unemployment, lead to a loss of income.\nOthers, like a fire, may result in a loss of wealth.Such needs may be addressed through insurance, if the probability of their\noccurrence is low but cost impact is high. One may alternatively meet them by\nsetting aside a large amount of liquid assets as a reserve.**c)** **Wealth accumulation**The accumulation motive refers to an individual’s desire to invest for\naccumulating wealth, taking advantage of favourable market opportunities.\nSome individuals may take a cautious approach while investing, while some may\nbe willing to take more risks, with a view to earn a higher return. Higher return\nis desired because it helps to increase one’s wealth or net worth more rapidly.\nWealth is linked with independence, enterprise, power and influence.**5.** **Financial products**Corresponding to the above sets of needs there are three types of products in the\nfinancial market:|Transactional<br>products|Bank deposits and other savings instruments that enable one<br>to have adequate purchasing power (liquidity) at the right<br>time and quantum.|\n|---|---|\n|**Contingency**<br>**products like**<br>**insurance**|These provide protection against large losses that may be<br>suffered in the event of sudden unforeseen events.|\n|**Wealth**<br>**accumulation**<br>**products**|Shares and high yielding bonds or real estate are examples of<br>such products. Here the investment is made with a view to<br>committing money for making more money.|An individual would typically have a mix of all of the above needs and thus may\nneed to have all three types of products. In a nutshell one may say there is:i. A need to save – For cash requirementsii. A need to insure – Against uncertaintiesiii. A need to invest – For wealth creation**6.** **Risk profile and investments**As an individual moves through various stages in the life cycle, from young earner\ntowards middle ages and then towards the final years of one’s work life, the risk\nprofile, or approach towards taking risks also changes.When one is young, one may be quite aggressive and willing to take risks in order to\naccumulate as much wealth as possible. As the years pass however, one may become\nmore prudent and careful about investing. One is now concerned to secure and\nconsolidate one’s investments.Finally, as one nears retirement one may be more conservative. The focus is now to\nhave a corpus from which one can spend in the post retirement years. One may also\nthink about making donations for one’s children, for gifting to charity etc.12**One’s investment style also changes to keep pace with the risk profile.** This is\nindicated below:**Diagram 3:** **Risk Profile and Investment Style****Risk Profile** **Investment Style****Test Yourself 1**Which among the following gives specific protection against unforeseen events?I. InsuranceII. Transactional products like bank Fixed DepositsIII. SharesIV. Debentures**B.** **Role of financial planning****1.** **Financial planning**Financial planning is the process of carefully evaluating a ~~c~~ lient’s current and future\nneeds along with his or her risk profile and income, to chart out a road map for\nmeeting various anticipated/ unforeseen needs through recommending appropriate\nfinancial products.Elements of financial planning include: Investing - allocating assets based on one’s risk taking appetite, Risk management, Retirement planning, Tax and estate planning, and Financing one’s needsTo put it in a nutshell financial planning involves 360 degrees planning.13**Diagram 4:** **Elements of Financial Planning****2.** **Role of Financial planning**Financial planning is not a new discipline. It was practiced in simple form by our\nfore fathers. There were limited investment options then. A few decades ago many\nconsidered equity investment as akin to gambling. Savings were largely channelled\nin bank deposits, postal savings schemes and other fixed income instruments. The\nchallenges facing our society and our customers are far different today. Some of", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "e11", "section": "Specific transaction needs", "chunk_id": "Final IC 38 - CA_Life - English_006", "metadata": {"file_size": 4771, "chunk_index": 6, "chunk_tokens": 1008, "has_examples": true, "has_tables": true, "key_concepts": ["Wealth accumulation", "Financial products", "Contingency", "Risk profile and investments", "Risk Profile"]}}
{"chunk": "needs along with his or her risk profile and income, to chart out a road map for\nmeeting various anticipated/ unforeseen needs through recommending appropriate\nfinancial products.Elements of financial planning include: Investing - allocating assets based on one’s risk taking appetite, Risk management, Retirement planning, Tax and estate planning, and Financing one’s needsTo put it in a nutshell financial planning involves 360 degrees planning.13**Diagram 4:** **Elements of Financial Planning****2.** **Role of Financial planning**Financial planning is not a new discipline. It was practiced in simple form by our\nfore fathers. There were limited investment options then. A few decades ago many\nconsidered equity investment as akin to gambling. Savings were largely channelled\nin bank deposits, postal savings schemes and other fixed income instruments. The\nchallenges facing our society and our customers are far different today. Some of\nthem are:**i.** **Disintegration of the joint family**The joint family has given way to the nuclear family, consisting of father,\nmother and children. The typical head and earning member of this family has to\nbear the responsibility for taking care of oneself and one’s immediate family.\nThis may call for a lot of proper planning and advice from a professional financial\nplanner.**ii.** **Multiple investment choices**A large number of investment instruments are available today for wealth\ncreation, each offering varying degrees of risk and return. To achieve financial\ngoals, one has to choose wisely and make the right investment decisions based\non one’s risk taking appetite. Financial planning can help with one’s asset\nallocation.**iii.** **Changing lifestyles**Instant pleasure seems to be the order of the day. Individuals want to have the\nlatest mobile phones, cars, large homes, memberships of prestigious clubs, etc.\nTo satisfy these desires, people often borrow heavily and spend a good part of\ntheir income to pay off loans, leaving little scope to save. Financial planning\nhelps to plan and one’s expenditure so that one can cut down unnecessary\nexpenses so as to maintain one’s present standard of living while upgrading it\nover time.**iv.** **Inflation**Inflation is a rise in the general level of prices of goods and services in an\neconomy over a period of time. This leads to a fall in the value of money. As a\nresult, the purchasing power of money gets reduced. Inflation can play havoc14post retirement. Financial planning can help to ensure that one is equipped to\ndeal with inflation, especially in later years.**v.** **Other contingencies and needs**Financial planning also enables individuals to meet a number of other needs and\nchallenges like medical emergencies and tax liabilities. Individuals also need to\nensure that their estate consisting of their wealth and properties, smoothly pass\non to their loved ones after their death. There are other needs like the need to\ndo charity or meet certain social and religious obligations during one’s lifetime\nand even thereafter. Financial planning is the means to achieve all this.3. **When is the right time to start financial planning?****Financial planning** is not meant only for the wealthy. Indeed, Planning should\nideally start one earns one’s first salary. There is no trigger point to tell when one\nshould begin to plan.**There is however an important principle that should guide us – the longer the**\n**time period of our investments, the more they will multiply.**Hence one should start early. One’s investments would then get the maximum\nbenefit of time. Again, planning is not only for wealthy individuals. It is for\neveryone. To achieve one’s financial goals, one must follow a disciplined approach.\nAn unplanned, impulsive approach to financial planning is one of the prime causes\nof financial distress of individuals.**Test Yourself 2**When is the best time to start financial planning?I. Post retirement\nII. As soon as one gets his first salary\nIII. After marriage\nIV. Only after one gets rich**C.** **Financial planning - Types**Let us now look at the various types of financial planning exercises that an individual\nmay need to do.15**Diagram 5:** **Financial Planning Advisory Services**Consider the various advisory services that may be provided. There are six such\nareas that are taken up Cash planning Investment planning Insurance planning Retirement planning Estate planning Tax planning**1.** **Cash planning**Managing cash flows has two purposes.i. To manage income and expenditures flow including establishing andmaintaining a reserve of liquid assets to meet unanticipated needs.ii. To systematically create and maintain a surplus of cash for capitalinvestment.Cash Planning involves a number of steps. One must prepare a budget and analyse\none’s income and expenditure flows to check on what regular and lump sum costs", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "c14", "section": "Diagram 4:", "chunk_id": "Final IC 38 - CA_Life - English_007", "metadata": {"file_size": 4771, "chunk_index": 7, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Financial Planning Advisory Services", "Multiple investment choices", "Role of Financial planning", "Elements of Financial Planning", "Changing lifestyles"]}}
{"chunk": "An unplanned, impulsive approach to financial planning is one of the prime causes\nof financial distress of individuals.**Test Yourself 2**When is the best time to start financial planning?I. Post retirement\nII. As soon as one gets his first salary\nIII. After marriage\nIV. Only after one gets rich**C.** **Financial planning - Types**Let us now look at the various types of financial planning exercises that an individual\nmay need to do.15**Diagram 5:** **Financial Planning Advisory Services**Consider the various advisory services that may be provided. There are six such\nareas that are taken up Cash planning Investment planning Insurance planning Retirement planning Estate planning Tax planning**1.** **Cash planning**Managing cash flows has two purposes.i. To manage income and expenditures flow including establishing andmaintaining a reserve of liquid assets to meet unanticipated needs.ii. To systematically create and maintain a surplus of cash for capitalinvestment.Cash Planning involves a number of steps. One must prepare a budget and analyse\none’s income and expenditure flows to check on what regular and lump sum costs\nhave been incurred. While fixed expenses cannot be controlled easily, one can\nreduce, postpone and manage expenses that are variable. The next step is to\n**predict future monthly income and expenses over the whole year and** design a\nplan for managing these cash flows.Another part of the cash planning process is to design strategies for maximizing\ndiscretionary income.**Example**One can restructure one’s outstanding debts.One can meet outstanding credit card debts through consolidating them and paying\nthem off through a bank loan with lower interest.16One may reallocate one’s investments to make them earn more income.**2.** **Insurance planning**There are certain risks to which individuals are exposed that can keep them from\nattaining their personal financial goals. Insurance planning involves constructing a\nplan of action to provide adequate insurance against such risks.The task here is to estimate how much insurance is needed and determining what\ntype of policy is best suited.**i.** **Life insurance** may be decided by estimating the income and expenserequirements of the dependents in the event of premature death of the\nbread winner.**ii.** **Health insurance** requirements may be assessed in terms of thehospitalisation expenses that are likely to be incurred in any family medicalemergency.a. Finally **insurance for one’s assets** may be considered in terms of thetype and quantum of cover required to protect one’s home/ vehicle/\nfactory etc. from the risk of loss.**3.** **Investment planning**There is no one right way to invest. What is appropriate would vary from individual\nto individual. Investment planning is a process of determining the most suitable\ninvestment and asset allocation strategies based on an individual’s risk taking\nappetite, financial goals and the time horizon to meet those goals.**a)** **Investment parameters****Diagram 6:** **Investment Parameters**The first step here is to define certain investment parameters. These include:17**i.** **Returns** : Returns on Investment is often the most important parameter thatpeople look for when they invest their money. The rate of return determines\nhow fast one’s wealth from investments would grow over time. The role of\nreturns can be appreciated when one considers the ‘Power of compounding’.\nFor instance, if an amount of Rs 1000 is invested today at 8% rate of interest,\nat the end of five years, it would accumulate to Rs 1469 and at the end of\n10 years it would more than double to reach Rs 2159. This expectation of\nreturns which helps to accumulate wealth is one of the prime motives of\ninvestment. At the same time, one must note that higher rates of return may\nbe typically accompanied with higher levels of risk. One has to make a tradeoff between return and risk. This depends on an individual’s risk tolerance.**ii.** **Risk tolerance** : A measure of how much risk someone is willing to take inpurchasing an investment.**iii.** **Time horizon** : This is the amount of time available to attain a financialobjective. The longer the time horizon, the less concern is there about short\nterm liability. One can invest in longer term, in less liquid assets that earn\na higher return.**iv.** **Liquidity** : Individuals with limited investment capacity, or uncertain incomeand expenditure flows, or who are investing for meeting a particular\npersonal or business expenditure, would be concerned with liquidity [This", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Test Yourself 2", "chunk_id": "Final IC 38 - CA_Life - English_008", "metadata": {"file_size": 4771, "chunk_index": 8, "chunk_tokens": 958, "has_examples": true, "has_tables": false, "key_concepts": ["Financial Planning Advisory Services", "Health insurance", "Investment planning", "Returns", "Time horizon"]}}
{"chunk": "For instance, if an amount of Rs 1000 is invested today at 8% rate of interest,\nat the end of five years, it would accumulate to Rs 1469 and at the end of\n10 years it would more than double to reach Rs 2159. This expectation of\nreturns which helps to accumulate wealth is one of the prime motives of\ninvestment. At the same time, one must note that higher rates of return may\nbe typically accompanied with higher levels of risk. One has to make a tradeoff between return and risk. This depends on an individual’s risk tolerance.**ii.** **Risk tolerance** : A measure of how much risk someone is willing to take inpurchasing an investment.**iii.** **Time horizon** : This is the amount of time available to attain a financialobjective. The longer the time horizon, the less concern is there about short\nterm liability. One can invest in longer term, in less liquid assets that earn\na higher return.**iv.** **Liquidity** : Individuals with limited investment capacity, or uncertain incomeand expenditure flows, or who are investing for meeting a particular\npersonal or business expenditure, would be concerned with liquidity [This\nrefers to the ability to convert investment into cash without loss of value.]**v.** **Marketability** : The ease with which an asset can be bought or sold.**vi.** **Diversification** : The extent to which one seeks to diversify or spread theinvestments to reduce the risks.**vii.** **Taxes** : Many investments confer certain income tax benefits and one maylike to consider the post-tax returns of various investments.**b)** **Selection of appropriate investment vehicles**The next step is selection of appropriate investment vehicles based on the above\nparameters. The actual selection would depend on the individual’s expectations\nabout return and risk.In India there are a variety of products that may be considered for the purpose of\ninvestments. These include: Fixed deposits of banks/ corporates, Small savings schemes of post office, Public issues of shares, Debentures or other securities, Mutual funds Unit linked policies that are issued by life insurance companies etc.18**4.** **Retirement planning**It is the process of determining the amount of money that an individual needs to\nmeet his needs post retirement and deciding on various retirement options for\nmeeting these needs. Retirement planning involves three phases**a)** **Accumulation:** Accumulation of funds is done through various kinds ofstrategies to set aside money for investment with this purpose.**b)** **Conservation:** Conservation refers to the efforts made to ensure that one’sinvestments are put to hard work and that the principal gets maximised during\nthe individual’s working years.**c)** **Distribution:** Distribution refers to the optimal method of converting the corpusor principal into withdrawals/ annuity payments for meeting income needs\nafter retirement.**5.** **Estate planning**It is a plan for the devolution and transfer of one’s estate after one’s demise. There\nare various processes like nomination and assignment or preparation of a will. The\nbasic idea is to ensure that one’s property and assets are smoothly distributed and\nor utilised according to one’s wishes after one is no more.**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full\nadvantage of the tax breaks. As per the tax laws in India, life insurance premium\npaid by an individual on a life insurance policy on his/ her own life, on the life of\nhis/ her spouse and children is eligible for deduction under Section 80C of the\nIncome Tax Act for calculating the taxable income. Currently, this deduction is\nallowed up to Rs.1,50,000 subject to conditions. The maturity proceeds (sum\nassured plus bonus) of such policies are also exempted under Section 10 (10D).\nSimilarly, Death Claim amounts are exempt from Income Tax at the hands of the\nrecipient. One must note that the purpose here is to minimise and not evade taxes.Life insurance agents may be often required by their clients and prospective\ncustomers to advise them not only about meeting their insurance needs but also for\nsupport in meeting their other financial needs as well. A sound knowledge of", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Risk tolerance", "chunk_id": "Final IC 38 - CA_Life - English_009", "metadata": {"file_size": 4771, "chunk_index": 9, "chunk_tokens": 920, "has_examples": true, "has_tables": false, "key_concepts": ["Time horizon", "Estate planning", "Tax planning", "Risk tolerance", "Retirement planning"]}}
{"chunk": "or utilised according to one’s wishes after one is no more.**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full\nadvantage of the tax breaks. As per the tax laws in India, life insurance premium\npaid by an individual on a life insurance policy on his/ her own life, on the life of\nhis/ her spouse and children is eligible for deduction under Section 80C of the\nIncome Tax Act for calculating the taxable income. Currently, this deduction is\nallowed up to Rs.1,50,000 subject to conditions. The maturity proceeds (sum\nassured plus bonus) of such policies are also exempted under Section 10 (10D).\nSimilarly, Death Claim amounts are exempt from Income Tax at the hands of the\nrecipient. One must note that the purpose here is to minimise and not evade taxes.Life insurance agents may be often required by their clients and prospective\ncustomers to advise them not only about meeting their insurance needs but also for\nsupport in meeting their other financial needs as well. A sound knowledge of\nfinancial planning would be of great value to any insurance agent.**Test Yourself 3**Which among the following is not an objective of tax planning?I. Maximum tax benefitII. Reduced tax burden as a result of prudent investmentsIII. Tax evasionIV. Full advantage of tax breaks19**Summary**Financial planning is a process of: Identifying one’s life’s goals, Translating these identified goals into financial goals and Managing one’s finances in ways that will help one to achieve those goalsBased on the individual life cycle three types of financial products are needed.\nThese help in: Enabling future transactions, Meeting contingencies and Wealth accumulationThe need for financial planning is further increased by the changing societal\ndynamics like disintegration of the joint family, multiple investment choices\nthat are available today and changing lifestyles etc.The best time to start financial planning is right after one receives the first\nsalary.Financial planning advisory services include: Cash planning,\n Investment planning,\n Insurance planning,\n Retirement planning,\n Estate planning and\n Tax planning**Key Terms**1. Financial planning\n2. Life stages\n3. Risk profile\n4. Cash planning\n5. Investment planning\n6. Insurance planning\n7. Retirement planning\n8. Estate planning\n9. Suitability information\n10. Tax planning20**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.21## CHAPTER L-03## LIFE INSURANCE PRODUCTS: TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of life insurance products. It begins by\ntalking about products in general and then proceeds to discussing the need for life\ninsurance products and the role they play in achieving various life goals. Finally we\nlook at some traditional life insurance products.**Learning Outcomes**22**A.** **Overview of life insurance products****1.** **What is a product?**To begin with, let us understand what is meant by a ‘product’. In popular terms a\nproduct is normally just considered as a commodity or good that is brought and sold\nin the market.It is necessary to understand that every Product is a bundle of features or attributes\nthat confer certain benefits.All Companies try to differentiate their products by making them more attractive\nto customers and offering different kinds of features and benefits. A life insurance\nagent’s role is to understand and pitch on these features and benefits to make the\nproducts of their companies unique and attractive compared to others.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the\nfeatures of each brand is different from the other.Products may be:**i.** **Tangible** : refers to physical objects that can be directly seen or felt by touch\n(for instance a car or a television set)**ii.** **Intangible:** refers to products that can only be perceived indirectly.Life insurance is a product that is intangible.**2.** **Purpose of Life Insurance products.**Human beings possess **an immensely valuable asset** - **human capital – which is the**\n**source of our productive earning capacity.** However, there is an uncertainty about\nlife and human well-being. Events like death and disease can destroy our Earning\ncapabilities and life savings. Insurance provides protection for such situations.Life insurance products offer protection against the loss of economic value of an\nindividual’s productive abilities, as a result of death or disability. The moment an\nindividual takes a life insurance policy and pays the first premium, **an immediate**", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "s19", "section": "Tax planning", "chunk_id": "Final IC 38 - CA_Life - English_010", "metadata": {"file_size": 4771, "chunk_index": 10, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Tangible", "Answer 3", "Intangible:"]}}
{"chunk": "agent’s role is to understand and pitch on these features and benefits to make the\nproducts of their companies unique and attractive compared to others.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the\nfeatures of each brand is different from the other.Products may be:**i.** **Tangible** : refers to physical objects that can be directly seen or felt by touch\n(for instance a car or a television set)**ii.** **Intangible:** refers to products that can only be perceived indirectly.Life insurance is a product that is intangible.**2.** **Purpose of Life Insurance products.**Human beings possess **an immensely valuable asset** - **human capital – which is the**\n**source of our productive earning capacity.** However, there is an uncertainty about\nlife and human well-being. Events like death and disease can destroy our Earning\ncapabilities and life savings. Insurance provides protection for such situations.Life insurance products offer protection against the loss of economic value of an\nindividual’s productive abilities, as a result of death or disability. The moment an\nindividual takes a life insurance policy and pays the first premium, **an immediate**\n**estate is created** in his/ her name and its proceeds are available to his/ her\ndependents or loved ones.Life insurance provides peace of mind and protection to the near and dear ones of\nan individual, in case of one’ unfortunate death. Beyond providing such protection,\nlife insurance fulfils other needs of the market, such as savings, wealth\naccumulation, safety and security of investment and certain rates of return, which\nare not discussed in this course.Life insurance industry has seen enormous innovations in product offerings over the\nlast two centuries. The journey began with death benefit products but over the\nperiod, multiple living benefits like endowment, disability benefits, dreaded disease\ncovers and so on were added.23One of the major innovations of recent years was the creation of market linked\npolicies where the insured was invited to participate in choosing and managing his\ninvestment assets. Another major innovation was the evolution of flexible\nunbundled products, in which different benefits as well as cost components could\nbe varied by the policy holder as per changing needs, affordability and life-stages.**3.** **Suitability Information**In order to make insurance intermediaries including agents and brokers more\naccountable and reduce instances of mis-selling, IRDAI has created a concept of\n‘product suitability’. ‘Suitability information’ is the information of a prospect on\nage, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, etc. That is, before selling an insurance\npolicy to a client, an Agents should be able to justify the suitability of the product\nfor the client’s needs.In other words, the Agent takes into account the particular prospect’s risk profile age, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, insurance needs etc. and decides\nwhether the product is suitable for that prospect. The nature of product, the\namount of premium, the mode of premium payment and tenure of the policy as well\nas the manner of premium payment are also part of the parameters of ‘Suitability’.IRDAI mandates that the suitability information collected should be signed by the\nprospect and the agent; and preserved by the Insurer as part of the policy records\nand made available for inspection by the Authority.**4.** **Riders in Life Insurance Products**A rider is a provision typically added through an endorsement, which becomes part\nof the contract. Riders are commonly used to provide supplementary benefits like\nincreasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different\nrequirements of a person into a single plan.Riders provide a means to provide benefits like Disability cover, accident cover and\nCritical Illness cover as additional benefits in a standard life insurance contract.\nPolicy holders can avail of them by paying an extra premium.**Test Yourself 1**Which among the following is an intangible product?\nI. CarII. HouseIII. Life insurance\nIV. Soap24**B.** **Traditional life insurance products**We shall now learn about some of the traditional types of life insurance products.**Diagram 1:** **Traditional Life Insurance Products****1.** **Term insurance plans**Term insurance is a contract that is valid only during a certain time period. This\nmay range from the short time required to complete an airplane trip to multiple\nyears. Protection may extend up to age 65 or 70. One-year term policies are quite\nsimilar to property and casualty insurance contracts. There is no savings or cash", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "p24", "section": "Example", "chunk_id": "Final IC 38 - CA_Life - English_011", "metadata": {"file_size": 4771, "chunk_index": 11, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Riders in Life Insurance Products", "Tangible", "Test Yourself 1", "Diagram 1:", "Suitability Information"]}}
{"chunk": "of the contract. Riders are commonly used to provide supplementary benefits like\nincreasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different\nrequirements of a person into a single plan.Riders provide a means to provide benefits like Disability cover, accident cover and\nCritical Illness cover as additional benefits in a standard life insurance contract.\nPolicy holders can avail of them by paying an extra premium.**Test Yourself 1**Which among the following is an intangible product?\nI. CarII. HouseIII. Life insurance\nIV. Soap24**B.** **Traditional life insurance products**We shall now learn about some of the traditional types of life insurance products.**Diagram 1:** **Traditional Life Insurance Products****1.** **Term insurance plans**Term insurance is a contract that is valid only during a certain time period. This\nmay range from the short time required to complete an airplane trip to multiple\nyears. Protection may extend up to age 65 or 70. One-year term policies are quite\nsimilar to property and casualty insurance contracts. There is no savings or cash\nvalue element in this policy.In October 2020, IRDAI has introduced a Standard Individual Term Life Insurance\nProduct called, “Saral Jeevan Bima” (the Insurer’s name shall be prefixed to the\nproduct name), a non-linked non-participating individual pure risk premium life\ninsurance plan, which provides for payment of Sum Assured in lump sum to the\nnominee in case of the Life Assured’s unfortunate death during the policy term.Apart from certain benefits and riders specified by the Regulator, no other riders/\nbenefits/ options/ variants are allowed to be offered. Also, there shall be no\nexclusions under the product other than the suicide exclusion. Saral Jeevan Bima is\nto be offered to individuals without restrictions on gender, place of residence,\ntravel, occupation or educational qualifications.**a)** **Purpose**A Term Life insurance plan fulfils the main and basic idea behind life insurance,\nwhich is to provide an assured sum of money to the dependents of the insured\non his/ her death.**The policy works as an income replacement plan also.** Here the payment of a\nlump-sum amount is replaced by a series of monthly, quarterly or similar\nperiodical payments to the dependent beneficiaries.**b)** **Disability**\nNormally a Term insurance policy covers only death. However, it is possible to\nbuy a Disability Protection Rider on the main policy. In such a case, if the insured\nsuffers from a specified disability during the term of the contract, a disability25benefit would be paid to the beneficiaries/ insured person. The benefits will\ncontinue till the death of the insured person.**Diagram 2:** **Disability****c)** **Term insurance as a rider**Protection under Term Life is usually provided as a stand-alone policy but it\ncould also be provided through a rider in a policy.**Example**A rider to a pension plan provides for a death benefit to be payable if one dies\nbefore the date when pension is to start.**d)** **Convertibility**Convertible term insurance policies allow a policyholder to change or convert a\nterm insurance policy into a permanent plan like “Whole Life” without providing\nfresh evidence of insurability. This privilege helps those who wish to have\npermanent cash value insurance but are unable to afford its high premiums.\nWhen the term policy is converted into permanent insurance the new premium\nrate would be higher.**e)** **Unique Selling Proposition** ( **USP)**The unique selling proposition (USP) of term assurance is its low price, enabling\none to buy relatively large amounts of life insurance on a limited budget.**f)** **Variants**A number of variants of term assurance are possible.**Diagram 3:** **Variants of Term Assurance****i.** **Decreasing Term Assurance**\nThese plans typically consist of decreasing term insurance which provides an\namount of death benefit that is equal to the balance that is due on a loan, if the\nborrower dies before the loan is paid. These are often marketed as Mortgage\nRedemption (discussed in Chapter 15) or Credit Life Insurance. The plans are26usually sold to lending institutions as group insurance to cover the lives of their\nborrowers. Purchase of mortgage redemption insurance is often a condition of\nthe mortgage loan. Such plans may also be available for automobile or other\npersonal loans.**ii.** **Increasing term assurance**\nAs the name suggests, the plan provides a death benefit, which increases along\nwith the term of the policy. Premium generally increases as the amount of\ncoverage increases.**iii.** **Term insurance with return of premiums**", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "p24", "section": "Test Yourself 1", "chunk_id": "Final IC 38 - CA_Life - English_012", "metadata": {"file_size": 4771, "chunk_index": 12, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Convertibility", "Test Yourself 1", "Diagram 3:", "Term insurance with return of premiums", "Increasing term assurance"]}}
{"chunk": "one to buy relatively large amounts of life insurance on a limited budget.**f)** **Variants**A number of variants of term assurance are possible.**Diagram 3:** **Variants of Term Assurance****i.** **Decreasing Term Assurance**\nThese plans typically consist of decreasing term insurance which provides an\namount of death benefit that is equal to the balance that is due on a loan, if the\nborrower dies before the loan is paid. These are often marketed as Mortgage\nRedemption (discussed in Chapter 15) or Credit Life Insurance. The plans are26usually sold to lending institutions as group insurance to cover the lives of their\nborrowers. Purchase of mortgage redemption insurance is often a condition of\nthe mortgage loan. Such plans may also be available for automobile or other\npersonal loans.**ii.** **Increasing term assurance**\nAs the name suggests, the plan provides a death benefit, which increases along\nwith the term of the policy. Premium generally increases as the amount of\ncoverage increases.**iii.** **Term insurance with return of premiums**\nAnother type of policy (quite popular in India) is term assurance with return of\npremiums. Though the premium paid would be much higher than for a similar\nterm insurance plan without return of premiums, some customers may need such\npolicies.**g)** **Relevant scenarios**Term insurance may have relevance in the following situations:\ni. Where the need for insurance protection is purely temporary, as in case ofmortgage redemption\nii. As an additional supplement to a savings plan.\niii. As part of a “buy term and invest the rest” philosophy, where one seeks onlycheap term insurance protection from the insurance company and wants to\ninvest the difference of premiums in other attractive investments.**Important****Limitations of term plans:** Term Insurance plans are available only for specific\nperiods and one may not be able to continue the coverage beyond a certain age,\nsay 65 or 70.**2.** **Whole life insurance**Whole life insurance is an example of a permanent life insurance policy. Here, the\nlife insurer offers to pay the agreed death benefit when the insured dies, no matter\nwhen the death might occur. The premiums can be paid throughout one’s life or for\na limited time as specified.Whole life premiums are much higher than term premiums as whole life policies are\ndesigned to remain in force until the death of the insured, and pay the death benefit\nanytime. The Plan also provides for a cash value in the policy holder’s account. He/\nshe can withdraw cash in the form of a policy loan from this cash value or even\nredeem it by surrendering the policy for its cash value.In case of outstanding loans, the amount of loan and interest get deducted from the\npay-out to the beneficiaries upon death.**A whole life policy is a good plan for the main earner of the family who wishes**\n**to protect his/ her loved ones in the event of premature death and preserve his/**\n**her capital against erosion from various events like terminal illness.** One can also\nuse the cash value of the whole life insurance policy for retirement needs, if27required. Whole life insurance thus plays an important role in household saving and\ncreating wealth to be passed on to the next generation.**3.** **Endowment Assurance**It is a contract in which the sum assured is payable to the nominees of the insured\nin case of the death of the insured during the term of the policy. If the insured\nsurvives the term the sum assured is paid to the insured.**The product has both death and survival benefit components.** Endowment\nAssurance links one’s insurance and savings programmes by offering a safe and\ncompulsory method of savings accumulation.People buy endowment plans as a sure method of providing against old age or for\nmeeting specific purposes like having a fund for (a) educational purposes, (b)\nmeeting children’s marriage expenses or(c) paying a mortgage (housing) loan.**Government usually offers tax benefits on the premiums paid, which make it**\n**attractive.** Many endowment policies mature at ages 55 to 65, when the insured is\nplanning for his/ her retirement. In such cases such policies can supplement\nretirement savings.**Variants:** Endowment assurance has certain variants - discussed below.**4.** **Money Back Policy**\nThe Money Back policy is a popular endowment plan in India. It has a provision for\nreturning some part of the sum assured in instalments during the term and the\nbalance sum assured at the end of the term.**Example**A Money Back policy for 20 years may provide for paying survival benefits of 20% of\nthe sum assured each at the end of the 5 [th], 10 [th] and 15 [th] years and the balance 40%", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "e26", "section": "Variants", "chunk_id": "Final IC 38 - CA_Life - English_013", "metadata": {"file_size": 4771, "chunk_index": 13, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Whole life insurance", "Variants", "Variants:", "Limitations of term plans:", "Example"]}}
{"chunk": "compulsory method of savings accumulation.People buy endowment plans as a sure method of providing against old age or for\nmeeting specific purposes like having a fund for (a) educational purposes, (b)\nmeeting children’s marriage expenses or(c) paying a mortgage (housing) loan.**Government usually offers tax benefits on the premiums paid, which make it**\n**attractive.** Many endowment policies mature at ages 55 to 65, when the insured is\nplanning for his/ her retirement. In such cases such policies can supplement\nretirement savings.**Variants:** Endowment assurance has certain variants - discussed below.**4.** **Money Back Policy**\nThe Money Back policy is a popular endowment plan in India. It has a provision for\nreturning some part of the sum assured in instalments during the term and the\nbalance sum assured at the end of the term.**Example**A Money Back policy for 20 years may provide for paying survival benefits of 20% of\nthe sum assured each at the end of the 5 [th], 10 [th] and 15 [th] years and the balance 40%\nat the end of the full term of 20 years. If the life assured dies at the end of, say 18\nyears, the full sum assured and bonuses (explained in the next section) accrued are\npaid as death benefit, even though the insured would have been paid a benefit of\n60% of the face value already, as money back.Money Back plans have been popular because of their liquidity (cash back) element,\nwhich make them attractive for meeting short and medium term needs. Such plans\nprovide full death protection also, if the individual dies at any point during the term\nof the policy.**5.** **Participating (Par) and Non-Participating (Non-Par)Plans**The Life Insurance products can also be classified as Participating (Par) and Nonparticipating (Non-Par) products. The term “Par” implies policies which are\nparticipating in the profits of the life insurer. “Non–Par”, on the other hand,\nrepresents policies which do not participate in the profits. Both kinds are present\nin traditional life insurance. Under all traditional plans, the pooled life funds, which\nare derived from policyholders’ premiums, are invested as per regulatory norms.\nPolicy holders who opt for ‘par products’ are eligible to receive, in addition to a28guaranteed sum assured, a share in the surpluses( bonuses) that are generated by\nthe insurer. These are known as ‘With Profit’ plans.**6.** **Non-participating products**The Policy holders who buy non-linked without profit [non par] plans are paid a\nbenefit that is fixed and guaranteed at the beginning of the contract and nothing\nmore. Non-participating products may be offered either under a ‘linked platform’\nor a ‘non-linked platform’. These are known as ‘Without Profits’ plans.**Example**One may have an endowment policy of twenty years providing a guaranteed addition\nof 2% of sum assured for each year of term, so that the maturity benefit is sum\nassured plus a total addition of 40% of the sum assured.Under the IRDAI’s guidelines on traditional non-par policies, the benefits to be paid\non the happening of a specified event, have to be explicitly stated at the outset and\nnot linked to an index or benchmark. The same applies to additional benefits that\nare accrued at regular intervals. This means that the return on these policies must\nbe disclosed at the time of taking the policy.**Important**Death benefits are subject to regulations of IRDAI issued from time to time. At\npresent, as per the new Regulation 9 of IRDAI (Non-linked) Products Regulation,\n2019 pertaining to traditional products, the minimum death cover is as follows:For all non-linked individual life insurance products, the minimum Sum Assured on\ndeath during the entire term of the policy shall not be less than 7 times the\nannualized premium, for limited or regular premium products, and 1.25 times the\nsingle premium for single premium products.For participating products, in addition to the sum assured on death, the bonus and\nadditional benefits as stated in the policy and accrued till the date of death shall\nbecome payable on death as part of the death benefit, if not paid earlier. In\nessence, there are **two variants**, participating and non-participating plans.i. For **participating polices** the bonus is linked to the investment performanceof the fund and is not declared or guaranteed before. The **bonus, once it is**\n**announced, becomes a guarantee** . It is usually paid in case of death of the", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "a28", "section": "Government usually offers tax benefits on the premiums paid, which make it", "chunk_id": "Final IC 38 - CA_Life - English_014", "metadata": {"file_size": 4771, "chunk_index": 14, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Non-participating products", "Variants:", "Example", "Important", "Money Back Policy"]}}
{"chunk": "be disclosed at the time of taking the policy.**Important**Death benefits are subject to regulations of IRDAI issued from time to time. At\npresent, as per the new Regulation 9 of IRDAI (Non-linked) Products Regulation,\n2019 pertaining to traditional products, the minimum death cover is as follows:For all non-linked individual life insurance products, the minimum Sum Assured on\ndeath during the entire term of the policy shall not be less than 7 times the\nannualized premium, for limited or regular premium products, and 1.25 times the\nsingle premium for single premium products.For participating products, in addition to the sum assured on death, the bonus and\nadditional benefits as stated in the policy and accrued till the date of death shall\nbecome payable on death as part of the death benefit, if not paid earlier. In\nessence, there are **two variants**, participating and non-participating plans.i. For **participating polices** the bonus is linked to the investment performanceof the fund and is not declared or guaranteed before. The **bonus, once it is**\n**announced, becomes a guarantee** . It is usually paid in case of death of the\npolicyholder or maturity benefit. This bonus is also called **reversionary**\n**bonus** .\nii. In case of **non-participating policies**, the return on the policy is disclosed inthe beginning of the policy itself.**7.** **Pension Plans and Annuities**A pension plan is typically a fund into which money is paid during a person’s\nemployment years and from which money is drawn to support the person after his\n[retirement from work in the form of periodic payments.](https://en.wikipedia.org/wiki/Retirement)29Pension plans are designed on group (usually employer driven) or individual basis. A\ngroup pension may be a \"defined benefit plan\", where a fixed sum is paid regularly\nto a person, or a \"defined contribution plan\", under which a fixed sum is invested\n[which becomes available at retirement age. Pensions are essentially guaranteed life](https://en.wikipedia.org/wiki/Life_annuity)\n[annuities, thus insuring against the risk of longevity. A pension created by an](https://en.wikipedia.org/wiki/Life_annuity)\nemployer for the benefit of an employee is commonly referred to as an occupational\nor employer pension.On retirement, the money in the member's account is used to provide retirement\nbenefits, typically by purchasing an annuity which then provides a regular income.\nAn annuity is a long-term investment issued by an insurance company designed to\nhelp protect one from the risk of outliving one’s income. Through annuitization,\none’s contributions are converted into periodic payments that can last for life.Individuals can avail of pension benefits by purchasing pension plans from insurance\ncompanies. Pension plans can be **on accumulation or deferred** **basis** which allows\na person to contribute in two ways, (i) in lump sum, or (ii) over a period of time; so\nthat he/ she can get a pension from the desired age/ date (called as the ‘vesting’\ndate). One can opt to receive pensions/ annuities on monthly, quarterly, half-yearly\nor annual modes. Pension plans are available on an **immediate basis** also, from the\nvery next month of purchase, on payment of a lump sum amount, called as\nimmediate annuity.The Indian insurance industry has several deferred and immediate annuity products\nmarketed by Life Insurers. Each product has its own features, terms, conditions and\nannuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly\nmeet the needs of an average customer, in January 2021, IRDAI mandated all Life\nInsurers to introduce a standard, immediate annuity product, with simple features\nand standard terms and conditions on an individual (not group) basis. Such a\nstandard product will make it easier for the customers to make an informed choice,\nenhance the trust between the Insurers and the insured, and reduce mis-selling as\nwell as potential disputes.The standard individual immediate annuity product is called, “Saral Pension”,\nprefixed by the Insurer’s name. The product offer two (and only two) annuity\noptions as follows:a) Life annuity with 100% Return of Purchase Price; andb) Joint Life annuity with a provision of 100% annuity to the secondary annuitant\non death of the primary annuitant and return of 100% Purchase Price on death\nof last survivor.Mode of Annuity payment would be Monthly, Quarterly, Half-Yearly and Yearly.", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Important", "chunk_id": "Final IC 38 - CA_Life - English_015", "metadata": {"file_size": 4771, "chunk_index": 15, "chunk_tokens": 1002, "has_examples": false, "has_tables": false, "key_concepts": ["Pension Plans and Annuities", "Saral Pension:", "Important"]}}
{"chunk": "annuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly\nmeet the needs of an average customer, in January 2021, IRDAI mandated all Life\nInsurers to introduce a standard, immediate annuity product, with simple features\nand standard terms and conditions on an individual (not group) basis. Such a\nstandard product will make it easier for the customers to make an informed choice,\nenhance the trust between the Insurers and the insured, and reduce mis-selling as\nwell as potential disputes.The standard individual immediate annuity product is called, “Saral Pension”,\nprefixed by the Insurer’s name. The product offer two (and only two) annuity\noptions as follows:a) Life annuity with 100% Return of Purchase Price; andb) Joint Life annuity with a provision of 100% annuity to the secondary annuitant\non death of the primary annuitant and return of 100% Purchase Price on death\nof last survivor.Mode of Annuity payment would be Monthly, Quarterly, Half-Yearly and Yearly.\nDetails are available on IRDAI’s website at the following link\n=\n[https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1) PageNo43\n[53&flag=1](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1)30**Test Yourself 2**The premium paid for whole life insurance is _____________ than the premium paid\nfor term assurance.I. Higher\nII. Lower\nIII. Equal\nIV. Substantially higher**Summary**Life insurance products offer protection against the loss of economic value of\nan individual’s productive abilities, which is available to his/ her dependents or\nto the self.A life insurance policy, at its core, provides peace of mind and protection to the\nnear and dear ones of the individual in case something unfortunate happens to\nhim or her.Term insurance provides valid cover only during a certain time period that has\nbeen specified in the contract.The unique selling proposition (USP) of term assurance is its low price, enabling\none to buy relatively large amounts of life insurance on a limited budget.While term assurance policies are examples of temporary assurance, where\nprotection is available for a temporary period of time, whole life insurance is an- example of a permanent life insurance policy.**Key Terms**1. Term insurance2. Whole life insurance3. Endowment assurance\n4. Money back policy\n5. Par and non-par schemes\n6. Reversionary bonus**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is I.31## CHAPTER L-04## LIFE INSURANCE PRODUCTS: NON-TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of non-traditional life insurance products.\nWe start by examining the limitations of traditional life insurance products and then\nhave a look at the appeal of non-traditional life insurance products. Finally we look\nat some of the different types of non-traditional life insurance products available\nin the market.**Learning Outcomes**32**A.** **Overview of non-traditional life insurance products****1.** **Non-traditional life insurance products – Purpose and need**In the previous chapters we have considered some of the traditional life insurance\nproducts which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to\nprovide a rate of return comparable to other assets in the financial market. Issues\nhave also been raised about the way they are structured into a single package of\nbenefits and premiums.**2.** **Limitations of traditional products**a) A critical examination would reveal the following areas of concern:b) **Cash value component:** The savings or cash value component in traditional policies\nis not well defined. This makes it less transparent about mortality, interest rates,\nexpenses and other parameters that are made.c) **Rate of return:** It is not easy to ascertain the rate of return on traditional policies\nbecause the value of the benefits under “With Profit policies” can be known only\nwhen the contract ends. This makes it difficult to compare these policies with other\nfinancial instruments.d)e)f) **Surrender value:** The method of arriving at the cash and surrender values (at any\npoint of time), are set by the life insurer and not transparent.**Yield:** The yield on these policies are much lower than those from other", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "o4353", "section": "Saral Pension:", "chunk_id": "Final IC 38 - CA_Life - English_016", "metadata": {"file_size": 4771, "chunk_index": 16, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Yield:", "Chapter Introduction", "Surrender value:"]}}
{"chunk": "products which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to\nprovide a rate of return comparable to other assets in the financial market. Issues\nhave also been raised about the way they are structured into a single package of\nbenefits and premiums.**2.** **Limitations of traditional products**a) A critical examination would reveal the following areas of concern:b) **Cash value component:** The savings or cash value component in traditional policies\nis not well defined. This makes it less transparent about mortality, interest rates,\nexpenses and other parameters that are made.c) **Rate of return:** It is not easy to ascertain the rate of return on traditional policies\nbecause the value of the benefits under “With Profit policies” can be known only\nwhen the contract ends. This makes it difficult to compare these policies with other\nfinancial instruments.d)e)f) **Surrender value:** The method of arriving at the cash and surrender values (at any\npoint of time), are set by the life insurer and not transparent.**Yield:** The yield on these policies are much lower than those from other\ninvestments.**3.** **Features of Non-Traditional Policies:** Life insurance companies starteddesigning policies with certain innovative features, some of which are given\nbelow:a) **Direct linkage with investment gains:** Policies with direct linkage with thecapital market were designed in an attempt to make investment gains.\nb) **Policies that can beat inflation:** Policies were designed to give returnscloser to the inflation rates. The change was that insurers started thinking\nthat life policies need to match if not beat inflation.\nc) **Policies with Flexibility:** Policies which allowed customers to decide (withincertain limits) the amount of premium they wanted to pay; and the amount\nof death benefits and cash values they wanted, got designed.\nd) **Surrender value:** Policies that gave better surrender values available undertraditional policies were also designed by insurers.These policies became very popular and even began to replace traditional products\nin many countries, including India.33**Test Yourself 1**Which among the following is a non-traditional life insurance product?I. Term assuranceII. Universal life insuranceIII. Endowment insuranceIV. Whole life insurance**B.** **Non-traditional life insurance products****Some non-traditional products**We shall discuss some of the non-traditional products which have emerged in the\nIndian market and elsewhere.**1.** **Universal Life and Variable Life**Universal Life policy was introduced in the United States in 1979 and quickly became\nvery popular. Its features are **flexible premiums, flexible face amount and death**\n**benefit amounts.** Unlike traditional policies, where fixed premiums have to be paid\nperiodically to keep the contract in force, universal life policies allow the\npolicyholder (within limits) to decide the amount of premiums he or she wants to\npay for the coverage.Variable Life was introduced in the United States in 1977.It is a typeof “Whole Life”\npolicy where the death benefit and cash value of the policy fluctuates according to\nthe investment performance of a special investment account into which premiums\nare credited.The design and sale of the above two kinds of products, both of which were called\nVariable Insurance Products, have been discontinued and are not allowed in India\nsince2019,further to the issue of IRDAI (ULIP) Regulations, 2019.**2.** **Unit linked insurance**Unit Linked Plans, also known as ULIPs were first introduced in UK during the\n1960s.They have today emerged as one of the most popular and significant products,\ndisplacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.\nThe premium paid by the policyholder gets divided into two major portionsthe first portion which is utilised for providing insurance cover, andthe second portion that gets invested into the fund opted by the insured.The benefits under such contracts are wholly or partially determined by the value\nof units credited to the policyholder’s account at the date when payment is due.34In many markets these policies were positioned and sold as investment vehicles with\nan attached insurance component.Unlike traditional savings policies that are bundled, Unit linked contracts are\nunbundled. Their structure is transparent with the charges to pay for the insurance\nand expenses component being clearly specified.**Diagram 1:** **Premium break-up**After deducting the charges from the premium, the balance of the account and\nincome are invested in **units** .**The Value of Units**The value of units is defined by a rule or formula, which is outlined in advance.\nTypically the value of the units is given by the Net Asset Value (NAV), which reflects\nthe market value of the assets in which the fund is invested. Different persons could", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "e2019", "section": "Limitations of traditional products", "chunk_id": "Final IC 38 - CA_Life - English_017", "metadata": {"file_size": 4771, "chunk_index": 17, "chunk_tokens": 1002, "has_examples": false, "has_tables": false, "key_concepts": ["Features of Non-Traditional Policies:", "Yield:", "Test Yourself 1", "Universal Life and Variable Life", "Diagram 1:"]}}
{"chunk": "displacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.\nThe premium paid by the policyholder gets divided into two major portionsthe first portion which is utilised for providing insurance cover, andthe second portion that gets invested into the fund opted by the insured.The benefits under such contracts are wholly or partially determined by the value\nof units credited to the policyholder’s account at the date when payment is due.34In many markets these policies were positioned and sold as investment vehicles with\nan attached insurance component.Unlike traditional savings policies that are bundled, Unit linked contracts are\nunbundled. Their structure is transparent with the charges to pay for the insurance\nand expenses component being clearly specified.**Diagram 1:** **Premium break-up**After deducting the charges from the premium, the balance of the account and\nincome are invested in **units** .**The Value of Units**The value of units is defined by a rule or formula, which is outlined in advance.\nTypically the value of the units is given by the Net Asset Value (NAV), which reflects\nthe market value of the assets in which the fund is invested. Different persons could\narrive at the same benefits payable by following the formula.The Formula is as follows:Net Asset Value [NAV] = Market Value of Assets of the fund/ Number of units of the\nfundsThus, Policyholder benefits do not depend on the assumptions of the life insurancecompany.Unit linked policies allow policy holders to choose between different kinds of funds.\nEach fund would have a different portfolio mix. The investor gets to choose between\na broad option of debt, balanced and equity funds, defined below. Even within these\nbroad categories there may be other types of options.|Equity Fund|Debt Fund|Balanced Fund|Money Market Fund|\n|---|---|---|---|\n|~~This fund invests~~<br>the major portion of<br>the money in equity<br>and equity related<br>instruments.<br>|~~This fund invests~~<br>major portion of the<br>money in Govt.<br>Bonds, Corporate<br>Bonds, Fixed<br>Deposits etc.<br>|~~This fund~~<br>invests in a mix<br>of equity and<br>debt<br>instruments<br>|~~This fund invests~~<br>money mainly in<br>instruments such as<br>Treasury Bills,<br>Certificates of Deposit,<br>Commercial Paper etc.<br>|There is also provision to switch from one kind of fund to another if performance of\none or more funds is not found to be up to the mark.35Some of the specific features of ULIP Policies are given below:**i.** **Unitising**Benefits under ULIP policies are determined by the value of units credited to the\npolicyholder’s account at the date when the claim payment is due to be made. A\nunit is created by dividing an investment fund into a number of equal parts.**ii.** **Transparent structure**The charges for insurance cover and expenses in ULIPs are clearly specified. Once\nthese charges are deducted from the premium, the balance of the account and\nincome from it are invested in units.**iii.** **Pricing**Under ULIPs, the insured decides the amount of premium that he/ she can\ncontribute at regular intervals.In all Life Insurance policies, the initial costs are very high. Under traditional\npolicies, the premium charges for meeting these costs are spread throughout the\npolicy term.In the case of ULIPs, they are deducted from the initial premiums itself. This\nsignificantly reduces the amount allocated for investment. This is why the value of\nthe benefits, vis-à-vis the premiums paid, would be very low and even less than the\npremiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy, the\nbeneficiary would be paid the higher of the Sum Assured [which is a multiple of the\npremium] or the Fund Value (unit price multiplied by the number of units) standing\nto his or her account.**v.** **The bearing of investment risk**The value of the units depends on the value of the life insurer’s investments, which\nare not guaranteed.The life insurer, though expected to manage the portfolio efficiently, does not give\nany guarantee about unit values. Hence, the investment risk is borne by the\npolicyholder/ unit holder.36**Test Yourself 2**Which of the following statements is/ are incorrect?I. Variable life insurance is a temporary life insurance policy\nII. Variable life insurance is a permanent life insurance policy\nIII. The policy has a cash value account", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Diagram 1:", "chunk_id": "Final IC 38 - CA_Life - English_018", "metadata": {"file_size": 4771, "chunk_index": 18, "chunk_tokens": 1009, "has_examples": false, "has_tables": true, "key_concepts": ["Transparent structure", "Diagram 1:", "Unitising", "Death Benefit", "The Value of Units"]}}
{"chunk": "the benefits, vis-à-vis the premiums paid, would be very low and even less than the\npremiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy, the\nbeneficiary would be paid the higher of the Sum Assured [which is a multiple of the\npremium] or the Fund Value (unit price multiplied by the number of units) standing\nto his or her account.**v.** **The bearing of investment risk**The value of the units depends on the value of the life insurer’s investments, which\nare not guaranteed.The life insurer, though expected to manage the portfolio efficiently, does not give\nany guarantee about unit values. Hence, the investment risk is borne by the\npolicyholder/ unit holder.36**Test Yourself 2**Which of the following statements is/ are incorrect?I. Variable life insurance is a temporary life insurance policy\nII. Variable life insurance is a permanent life insurance policy\nIII. The policy has a cash value account\nIV. The policy provides a minimum death benefit guarantee**Summary**A critical concern with respect to life insurance policies was giving a competitive\nrate of return comparable to other assets in the financial marketplace.Some of the trends that led to the increase in non-traditional life products\ninclude unbundling, investment linkage and transparency.Universal life insurance is a form of permanent life insurance characterised by\nits flexible premiums, flexible face amount and death benefit amounts, and the\nunbundling of its pricing factors.ULIPs became one of the most popular and significant products, replacing\ntraditional plans in many markets.ULIPs provide the means for directly and immediately cashing on the benefits of\na Life Insurer’s investment performance.**Key Terms**1. Universal life insurance2. Variable life insurance3. Unit linked insurance4. Net asset value**Answers to Test Yourself****Answer 1** -The correct option is II.**Answer 2** - The correct option is I.37## CHAPTER L-05## APPLICATIONS OF LIFE INSURANCE**Chapter Introduction**Life insurance does not merely seek to protect individuals from premature death. It\nhas other applications as well. It can be applied to the creation of trusts with\nresultant insurance benefits; it can be applied for creating a policy covering key\npersonnel of industries and also for redeeming mortgages. We shall briefly describe\nthese various applications of life insurance.**Learning Outcomes**38N’s\n**A.** **Applications of Life insurance****1.** **Married Women’s Property Act**Section 6 of the Married Women’s Property Act, 1874 tries to ensure that the\nbenefits under a life insurance policy will pass on in a secure manner to the wife\nand children through creation of a trust for the purpose.**Diagram 1:** **Beneficiaries under MWP Act**The section provides that when a married man takes a policy on his own life and\nclearly expresses on the face of such policy that it is for the benefit of his wife or\nhis wife and children, and to be held in a trust for their benefit only, the proceeds\nof such a policy shall not, so long as the objects of the trust remains, be subject to\nthe control of the husband or to his creditors or form part of his estate.**Features of a policy under the MWP Act**i. Each policy will remain a separate Trust. Either the wife or child (over 18years of age) can be a trustee.ii. The policy shall be beyond the control of court attachments, creditors andeven the life assured.iii. The claim money shall be paid to the trustees.iv. The policy cannot be surrendered and neither nomination nor assignment isallowed.v. If the policyholder does not appoint a special trustee to receive andadminister the benefits under the policy, the sum secured under the policy\nbecomes payable to the Official Trustee of the State in which the office at\nwhich the insurance was effected is situated.39**Benefits**The Trust is set up under a deed that cannot be revoked or amended. It can contain\none or more insurance policies. It is important to appoint a trustee who would be\nresponsible for administering the trust property, including investing the insurance\nproceeds, on behalf of the beneficiaries. These benefits are secured from passing\nto future creditors**2.** **Key-man Insurance**Keyman insurance is an important form of business insurance.**Definition**Key-man Insurance can be described as an insurance policy taken out by a business\nto compensate that business for financial losses that would arise from the death or\nextended incapacity of an important member of the business.Many businesses have key persons responsible for a major part of its profits or has", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "e2", "section": "Death Benefit", "chunk_id": "Final IC 38 - CA_Life - English_019", "metadata": {"file_size": 4771, "chunk_index": 19, "chunk_tokens": 1010, "has_examples": false, "has_tables": false, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Diagram 1:", "Death Benefit"]}}
{"chunk": "becomes payable to the Official Trustee of the State in which the office at\nwhich the insurance was effected is situated.39**Benefits**The Trust is set up under a deed that cannot be revoked or amended. It can contain\none or more insurance policies. It is important to appoint a trustee who would be\nresponsible for administering the trust property, including investing the insurance\nproceeds, on behalf of the beneficiaries. These benefits are secured from passing\nto future creditors**2.** **Key-man Insurance**Keyman insurance is an important form of business insurance.**Definition**Key-man Insurance can be described as an insurance policy taken out by a business\nto compensate that business for financial losses that would arise from the death or\nextended incapacity of an important member of the business.Many businesses have key persons responsible for a major part of its profits or has\nknowledge and skills that are vital to the organisation and difficult to replace. Key\nman insurance is taken by employers on the life of such key persons to facilitate\nbusiness continuity and offset the costs and losses which are likely to be suffered in\nthe event of the loss of a key person. Keyman insurance does not indemnify the\nactual losses incurred but compensates with a fixed monetary sum as specified on\nthe insurance policy.Keyman insurance is allowed as a term insurance policy where the sum assured is\nlinked to the profitability of the company rather than the key person’s own income.\nThe premium is paid by the company. In case the key person dies, the benefit is\npaid to the company. The proceeds of Keyman insurance is taxable at the hands of\nthe company.**a)** **Who can be a key-man?**A key person can be anyone directly associated with the business whose loss can\ncause financial strain to the business. For example, the person could be a\ndirector of the company, a partner, a key sales person, key project manager, or\nsomeone with specific skills or knowledge which is especially valuable to thecompany.**b)** **Insurable losses**The following are the losses for which key person insurance can provide\ncompensation:i. Losses related to the extended period when a key person is unable to work,to provide temporary personnel and, if necessary to finance the recruitment\nand training of a replacement40ii. Insurance to protect profits. For example, offsetting lost income from lostsales, losses resulting from the delay or cancellation of any business project\nthat the key person was involved in, loss of opportunity to expand, loss of\nspecialised skills or knowledge**3.** **Mortgage Redemption Insurance (MRI)**A person taking a loan to buy a property, may be required to pay for mortgage\nredemption insurance by the bank, as part of the loan arrangement. “Mortgage\nRedemption Insurance” is popularly referred to “Credit Life Insurance policy”.**a)** **What is MRI?**It is an insurance policy that provides financial protection for home loan\nborrowers. It is basically a decreasing term life insurance policy taken by\nmortgagor to repay the balance on a mortgage loan if he/ she dies before its full\nrepayment. It can be called a loan protector policy. This plan is suitable for\npeople whose dependents may need assistance in clearing their debts in case of\nthe unexpected demise of the policyholder.**b)** **Features**The insurance cover under this policy decreases each year unlike a term\ninsurance policy where insurance cover is constant during the policy period.**Test Yourself 1**What is the objective behind Mortgage Redemption Insurance?I. Facilitate cheaper mortgage rates\nII. Provide financial protection for home loan borrowers\nIII. Protect value of the mortgaged property\nIV. Evade eviction in case of default**Summary**Section 6 of the Married Women’s Property Act, 1874 provides for security of\nbenefits under a life insurance policy to the wife and children.The policy effected under MWP Act shall be beyond the control of court\nattachments, creditors and even the life assured.Keyman insurance is an important form of business insurance. It can be\ndescribed as an insurance policy taken out by a business to compensate at for\nfinancial losses that would arise from the death or extended capacity of an\nimportant member of the business.41Mortgage redemption insurance is basically a decreasing term life insurance\npolicy taken by a mortgagor to repay the balance on a mortgage loan if he/ she\ndies before its full repayment.**Key Terms**1. Married Women’s Property Act\n2. Keyman insurance\n3. Mortgage Redemption Insurance**Answers to Test Yourself****Answer 1** - The correct option is II.42## CHAPTER L-06## PRICING AND VALUATION IN LIFE INSURANCE**Chapter Introduction**The objective of this chapter is to introduce to the learner the basic elements that\nare involved in the pricing and benefits of life insurance contracts. We shall first", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "t40", "section": "Benefits", "chunk_id": "Final IC 38 - CA_Life - English_020", "metadata": {"file_size": 4771, "chunk_index": 20, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Mortgage Redemption Insurance (MRI)", "Test Yourself 1", "What is MRI?", "Chapter Introduction"]}}
{"chunk": "IV. Evade eviction in case of default**Summary**Section 6 of the Married Women’s Property Act, 1874 provides for security of\nbenefits under a life insurance policy to the wife and children.The policy effected under MWP Act shall be beyond the control of court\nattachments, creditors and even the life assured.Keyman insurance is an important form of business insurance. It can be\ndescribed as an insurance policy taken out by a business to compensate at for\nfinancial losses that would arise from the death or extended capacity of an\nimportant member of the business.41Mortgage redemption insurance is basically a decreasing term life insurance\npolicy taken by a mortgagor to repay the balance on a mortgage loan if he/ she\ndies before its full repayment.**Key Terms**1. Married Women’s Property Act\n2. Keyman insurance\n3. Mortgage Redemption Insurance**Answers to Test Yourself****Answer 1** - The correct option is II.42## CHAPTER L-06## PRICING AND VALUATION IN LIFE INSURANCE**Chapter Introduction**The objective of this chapter is to introduce to the learner the basic elements that\nare involved in the pricing and benefits of life insurance contracts. We shall first\ndiscuss the elements that constitute the premium and then discuss the concept of\nsurplus and bonus.**Learning Outcomes**43**A.** **Insurance pricing – Basic elements****1.** **Premium**In ordinary language, the term premium denotes the price that is paid by an insured\nfor purchasing an insurance policy. It is normally expressed as a rate of premium\nper thousand rupees of sum assured. The premium rates depend on the age of the\nprospect and the plan.These premium rates are available in the form of tables of rates that are available\nwith insurance companies.**Diagram 1:** PremiumThe rates printed in these tables are known as “Office Premiums”. They are in most\ncases the same throughout the term and are expressed as an annual rate.**Example**If the premium for a twenty year endowment policy for a given age is Rs. 4,800, it\nmeans that Rs. 4,800 has to be paid each year for twenty years.However it is possible to have some policies in which the premiums are payable only\nin the first few years. Companies also have single premium contracts in which only\none premium is payable at the beginning of the contract. These policies are usually\ninvestment oriented.**2.** **Rebates**Life insurance companies may also offer certain types of rebates on the premium\nthat is payable. Two such rebates are: For sum assured\n For mode of premum44**Rebate for sum assured**The rebate **for sum assured** is offered to those who buy policies with higher\namounts of sum assured. It is offered as a way of passing on to the customer,\nthe gains that the insurer may make when servicing higher value policies. The\nlogic is that the effort and cost required to process a policy of Rs 50,000 or\n5,00,000 remains the same. But higher sum assured policies yield more premium\nand so more profits.**Rebate for mode of premium**Similarly a rebate may be offered **for the mode of premium** . Life insurance\ncompanies may allow premiums to be paid on annual, half yearly, quarterly or\nmonthly basis. More frequent the mode, more the administrative costs for\ncollecting and accounting the premium. Again, in the yearly mode, the insurer\ncan utilise this amount during the entire year and earn interest on it. Insurers\nwould hence encourage payment via yearly and half yearly modes by allowing a\nrebate on these. They may also charge a little extra for monthly mode of\npayments, to cover additional administrative expenses involved.**3.** **Extra charges**The tabular premium is charged for those individuals who are not subject to any\nsignificant factors that would pose an extra risk. They are known as **standard**\n**lives** and the rates charged are known as ordinary rates.If a person proposing for insurance suffers from certain health problems like\nheart ailments or diabetes that can pose a hazard to his life, he or she is\nconsidered to be sub-standard. The insurer may decide to impose an extra\npremium by way of a health extra. Similarly an occupational extra may be\nimposed on those engaged in a hazardous occupation, like a circus acrobat.\nThese extras would result in the premium being more than the tabular premium.Again, an insurer may offer certain extra benefits under a policy, which are\navailable on payment of an extra premium.**Example**A life insurer may offer a Double Accident Benefit or DAB (where double the sum\nassured is payable as a claim if death is a result of accident). For this it may", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "L-06", "section": "Summary", "chunk_id": "Final IC 38 - CA_Life - English_021", "metadata": {"file_size": 4771, "chunk_index": 21, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Extra charges", "Rebates", "Diagram 1:", "Insurance pricing – Basic elements"]}}
{"chunk": "would hence encourage payment via yearly and half yearly modes by allowing a\nrebate on these. They may also charge a little extra for monthly mode of\npayments, to cover additional administrative expenses involved.**3.** **Extra charges**The tabular premium is charged for those individuals who are not subject to any\nsignificant factors that would pose an extra risk. They are known as **standard**\n**lives** and the rates charged are known as ordinary rates.If a person proposing for insurance suffers from certain health problems like\nheart ailments or diabetes that can pose a hazard to his life, he or she is\nconsidered to be sub-standard. The insurer may decide to impose an extra\npremium by way of a health extra. Similarly an occupational extra may be\nimposed on those engaged in a hazardous occupation, like a circus acrobat.\nThese extras would result in the premium being more than the tabular premium.Again, an insurer may offer certain extra benefits under a policy, which are\navailable on payment of an extra premium.**Example**A life insurer may offer a Double Accident Benefit or DAB (where double the sum\nassured is payable as a claim if death is a result of accident). For this it may\ncharge an extra premium of one rupee per thousand sum assured.Similarly a benefit known as Permanent Disability Benefit (PDB) may be availed\nby paying an extra per thousand sum assured.**4.** **Determining the premium**Let us now examine how life insurers arrive at the rates that are presented in\nthe premium tables. This task is performed by an actuary. The process of setting45the premium in case of traditional life insurance policies like term insurance,\nwhole life and endowment considers following elements: Mortality\n Interest\n Expenses of management\n Reserves\n Bonus loading**Diagram 2:** **Components of Premium**The first two elements give us the Net premium. By adding [also called ‘loading’]\nthe other elements to the net premium we get the gross or office premium**a)** **Mortality and Interest**Mortality is the first element in premiums. It is the chance or likelihood that a\nperson of a certain age would die during a given year. To find out the expected\nMortality of a person, “Mortality Tables” are used.**Example**If the mortality rate for age 35 is 0.0035 it implies that out of every 1000 people\nwho are alive as on age 35, 3.5 (or 35 out of 10,000) are expected to die between\nage 35 and 36.The table may be used to calculate mortality cost for different ages. For\nexample the rate of 0.0035 for age 35 implies a cost of insurance of 0.0035 x\n1000 (sum assured) = Rs. 3.50 per thousand sum assured.The above cost may be also called the “Risk Premium”. For higher ages the risk\npremium would be higher.46**Example**If we need to have Rs. 5 per thousand to meet the cost of insurance after five\nyears and if we assume a rate of interest of 6%, the present value of Rs. 5 payable\nafter five years would be 5 x 1/ (1.06) [5 ] = 3.74.If instead of 6% we were to assume 10%, the present value would be only 3.10.\nIn other words the higher the rate of interest assumed, the lower the present\nvalue.From our study of mortality and interest there are two major conclusions we can\nderive Higher the mortality rate in the mortality table, higher the premiumswould be\n Higher the interest rate assumed, lower the premium**Net premium**\nThe estimates of mortality and interest give the “Net Premium”**Gross premium**\nGross premium is the net premium plus an amount called loading. There are\nthree considerations or guiding principles that needs to be borne in mind when\ndetermining the amount of loading:**b)** **Expenses and reserves**Life insurers have to incur various types of operating expenses including: Agents training and recruitment,\n Commissions of agents,\n Staff salaries,\n Office accommodation,\n Office stationery,\n Electricity charges,\n Other miscellaneous etc.All these have to be paid from premiums that are collected by insurers.\nThese expenses are suitably loaded to the net premium.**c)** **Lapses and contingencies**In addition to expenses, there are other factors that can make the calculations\nof life insurers go wrong.One source of risk is that of lapses and withdrawals. A lapse means that the\npolicyholder discontinues payment of premiums. In case of withdrawals, the", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "g45", "section": "Extra charges", "chunk_id": "Final IC 38 - CA_Life - English_022", "metadata": {"file_size": 4771, "chunk_index": 22, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Extra charges", "Net premium", "Example", "Lapses and contingencies", "Expenses and reserves"]}}
{"chunk": "derive Higher the mortality rate in the mortality table, higher the premiumswould be\n Higher the interest rate assumed, lower the premium**Net premium**\nThe estimates of mortality and interest give the “Net Premium”**Gross premium**\nGross premium is the net premium plus an amount called loading. There are\nthree considerations or guiding principles that needs to be borne in mind when\ndetermining the amount of loading:**b)** **Expenses and reserves**Life insurers have to incur various types of operating expenses including: Agents training and recruitment,\n Commissions of agents,\n Staff salaries,\n Office accommodation,\n Office stationery,\n Electricity charges,\n Other miscellaneous etc.All these have to be paid from premiums that are collected by insurers.\nThese expenses are suitably loaded to the net premium.**c)** **Lapses and contingencies**In addition to expenses, there are other factors that can make the calculations\nof life insurers go wrong.One source of risk is that of lapses and withdrawals. A lapse means that the\npolicyholder discontinues payment of premiums. In case of withdrawals, the\npolicyholder surrenders the policy and receives an amount from the policy’s\nacquired cash value.47Lapses usually happen within the first three years, especially in the first year of\nthe contract.**d)** **With Profit (participating) policies and Bonus loading**The concept of ‘With Profit’ policies originated when Life insurers started the\npractice of charging a high loading in advance to create a buffer to keep them\nsolvent even in adverse situations. If subsequent experience proved to be more\nfavourable, the life insurer would share some of the profits it made as a result\nwith policy holders by way of bonus.In sum we can say that:**Gross premium = Net premium + Loading for expenses + Loading for**\n**contingencies + Bonus loading****Test Yourself 1**What does a policy lapse mean?I. Policyholder completes premium payment for a policy\nII. Policyholder discontinues premium payment for a policy\nIII. Policy attains maturity\nIV. Policy is withdrawn from the market**B.** **Surplus and bonus****1.** **Determination of surplus and bonus**Every life insurance company is expected to undertake a periodic valuation of its\nassets and liabilities. Such a valuation has two purposes:i. To assess the financial state of the life insurer and determine if it is solventor insolvent\nii. To determine the surplus available for distribution among policyholders/share holders**Definition**Surplus is the excess of value of assets over value of liabilities. If it is negative, it is\nknown as a strain.Let us now see how the concept of surplus in life insurance is different from that of\nprofit of a firm.48Firms in general look at profits in two ways. Firstly, profit is the **excess of income**\n**over outgo** for a given accounting period, as it appears in the profit and loss\naccount. Profit also forms part of the balance sheet of a firm - it may be defined as\nthe **excess of assets over liabilities** . In both instances, profits are determined at\nthe end of the accounting period.**Surplus = Assets - Liabilities**Let us understand what liabilities mean in life insurance. For a given block of life\ninsurance policies, the life insurer has to make provision for meeting future claims,\nexpenses and other expected pay-outs that may arise. The insurer also expects to\nreceive premiums in future for these policies.Liabilities are thus the present value of all payments that have to be made less the\npresent value of premiums expected to be received on these policies. The present\nvalue is arrived at by applying a suitable rate of discount [the interest rate]\nSurplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed. Life insurers are obliged to share the benefits arising as a\nresult with holders of it’s with profit policies.**Example**The profits of XYZ firm as on 31 [st] March 2013, is given as its income less expenses or\nits assets less liabilities as on that date.In both instances, the profit is clearly defined and is known.**2.** **Bonus**Insurers have to declare and distribute its divisible surplus among the policy holders\nand shareholders of the company [if any] in the form of a bonus. In India, the United\nKingdom and many other countries, distribution of surplus is popular.Bonus is paid as an addition to the basic benefit payable under a contract. Typically\nit may appear as an addition to basic sum assured or basic pension per annum. It is", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Net premium", "chunk_id": "Final IC 38 - CA_Life - English_023", "metadata": {"file_size": 4771, "chunk_index": 23, "chunk_tokens": 977, "has_examples": true, "has_tables": false, "key_concepts": ["Surplus and bonus", "Net premium", "Test Yourself 1", "Example", "Lapses and contingencies"]}}
{"chunk": "receive premiums in future for these policies.Liabilities are thus the present value of all payments that have to be made less the\npresent value of premiums expected to be received on these policies. The present\nvalue is arrived at by applying a suitable rate of discount [the interest rate]\nSurplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed. Life insurers are obliged to share the benefits arising as a\nresult with holders of it’s with profit policies.**Example**The profits of XYZ firm as on 31 [st] March 2013, is given as its income less expenses or\nits assets less liabilities as on that date.In both instances, the profit is clearly defined and is known.**2.** **Bonus**Insurers have to declare and distribute its divisible surplus among the policy holders\nand shareholders of the company [if any] in the form of a bonus. In India, the United\nKingdom and many other countries, distribution of surplus is popular.Bonus is paid as an addition to the basic benefit payable under a contract. Typically\nit may appear as an addition to basic sum assured or basic pension per annum. It is\nexpressed, for example, as Rs. 60 per thousand sum assuredThe most common form of bonus is the **reversionary bonus** . Once declared these\nbonus additions, made each year, get attached to the policy and cannot be taken\naway. They are called ‘Reversionary’ bonuses because they are received only at the\ntime of a claim by death or maturity. Bonuses may also be payable on surrender\nprovided the contract is eligible through having run for a minimum term [say 5 years]49**Types of reversionary bonuses****Diagram 3:** **Types of Reversionary Bonuses****i.** **Simple Reversionary Bonus**This is a bonus expressed as a percentage of the basic cash benefit under the\ncontract. In India for example, it is declared as amount per thousand sum\nassured.**ii.** **Compound Bonus**Here the company expresses a bonus as a percentage of basic benefit and\nalready attached bonuses. It is thus a bonus on a bonus. A way to express it may\nbe as @ 8% of basic sum assured plus attached bonus.**iii.** **Terminal Bonus**As the name suggests, this bonus attaches to the contract only at the time of its\ntermination [by death or maturity]. It is applicable only for the claims arising in\nthe ensuing year. Thus terminal bonus declared for 2013 would only apply to\nclaims that have arisen during 2013-14 and not for subsequent years. Terminal\nbonuses depend on the time duration of the contract and increase with it. A\ncontract that has run for 25 years would have higher terminal bonus than one\nwhich has run for 15 years.**3.** **The Contribution Method**Another method of distribution of surplus adopted in North America is the\n“Contribution” method. Here, the surplus, i.e. the difference between what was\nexpected to happen and what actually happened over the year with respect to\nmortality, interest and expenses is declared and distributed as dividends.The dividends can be paid in cash, by way of adjustments/ reductions in future\npremiums, by allowing purchase of non-forfeitable paid up additions to the policy\nor as accumulations to the credit of the policy.50**4.** **Unit Linked Policies**The Principles of Pricing and other features of ULIP Policies have already been\ncovered in an earlier chapter.**Summary**In ordinary language, the term premium denotes the price that is paid by an\ninsured for purchasing an insurance policy.The process of setting the premium for life insurance policies involves\nconsideration of mortality, interests, expense management and reserves.Gross premium is the net premium plus an amount called loading.A lapse means that the policyholder discontinues payment of premiums. In case\nof withdrawals, the policyholder surrenders the policy and receives an amount\nfrom the policy’s acquired cash value.Surplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed.Surplus allocation could be towards maintaining solvency requirements,\nincreasing free assets etc.The most common form of bonus is the reversionary bonus.**Key Terms**1. Premium2. Rebate3. Bonus\n4. Surplus\n5. Reserve\n6. Loading\n7. Reversionary bonus**Answers to Test Yourself****Answer 1** - The correct option is II.51## CHAPTER L-07## LIFE INSURANCE DOCUMENTATION**Chapter Introduction**We have seen that the insurance industry deals with a large number of forms and\ndocuments in Chapter 7. There are some documents specific to life insurance, which\nare discussed in this chapter. Here, we are also discussing the main provisions", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "m2", "section": "Example", "chunk_id": "Final IC 38 - CA_Life - English_024", "metadata": {"file_size": 4771, "chunk_index": 24, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Unit Linked Policies", "Answers to Test Yourself", "Compound Bonus", "Simple Reversionary Bonus", "Example"]}}
{"chunk": "insured for purchasing an insurance policy.The process of setting the premium for life insurance policies involves\nconsideration of mortality, interests, expense management and reserves.Gross premium is the net premium plus an amount called loading.A lapse means that the policyholder discontinues payment of premiums. In case\nof withdrawals, the policyholder surrenders the policy and receives an amount\nfrom the policy’s acquired cash value.Surplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed.Surplus allocation could be towards maintaining solvency requirements,\nincreasing free assets etc.The most common form of bonus is the reversionary bonus.**Key Terms**1. Premium2. Rebate3. Bonus\n4. Surplus\n5. Reserve\n6. Loading\n7. Reversionary bonus**Answers to Test Yourself****Answer 1** - The correct option is II.51## CHAPTER L-07## LIFE INSURANCE DOCUMENTATION**Chapter Introduction**We have seen that the insurance industry deals with a large number of forms and\ndocuments in Chapter 7. There are some documents specific to life insurance, which\nare discussed in this chapter. Here, we are also discussing the main provisions\nincorporated in a policy document. Provisions related to grace period, policy lapse\nand non-forfeiture and certain other privileges are also discussed.**Learning Outcomes**52**A. Proposal stage documentation**Further to the common points discussed about the Prospectus and the Proposal Form\nin Chapter 7, there are some additional points that Life Insurers need to understand.**Prospectus:** In insurance, ‘Prospectus’ means a document in physical, electronic or\nany other format issued by the insurer to sell or promote the insurance product.\nThe prospectus of an insurance product shall clearly state(a) the Unique Identification Number (UIN) allotted by the Authority for theconcerned insurance product:\n(b) the scope of benefits;\n(c) the extent of insurance cover;\n(d) the warranties, exclusions/exceptions and conditions of the insurance coveralong with explanations.\nThe prospectus should also provide:(a) a description of the contingency or contingencies to be covered by insurance;\n(b) the class or classes of lives or property eligible for insurance under the termsof such prospectus.\nIn Life insurance, the prospectus should also mention about the Riders (also called\nAdd-on covers in Health and General Insurance) allowable on the product and their\nbenefits.**Proposal Form:** In respect of Life insurance, the details of the proposers’ family\nmembers (including parents) indicating their longevity, status of health and\nailments suffered by any of them, are collected through the Proposal form.\nDepending on the product, the medical details of the life proposed for insurance,\nhis/ her personal history of disease and personal characteristics may also be asked\nfor. The Proposal Form is the document by which insurers get all the information\nthat they need from the prospect.Section 45 of the Insurance Act, provides that the Policy shall not be called in\nquestion on the ground of mis-statement after three years. Agents have an\nimportant role in guiding the prospect to give answers to all the questions in the\nProposal Form/ Medical Forms etc. truthfully and advising them of the implications\nof not doing so in terms of Section 45.Proposal Forms for Life Insurance should state the requirements of Section 45 of the\nAct. While answering the questions in the Proposal Form for obtaining life insurance\ncover, the prospect is to be guided by the provisions of Section 45 of the Act.Similarly, Section 39 of the Act is about the provision of nomination. Wherever the\nfacility of Nomination is available to the proposer, the Agent shall inform him/ her\nof the provisions of Section 39 of the Act and encourage the proposer to avail the\nfacility.Aspects related to the personal financial planning of the life proposed including his/\nher work span, projected income and expenses, as well as needs for savings and\ninvestment, health, retirement and insurance may also be asked in the Life\nInsurance Proposal Form.53**Age Proof:** Age being an important factor for assessing the risk profile of the life to\nbe insured, Life insurers collect documentary evidence to verify correct age. Valid\nage proofs may be standard or non-standard, as discussed in Chapter 7.Life insurers look into the following documents as well.**a)** **Agent’s Confidential Report**The agent is the primary underwriter. All material facts and particulars about the\npolicyholder, relevant to risk assessment, need to be revealed by the agent in his/\nher report. This means that matters of health, habits, occupation, income and\nfamily details need to be mentioned in the report.**b)** **Medical Examiner’s report**In many cases, the life to be insured has to be medically examined by a doctor who", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "m2", "section": "Key Terms", "chunk_id": "Final IC 38 - CA_Life - English_025", "metadata": {"file_size": 4771, "chunk_index": 25, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus:", "Proposal Form:", "Chapter Introduction", "Key Terms"]}}
{"chunk": "facility of Nomination is available to the proposer, the Agent shall inform him/ her\nof the provisions of Section 39 of the Act and encourage the proposer to avail the\nfacility.Aspects related to the personal financial planning of the life proposed including his/\nher work span, projected income and expenses, as well as needs for savings and\ninvestment, health, retirement and insurance may also be asked in the Life\nInsurance Proposal Form.53**Age Proof:** Age being an important factor for assessing the risk profile of the life to\nbe insured, Life insurers collect documentary evidence to verify correct age. Valid\nage proofs may be standard or non-standard, as discussed in Chapter 7.Life insurers look into the following documents as well.**a)** **Agent’s Confidential Report**The agent is the primary underwriter. All material facts and particulars about the\npolicyholder, relevant to risk assessment, need to be revealed by the agent in his/\nher report. This means that matters of health, habits, occupation, income and\nfamily details need to be mentioned in the report.**b)** **Medical Examiner’s report**In many cases, the life to be insured has to be medically examined by a doctor who\nis empanelled by the insurance company. Details of physical features like height,\nweight, blood pressure, cardiac status etc. are recorded and mentioned by the\ndoctor in his report called the medical examiner’s report. The underwriter of the\ninsurance company thereby gets an account of the current health position of the\nlife to be insured.Many proposals are underwritten and accepted for insurance without calling for a\nmedical examination. They are known as non–medical cases. The medical\nexaminer’s report is required typically when the proposal cannot be considered\nunder non-medical underwriting because the sum proposed or the age of the\nproposed life is high or there are certain characteristics which are revealed in the\nproposal, which call for examination and report by a medical examiner.**c)** **Moral Hazard report**Moral Hazard is the likelihood that a client's behaviour might change as a result of\npurchasing a life insurance policy and such a change would increase the chance of\na loss. This is one factor that Life insurance underwriters take into account seriously\nwhen assessing the risk.Life insurance companies seek to guard against the possibility of individuals seeking\nto make a profit from the purchase of life insurance through actions like ending\none’s own life or the life of another. Life insurance underwriters would thus look\nfor any factors which might suggest such hazard. For this purpose, the company may\nrequire that a Moral Hazard Report has to be submitted by an official of the\ninsurance company.**Example**Vikas recently purchased a life insurance policy. He then decided to go on a skiing\nexpedition at a site which was touted to be one of the most dangerous skiing places\non earth. In the past he had refused to undertake such expeditions.54**B. Policy Stage Documentation****1.** **First Premium Receipt**An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR).\n**The FPR is the evidence that the policy contract has begun.** The first premium\nreceipt contains the following information:i. Name and address of the life assured\nii. Policy number\niii. Premium amount paid\niv. Method and frequency of premium payment\nv. Next due date of premium payment\nvi. Date of commencement of the risk\nvii. Date of final maturity of the policy\nviii.Date of payment of the last premium\nix. Sum assuredAfter the issue of the FPR, the insurance company will issue subsequent premium\nreceipts when it receives further premiums from the proposer. These receipts are\nknown as renewal premium receipts (RPR). The RPRs act as proof of payment in the\nevent of any disputes related to premium payment.**2.** **Policy Document**The policy document is the most important document associated with insurance. **It**\n**is evidence of the contract between the assured and the insurance company.** It\nis not the contract itself. If the policy document is lost by the policy holder, it does\nnot affect the insurance contract. The insurance company will issue a duplicate\npolicy without making any changes to the contract. The policy document has to be\nsigned by a competent authority and should be stamped according to the Indian\nStamp Act. Life insurers are very careful while designing the policy document\nbecause they bear onus of responsibility for any ambiguity or confusion that may\narise in the interpretation of its wordings.The standard policy document typically has three parts:**a)** **Policy Schedule**The policy schedule forms the first part. It is usually found on the face page of\nthe policy. The schedules of life insurance contracts would be generally similar.", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Age Proof:", "chunk_id": "Final IC 38 - CA_Life - English_026", "metadata": {"file_size": 4771, "chunk_index": 26, "chunk_tokens": 991, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Policy Schedule", "B. Policy Stage Documentation", "Example", "Policy Document"]}}
{"chunk": "receipts when it receives further premiums from the proposer. These receipts are\nknown as renewal premium receipts (RPR). The RPRs act as proof of payment in the\nevent of any disputes related to premium payment.**2.** **Policy Document**The policy document is the most important document associated with insurance. **It**\n**is evidence of the contract between the assured and the insurance company.** It\nis not the contract itself. If the policy document is lost by the policy holder, it does\nnot affect the insurance contract. The insurance company will issue a duplicate\npolicy without making any changes to the contract. The policy document has to be\nsigned by a competent authority and should be stamped according to the Indian\nStamp Act. Life insurers are very careful while designing the policy document\nbecause they bear onus of responsibility for any ambiguity or confusion that may\narise in the interpretation of its wordings.The standard policy document typically has three parts:**a)** **Policy Schedule**The policy schedule forms the first part. It is usually found on the face page of\nthe policy. The schedules of life insurance contracts would be generally similar.\nThey would normally contain the following information:55**Diagram 1:** **Policy document components**i. Name of the insurance companyii. Some common details of a policy are: Policy owner’s name and address\n Date of birth and age last birthday\n Plan and term of policy contract\n Sum assured\n Amount of premium\n Premium paying term\n Date of commencement, date of maturity and due date of last premium\n Whether policy is with or without profits\n Name of nominee\n Mode of premium payment – yearly; half yearly; quarterly; monthly; viadeduction from salary\n The policy number – which is the unique identity number of the policycontractiii. The insurer’s promise to pay. The events on the happening of which and theamounts that are promised to be paid. This forms the heart of the insurance\ncontractiv. The signature of the authorised signatory and policy stampv. The address of the local Insurance Ombudsman.**b)** **Standard Provisions**The second component of the policy document is made up of standard policy\nprovisions, such as relating to proof of age, premium payment grace period etc.\nwhich are normally present in all life insurance contracts. Some of these\nprovisions may not be applicable in the case of certain kinds of contracts, like\nterm, single premium or non-participating (with profits) policies. These standard\nprovisions define the rights and privileges and other conditions, which are\napplicable under the contract.**c)** **Specific Policy Provisions**The third part of the policy document consists of specific policy provisions that\nare specific to the individual policy contract. These may be printed on the face\nof the document or inserted separately in the form of an attachment.56While standard policy provisions, like days of grace or non-forfeiture in case of\nlapse, are often statutorily provided under the contract, specific provisions are\ngenerally linked to the particular contract between the insurer and the insured.**Example**A clause precluding death due to pregnancy for a lady who is expecting at the time\nof writing the contract.**Test Yourself 1**What does a first premium receipt (FPR) signify? Choose the most appropriate\noption.I. Free-look period has ended\nII. It is evidence that the policy contract has begun\nIII. Policy cannot be cancelled now\nIV. Policy has acquired a certain cash value.**C. Policy conditions and privileges****Grace Period**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period. Every life insurance contract undertakes to pay the death benefit on\nthe condition that the premiums have been paid up to date and the policy is in\nforce. The “Grace Period” clause grants the policyholder an additional period of\ntime to pay the premium after it has become due.The premium however remains due and if the policyholder dies during this period,\nthe insurer deducts the premium from the death benefit. If premiums remain unpaid\neven after the grace period is over, the policy would then be considered lapsed and\nthe company is not under obligation to pay the death benefit. The only amount\npayable would be whatever is applicable under the non-forfeiture provisions.**Important****Lapse and Reinstatement/ Revival**We have already seen that a policy may be said to be in lapse condition if premium\nhas not been paid even during the days of grace. The good news is that most lapsed\nlife insurance policies can be reinstated [revived]. As per IRDAI Product Regulations,", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Policy Document", "chunk_id": "Final IC 38 - CA_Life - English_027", "metadata": {"file_size": 4771, "chunk_index": 27, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Grace Period", "Policy Schedule", "Diagram 1:", "Specific Policy Provisions", "Example"]}}
{"chunk": "otherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period. Every life insurance contract undertakes to pay the death benefit on\nthe condition that the premiums have been paid up to date and the policy is in\nforce. The “Grace Period” clause grants the policyholder an additional period of\ntime to pay the premium after it has become due.The premium however remains due and if the policyholder dies during this period,\nthe insurer deducts the premium from the death benefit. If premiums remain unpaid\neven after the grace period is over, the policy would then be considered lapsed and\nthe company is not under obligation to pay the death benefit. The only amount\npayable would be whatever is applicable under the non-forfeiture provisions.**Important****Lapse and Reinstatement/ Revival**We have already seen that a policy may be said to be in lapse condition if premium\nhas not been paid even during the days of grace. The good news is that most lapsed\nlife insurance policies can be reinstated [revived]. As per IRDAI Product Regulations,\na Non-Linked Policy can be revived within 5 years from the date of unpaid premium,\nwhereas a Linked Policy can be revived within 3 years.**Definition**Reinstatement is the process by which a life insurance company puts back into force\na policy that has either been terminated because of non-payment of premiums or\nhas been continued under one of the non-forfeiture provisions.A revival of the policy cannot however be an unconditional right of the insured. It\ncan be accomplished only under certain conditions:57**i.** **Revival application within specific time period:** The policy owner must\ncomplete the revival application within the time frame stated in the\nprovision for such reinstatement, say five years from the date of lapsation.**ii.** **Satisfactory evidence of continued insurability:** The insured must presentto the insurance company satisfactory evidence of continued insurability of\nthe insured. Not only must her health be satisfactory but other factors such\nas financial income and morals must not have deteriorated substantially.**iii.** **Payment of overdue premiums with interest:** The policy owner is requiredto make payment of all overdue premiums with interest from due date of\neach premium.**iv.** After having evaluated the evidence of continued insurability the insurermay decide to revive the policy as per existing terms and premium or even\noffer revival with increase in premium or reduced risk cover or both.**Perhaps the most significant of the above conditions is that which requires**\n**evidence of insurability at revival.** The type of evidence called for would depend\non the circumstances of each individual policy. If the policy has been in a lapsed\nstate for a very short period of time, the insurer may reinstate the policy without\nany evidence of insurability or may only require a simple statement from the insured\ncertifying that he is in good health.The company may however require a medical examination or other evidence of\ninsurability under certain circumstances:i. If the grace period has expired since long and the policy is in a lapsedcondition for say, nearly a year.ii. If the insurer has reason to suspect that a health or other problem may bepresent. Fresh medical examination may also be required if the sum assured\nor face amount of the policy is large.**Important**Revival of lapsed policies is an important service function that life insurers seek to\nactively encourage since policies in lapsed state may do little good to either insurer\nor policyholder.**Non-forfeiture provisions**The Insurance Act, 1938 (Section 113) protects policies (which have acquired\nsurrender value), from lapsation, by keeping them alive to the extent of paid-up\nsum assured even without payment of further premiums. This is because the\npolicyholder has a claim to the cash value accumulated under the policy.**a)** **Surrender values**Surrender value is the amount you stand to get when you decide to make a\npremature exit from the plan, i.e. when you have decided to completely withdraw\nor terminate the policy before its maturity.Life insurers normally have a chart that lists the surrender values at various times\nand also the method that will be used for calculating the surrender values. The58formula takes into account the type and plan of insurance, age of the policy and\nthe length of the policy premium-paying period.The actual amount of cash one gets in hand on surrender may be different from the\nsurrender value amount prescribed in the policy. The actual amount may differ on\naccount of any accrued bonuses, recoveries etc.**Guaranteed Surrender Value [GSV]:** The law in India as per IRDAI Guidelines\n(revised in 2019) provides for a Guaranteed Surrender Value [GSV] to be payable if", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "e58", "section": "Important", "chunk_id": "Final IC 38 - CA_Life - English_028", "metadata": {"file_size": 4771, "chunk_index": 28, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Non-forfeiture provisions", "Payment of overdue premiums with interest:", "Important", "Satisfactory evidence of continued insurability:", "Definition"]}}
{"chunk": "surrender value), from lapsation, by keeping them alive to the extent of paid-up\nsum assured even without payment of further premiums. This is because the\npolicyholder has a claim to the cash value accumulated under the policy.**a)** **Surrender values**Surrender value is the amount you stand to get when you decide to make a\npremature exit from the plan, i.e. when you have decided to completely withdraw\nor terminate the policy before its maturity.Life insurers normally have a chart that lists the surrender values at various times\nand also the method that will be used for calculating the surrender values. The58formula takes into account the type and plan of insurance, age of the policy and\nthe length of the policy premium-paying period.The actual amount of cash one gets in hand on surrender may be different from the\nsurrender value amount prescribed in the policy. The actual amount may differ on\naccount of any accrued bonuses, recoveries etc.**Guaranteed Surrender Value [GSV]:** The law in India as per IRDAI Guidelines\n(revised in 2019) provides for a Guaranteed Surrender Value [GSV] to be payable if\nall premiums have been paid for at least two consecutive years. This Value arrived\nas a percentage (say 30%) of premiums paid is called Guaranteed Surrender Value.\nThe value depends on the duration of premium paid. The GSV is required to be\nmentioned in the policy document.**b)** **Policy loans**Life insurance policies that accumulate a cash value also have a provision to grant\nthe policyholder the right to borrow money from the insurer by using the cash value\nof the policy as a security for the loan. The policy loan is usually limited to a\npercentage of the policy’s surrender value (say 90%). Note that the policyholder\nborrows from his own account. He or she would have been eligible to get the amount\nif the policy had been surrendered. In that case the insurance would have been\nterminated.Insurers charge interest on policy loans, which are payable semi-annually or\nannually. Although loan and interest are repayable periodically, If the loan has not\nbeen repaid, the insurer deducts the amount of outstanding (unpaid) loan and\ninterest from the policy benefit that is payable. A loan provides relief to\npolicyholder in case of financial emergencies while keeping the insurance alive.Since the loan is granted on the policy being kept as security, the policy has to be\nassigned (explained in later para) in favour of the insurer. Where the policyholder\nhas nominated (explained in later para) someone to receive the money in the event\nof death of the insured, this nomination shall not be cancelled but the nominee’s\nright will be affected to the extent of the insurer’s interest in the policy.**Example**Arjun bought a life insurance policy wherein the total death claim payable under\nthe policy was Rs. 2.5 lakhs. Arjun’s total outstanding loan and interest under the\npolicy amounts to Rs. 1.5 lakhs. Hence in the event of Arjun’s death, the nominee\nwill be eligible to get the balance of Rs. 1 lakh.**Special policy provisions and endorsements****a)** **Nomination**i. Under Section 39 of the Insurance Act 1938, the holder of a policy on his/her own life may nominate the person or persons to whom the money secured\nby the policy shall be paid in the event of his/her death.\nii. The life assured can **nominate one or more than one person** as nominees.\niii. Nominees are entitled for **valid discharge** and have to **hold the money as a****trustee** on behalf of those entitled to it.\niv. Nomination can be done either **at the time the policy is bought or later** atany time before the maturity of the Policy.59v. Nomination may be incorporated in the text of the Policy itself or by anendorsement on the Policy. Nominations need be communicated to the\ninsurer and registered by the insurer in the records relating to the Policy.\nvi. Nomination can be cancelled or changed at any time before Policy matures,by an endorsement or a further endorsement or a will as the case may be.**Important**Nomination only gives the nominee the right to receive the policy monies from\nthe insurer in the event of the death of the life assured. However, the money\nwould be belonging to the legal heir only. **A nominee does not have any right**\n**to the whole (or part) of the claim.** However vide Section 39(7) of Insurance\nAct,1938, in respect of all policies maturing for payment after 26 [th] December,\n2014, nomination in favour of parents, spouse, children or spouse and children", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "e58", "section": "Surrender values", "chunk_id": "Final IC 38 - CA_Life - English_029", "metadata": {"file_size": 4771, "chunk_index": 29, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Policy loans", "Special policy provisions and endorsements", "Example", "Important", "A nominee does not have any right"]}}
{"chunk": "iv. Nomination can be done either **at the time the policy is bought or later** atany time before the maturity of the Policy.59v. Nomination may be incorporated in the text of the Policy itself or by anendorsement on the Policy. Nominations need be communicated to the\ninsurer and registered by the insurer in the records relating to the Policy.\nvi. Nomination can be cancelled or changed at any time before Policy matures,by an endorsement or a further endorsement or a will as the case may be.**Important**Nomination only gives the nominee the right to receive the policy monies from\nthe insurer in the event of the death of the life assured. However, the money\nwould be belonging to the legal heir only. **A nominee does not have any right**\n**to the whole (or part) of the claim.** However vide Section 39(7) of Insurance\nAct,1938, in respect of all policies maturing for payment after 26 [th] December,\n2014, nomination in favour of parents, spouse, children or spouse and children\nby the owner of the policy on his/ own life makes the nominees beneficially\nentitled to the amount payable by the insurance company.Where the nominee is a minor, the policy holder needs to appoint an appointee.\nThe appointee needs to sign the policy document to show his or her consent to\nacting as an appointee. The appointees lose their status when the nominee\nreaches majority age. The policy holder can change the appointee at any time.\nIf no appointee is given, and the nominee is a minor, then on the death of the\nlife assured, the death claim is paid to the legal heirs of the policyholder.Where more than one nominee is appointed, the death claim will be payable to\nthem jointly, or to the survivor or survivors. Nominations made after the\ncommencement of the policy have to be intimated to the insurers to be\neffective.Section 39(11) of the Insurance Act says that where a policyholder dies after the\nmaturity of the policy but the proceeds and benefit of his policy has not been\nmade to him because of his death, his nominee shall be entitled to the proceeds\nand benefit of his policy.**Diagram 2:** **Provisions related to nomination****b)** **Assignment**Since life insurance policy carries a promise or a debt that the insurance\ncompany owes the insured, it is considered a security for money or property.60We have seen that loan is advanced against by the insurers against the surrender\nvalue of the policy. Similarly, many financial institutions including banks\nadvance loan against the security of the insurance policy by having it assigned\nit in their favour.The term assignment ordinarily refers to transfer of property by writing in favour\nof another person.The assignment of a life insurance policy implies the act of transferring the\nrights, title and interest in the policy (as property) from one person to another.\nThe person who transfers the rights is called **assignor** and the person to whom\nproperty is transferred is called **assignee** . On assignment, the ownership of the\npolicy changes and hence nomination is cancelled, except when assignment is\nmade to the insurance company for a policy loan.There are two types of assignments.**Diagram 3:** **Types of Assignment**|Conditional Assignment|Absolute Assignment|\n|---|---|\n|Conditional assignment<br>provides that the policy<br>shall revert back to the<br>life assured on his or<br>her surviving the date of<br>maturity or on death of<br>the assignee.| Absolute assignment provides that all rights, title and<br>interest which the assignor has in the policy are<br>transferred to the assignee without reversion to the<br>former or his/ her estate in any event.<br> The policy thus vests absolutely with the assignee. The<br>latter can deal with the policy in whatever manner he or<br>she likes without the consent of the assignor.|Absolute assignment is more commonly seen in many commercial situations\nwhere the policy is typically mortgaged against a debt assumed by the", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Important", "chunk_id": "Final IC 38 - CA_Life - English_030", "metadata": {"file_size": 4771, "chunk_index": 30, "chunk_tokens": 857, "has_examples": true, "has_tables": true, "key_concepts": ["Types of Assignment", "Provisions related to nomination", "Important", "Diagram 3:", "A nominee does not have any right"]}}
{"chunk": "The person who transfers the rights is called **assignor** and the person to whom\nproperty is transferred is called **assignee** . On assignment, the ownership of the\npolicy changes and hence nomination is cancelled, except when assignment is\nmade to the insurance company for a policy loan.There are two types of assignments.**Diagram 3:** **Types of Assignment**|Conditional Assignment|Absolute Assignment|\n|---|---|\n|Conditional assignment<br>provides that the policy<br>shall revert back to the<br>life assured on his or<br>her surviving the date of<br>maturity or on death of<br>the assignee.| Absolute assignment provides that all rights, title and<br>interest which the assignor has in the policy are<br>transferred to the assignee without reversion to the<br>former or his/ her estate in any event.<br> The policy thus vests absolutely with the assignee. The<br>latter can deal with the policy in whatever manner he or<br>she likes without the consent of the assignor.|Absolute assignment is more commonly seen in many commercial situations\nwhere the policy is typically mortgaged against a debt assumed by the\npolicyholder, like a housing loan.**Conditions for valid assignment**Let us now look at the conditions that are necessary for a valid assignment.i. The assignor must have **absolute right and title or assignable interest** tothe policy being assigned.ii. The assignment should **not be opposed to any law in force** .iii. Assignee can do another assignment, but cannot do nomination becauseassignee is not the life assured.**Important** : A life insurance policy can be assigned wholly or partially The assignment must be signed by the transferor or assignor or dulyauthorized agent and attested by at least one witness.61 The transfer of title has to be specifically set forth in the form of anendorsement on the policy or a separate instrument.\n The policyholder must give notice of the assignment to the insurer,without which the assignment will not be valid. Section 38(2) specifies that an insurer may accept the assignment, ordecline the same, if it has sufficient reason to believe that such\nassignment is not bona fide or is not in the interest of the policyholder\nor in public interest or is for the purpose of trading of insurance policy. However, the insurer shall, before refusing to act upon the endorsement,record in writing the reasons for such refusal and communicate the same\nto the policyholder not later than thirty days from the date of the\npolicyholder giving notice of such transfer or assignment.**Diagram 4:** **Provisions related to assignment of insurance policies****Commonly extended privileges to policyholders**a) **Duplicate Policy:**A life insurance policy document is only an evidence of a promise. Loss or\ndestruction of the policy document does not in any way absolve the company of\nits liability under the contract. Life insurance companies generally have\nstandard procedures to be followed in case of loss of the policy document.Normally the office would examine the case to see if there is any reason to doubt\nthe alleged loss. Satisfactory proof may need to be produced that the policy has\nbeen lost and not dealt with in any manner. Generally the claim may be settled\non the claimant furnishing an indemnity bond with or without surety.If payment is shortly due and the amount to be paid is high, the office may also\ninsist that an advertisement be placed in a national paper with wide circulation,\nreporting the loss. A duplicate policy may be issued on being sure that there is\nno objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year of62the policy, except for change in the mode of premium or alterations which are\nof a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a separate\npaper. Other alterations, which require a material change in policy conditions,\nmay require the cancellation of existing policies and issue of new policies.Some of the main types of alterations that are permitted arei. Change in certain classes of insurance or term [where risk is not increased]\nii. Reduction in the sum assured\niii. Change in the mode of payment of premium\niv. Change in the date of commencement of the policy\nv. Splitting up of the policy into two or more policies", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "f62", "section": "Diagram 3:", "chunk_id": "Final IC 38 - CA_Life - English_031", "metadata": {"file_size": 4771, "chunk_index": 31, "chunk_tokens": 1009, "has_examples": false, "has_tables": true, "key_concepts": ["Commonly extended privileges to policyholders", "Types of Assignment", "Conditions for valid assignment", "Important", "Diagram 3:"]}}
{"chunk": "no objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year of62the policy, except for change in the mode of premium or alterations which are\nof a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a separate\npaper. Other alterations, which require a material change in policy conditions,\nmay require the cancellation of existing policies and issue of new policies.Some of the main types of alterations that are permitted arei. Change in certain classes of insurance or term [where risk is not increased]\nii. Reduction in the sum assured\niii. Change in the mode of payment of premium\niv. Change in the date of commencement of the policy\nv. Splitting up of the policy into two or more policies\nvi. Removal of an extra premium or restrictive clause\nvii. Change from without profits to with profits plan\nviii. Correction in name\nix. Settlement option for payment of claim and grant of double accident benefitThese alterations generally do not involve an increase in the risk. There are\nother alterations in policies that are not allowed. These may be alterations that\nhave the effect of lowering the premium. Examples are extension of the\npremium paying term; change from with profit to without profit plans; change\nfrom one class of insurance to another, where it increases the risk: and increase\nin the sum assured.**Test Yourself 2**Under what circumstances would the policyholder need to appoint an appointee?I. Insured is minorII. Nominee is a minor\nIII. Policyholder is not of sound mind\nIV. Policyholder is not married**Summary**Matters of health, habits and occupation, income and family details need to be\nmentioned by the agent in the agent’s report.Details pertaining to physical features like height, weight, blood pressure,\ncardiac status etc. are recorded and mentioned by the doctor in his/ her report\ncalled the medical examiner’s report.Moral hazard is the likelihood that a client's behaviour might change as a result\nof purchasing a life insurance policy and such a change would increase the\nchance of a loss.An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR). The FPR is the evidence that the policy contract has\nbegun.63The policy document is the most important document associated with insurance.\nIt is the evidence of the contract between the assured and the insurancecompany.The standard policy document typically has three parts which are the policy\nschedule, standard provisions and the policy’s specific provisions.The grace period clause grants the policyholder an additional period of time to\npay the premium after it has become due.Reinstatement is the process by which a life insurance company puts back into\nforce a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A policy loan is different from an ordinary commercial loan in two respects,\nfirstly the policy owner is not legally obligated to repay the loan and the insurer\nneed not perform a credit check on the insured.Nomination is where the life assured proposes the name of the person(s) to\nwhich the sum assured should be paid by the insurance company after their\ndeath.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except for\nsome simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period\n10. Policy lapse\n11. Policy revival\n12. Surrender value13. Nomination\n14. Assignment**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.64## CHAPTER L-08## LIFE INSURANCE UNDERWRITING**Chapter Introduction**A life insurance agent’s work does not stop once a proposal is secured from a\nprospective customer. The proposal must also be accepted by the insurance", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "f62", "section": "Alteration", "chunk_id": "Final IC 38 - CA_Life - English_032", "metadata": {"file_size": 4771, "chunk_index": 32, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Chapter Introduction", "Key Terms", "Answer 1"]}}
{"chunk": "death.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except for\nsome simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period\n10. Policy lapse\n11. Policy revival\n12. Surrender value13. Nomination\n14. Assignment**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.64## CHAPTER L-08## LIFE INSURANCE UNDERWRITING**Chapter Introduction**A life insurance agent’s work does not stop once a proposal is secured from a\nprospective customer. The proposal must also be accepted by the insurance\ncompany and result in a policy.Every life insurance proposal has to pass through a gateway where the life insurer\ndecides whether to accept the proposal and if so, on what terms. In this chapter we\nshall know more about the process of underwriting and the elements involved in theprocess.**Learning Outcomes**65**A.** **Underwriting – Basic concepts****1.** **Underwriting purpose**Underwriting has two purposesi. To assess the risk, classify the risk and decide the terms of acceptance or todecline the risk.\nii. To prevent anti-selection against the insurer**Definition**The term **underwriting** refers to the process of evaluating each proposal for life\ninsurance in terms of the degree of risk it represents and then deciding whether or\nnot to grant insurance and on what terms.**Anti-selection** is the tendency of people, who suspect or know that their chance of\nexperiencing a loss is high, to seek out insurance with a view to gain in the process.**Example**If life insurers were to be not selective about whom they offered insurance, there\nis a chance that people with serious ailments like heart problems or cancer, who\ndid not expect to live long, would seek to buy insurance.In other words, if an insurer did not exercise underwriting discretion, it would be\nselected against and may suffer losses in the process.**2.** **Equity among risks**The term “Equity” means that applicants who are exposed to similar degrees of risk\nmust be placed in the same premium class. The Mortality table, used to determine\npremiums, represents the mortality experience of standard lives or average risks.\nThey include the vast majority of individuals who propose to take life insurance.**a)** **Risk classification**To usher equity, the underwriter engages in a process known as **risk classification**\ni.e. individual lives are categorised and assigned to different risk classes depending\non the degree of risks they pose. There are four such risk classes.**Diagram 1:** **Risk classification**66**i.** **Standard lives**\nThese consist of those whose anticipated mortality corresponds to the standard\nlives represented by the mortality table.**ii.** **Preferred risks**\nThese are the ones whose anticipated mortality is significantly lower than\nstandard lives and hence could be charged a lower premium.**iii.** **Substandard lives**\nThese are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable cost.\nSometimes an individual’s proposal may also be temporarily declined if he or\nshe has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes\ninformation gathering by an agent or company representative to decide whether\nan applicant is suitable for granting insurance coverage. The agent plays a\ncritical role as primary underwriter. He is in the best position to know the life\nto be insured.Many insurance companies may require that agents complete a statement or a\nconfidential report, asking for specific information, opinion and", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "e13", "section": "Key Terms", "chunk_id": "Final IC 38 - CA_Life - English_033", "metadata": {"file_size": 4771, "chunk_index": 33, "chunk_tokens": 986, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Field or Primary level", "Equity among risks", "Substandard lives", "Chapter Introduction"]}}
{"chunk": "These are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable cost.\nSometimes an individual’s proposal may also be temporarily declined if he or\nshe has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes\ninformation gathering by an agent or company representative to decide whether\nan applicant is suitable for granting insurance coverage. The agent plays a\ncritical role as primary underwriter. He is in the best position to know the life\nto be insured.Many insurance companies may require that agents complete a statement or a\nconfidential report, asking for specific information, opinion and\nrecommendations to be provided by the agent with respect to the proposed life.**Fraud monitoring and role of agent as primary underwriter**Much of the decision with regard to acceptance of a risk depends on the facts\nthat have been disclosed by the proposer in the proposal form. It may be difficult\nfor an underwriter who is sitting in the underwriting department to know\nwhether these facts are untrue and have been fraudulently misrepresented with\ndeliberate intent to deceive.The agent plays a significant role here. He or she is in the best position to ensure\nthat the facts that have been represented are true, due to his/ her direct and\npersonal contact with the proposed life.67**b)** **Underwriting at the Department level**The main level of Underwriting is at the Department or Office level. It involves\nspecialists and persons who consider all the relevant data on the case to decide\nwhether to accept a proposal for Life insurance and on what terms.**4.** **Methods of underwriting****Diagram 2:** **Methods of Underwriting**Underwriters may use two types of methods for the purpose:|Judgment Method|Numerical Method|\n|---|---|\n|~~Under~~<br>~~this~~<br>~~method~~<br>subjective judgment is used,<br>especially when deciding on<br>a case that is complex.<br>|~~Under this method underwriters assign positive~~<br>rating points for all negative or adverse factors<br>(negative points for any positive or favourable<br>factors).<br>|\n|~~**Example:**Deciding whether~~<br>life insurance can be given to<br>a <br>person<br>staying<br>in<br>a <br>disturbed country/ area.<br>|~~**Example:** A person with history of cardiac~~<br>ailments and/ or early deaths in the family may<br>be assigned positive points. The total number of<br>points so assigned will help an underwriter in<br>deciding the extent of risk involved.<br>|\n|~~In such situations, the~~<br>department may get the<br>expert opinion of a medical<br>doctor who is also called a<br>medical referee.|~~The sum total of these positive/negative points,~~<br>and/or is referred to as Extra Mortality Rating<br>(EMR). Higher EMR indicates that the life is<br>substandard.<br>If<br>the<br>EMR<br>is<br>very<br>high,<br>underwriters may decline insurance.|**Underwriting Decisions**Let us now consider the various kinds of decisions that underwriters may take with\nregard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. This ratingindicates that the risk is accepted at the same rate of premium as would\napply to an ordinary or standard life.68**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing with thelarge majority of sub-standard risks. It involves charging an extra over the\ntabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount of\nbenefit it has to pay in the event of a claim.\n**Example: Consider the case of an insured who** has suffered and recovered\nfrom a certain disease like TB. Imposition of Lien would imply that if this\nperson were to die from a relapse of the TB, within a given period, only a", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Declined lives", "chunk_id": "Final IC 38 - CA_Life - English_034", "metadata": {"file_size": 4771, "chunk_index": 34, "chunk_tokens": 1007, "has_examples": true, "has_tables": true, "key_concepts": ["Example: Consider the case of an insured who", "Underwriting at the Department level", "Methods of Underwriting", "Methods of underwriting", "Acceptance with a lien on the sum assured:"]}}
{"chunk": "regard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. This ratingindicates that the risk is accepted at the same rate of premium as would\napply to an ordinary or standard life.68**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing with thelarge majority of sub-standard risks. It involves charging an extra over the\ntabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount of\nbenefit it has to pay in the event of a claim.\n**Example: Consider the case of an insured who** has suffered and recovered\nfrom a certain disease like TB. Imposition of Lien would imply that if this\nperson were to die from a relapse of the TB, within a given period, only a\ndecreased amount of death benefit may be payable.**d)** **Acceptance with a restrictive clause:** For certain kinds of hazards arestrictive clause may be applied which limits death benefit in the event of\ndeath under certain circumstances.**Example** is a pregnancy clause imposed on pregnant ladies that limits\ninsurance payable in the event of pregnancy related deaths occurring within\nsay three months of delivery.\n**e)** **Decline or postpone:** Finally, a life insurance underwriter may decide todecline or reject a proposal for insurance. This would happen when there\nare certain health/ other features which are so adverse that they\nconsiderably increase the risk.\n**Example:** An individual who suffers from cancer and has little chance of\nremission, would be a candidate for rejection,Similarly in some cases it may be prudent to postpone acceptance of the risk\nuntil such time as the situation has improved and become more favourable.69**Example**A lady who has just had a hysterectomy operation may be asked to wait for a few\nmonths before insurance on her life is allowed, to allow any post operation\ncomplications that may have arisen to disappear.**Test Yourself 1**Which of the following cases is likely to be declined or postponed by a life insurer?I. A healthy 18 year old\nII. A sports person\nIII. A person suffering from AIDS\nIV. A housewife with no income of her own**B.** **Non-medical underwriting****1.** **Non-medical underwriting**A large number of life insurance proposals may typically get selected for insurance\nwithout conducting a medical examination to check the insurability of a life to be\ninsured. Such cases are termed as **non-medical proposals** .In view of multiple reasons including the costs involved, in some types of policies,\nLife insurers grant insurance without insisting on a medical examination**2.** **Conditions for non-medical underwriting**However non-medical underwriting calls for conditions like applicability to certain\nclass of lives, certain plans of insurance, certain upper limits of sum insured, entry\nage limits, maximum term of insurance etc.to be followed.\n**3.** **Rating factors in underwriting**Rating factors refer to various aspects related to financial situation, life style,\nhabits, family history, personal history of health and other personal circumstances\nin the prospective insured’s life that may pose a hazard and increase the risk.\nUnderwriting involves identifying these hazards and their likely impact and\nclassifying the risk accordingly.Rating factors may be broadly divided into two – those which contribute to moral\nhazard and those which contribute to physical [medical] hazards. Life insurance\ncompanies often divide their underwriting into categories accordingly. Factors like\nincome, occupation, lifestyle and habits, which contribute to moral hazard, are\nassessed as part of **financial underwriting**, while medical aspects of health fall\nunder **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face some\nproblems with respect to moral hazard. This is because many women in Indian\nsociety are victims of male domination and social exploitation. Evils like dowry\ndeaths exist even today. Longevity of women can also be affected from problems\nconnected with pregnancy.70Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only to\nthose who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**\nMinors have no contracting power of their own. Hence a proposal on the life of\na minor has to be submitted by another person who is related to the minor in\nthe capacity of a parent or legal guardian. It would also be necessary to ascertain", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Acceptance at ordinary rates (OR)", "chunk_id": "Final IC 38 - CA_Life - English_035", "metadata": {"file_size": 4771, "chunk_index": 35, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Example: Consider the case of an insured who", "Acceptance with a restrictive clause:", "Minors", "Acceptance with a lien on the sum assured:", "Test Yourself 1"]}}
{"chunk": "companies often divide their underwriting into categories accordingly. Factors like\nincome, occupation, lifestyle and habits, which contribute to moral hazard, are\nassessed as part of **financial underwriting**, while medical aspects of health fall\nunder **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face some\nproblems with respect to moral hazard. This is because many women in Indian\nsociety are victims of male domination and social exploitation. Evils like dowry\ndeaths exist even today. Longevity of women can also be affected from problems\nconnected with pregnancy.70Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only to\nthose who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**\nMinors have no contracting power of their own. Hence a proposal on the life of\na minor has to be submitted by another person who is related to the minor in\nthe capacity of a parent or legal guardian. It would also be necessary to ascertain\nthe need for insurance, since minors usually have no earned income of their\nown. Three conditions would generally be sought when considering insurance for\nminors:**i.** **Whether they have a properly developed physique**Poor physique can be a result of malnutrition or other health problems posing\ngrave risks.\n**ii.** **Proper family history and personal history**If there are adverse indicators here, it may pose risks.\n**iii.** **Whether the family is adequately insured**It is necessary to check if the family has a culture of insurance. One must be\non guard if no other member of the minor’s family has been insured. Amount\nof insurance is generally linked to that of parents.\n**c)** **Large sums assured**\nAn underwriter needs to be wary when the amount of insurance is very large\nrelative to annual income of the proposed insured. Generally sum assured may\nbe assumed to be around ten to twelve times one’s annual income. If the ratio\nis much higher than this, it raises the possibility of selection against the insurer.**Example**\nIf an individual has an annual income of Rs. 5 lakhs and proposes for a life\ninsurance cover of Rs. 3 crores, it raises a cause for concern.Typically concerns can arise in such instances because of the possibility that\nsuch a large amount of insurance is being proposed in anticipation of suicide or\nas a result of expected deterioration in health. A third reason for such large\nsums could be excessive misselling by the sales person.Large sums assured would also mean premiums increasing in proportion and raise\nthe question of whether the payment of such premiums would be continued. In\ngeneral, the premium payable should be within one third of an individual’s\nannual income**d)** **Age**\nMortality risk is closely related to age. The underwriter needs to be careful when\nconsidering insurance for people of advanced ages.**Example**\nIf the insurance is being proposed for the first time after age 50, there is a need\nto suspect moral hazard and enquire about why such insurance was not taken\nearlier.71We must also note that chances of occurrence of degenerative diseases like\ndiseases of the heart and kidney failure increase with age and become higher at\nolder ages. Life insurers may also seek for some special reports when proposals\nare submitted for high sums assured/ advanced ages or a combination of both.**Example**\nExamples of such reports are ECG; EEG; X-Ray of the chest and Blood Sugar test.\nThese tests may reveal deeper insights about the health of the proposed life\nthan the answers given in the proposal or an ordinary medical examination can\nprovide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of the\nlife proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Female insurance", "chunk_id": "Final IC 38 - CA_Life - English_036", "metadata": {"file_size": 4771, "chunk_index": 36, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Minors", "Occupation", "Accidental hazards", "Example"]}}
{"chunk": "These tests may reveal deeper insights about the health of the proposed life\nthan the answers given in the proposal or an ordinary medical examination can\nprovide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of the\nlife proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus\nartistes, scaffolding workers, demolition experts and film stunt artistes.**ii.** **Health hazards** arise when the nature of the job is such as to give rise to\npossibility of medical impairment. There are various kinds of health hazards.72 Some jobs like that of **rickshaw pullers** involve a lot of physical strain andimpact the respiratory system. Situations where one may be exposed to **toxic substances** like mining dustor carcinogenic substances (that cause cancer) like chemicals and nuclear\nradiation. Working in **high pressure environments** like underground tunnels or deepsea, can cause acute decompression sickness. Finally, **overexposure** to certain job situations (like sitting crampedbefore a computer or working in a high noise setting) can impair\nfunctioning of certain body parts in the longer run.**iii.** **Moral hazard** can arise when a job involves proximity or can cause\npredisposition towards criminal elements or to drugs and alcohol. An example\nis that of a dancer in a nightclub or an enforcer in a liquor bar or the\n‘bodyguard’ of a businessman with suspected criminal links. Again the job\nprofiles of certain individuals like superstar entertainers may lead them to\nintoxicating lifestyles, which sometimes come to tragic ends.When an occupation falls under any such hazardous category, the applicant for\ninsurance may need to complete an occupational questionnaire that asks for\nspecific details of the job, duties involved and risks exposed to. A rating may\nalso be imposed for occupation in the form of a flat extra (for example Rupees\ntwo per thousand sums assured.) Such extra may be reduced or removed when\nthe insured’s occupation changes.**f)** **Lifestyle and habits**Lifestyle and habits are terms, covering a wide range of individual lifestyle\ncharacteristics, which may be brought out in the agent’s confidential reports\nand moral hazard reports, suggesting an exposure to risk. In particular three\nfeatures are important:**Smoking and tobacco use** : Use of tobacco is not only a risk in itself but also\ncontributes to increasing other medical risks. Companies charge differential\nrates today for smokers and non-smokers and users of other forms of tobacco\nusage like _gutkha_ and _paan masala_ .**Alcohol:** Drinking alcohol occasionally or in modest quantities is not considered\na hazard. However, long term heavy drinking can impair liver functioning, affect\nthe digestive system and lead to mental disorders. Alcoholism is also linked with\naccidents, violence, family abuse, depression and suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants. Some\nof these are even illegal and their use indicates criminal disposition and moral\nhazard.73**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical underwriting.\nThey may often call for a medical examiner’s report. Let us look at some of the\nfactors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision****a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Examples", "chunk_id": "Final IC 38 - CA_Life - English_037", "metadata": {"file_size": 4771, "chunk_index": 37, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Moral hazard", "Health hazards", "Occupation", "Accidental hazards"]}}
{"chunk": "accidents, violence, family abuse, depression and suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants. Some\nof these are even illegal and their use indicates criminal disposition and moral\nhazard.73**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical underwriting.\nThey may often call for a medical examiner’s report. Let us look at some of the\nfactors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision****a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to\nanother, say from parents to children.**ii.** **Average longevity of the family** : When the parents have died early onaccount of certain diseases like heart trouble or cancer, it may be a pointer\nthat the offspring may also not live long.**iii.** **Family environment** : Thirdly, the environment in which the family lives cancause exposure to infection and other risks.Life insurers have thus to be careful when entertaining cases of individuals with\nadverse family history. They may call for other reports and may impose an extra\nmortality rating in such cases.74**b)** **Personal history**Personal history refers to past impairments of various systems of the human body\nwhich the life to be insured has suffered from. The proposal form for life\ninsurance typically contains a set of questions which enquire whether the life to\nbe insured has been under treatment for any of these.The major kinds of ailments that are considered by the underwriters include\nCardiovascular diseases, diseases of the respiratory system, malignant tumours/\ncancer, ailments of the renal system, impairments of the endocrine system,\ndiseases of the digestive system like gastric ulcers and cirrhosis of the liver and\ndiseases of the nervous system.**c)** **Personal characteristics**These can also be significant indicators of the tendency to disease.**i.** **Build**A person’s build consists of his height, weight, chest and girth of the abdomen.\nFor given age and height, there is a standard weight that has been defined and\nif the weight is too high or low in relation to this standard weight, we can say\nthat the person is overweight or underweight.Similarly, it is expected that the chest should be expanded at least by four\ncentimetres in a normal person and that the abdominal girth should not be more\nthan one’s expanded chest.**ii.** **Blood pressure**Another indicator is a person’s blood pressure. There are two measures of this Systolic DiastolicWhen the actual readings are much higher than the normal values, we say that\nthe person has high blood pressure or hypertension. When it is too low, it is\ntermed as hypotension. The former can have serious consequences.**iii.** **Urine – Specific gravity**Finally, a reading of the specific gravity of one’s urine can indicate the balance\namong various salts in the urinary system. It can indicate any malfunctioning of\nthe system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought it\nin April 2013. You and your insurance company agree to change the policy to\nofficially start it from April, 2013. In this case, you have backdated the policy.\nUsually, no interest is charged if the policy is backdated by less than a month.Backdating is done for the following purposes:75(i) **Getting a lower premium based on age:** While issuing the policy, insurersconsider the nearest age of the policyholder. It means if you are 32 years\nand 7 months old, the insurer will consider your age as 33 years. This nearest\nage may put you in a higher premium slab. However, if you backdate the\npolicy by 2 months, the insurer will consider your age as 32 years and 5\nmonths only. Now you will be paying lower premiums based on a plan for a", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Substance abuse", "chunk_id": "Final IC 38 - CA_Life - English_038", "metadata": {"file_size": 4771, "chunk_index": 38, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Substance abuse", "Backdating:", "Getting a lower premium based on age:", "Average longevity of the family", "Blood pressure"]}}
{"chunk": "the system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought it\nin April 2013. You and your insurance company agree to change the policy to\nofficially start it from April, 2013. In this case, you have backdated the policy.\nUsually, no interest is charged if the policy is backdated by less than a month.Backdating is done for the following purposes:75(i) **Getting a lower premium based on age:** While issuing the policy, insurersconsider the nearest age of the policyholder. It means if you are 32 years\nand 7 months old, the insurer will consider your age as 33 years. This nearest\nage may put you in a higher premium slab. However, if you backdate the\npolicy by 2 months, the insurer will consider your age as 32 years and 5\nmonths only. Now you will be paying lower premiums based on a plan for a\n32-year old.(ii) **Set the timing of payment:** There are specific professions where theincome flow is not steady. In such a scenario if an individual accidently buys\na life insurance policy in its off-season then the policy can be backdated to\nthe period of maximum earnings. For instance, a farmer may have a\nseasonal income. He would prefer to make insurance payments only after\nhe has received his crop proceedings. In this case, a farmer could backdate\nthe policy to start it in the harvest season.(iii) **To coincide with special dates:** You can backdate the policy to coincidewith your important dates, such as birthday and anniversary. It keeps easy\nfor you to remember your premium due date.(iv) **Early maturity claims** : Backdating reduces the tenure of a policy andfacilitates early maturity. For instance, if a 30-year life insurance cover\nbought on March 2000 is backdated to April 1999, the policy would mature\non April, 2029 instead of March 2030. In case of endowment policies, this\ncould be beneficial as maturity benefits accrue earlier.**Test Yourself 3**Why is heredity history of importance in medical underwriting?I. Rich parents have healthy kids\nII. Certain diseases can be passed on from parents to children\nIII. Poor parents have malnourished kids\nIV. Family environment is a critical factor**Summary**To bring equity, the underwriter engages in risk classification where individual\nlives are categorised and assigned to different risk classes depending on the\ndegree of risks they pose.Underwriting process may be said to take place at two levels: At field level and At underwriting department levelUnderwriting decisions made by underwriters include acceptance of standard\nrisk at standard rates or charging extra for sub-standard risks. Sometimes there\nis acceptance with lien on sum assured or acceptance is based on restrictive\nclauses. Where the risk is large the proposal is declined or postponed.76A large number of life insurance proposals may typically get selected for\ninsurance without conducting a medical examination. Such cases are termed as\nnon-medical proposals.Some of the rating factors for non-medical underwriting include Age Large sum assured Moral hazard etc.Some of the factors considered in medical underwriting include Family history, Heredity and personal history etc.**Key Terms**1. Underwriting\n2. Standard life\n3. Non-medical underwriting\n4. Rating factor\n5. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.77## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the forms\nto be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**78**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a policy\nresults into a claim. The true value of life insurance is judged by the way a claim is\nsettled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that life\ninsurers, shall process death claims without delay and call for all requirements", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "L-09", "section": "Backdating:", "chunk_id": "Final IC 38 - CA_Life - English_039", "metadata": {"file_size": 4771, "chunk_index": 39, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Set the timing of payment:", "To coincide with special dates:", "Answers to Test Yourself", "Answer 2", "Backdating:"]}}
{"chunk": "3. Non-medical underwriting\n4. Rating factor\n5. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.77## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the forms\nto be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**78**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a policy\nresults into a claim. The true value of life insurance is judged by the way a claim is\nsettled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that life\ninsurers, shall process death claims without delay and call for all requirements\ntogether, within 15 days of the receipt of the death intimation.A death claim shall be paid, rejected or repudiated giving all the relevant reasons,\nwithin 30 days from the date of receipt of all relevant papers/ clarifications.If, in the opinion of the insurer, the claim warrants investigation, it shall complete\nthe same expeditiously, within 90 days from the date of intimation and settle the\nclaim within 30 days thereafter.IRDAI specifies that in respect of Maturity clams, Survival Benefit claims and\nAnnuities, the Life Insurer shall initiate the claim process by sending advance\nintimation, by sending post-dated cheque or by giving direct credit to the bank\naccount of the claimant through any electronic mode approved by RBI, so as to pay\nthe claim on or before the due date.**Definition**A claim is a demand that the insurer should make good the promise specified in the\ncontract.A claim under a life insurance contract is triggered by the happening of one or more\nof the events covered under the insurance contract. While in some claims, the\ncontract continues, in others, the contract is terminated.Claims can be of two types:**i.** survival claims payable when the life assured is alive and**ii.** death claim**Diagram 1:** **Types of claims**While a **death claim** arises only upon the death of the life assured, **survival claims**\nare payable on happening of events specified in the policy.79**Important**In all claims situations, the insurer has to ensure that the identity of the claimant\nis proven and well documented as per KYC norms.**Example**Such specified events where the claims are paid to the insured.i. The insured reaching the maturity period of the policy;\nii. The insured reaching the pre-decided duration(s) under a money-backpolicy, when instalment(s) become payable; or under annuity plans.\niii. Occurrences of Critical illnesses covered under the policy (as a rider benefitor otherwise);\niv. Surrender of the policy either by the policyholder or assignee;**B.** **Ascertaining whether a claim situation has occurred****i.** **Survival claim** is payable to the insured on reaching the period of maturityor fulfilling conditions stipulated in the policy.**ii.** **Maturity claims and money-back instalment claims** are easily establishedas they are based on dates which are determined at the beginning of the\ncontract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy are\nclearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments. Here,unlike other claims, the event is triggered by the decision of the policy\nholder or assignee to cancel the contract and withdraw what is due to him\nor her under the contract. There is typically a penalty for premature\nwithdrawal. The amount paid would be less than what would be due under\na full claim and hence would be less than what would have been due if the\nfull claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned, all", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "L-09", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 - CA_Life - English_040", "metadata": {"file_size": 4771, "chunk_index": 40, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Survival claim", "Answer 3", "Diagram 1:"]}}
{"chunk": "contract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy are\nclearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments. Here,unlike other claims, the event is triggered by the decision of the policy\nholder or assignee to cancel the contract and withdraw what is due to him\nor her under the contract. There is typically a penalty for premature\nwithdrawal. The amount paid would be less than what would be due under\na full claim and hence would be less than what would have been due if the\nfull claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned, all\nthe benefits would be payable to the assignee and it would not meet the intended\npurpose of the critical illness benefit. To avoid this situation, policy holders need\nto be educated about the extent of benefits they may assign by way of a conditional\nassignment.A **maturity or death claim** or a surrender leads to termination of the insurance\ncover under the contract and no further insurance cover is available.80**Types of claims:** The following payments may occur during the policy term:\n**a)** **Survival Benefit Payments**Periodical payments are made by the insurer to the insured at specified times\nduring the term of the policy.**I.** **Surrender of Policy**Surrender value reflects the value of investments and depends on various factors\nsuch as sum assured, bonuses, policy term and premiums paid. Premature closing\nof a life insurance policy is a voluntary termination of the policy contract. A\npolicy can be surrendered only if it has acquired paid-up value. The amount\npayable to the insured is the **surrender value** which is usually a percentage of\nthe premiums paid. The actual surrender value paid to the insured is more than\nthe Guaranteed Surrender Value (GSV).**II.** **Rider Benefit**A payment under a rider is made by an insurance company on the occurrence of\na specified event according to the terms and conditions.\nUnder a **critical illness rider**, in the event of diagnosis of a critical illness, a\nspecified amount is paid as per terms. The illness should have been covered in\nthe list of critical illnesses specified by the insurance company.Under **hospital care rider**, the insurer pays the treatment costs in the event of\nhospitalisation of the insured, subject to terms and conditions.The policy contract continues even after the rider payments are made.The following claim payments are made at the end of the policy term specified\nin the insurance contract.**III.** **Maturity Claim**In such claims, the insurer promises to pay the insured a specified amount at\nthe end of the term, if the insured survives the plan’s entire term. This is known\nas a **maturity claim.****i.** **Participating Plan:** The maturity claim amount payable under a participatingplan is the sum assured plus accumulated bonuses less dues such as\noutstanding premium and policy loans and interests thereon.\n**ii.** **Return of Premium (ROP) Plan:** In some cases premiums paid over the termperiod are returned when the policy matures.\n**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which is81paid to the nominee or assignee or legal heir whatever the situation may be. A\ndeath claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "s81", "section": "Surrender value payments", "chunk_id": "Final IC 38 - CA_Life - English_041", "metadata": {"file_size": 4771, "chunk_index": 41, "chunk_tokens": 987, "has_examples": true, "has_tables": false, "key_concepts": ["Maturity Claim", "Participating Plan:", "Rider Benefit", "III.", "Annuities:"]}}
{"chunk": "**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which is81paid to the nominee or assignee or legal heir whatever the situation may be. A\ndeath claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,\ndate and place of death.**i.** **Forms to be submitted for death claim**Usually, the following forms are to be submitted by the beneficiary to the insurer\nto facilitate processing of the claim: Claim form by nominee\n Certificate of burial or cremation\n Treating physician’s certificate\n Hospital’s certificate\n Employer’s certificate\n Death certificate issued by municipal authorities etc., as proof of death\n Certified court copies of police reports like First Information Report(FIR), Inquest Report, Post-Mortem Report, and Final Report - these\nreports are required in case of death by accident.**Diagram 2:** **Forms to be submitted for Death Claim****ii.** **Repudiation of death claim**The death claim may be paid or repudiated. If, while processing the claim, the\ninsurer detects that the proposer had made any incorrect statements or had\nsuppressed material facts relevant to the policy, the contract would be declared\nas void. All benefits under the policy are forfeited.**iii.** **Section 45: Indisputability Clause**However this penalty is subject to **Section 45** of the Insurance Act, 1938.82**Important****Section 45 states:**“No policy of life insurance shall be called in question on any ground whatsoever\nafter the expiry of three years from the date of the policy, i.e. from the date of\nissuance of the policy or the date of commencement of risk or the date of revival\nof the policy or the date of the rider to the policy, whichever is later”.**C.** **Claim Procedure for Life Insurance Policy****Although there is no laid down standard claims procedure for all insurers,**\n**the IRDAI has laid down guidelines for insurers in the matter of claim**\n**settlement.****Regulation 8: Claims procedure in respect of a life insurance policy**i. A life insurance policy shall state the **primary documents** which are normallyrequired to be submitted by a claimant in support of a claim.ii. A life insurance company, upon receiving a claim, shall process the claimwithout delay. Any queries or requirement of additional documents, to the\nextent possible, shall be raised all at once and not in a piece-meal manner,\nwithin a period of 15 days of the receipt of the claim.iii. As per the IRDAI (Protection of Policyholders’ Interests) Regulations, 2017, adeath claim under a life insurance policy shall be paid, rejected or\nrepudiated giving all the relevant reasons, within 30 days from the date of\nreceipt of all relevant papers and required clarifications. However, if the\ninsurer needs the claim to be investigated, it shall initiate and complete the\ninvestigation at the earliest, in any case not later than 90 days from the date\nof receipt of claim intimation. The claim should be settled within 30 days of\ncompleting the investigation.iv. Where a claim is ready for payment but the payment cannot be made due toany reasons of proper identification of the payee, the life insurer shall hold\nthe amount for the benefit of the payee and it shall earn interest at the rate\napplicable to a savings bank account with a scheduled bank (effective from\n30 days following the submission of all papers and information).v. Where there is a delay on the part of the insurer in processing a claim for areason other than the one covered by sub-regulation (iv), the life insurance\ncompany shall pay **interest on the claim amount at a rate which is 2%**\n**above the bank rate** prevalent at the beginning of the financial year in", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": "s81", "section": "Unit Linked Insurance Plan (ULIP):", "chunk_id": "Final IC 38 - CA_Life - English_042", "metadata": {"file_size": 4771, "chunk_index": 42, "chunk_tokens": 1005, "has_examples": false, "has_tables": false, "key_concepts": ["Repudiation of death claim", "Section 45", "Section 45: Indisputability Clause", "Unit Linked Insurance Plan (ULIP):", "Important"]}}
{"chunk": "repudiated giving all the relevant reasons, within 30 days from the date of\nreceipt of all relevant papers and required clarifications. However, if the\ninsurer needs the claim to be investigated, it shall initiate and complete the\ninvestigation at the earliest, in any case not later than 90 days from the date\nof receipt of claim intimation. The claim should be settled within 30 days of\ncompleting the investigation.iv. Where a claim is ready for payment but the payment cannot be made due toany reasons of proper identification of the payee, the life insurer shall hold\nthe amount for the benefit of the payee and it shall earn interest at the rate\napplicable to a savings bank account with a scheduled bank (effective from\n30 days following the submission of all papers and information).v. Where there is a delay on the part of the insurer in processing a claim for areason other than the one covered by sub-regulation (iv), the life insurance\ncompany shall pay **interest on the claim amount at a rate which is 2%**\n**above the bank rate** prevalent at the beginning of the financial year in\nwhich the claim is reviewed by it.**Role of an agent**An agent shall render all possible service to the nominee/ legal heir or the\nbeneficiary in filling up of claim forms accurately and assisting in submission of\nthese at the insurer’s office.83Apart from discharging obligations, goodwill is generated from such a situation\nwhereby there exists ample opportunity for the agent to procure business or\nreferrals in future from the family of the deceased.**Test Yourself 1**Which of the below statement best describes the concept of claim? Choose the most\nappropriate option.I. A claim is a request that the insurer should make good the promise specified inthe contract\nII. A claim is a demand that the insurer should make good the promise specified inthe contract\nIII. A claim is a demand that the insured should make good the commitmentspecified in the agreement\nIV. A claim is a request that the insured should make good the promise specified inthe agreement**Summary**A claim is a demand that the insurer should make good the promise specified in\nthe contract.A claim can be survival claim or death claim. While a death claim arises only\nupon the death of the life assured, survival claims can be caused by one or more\neventsFor payment of a survival claim, the insurer has to ascertain that the event has\noccurred as per the conditions stipulated in the policy.The following payments may occur during the policy term:\n Survival Benefit Payments\n Surrender of Policy\n Rider Benefit\n Maturity Claim\n Death ClaimSection 45 (Indisputability Clause) of the Insurance Act offers protection against\nrejection of claim by the insurer on flimsy grounds provided and sets a time limit\nof 3 years for the Insurer for calling a policy into question.Under the IRDAI (Protection of Policyholders Interests) Regulations, 2017, the\nIRDAI has laid down regulations to safeguard/ protect the insured or beneficiary\nin case of claims.**Answers to Test Yourself****Answer 1** The correct option is II.84", "source_file": "Final IC 38 - CA_Life - English.md", "chapter": null, "section": "Role of an agent", "chunk_id": "Final IC 38 - CA_Life - English_043", "metadata": {"file_size": 4771, "chunk_index": 43, "chunk_tokens": 672, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 1", "Answer 1", "Role of an agent", "Summary"]}}
{"chunk": "## IC - 38 **INSURANCE AGENTS** **SECTION - COMMON****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## INSURANCE AGENTS **SECTION-COMMON** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nInsurance Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**COMMON CHAPTERS **|**COMMON CHAPTERS **|\n|C-01|Introduction to Insurance|2|\n|C-02|Core Elements of Insurance|18|\n|C-03|Principles of Insurance|27|\n|C-04|Features of Insurance Contracts|40|\n|C-05|Underwriting and Rating|48|\n|C-06|Claims Processing|56|\n|C-07|Documentation|63|\n|C-08|Customer Service|72|\n|C-09|Grievance Redressal Mechanism|87|\n|C-10|Regulatory Aspects for Insurance Agents<br>|95|iv## SECTION **AN OVERVIEW**1## CHAPTER C-01## INTRODUCTION TO INSURANCE**Chapter Introduction**This chapter aims to introduce the basics of insurance, trace its evolution and how\nit works. It intends to teach how insurance provides protection against economic", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "C-46", "section": "INSURANCE AGENTS", "chunk_id": "Final IC 38 - IA_English Common_000", "metadata": {"file_size": 6529, "chunk_index": 0, "chunk_tokens": 874, "has_examples": false, "has_tables": true, "key_concepts": ["IC - 38", "INSURANCE AGENTS", "SECTION - COMMON", "SECTION-COMMON", "Chapter Introduction"]}}
{"chunk": "wishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**COMMON CHAPTERS **|**COMMON CHAPTERS **|\n|C-01|Introduction to Insurance|2|\n|C-02|Core Elements of Insurance|18|\n|C-03|Principles of Insurance|27|\n|C-04|Features of Insurance Contracts|40|\n|C-05|Underwriting and Rating|48|\n|C-06|Claims Processing|56|\n|C-07|Documentation|63|\n|C-08|Customer Service|72|\n|C-09|Grievance Redressal Mechanism|87|\n|C-10|Regulatory Aspects for Insurance Agents<br>|95|iv## SECTION **AN OVERVIEW**1## CHAPTER C-01## INTRODUCTION TO INSURANCE**Chapter Introduction**This chapter aims to introduce the basics of insurance, trace its evolution and how\nit works. It intends to teach how insurance provides protection against economic\nlosses arising as a result of unforeseen events and serves as an instrument of risktransfer.2**A.** **Insurance – History and Evolution**We live in a world of uncertainty. We hear about: Trains colliding Floods destroying entire communities Earthquakes destroying buildings Young people dying unexpectedly**Diagram 1:** **Events happening around us**Why do these events make people anxious and afraid?The reason is simple.**i.** Firstly these **events are unpredictable.** If one can anticipate and predict anevent, one can prepare for it.**ii.** Secondly, such unpredictable and untoward events are often a **cause of****economic loss and grief** .The people around can come to the aid of individuals who are affected by such\nevents, by having a system of sharing and mutual support. The idea of insurance is\nthousands of years old. Yet, the present form of insurance, is only two or threecenturies old.**1.** **History of insurance**Insurance has existed in some form or other since 3000 BC. Many civilisations, have\npracticed the concept of pooling and sharing among themselves, all the losses\nsuffered by some members of the community. Let us take a look at some of the\nways in which this concept was applied.3**2.** **Insurance through the ages – Some instances**|Bottomry Loans|Traders of Babylon paid extra money to their lenders to write off<br>their loans if shipment was lost or stolen.<br>Traders of Bharuch and Surat also had similar practices.|\n|---|---|\n|**Benevolent**<br>**Societies/**<br>**Friendly**<br>**Societies**|Greeks of 7th Cy. AD, used to pay in advance to take care of the<br>family of members who died and also the funeral expenses of the<br>member.<br>Similar practices were followed in England as well.|\n|**Rhodes**|Traders of Rhodes who were sending goods by sea, were sharing<br>losses if any of them lost their goods due to jettison1.|\n|**Chinese Traders**|**Chinese traders**in ancient days used to send their goods in<br>different ships, so that even if some boats sank, their loss would be<br>partial.|**3.** **Modern concepts of insurance**In India the principle of life insurance was reflected in the joint-family system.\nLosses arising from the demise of a member were shared by various family\nmembers so that each member of the family continued to feel secure.The break-up of the joint family system and emergence of the nuclear family in\nthe modern era, coupled with the stress of daily life has made it necessary to\nevolve alternative systems for security. This highlights the importance of lifeinsurance to an individual.**i.** **Lloyds** : The origins of modern commercial insurance started at Lloyd’sCoffee House in London, where traders agreed to share losses they suffered\ndue to various perils at sea.**ii.** **Amicable Society for a Perpetual Assurance** founded in 1706 in London isconsidered to be the first life insurance company in the world.**4.** **History of insurance in India****a)** **India** : Modern insurance in India began in early 1800 or thereabouts, with\nagencies of foreign insurers starting marine insurance business.|The Oriental Life<br>Insurance Co. Ltd|The first life insurance company to be set up in India<br>was an English company|\n|---|---|", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "C-01", "section": "CONTENTS|Chapter no.|Title|Page no.|", "chunk_id": "Final IC 38 - IA_English Common_001", "metadata": {"file_size": 6529, "chunk_index": 1, "chunk_tokens": 993, "has_examples": true, "has_tables": true, "key_concepts": ["Rhodes", "AN OVERVIEW", "COMMON CHAPTERS", "Modern concepts of insurance", "Societies/"]}}
{"chunk": "Losses arising from the demise of a member were shared by various family\nmembers so that each member of the family continued to feel secure.The break-up of the joint family system and emergence of the nuclear family in\nthe modern era, coupled with the stress of daily life has made it necessary to\nevolve alternative systems for security. This highlights the importance of lifeinsurance to an individual.**i.** **Lloyds** : The origins of modern commercial insurance started at Lloyd’sCoffee House in London, where traders agreed to share losses they suffered\ndue to various perils at sea.**ii.** **Amicable Society for a Perpetual Assurance** founded in 1706 in London isconsidered to be the first life insurance company in the world.**4.** **History of insurance in India****a)** **India** : Modern insurance in India began in early 1800 or thereabouts, with\nagencies of foreign insurers starting marine insurance business.|The Oriental Life<br>Insurance Co. Ltd|The first life insurance company to be set up in India<br>was an English company|\n|---|---|\n|**Triton Insurance Co. Ltd.**|The first non-life insurer to be established in India|\n|**Bombay Mutual**<br>**Assurance Society Ltd.**|The first Indian insurance company. It was formed<br>in 1870 in Mumbai|1 Jettison/ Jettisoning’ refers to throwing away some of the cargo to reduce the weight of the ship while at sea.4Many other Indian companies were set up subsequently as a result of the Swadeshi\nmovement at the turn of the century.**Important**a) The **Insurance Act 1938** was the first legislation to regulate the conduct ofinsurance companies in India. This Act, as amended from time to time continuesto be in force.b) Life insurance business was nationalised on 1st September 1956 and the **Life****Insurance Corporation of India (LIC)** was formed. From 1956 to 1999, the LIC\nheld exclusive rights to do life insurance business in India.c) In 1972, the non-life insurance business was also nationalised and the **General****Insurance Corporation of India (GIC) and its four subsidiaries** were set up.d) **The Malhotra Committee, in its report submitted in 1994, recommended**opening of the market for competitione) The Insurance market was liberalised in 2000, with the passing of the InsuranceRegulatory & Development Act, 1999 (IRDAI), which also established the\nInsurance Regulatory and Development Authority of India (IRDAI) in April 2000 as\na statutory regulatory body for the insurance industry.f) An amendment of the Insurance Act in 2021, has allowed Foreign investors, tohold up to 74% of the paid up equity capital in an Indian Insurance company.\nForeign insurers can now establish branches in India to do reinsurance.**a.** **Insurance industry today (As on 30** **[th]** **September 2021)**a) There are 24 Life insurance companies operating in India. Of these, LifeInsurance Corporation (LIC) of India is a public sector company (PSU) and the\nremaining 23 life insurance companies are in the private sector.b) There are 34 General Insurance companies of which 4 - National InsuranceCo. Ltd, The New India Assurance Co. Ltd., The Oriental Insurance Co. Ltd\nand United India Insurance Co. Ltd. are PSU Companies dealing with all lines\nof general insurance. 26 Private Companies also deal with all lines of general\ninsurance. 6General Insurers deal only in Health insurance. 2 are specialised\ninsurers - Agricultural Insurance Company [AIC] and Export Credit and\nGuarantees Corporation [ECGC], both set up as Public sector entities.c) There is one Reinsurance Company – The General Insurance Corporation ofIndia [GIC Re] and 11 foreign Reinsurers that operate through branch offices.5d) The Department of Posts (called as India Post) of the Government of India,also transacts life insurance known as Postal Life Insurance. India post is\nexempt from the purview of the Insurance Regulator.**Test Yourself 1**Which among the following is the regulatory body for the insurance industry in India?I. Insurance Authority of IndiaII. Insurance Regulatory and Development Authority of IndiaIII. Life Insurance Corporation of IndiaIV. General Insurance Corporation of India**How insurance works**Modern commerce was founded on the principle of ownership of property. When an\nasset loses value (by loss or destruction), the owner of the asset suffers an economic\nloss. This loss can be compensated from a common fund made up of small\ncontributions from many similar asset owners. This process of transferring the", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Lloyds", "chunk_id": "Final IC 38 - IA_English Common_002", "metadata": {"file_size": 6529, "chunk_index": 2, "chunk_tokens": 1002, "has_examples": true, "has_tables": true, "key_concepts": ["Triton Insurance Co. Ltd.", "India", "Amicable Society for a Perpetual Assurance", "Assurance Society Ltd.", "Test Yourself 1"]}}
{"chunk": "insurance. 6General Insurers deal only in Health insurance. 2 are specialised\ninsurers - Agricultural Insurance Company [AIC] and Export Credit and\nGuarantees Corporation [ECGC], both set up as Public sector entities.c) There is one Reinsurance Company – The General Insurance Corporation ofIndia [GIC Re] and 11 foreign Reinsurers that operate through branch offices.5d) The Department of Posts (called as India Post) of the Government of India,also transacts life insurance known as Postal Life Insurance. India post is\nexempt from the purview of the Insurance Regulator.**Test Yourself 1**Which among the following is the regulatory body for the insurance industry in India?I. Insurance Authority of IndiaII. Insurance Regulatory and Development Authority of IndiaIII. Life Insurance Corporation of IndiaIV. General Insurance Corporation of India**How insurance works**Modern commerce was founded on the principle of ownership of property. When an\nasset loses value (by loss or destruction), the owner of the asset suffers an economic\nloss. This loss can be compensated from a common fund made up of small\ncontributions from many similar asset owners. This process of transferring the\nchance and consequence of a loss making event is insurance.This mechanism of pooling risks works differently in the case of death and disabilityas there is no loss/ destruction of a commercial asset.**Definition**Insurance may thus be considered as a process by which the losses of a few are\nshared amongst many of those exposed to similar uncertain events/ situations.**Diagram 2:** **How insurance works**There are however some questions that need to be answered.i. Would people agree to part with their hard earned money, to create such acommon fund?ii. How could they trust that their contributions are actually being used for thedesired purpose?6iii. How would they know if they are paying too much or too little?iv. Who would take the responsibility of managing these funds and paying thosewho suffer the loss?The need for an Insurer comes as an answer to all these questions. The Insurer\nassesses the risk, decides and collects the individual contributions (called premium),\npools the risks and premiums, and arranges to pay to those who suffer the loss. The\ninsurer must also win the trust of the individuals and the community.**1.** **Insurance is about value**a) Firstly, there must be an asset which has an economic value. The **Asset** may be:i. P **hysical** (like a car or a building) orii. N **on-physical** (like reputation, goodwill, liability to pay to someone) oriii. P **ersonal** (like one’s eyes, limbs, body and physical capabilities).b) The asset may lose its value if a certain event happens. This chance of loss iscalled as **risk** . The cause of the risk event is known as **peril** .c) There is a principle known as **pooling** . This consists of collecting numerousindividual contributions (known as premiums) from various persons. These\npersons have similar assets which are exposed to similar risks. Their assets are\nalso referred to as ‘risks’ in many contexts.d) This pool of funds is used to compensate the few who might suffer the lossescaused by a **peril** .e) This process of pooling funds and compensating the unfortunate few is carriedout through an institution known as the **insurer** (Insurance Company).f) The insurer enters into an insurance **contract** with each person who seeks toparticipate in this mechanism of pooling. The persons who participate are known\nas **insured.****2.** **Insurance reduces Risk Burden**The burden of risk refers to the costs, losses and disabilities one has to bear as a\nresult of being exposed to a given loss situation/ event.**Diagram 3:** **Risk burdens that one carries**There are two types of risk burdens that one carries – **primary and secondary** .7**a)** **Primary burden of risk**The **primary burden of risk** consists of losses that are actually suffered by\nhouseholds (and business units), as a result of pure risk events. These losses are\noften direct and measurable; and can be easily compensated for by insurance.**Example**When a factory gets destroyed by fire, the actual value of goods damaged or\ndestroyed can be estimated and the compensation can be paid to the owner of\nthe factory who has suffered the loss.Similarly, if an individual undergoes a heart surgery, the medical cost of the\nsame is known and compensated. In addition there may be some indirect losses.**Example**A fire may interrupt business operations and lead to loss of profits which also\ncan be estimated and the compensation can be paid to the one who suffers sucha loss.Someone whose scooter hits a pedestrian is liable to pay the victim the", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Test Yourself 1", "chunk_id": "Final IC 38 - IA_English Common_003", "metadata": {"file_size": 6529, "chunk_index": 3, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Example", "Primary burden of risk", "Asset", "Insurance is about value"]}}
{"chunk": "result of being exposed to a given loss situation/ event.**Diagram 3:** **Risk burdens that one carries**There are two types of risk burdens that one carries – **primary and secondary** .7**a)** **Primary burden of risk**The **primary burden of risk** consists of losses that are actually suffered by\nhouseholds (and business units), as a result of pure risk events. These losses are\noften direct and measurable; and can be easily compensated for by insurance.**Example**When a factory gets destroyed by fire, the actual value of goods damaged or\ndestroyed can be estimated and the compensation can be paid to the owner of\nthe factory who has suffered the loss.Similarly, if an individual undergoes a heart surgery, the medical cost of the\nsame is known and compensated. In addition there may be some indirect losses.**Example**A fire may interrupt business operations and lead to loss of profits which also\ncan be estimated and the compensation can be paid to the one who suffers sucha loss.Someone whose scooter hits a pedestrian is liable to pay the victim the\ncompensation that the Court decides.**b)** **Secondary burden of risk**Even when no such event occurs and there is no loss, the people who are exposed\nto the peril carry some burden. That is, apart from the primary burden, one also\ncarries a secondary burden of risk.The **secondary burden of risk** consists of costs and strains that one has to bear,\neven if the said event does not occur, from the mere fact that one is exposedto a loss situation.Let us understand some of these burdens:i. Firstly there is **physical and mental strain caused by fear and anxiety** . This\ncan cause stress and affect a person’s wellbeing.ii. Secondly when one is **uncertain about whether a loss would occur or not**,it would be prudent to keep a reserve fund to meet such an eventuality.\nSuch funds may be held in liquid form and yield low returns.By transferring the risk to an insurer, it becomes possible to enjoy peace of mind\nand also invest one’s funds more effectively. It is precisely for these reasons thatinsurance is needed.In India, one must purchase third party insurance if he/ she owns a vehicle because\nit is mandatory if one wants to drive on a public road. At the same time it would be\nprudent to cover the possibility of loss of own damage to the car though it is not8mandatory. It is also compulsory to have a Personal Accident cover for the Owner\nDriver.**Test Yourself 2**Which among the following is a secondary burden of risk?\nI. Business interruption cost\nII. Goods damaged cost\nIII. Setting aside reserves as a provision for meeting potential losses in the future\nIV. Hospitalisation costs as a result of heart attack**B.** **The Principle of Risk Pooling**Insurance companies enter into contracts with different entities – policyholders,\nwho can be individuals or corporates. The benefits they pay to policyholders are\ncontractual obligations. Insurance contracts are meaningful only if the Insurers are\nfinancially capable of taking over the risks and compensating for the losses, if and\nwhen they occur. The structure arises from application of the mutuality or the\npooling principle.**Mutuality** and Diversification are two important ways to reduce risk in financial\nmarkets. They are fundamentally different.|Diversification|Mutuality|\n|---|---|\n|Here the funds are spread out among<br>various assets (eggs are placed in different<br>baskets).|Under mutuality or pooling, the funds of<br>various individuals are combined (all eggs<br>are placed in one basket).|\n|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured immediately\ncreates a large quantity of funds ( corpus)that is available to him/ her in the event\nof a loss arising due to the insured risk. This potential corpus of money is what\nmakes insurance unique and without any substitutes among all financial products.9**C.** **Risk Management Techniques**One may also ask whether insurance is the right solution to all kinds of risksituations. The answer is ‘No’.Insurance is only one of the methods by which individuals may seek to manage their\nrisks. Here they transfer the risks they face to an insurance company. However there\nare other methods of dealing with risks, which are explained below:**1.** **Risk avoidance**Reducing risk by avoiding a loss situation is known as risk avoidance. Thus one may\ntry to avoid activities or situations, or avoid dealing with property or persons due", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "t8", "section": "Diagram 3:", "chunk_id": "Final IC 38 - IA_English Common_004", "metadata": {"file_size": 6529, "chunk_index": 4, "chunk_tokens": 1007, "has_examples": true, "has_tables": true, "key_concepts": ["Mutuality", "Example", "Secondary burden of risk", "Primary burden of risk", "Mutuality -"]}}
{"chunk": "|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured immediately\ncreates a large quantity of funds ( corpus)that is available to him/ her in the event\nof a loss arising due to the insured risk. This potential corpus of money is what\nmakes insurance unique and without any substitutes among all financial products.9**C.** **Risk Management Techniques**One may also ask whether insurance is the right solution to all kinds of risksituations. The answer is ‘No’.Insurance is only one of the methods by which individuals may seek to manage their\nrisks. Here they transfer the risks they face to an insurance company. However there\nare other methods of dealing with risks, which are explained below:**1.** **Risk avoidance**Reducing risk by avoiding a loss situation is known as risk avoidance. Thus one may\ntry to avoid activities or situations, or avoid dealing with property or persons due\nto which there can be an exposure.**Example**i. One may avoid certain manufacturing risks by contracting out the manufacturingto someone else.ii. One may not venture outside the house for fear of meeting with an accident ormay not travel at all for fear of falling ill when abroad.Risk avoidance is considered a negative way to handle risk. Individuals and societies\nneed to take some risks for doing activities for their progress. Avoiding such risk\ntaking activities would lead to losing the benefits from such activity.**2.** **Risk retention**One tries to manage the impact of risk and decides to bear the risk and its effects\nby oneself. This is known as self-insurance.**Example**A business house may decide, based on experience about its capacity to bear small\nlosses upto a certain limit, to retain the risk with itself.**3.** **Risk reduction and control**This is a more practical and relevant approach than risk avoidance. It means taking\nsteps to lower the chance of occurrence of a loss and/ or to reduce severity of its\nimpact if such loss should occur.**Important**Measures to reduce the chance of occurrence of loss causing events are known as\n‘ **Loss Prevention** ’. The measures to reduce the degree of loss, in case a loss\nhappens, are called ‘ **Loss Reduction** ’/ Loss Minimisation.Risk reduction involves reducing the frequency and/ or sizes of losses through:10**a)** **Education and training of various types of employees in proper risk****practices – e.g.** (i) participating in ‘fire drills’; (ii)wearing of seatbeltshelmets on cars.**b)** **Making Environmental changes –** like improving physical conditions - e.g. (i)installing fire alarms; (ii) spraying chemicals to kill mosquitoes to reduce\nspread of Malaria.**c)** **Changes made in dangerous or hazardous operations,** while usingmachinery and equipment or in the performance of other task - e.g. (i)\nwearing helmets inside construction sites; (ii) wearing gloves and face shields\nwhile handling chemicals.**d)** **Leading a healthy lifestyle** - helps in reduce the incidence of falling ill - e.g.(i) undergoing regular medical check-ups; (ii) practicing yoga regularly.**e)** **Separation**, or spreading out various items of property into varied locationsrather than concentrating them, to reduce impact of mishap in any one\nlocation - e.g. (i) storing large quantities of flammable substances at separate\nlocations; (ii) fixing fire proof doors in hazardous areas of factories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself as theyoccur. The firm assumes and finances its own risk, either through its own or\nborrowed funds, this is known as **self-insurance** .**b)** **Risk retention within a bigger group:** If the risk is part of a bigger group,like a parent company, the risk can be retained within the larger group which\nwould finance the losses. This can be a group formed by mutual consent aswell.**c)** **Risk transfer** is an alternative to risk retention. It involves transferring theresponsibility for losses to another party.**Insurance is one of the major forms of risk transfer. Instead of facing the**\n**uncertainty of many of the other forms, people prefer Insurance as it**\n**provides certainty and peace of mind.****5.** **Insurance vs Assurance**Insurance is used for most General insurance contracts which provide protection\nagainst an event that may or may not happen, and where the loss amount can", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Diagram 4:", "chunk_id": "Final IC 38 - IA_English Common_005", "metadata": {"file_size": 6529, "chunk_index": 5, "chunk_tokens": 1017, "has_examples": true, "has_tables": true, "key_concepts": ["Risk reduction and control", "Risk retention through self-financing", "Risk retention within a bigger group:", "Making Environmental changes –", "Risk financing"]}}
{"chunk": "locations; (ii) fixing fire proof doors in hazardous areas of factories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself as theyoccur. The firm assumes and finances its own risk, either through its own or\nborrowed funds, this is known as **self-insurance** .**b)** **Risk retention within a bigger group:** If the risk is part of a bigger group,like a parent company, the risk can be retained within the larger group which\nwould finance the losses. This can be a group formed by mutual consent aswell.**c)** **Risk transfer** is an alternative to risk retention. It involves transferring theresponsibility for losses to another party.**Insurance is one of the major forms of risk transfer. Instead of facing the**\n**uncertainty of many of the other forms, people prefer Insurance as it**\n**provides certainty and peace of mind.****5.** **Insurance vs Assurance**Insurance is used for most General insurance contracts which provide protection\nagainst an event that may or may not happen, and where the loss amount can\nbe assessed only after the event.Assurance refers to financial coverage for extended periods or until death. In\nthe case of life, the happening of death (the loss making event), is certain. Only\nthe timing is uncertain. Further, it is not possible to estimate the amount of\neconomic loss suffered when a person dies. The loss amount that is to be paid,11must be fixed in advance. This is why people use the term ‘Assurance’ in caseof Life insurance.**Though there are such subtle technical differences, the terms ‘Insurance’**\n**and ‘Assurance’ are used interchangeably in most markets, including India.**_[One of the biggest general insurers in India carries the name – New India_\n_**Assurance**_ _Company Ltd. and no life company in India is using the word_\n_**‘Assurance’**_ _in its name!]_**Diagram 5:** **How insurance indemnifies the insured****Test Yourself 3**Which among the following is a method of risk transfer?\nI. Bank Fixed DepositII. InsuranceIII. Equity sharesIV. Real Estate**D.** **Insurance as a tool for managing risk**The term ‘Risk’ refers not to a loss that has actually been suffered but a loss that is\nlikely to occur. It is thus an expected loss. The cost of this expected loss is the\nproduct of two factors:i. The **probability** that the peril being insured against may happen, leading tothe lossii. The **severity (impact)** or the amount of loss that may be suffered as a result.12The cost of risk would increase in direct proportion with both the **probability** and\nthe **severity** (amount of loss). This works in different ways – (a) If the amount of\nloss is very high, and the probability of its occurrence is small, the cost of the risk\nwould be low as such instances may be very few. (b) Even if the amount of loss is\nsmall, if the probability of its occurrence is very high, the cost of the risk would be\nhigh, as there would be many such occurrences. Insurance can be seen as a powerful\ntool for managing one’s risk. It protects one from the financial impact of losingone’s assets/ wealth due to an insured loss.**Diagram 6:** **Considerations before opting for insurance****E.** **Considerations before opting for Insurance**When deciding whether to insure or not, one needs to evaluate the cost of\ntransferring the risk [the insurance premium] against the cost of bearing it oneself.\nInsurance would be most required where the loss impact could be very high, but the\nprobability (and hence the premium), is very low. E.g. (i) the chance of an\nearthquake; (ii) the chance of a ship sinking.**a)** **Do not risk a lot for a little** : A reasonable relationship must be there betweenthe cost of transferring the risk and the value derived.Would it make sense to insure an ordinary ball pen?**b)** **Do not risk more than one can afford to lose:** If the loss that can arise as aresult of an event is large enough to cause bankruptcy, retention of the risk\nwould not be appropriate.If a large oil refinery gets destroyed, the owners cannot afford to bear the loss.**c)** **Consider the likely outcomes of the risk carefully:** It is best to insure thoseassets for which the probability of occurrence (frequency) of a loss is low but", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Risk financing", "chunk_id": "Final IC 38 - IA_English Common_006", "metadata": {"file_size": 6529, "chunk_index": 6, "chunk_tokens": 970, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance vs Assurance", "Considerations before opting for insurance", "Risk financing", "Considerations before opting for Insurance", "Risk retention through self-financing"]}}
{"chunk": "transferring the risk [the insurance premium] against the cost of bearing it oneself.\nInsurance would be most required where the loss impact could be very high, but the\nprobability (and hence the premium), is very low. E.g. (i) the chance of an\nearthquake; (ii) the chance of a ship sinking.**a)** **Do not risk a lot for a little** : A reasonable relationship must be there betweenthe cost of transferring the risk and the value derived.Would it make sense to insure an ordinary ball pen?**b)** **Do not risk more than one can afford to lose:** If the loss that can arise as aresult of an event is large enough to cause bankruptcy, retention of the risk\nwould not be appropriate.If a large oil refinery gets destroyed, the owners cannot afford to bear the loss.**c)** **Consider the likely outcomes of the risk carefully:** It is best to insure thoseassets for which the probability of occurrence (frequency) of a loss is low but\nthe possible impact (severity), is high.The loss of a space satellite can be so costly that it has to be insured.13**Test Yourself 4**Which among the following scenarios needs insurance?I. The sole bread winner of a family might die untimely\nII. A person may lose his wallet\nIII. Stock prices may fall drastically\nIV. A house may lose value due to natural wear and tear**F.** **Insurance Market Players**The Insurance Companies (Insurers) are the major players in the insurance industry.\nIn addition to insurers, there are multiple parties who are part of the Insurance\nvalue chain. There is the Insurance Regulator, which regulates the entire market.Intermediaries like Agents, Brokers, Banks (through Bancassurance) Insurance\nMarketing Firms and Point of Sales Persons are in the field of interacting with the\nprospects/ insured finding out their needs, giving them information about the\npolicies available for covering their needs.Surveyors and Loss Assessors/ Adjusters go into assessing claims and ancillary work.\nThird Party Administrators deal with Health and Travel Insurance Claims.\nRegulations provides that all intermediaries have a responsibility towards thecustomer.Agents, being intermediaries between the insurance company and the insured have\nthe responsibility to ensure all material information about the risk is provided bythe insured to insurer.**Important****Duty of an Insurance Agent/ Intermediary towards the Prospect (Customer)**IRDAI regulations provides that intermediaries have certain responsibilities towards\nthe prospect. The intermediary has a responsibility towards the insurer as well.The regulation states that where the prospect depends upon the advice of the\ninsurer or his agent or an insurance intermediary, such a person must advise the\nprospect in a fair manner. It also says that “An insurer or its agent or other\nintermediary shall provide all material information in respect of a proposed cover\nto the prospect to enable the prospect to decide on the best cover that would be inhis or her interest”.If the proposal and other connected papers are not filled by the customer, a\ncertificate may be incorporated at the end of proposal form from the customer that\nthe contents of the form and documents have been fully explained to him and that\nhe has fully understood the importance of the proposed contract.When the customer pays the insurer towards premium, the insurer is bound to issue\na receipt. That is, even if the premium is paid in advance.14**G.** **Role of Insurance in the Society**Insurance companies play an important role in a country’s economic development.\nThey ensure that the wealth of the country is protected and preserved. Some of\ntheir contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunate fewmembers who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly\ninvested in speculative ventures.c) Insurance provides the benefit of protection to numerous insured - bothindividuals and enterprises –against losses caused by accidents or fortuitous\nevents. It preserves capital and releases it for development of business and\nindustry, which helps the country’s growth.d) Insurance enables investment of capital leading to commercial and industrialdevelopment. It also helps in removing the fear, worry and anxiety\nassociated with entrepreneurship.e) Many Banks and Financial institutions do not advance loans on propertyunless it is insured against loss or damage. Many of them insist on assigning\nthe policy as collateral security.f) Before accepting large complicated risks, general insurers arrange forinspection of the property by qualified engineers/ other experts. They assess\nthe risk and suggest risk management measures to reduce the risk and help", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Do not risk a lot for a little", "chunk_id": "Final IC 38 - IA_English Common_007", "metadata": {"file_size": 6529, "chunk_index": 7, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 4", "Do not risk more than one can afford to lose:", "Important", "Insurance Market Players", "Do not risk a lot for a little"]}}
{"chunk": "their contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunate fewmembers who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly\ninvested in speculative ventures.c) Insurance provides the benefit of protection to numerous insured - bothindividuals and enterprises –against losses caused by accidents or fortuitous\nevents. It preserves capital and releases it for development of business and\nindustry, which helps the country’s growth.d) Insurance enables investment of capital leading to commercial and industrialdevelopment. It also helps in removing the fear, worry and anxiety\nassociated with entrepreneurship.e) Many Banks and Financial institutions do not advance loans on propertyunless it is insured against loss or damage. Many of them insist on assigning\nthe policy as collateral security.f) Before accepting large complicated risks, general insurers arrange forinspection of the property by qualified engineers/ other experts. They assess\nthe risk and suggest risk management measures to reduce the risk and help\nin rating.g) Insurance earns foreign exchange for the country like trade, shipping andbanking services.h) Insurers are associated with institutions engaged in fire loss prevention,cargo loss prevention, industrial safety and road safety.i) Entrepreneurs get the confidence to invest in new or relatively unknownfields with the protection offered by Insurance.**Information****Insurance and Social Security**a) Social security is an obligation of the State. Social security schemes of theState involve the use of compulsory or voluntary insurance, as a tool of social\nsecurity. The Employees State Insurance Act, 1948 provides for **Employees**\n**State Insurance Corporation** to pay for the expenses of sickness,15disablement, maternity and death for industrial employees and their families,who are covered.b) Insurers play an important role in social security schemes sponsored by theGovernment such as1. PMJJBY –Pradhan Mantri Jeevan Jyoti Bima Yojana\n2. PMSBY – Pradhan Mantri Suraksha Bima Yojana\n3. PMFBY- Pradhan Mantri Fasal Bima Yojana\n4. PMJAY – Pradhan Mantri Jan Arogya Yojana (Ayushmaan Bharat)\n5. PMVVY - Pradhan Mantri Vaya Vandana Yojana – a Pension plan\n6. APY - Atal Pension YojanaThese, and other Government schemes have been benefiting the Indian\nsociety/ community.c) In addition to supporting Government schemes, the insurance industry offersinsurance covers on a commercial basis which have the ultimate objective of\nproviding social security. The **rural insurance schemes**, operated on a\ncommercial basis, are designed to provide social security to the rural families.**Test Yourself 5**Which of the following insurance schemes are sponsored by the Government of\nIndia?I. PM Jan Arogya Yojana - Ayushmaan Bharat\nII. PM Fasal Bima Yojana\nIII. PM Suraksha Bima Yojana\nIV. All of the above**Summary**Insurance is risk transfer through risk pooling.Commercial insurance business as practiced today started at the Lloyd’s CoffeeHouse in London.An insurance arrangement involves the following: Asset,\n Risk,\n Peril,\n Contract,\n Insurer and\n InsuredWhen persons having similar assets, exposed to similar risks, contribute into a\ncommon pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,16 Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and\n Do not risk a lot for a little**Key Terms**1. Risk2. Pooling3. Asset4. Burden of risk5. Risk avoidance6. Risk control7. Risk retention8. Risk financing9. Risk transfer**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is I.\n**Answer 5** - The correct option is IV.17## CHAPTER C-02## CORE ELEMENTS OF INSURANCE**Chapter Introduction**In this chapter, we shall learn about the various key elements and principles of", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "s1", "section": "Information", "chunk_id": "Final IC 38 - IA_English Common_008", "metadata": {"file_size": 6529, "chunk_index": 8, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Insurance and Social Security", "Answer 2", "Information", "Answer 3"]}}
{"chunk": "common pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,16 Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and\n Do not risk a lot for a little**Key Terms**1. Risk2. Pooling3. Asset4. Burden of risk5. Risk avoidance6. Risk control7. Risk retention8. Risk financing9. Risk transfer**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is I.\n**Answer 5** - The correct option is IV.17## CHAPTER C-02## CORE ELEMENTS OF INSURANCE**Chapter Introduction**In this chapter, we shall learn about the various key elements and principles of\ninsurance that govern the working of insurance.**Learning Outcomes**After studying this chapter, one should be able to:1. Understand Assets are2. Understand Risk, Hazards and Perils3. Appreciate Risk Management4. Understand Risk Pooling in insurance18**A.** **Elements of insurance**We have seen that the process of insurance has four elements Asset Risk Risk poolingLet us now look at the various elements of the insurance process in some detail.**1.** **Asset****Definition**An asset may be defined as ‘anything that confers some benefits and has aneconomic value to its owner’.An asset must have the following features: **Economic value:** An asset must have economic value. Value can arise in twoways.**a)** **Income generation** : Asset may be productive and generate income.**Example**A machine used to manufacture biscuits, or a cow that yields milk, both generate\nincome for their owner. A healthy worker is an asset to an organization.**b)** **Serving needs** : An asset could also add value by satisfying one or a group ofneeds.**Example**A refrigerator cools and preserves food while a car provides comfort and\nconvenience in transportation, similarly a body free of illness adds value to oneself\nand family also. **Scarcity and Ownership**What about air and sunlight? Are they not assets? - **The answer is ‘No’.**Few things are as valuable as air and sunlight. We cannot live without them. Yet\nthey are not considered as assets in the economic sense of the term.There are two reasons for this: Their supply is abundant and not scarce.\n They are not owned by any one individual but are freely available to all.This implies that an asset must satisfy two more conditions to qualify as such - its\nscarcity and its ownership or possession by someone.19 **Insurance of assets**Insurance provides protection only against financial losses arising from unexpected\nevents and not natural wear and tear, of assets due to usage over time.We must note that **insurance cannot protect an asset from loss or damage** . An\nearthquake will destroy a house whether it is insured or not. The insurer can only\npay a sum of money, which would reduce the economic impact of the loss.Losses can arise in the event of breach of an agreement.**Example**An exporter would lose a great deal if the importer on the other side refused to\naccept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives and\nthose of our loved ones. Our lives can be seriously affected when subjected to anaccident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death or disability.These kinds of losses are covered by insurances of the person or personal lines of\ninsurance. Insurance is possible for anyone who has assets that have value [i.e.\nwhich generate income or meet some needs]; the loss of which [due to fortuitous\nor accidental events] cause financial loss that can be [measured in terms of money].Thus these assets are commonly referred to as subject matter of insurance in\ninsurance parlance.**2.** **Risk**The second element in the process of insurance is the concept of risk. Risk can be\ndefined as the **chance of a loss** . Risk thus refers to the likely loss or damage that\ncan arise on account of happening of an event. [Risk is sometimes used to refer the", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "k2", "section": "Key Terms", "chunk_id": "Final IC 38 - IA_English Common_009", "metadata": {"file_size": 6529, "chunk_index": 9, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Income generation", "Key Terms", "Answer 5", "Life insurance", "Serving needs"]}}
{"chunk": "accept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives and\nthose of our loved ones. Our lives can be seriously affected when subjected to anaccident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death or disability.These kinds of losses are covered by insurances of the person or personal lines of\ninsurance. Insurance is possible for anyone who has assets that have value [i.e.\nwhich generate income or meet some needs]; the loss of which [due to fortuitous\nor accidental events] cause financial loss that can be [measured in terms of money].Thus these assets are commonly referred to as subject matter of insurance in\ninsurance parlance.**2.** **Risk**The second element in the process of insurance is the concept of risk. Risk can be\ndefined as the **chance of a loss** . Risk thus refers to the likely loss or damage that\ncan arise on account of happening of an event. [Risk is sometimes used to refer the\nsubject matter of insurance, as well.] One do not usually expect one’s house to burn\nor one’s car to have an accident. Yet it can happen.Examples of risks are the possibility of economic loss arising from the burning of a\nhouse or a burglary or an accident which results in the loss of a limb.This has two implications.**i.** **Firstly,** it means that that the loss may or may not happen.**ii.** **Secondly,** the event, the occurrence of which actually leads to the loss, isknown as a **peril** . It is the cause of the loss.20**Example**Examples of perils are fire, earthquakes, floods, lightning, burglary, heart attacketc.**Natural wear and tear**It is true that nothing lasts forever. Every asset has a finite lifetime during which it\nis functional and yields benefits. This is a natural process and one discards or\nchanges one’s mobiles, washing machines and clothes when they are worn out.\nTherefore losses arising out of normal wear and tear are not covered in insurance.**Exposure to risk** : Occurrence of a peril need not necessarily lead to a loss. A person\nstaying in Mumbai does not suffer any loss due to a flood in coastal Andhra. For loss\nto happen the asset must be exposed to the peril. Exposure to risk alone is not\nenough ground for insurance compensation.ExampleA fire may break out in factory premises without causing actual damage. Insurance\ncomes into play only if there is an actual economic (financial) loss as a result of a\nperil.**Degree of Risk Exposure:**Two assets may be exposed to the same peril but the likelihood of loss or the amount\nof loss may vary greatly. A vehicle carrying explosives can yield far greater loss from\nfire than tanker carrying water.**3.** **Risk Management** **Extent of damage likely to be suffered**This is given by the degree of loss and its impact on an individual or business.\nOn this basis one may identify three types of risk events or situations: **Critical**Where losses are of such a magnitude; that may result in total loss or\nbankruptcy. Losses can be critical when the accident results in significant and\nsevere impact, disability, damage to equipment and the environment, which\nmay be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.21 A torpedo from a pirate ship sinks an entire passenger ship but most passengersare saved. A major accident resulting in a kidney damage necessitating a kidney transplantoperation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of people,\nwidespread loss of assets, having significant environmental impact which are\npractically irreversible. Catastrophic losses usually signify disasters that are\nsudden, widespread and unstoppable.**Example: Catastrophic** An earthquake or flood that completely destroys a few villages\n A major fire that completely destroys a multi crore installation over a largeterritory\n The terrorist attack of 9/ 11 on World Trade Centre which caused injuries to alarge number of people", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Life insurance", "chunk_id": "Final IC 38 - IA_English Common_010", "metadata": {"file_size": 6529, "chunk_index": 10, "chunk_tokens": 977, "has_examples": true, "has_tables": false, "key_concepts": ["Secondly,", "Example: Critical", "Risk Management", "Critical", "Example"]}}
{"chunk": "may be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.21 A torpedo from a pirate ship sinks an entire passenger ship but most passengersare saved. A major accident resulting in a kidney damage necessitating a kidney transplantoperation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of people,\nwidespread loss of assets, having significant environmental impact which are\npractically irreversible. Catastrophic losses usually signify disasters that are\nsudden, widespread and unstoppable.**Example: Catastrophic** An earthquake or flood that completely destroys a few villages\n A major fire that completely destroys a multi crore installation over a largeterritory\n The terrorist attack of 9/ 11 on World Trade Centre which caused injuries to alarge number of people\n A pandemic like Covid – 19 causing disease to people across the globe. **Marginal/ Insignificant**Where the possible losses are insignificant and can be easily met from an\nindividual or a firm’s existing assets or current income without imposing anyundue financial strain.**Example** A minor car accident results in the side being slightly grazed due to which someof the paint is damaged and a fender is slightly bent.\n An individual suffering from common cold and cough..**4.** **Hazards and Perils**The condition or conditions which increase the probability of a loss or its severity,\nand thus impact(s) the risk is known as hazard. When insurers make an assessment\nof the risk, it is generally with reference to the hazards to which the asset is subject.The term hazard in insurance language refers to those conditions or features or\ncharacteristics which create or increase the chance of loss arising from a given peril.\nA thorough knowledge of various hazards to which a risk is exposed to is most\nessential for underwriting. Examples of the link between assets, peril and hazards\nare given below.22|Asset|Peril|Hazard|\n|---|---|---|\n|**Life**|Cancer|Excessive Smoking|\n|**Factory**|Fire|Explosive material left Unattended|\n|**Car**|Car Accident|Careless driving by driver|\n|**Cargo**|Storm|Water seeping in cargo and spoiling; Cargo not packaged in<br>waterproof containers|**Important** **Types of hazards****a)** **Physical hazard** is a physical condition that increases the chance of loss.**Example**i. Defective wiring in a building\nii. Indulging in water sports\niii. Leading a sedentary lifestyle**b)** **Moral hazard** refers to dishonesty or character defects in an individual thatinfluence the frequency or severity of the loss. A dishonest individual may\nattempt to commit fraud and make money by misusing the facility of insurance.**Example**If one deliberately sets a fire to one’s property and collects claims against losses\nunder the policy, such claims are clearly fraudulent and could be justifiably rejectedA classic instance of moral hazard is purchasing insurance for a factory and then\nburning it down to collect the insurance amount or buying health insurance after\nonset of a major ailment.**c)** **Legal hazard** is more prevalent in cases involving a liability to pay for damages.It arises when certain features of the legal system or regulatory environment\ncan increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of accidents\ncan raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the price[premiums] charged for insurance coverage would increase if the susceptibility to\nloss, arising as a result of the presence of associated hazards, is high.23**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause an\naverage loss of Rs. 50000. If the chance of a house catching fire is 2 in 1000 [or 2/\n1000 = 0.002] it would mean that the total amount of loss suffered would be Rs", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Example: Critical", "chunk_id": "Final IC 38 - IA_English Common_011", "metadata": {"file_size": 6529, "chunk_index": 11, "chunk_tokens": 987, "has_examples": true, "has_tables": true, "key_concepts": ["Example: Critical", "Moral hazard", "Factory", "Types of hazards", "Physical hazard"]}}
{"chunk": "onset of a major ailment.**c)** **Legal hazard** is more prevalent in cases involving a liability to pay for damages.It arises when certain features of the legal system or regulatory environment\ncan increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of accidents\ncan raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the price[premiums] charged for insurance coverage would increase if the susceptibility to\nloss, arising as a result of the presence of associated hazards, is high.23**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause an\naverage loss of Rs. 50000. If the chance of a house catching fire is 2 in 1000 [or 2/\n1000 = 0.002] it would mean that the total amount of loss suffered would be Rs\n10000000 [= 50000x 0.002 x 100000].If an insurer were to get the owners of each of the 100000 houses to contribute Rs\n100 and if these contributions (100000 x 100 = Rs.10000000) were to be pooled into\na single fund, it would be enough to pay for the loss of the unfortunate few whosuffered from the fire.To ensure that there is equity [fairness] among all those being insured, it is\nnecessary that the houses should all be similarly exposed to the risk. In the above\nexample risk exposure to mud houses will be different.**a)** **How exactly does the principle work in insurance?**It is by pooling number of risks of all the insured similarly placed and exposed\nto possibility of loss due to a peril that the insurer is able to assume that risk\nand its financial impact.|Large<br>number<br>of people|Paying<br>Premium|Premium|Paying Claims to a<br>few who suffered<br>loss|\n|---|---|---|---|\n|**Many**<br>**people**<br>**pay**|**Small**<br>**amounts of**<br>**money as**<br>**Premiums**|**These small amounts are pooled**<br>**together as a Common Pool, big**<br>**enough to pay a statistically**<br>**estimated number of claims**|**Big amounts are**<br>**paid to those who**<br>**suffer a loss**|**b)** **Risk pooling and the law of large numbers**The probability of damage [derived as 2 out of 1000 or 0.002 in the example\nabove] forms the basis on which the premium is determined. The insurer would\nface no risk of loss if the actual experience was as expected. In such a situation\nthe premiums of the numerous insured would be sufficient to completely\ncompensate for the losses of those who have been affected by the peril. The\ninsurer would however face a risk if the actual experience was more adverse\nthan expected and the premiums collected were not sufficient to pay the claims.How can the insurer be sure about its predictions? This becomes possible because\nof a principle known as the “Law of large numbers”. It states that the larger the\nsize of the pool of risks, the actual average of losses would be closer to the\nestimated or expected average loss.24**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have the\nsufficient money, they are considered solvent and if they do not have money to\nmeet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or solvency\nmargin) to meet unforeseen deviations between expected and actual claims\nsituations. Solvency Ratio assesses the extent to which assets are available to\ncover the insurers’ commitments towards future payments. Different countries\nuse different measures to assess Solvency Ratio. In India, IRDAI has mandated\nthat insurers are required to maintain a minimum solvency ratio of 1.5.**Example**To give a simple illustration, the probability of getting heads on a toss of the coin", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Legal hazard", "chunk_id": "Final IC 38 - IA_English Common_012", "metadata": {"file_size": 6529, "chunk_index": 12, "chunk_tokens": 993, "has_examples": true, "has_tables": true, "key_concepts": ["How exactly does the principle work in insurance?", "Premiums", "These small amounts are pooled", "Example", "Legal hazard"]}}
{"chunk": "size of the pool of risks, the actual average of losses would be closer to the\nestimated or expected average loss.24**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have the\nsufficient money, they are considered solvent and if they do not have money to\nmeet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or solvency\nmargin) to meet unforeseen deviations between expected and actual claims\nsituations. Solvency Ratio assesses the extent to which assets are available to\ncover the insurers’ commitments towards future payments. Different countries\nuse different measures to assess Solvency Ratio. In India, IRDAI has mandated\nthat insurers are required to maintain a minimum solvency ratio of 1.5.**Example**To give a simple illustration, the probability of getting heads on a toss of the coin\nis 1 out of 2. But one cannot be sure to actually get 2 heads if a coin is tossed fourtimes.Only when the number of tosses gets very large and closer to infinity, the chance of\ngetting heads once for every two tosses will become closer to one.It follows that insurers can be sure of their ground only when they have been able\nto insure a large number of insured. An insurer who has insured only a few hundred\nhouses, likely would be worse affected than one who has insured several thousandhouses.**Important****Conditions for insuring a risk**When does it make sense to insure a risk from the insurer’s point of view?Six broad requirements for a risk to be considered insurable are given below.**i.** **A sufficiently large number of homogenously [similar] exposed units** to makethe losses reasonably predictable. This follows from the **law of large numbers** .\nWithout this it would be difficult to make predictions.**ii.** **Loss produced by the risk must be definite and measurable** . It is difficult todecide the compensation if one cannot say for sure that a loss has occurred andhow much it is.**iii.** **Loss must be fortuitous or accidental** . It must be the result of an event thatmay or may not happen. The event must be beyond the control of insured. No\ninsurer would cover a loss that is intentionally caused by the insured.25**iv.** **Sharing of losses of the few by many** can work only if a small percentage of theinsured group suffers loss at any given period of time.**v.** **Economic feasibility:** The cost of insurance must not be high in relation to thepossible loss; otherwise the insurance would be economically unviable.**vi.** **Public policy:** Finally the contract should not be contrary to public policy andmorality.**Test Yourself 1**Which one of the following does not represent an insurable risk?I. FireII. Stolen goods\nIII. Burglary\nIV. Loss of goods due to ship capsizing**Summary**a) The process of insurance has four elements (asset, risk, risk pooling and aninsurance contract).b) An asset may be anything that confers some benefit and is of economic value toits owner.c) A chance of loss represents risk.d) Condition or conditions that increase the probability or severity of the loss arereferred to as hazards.e) The mathematical principle, that makes insurance possible is known as principleof risk pooling.**Key terms**a) Asset\nb) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.26## CHAPTER C-03## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk being\nproposed, whether requested or not\". All insurance contracts are based on the\nprinciple of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss on\nthe occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to the\nsubject matter of insurance, from the insured to the insurer.e) The principle of contribution implies that if the same property is insured with", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "C-03", "section": "Insurance Companies to remain Solvent:", "chunk_id": "Final IC 38 - IA_English Common_013", "metadata": {"file_size": 6529, "chunk_index": 13, "chunk_tokens": 1021, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Sharing of losses of the few by many", "Conditions for insuring a risk", "Public policy:", "Test Yourself 1"]}}
{"chunk": "b) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.26## CHAPTER C-03## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk being\nproposed, whether requested or not\". All insurance contracts are based on the\nprinciple of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss on\nthe occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to the\nsubject matter of insurance, from the insured to the insurer.e) The principle of contribution implies that if the same property is insured with\nmore than one insurance company, the compensation paid by all the insurers\ntogether cannot exceed the actual loss suffered.f) Proximate cause is a key principle of insurance and is concerned with how the\nloss or damage actually occurred and whether it is indeed as a result of an\ninsured peril.27**A.** **Uberrima Fides**Insurance contracts have various special features that are discussed below:**1.** **Utmost Good Faith or** _**‘Uberrima Fides’**_Utmost Good Faith or \"Uberrima fides\", one of the fundamental principles of an\ninsurance contract, is defined as “a positive duty to voluntarily disclose, accurately\nand fully, all facts material to the risk being proposed, whether requested or not\".All commercial contracts are based on Good Faith in so much as there shall be nofraud or deceit when giving information or doing the transaction. The rule observed\nhere is that of **“Caveat Emptor”** which means **Buyer Beware** . The parties to the\ncontract are expected to examine the subject matter of the contract and so long as\none party does not mislead the other and the answers are given truthfully, there is\nno question of the other party avoiding the contract.Insurance contracts stand on a different footing as the subject matter of the\ncontract is intangible and cannot be easily known to the insurer. Again, there are\nmany facts, which may be known only to the proposer. The insurer has to rely\nentirely on the proposer for information. Hence the proposer has a legal duty to\ndisclose all material information about the subject matter of insurance to the\ninsurers. That is, the insured should not make any misrepresentation regarding any\nfact that is material for the insurance contract. This higher obligation of full\nrepresentation and full disclosure in respect of Insurance contracts makes themcontracts of Utmost Good Faith.**If Utmost Good Faith is not observed by either party, the contract may be**\n**avoided by the other.** This follows from the logic that no one should be allowed to\ntake advantage of his own wrong especially while entering into a contract ofinsurance.**a)** **Material fact** has been defined as a fact that would affect the judgment of aninsurance underwriter in deciding whether to accept the risk and if so, the rate\nof premium and the terms and conditions. The insured has an obligation to fully\nand accurately disclose all facts that are material to an insurance contract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk? If so, at what rate of premium and subject to what terms and conditions?This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to material28facts which he ought to know. There is a corresponding duty of the insurer not to\nwithhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer should\ndisclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age, hobbies,\nfinancial information like income details of proposer, pre-existing life", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "C-03", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 - IA_English Common_014", "metadata": {"file_size": 6529, "chunk_index": 14, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Material fact", "Example", "Utmost Good Faith or", "Chapter Introduction"]}}
{"chunk": "of premium and the terms and conditions. The insured has an obligation to fully\nand accurately disclose all facts that are material to an insurance contract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk? If so, at what rate of premium and subject to what terms and conditions?This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to material28facts which he ought to know. There is a corresponding duty of the insurer not to\nwithhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer should\ndisclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age, hobbies,\nfinancial information like income details of proposer, pre-existing life\ninsurance policies, occupation etc.**ii.** **Fire Insurance:** Construction, location/ situation of risk and usage ofbuilding, age of the building, nature of goods in premises etc.**iii.** **Marine Insurance:** Description of goods, method of packing and mode oftransit etc.**iv.** **Motor Insurance:** Description of vehicle, date of purchase and RegionalRegistration authority etc.**v.** **Health Insurance:** Pre-existing disease, age etc.**b)** **When a Fact becomes ‘Material’: Some types of material facts that one** needsto disclose are those indicating that the particular risk represents a greater\nexposure than can be normally expected.**Example**Hazardous nature of cargo being sent by a ship, past history of illness, past history\nburglary of a house.i. Existence of policies taken from all insurers and their present statusii. All questions in the proposal form or application for insurance are consideredto be material, as these relate to various aspects of the subject matter of\ninsurance and its exposure to risk. They need to be answered truthfully and\nbe full in all respects.The following are some scenarios wherein material facts need not be disclosed.**Information**a. **Material Facts that need not be disclosed:** Unless there is a specific enquiry byunderwriters, the proposer has no obligation to disclose facts like:**i.** **Measures implemented to reduce the risk. E.g.:** The presence of a fireextinguisher**ii.** **Facts which the insured does not know or is unaware of. E.g.:** Anindividual, who had high blood pressure but was not aware about the same29at the time of taking the policy, cannot be charged with non-disclosure ofthis fact.**iii.** **Which could be discovered, by reasonable diligence.** It is not necessary todisclose every minute material fact. The underwriters must be conscious\nenough to ask for the same if they require further information. E.g.: When\ninsuring a textile shop one does not need to specifically say that some of the\nsynthetic clothes in the shop are highly combustible.**iv.** **Matters of law** : Everybody is supposed to know the law of the land. **E.g.:**Municipal laws about storing of explosives**v.** **About which insurer appears to be indifferent (or has waived the need****for further information)**In such cases, the insurer cannot later disclaim responsibility on grounds that the\nanswers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is accepted\nand a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose any\nmaterial facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo some\nsurgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to disclose_", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "l28", "section": "Example", "chunk_id": "Final IC 38 - IA_English Common_015", "metadata": {"file_size": 6529, "chunk_index": 15, "chunk_tokens": 961, "has_examples": true, "has_tables": false, "key_concepts": ["Information", "Motor Insurance:", "Health Insurance:", "Example", "Matters of law"]}}
{"chunk": "answers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is accepted\nand a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose any\nmaterial facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo some\nsurgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to disclose_\n_all facts that are material and relevant, as though it is a new policy.]_In the case he has Health Insurance, at the time of renewing the policy, Mr. Rajanhas to inform the insurer about this health issue.Similarly, in the case of General Insurance, at the time of renewing the Fire policy\nfor an enterprise/ factory, the insured has to inform the insurer if a change was\nmade in the occupancy of the building.At the time of renewing the Hull policy for a ship, the insured has to inform the\ninsurer if the ship was modified to carry a different type cargo; say, hazardous\nchemicals instead of pulses.c. **Situations of Non-Disclosure** may arise when the insured is silent about materialfacts because the insurer has not raised any specific enquiry. Such situations may\nalso arise through evasive answers to queries raised by the insurer.30Often non-disclosure may be inadvertent (meaning that it may be made without\none’s knowledge or intention) or because the proposer thought that a fact wasnot material. In such a case it is innocent.When a fact is intentionally suppressed it is treated as concealment. Here, thereis the intent to deceive.d. **Misrepresentation:** Any statement made during negotiation of a contract ofinsurance is called representation. A representation may be a definite statement\nof fact or a statement of belief, intention or expectation. It is expected that the\nstatement must be substantially correct. Representations that concern matters\nof belief or expectation must be made in good faith. Misrepresentation is of twokinds:**i.** **Innocent Misrepresentation** relates to inaccurate statements, which aremade without any fraudulent intention.**ii.** **Fraudulent Misrepresentation** on the other hand refers to false statementsthat are made with deliberate intent to deceive the insurer or are maderecklessly without due regard for truth.An insurance contract generally becomes void when there is a clear case of\nconcealment with intent to deceive, or when there is fraudulent\nmisrepresentation.Amendments (March, 2015) to Insurance Act, 1938 have provided certain\nguidelines about the conditions under which a policy can be called into question\nfor fraud. The new provisions are as followse. **Fraud:** The term “Fraud” has been specified under **Section 45 (2) of the****Insurance Act (amended in 2015).** Accordingly, a Life Insurance policy can be\ncalled in question on the ground of Fraud by the insurer only within a time period\nand not later. However, Insurers can do so only within three years from (a) the\ndate of issuance of the policy (b) the date of commencement of risk, (c) the date\nof revival of the policy or (d) the date of the rider to the policy, whichever islater.The insurer needs to communicate the reasons on which the policy is questioned\nin writing to the insured or his/ her legal representatives, nominees or assignees.The expression \"fraud\" means any act committed by the insured, with the intent\nto deceive the insurer or to induce the insurer to issue an insurance policy. It is\nalso provided that in case the policyholder is not alive, the onus of disproving\nfraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.31**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Duty to Disclose:", "chunk_id": "Final IC 38 - IA_English Common_016", "metadata": {"file_size": 6529, "chunk_index": 16, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Misrepresentation:", "Innocent Misrepresentation", "Section 45 (2) of the", "Fraud:", "Situations of Non-Disclosure"]}}
{"chunk": "of revival of the policy or (d) the date of the rider to the policy, whichever islater.The insurer needs to communicate the reasons on which the policy is questioned\nin writing to the insured or his/ her legal representatives, nominees or assignees.The expression \"fraud\" means any act committed by the insured, with the intent\nto deceive the insurer or to induce the insurer to issue an insurance policy. It is\nalso provided that in case the policyholder is not alive, the onus of disproving\nfraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.31**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom\nof liability. By the same token, he must stand to lose financially by any loss,\ndamage, injury or creation of liability.Let us see how insurance differs from a gambling or wager agreement.**a)** **Gambling and insurance:** Unlike a card game, where one could win or lose, afire can have only one consequence – loss to the owner of the house.The owner takes insurance to ensure that the loss suffered is compensated for\nin some way.In other words, Insurable Interest is the interest the insured has in the subjectmatter of insurance. Insurable interest makes an insurance contract valid andenforceable under the law.**Example**If Mr. Patel has brought a house with a mortgage loan of Rs 15 lakhs from a bank\nand he has repaid 12 lakhs of this amount, the bank’s interest would be only to the\ntune of the balance three lakhs which is outstanding.Thus the bank also has an insurable interest financially in the house for the balance\namount of loan that is unpaid and would ensure that it is made a co insured in the\npolicyMr. Patel owns a house for which he has taken a mortgage loan of Rs. 15 lakhs from\na bank. Ponder over the questions below: Does he have an insurable interest in the house? Does the bank have an insurable interest in the house? What about his neighbour?Mr. Dass has a family consisting of spouse, two kids and old parents. Ponder over\nthe below questions: Does he have an insurable interest in their well-being? Does he stand to financially lose if any of them are hospitalised? What about his neighbour’s kids? Would he have an insurable interest in them?32It would be relevant here to make a distinction between the subject matter of\ninsurance and the subject matter of an insurance contract.**The subject matter of insurance** relates to property being insured against, whichhas an intrinsic value of its own.**The subject matter of an insurance contract** on the other hand is the insured’s\nfinancial interest in that property. It is only when the insured has such an interest\nin the property that he/ she has the legal right to insure. The insurance policy in\nthe strictest sense covers not the property per se, but the insured’s financial\ninterest in the property.**Diagram 1:** **Insurable interest according to common law****b)** **Time when insurable interest should be present:** In life insurance, insurableinterest should be present at the time of taking the policy. In general insurance,\ninsurable interest should be present both at the time of taking the policy and at\nthe time of claim with some exceptions like marine policies in which case itmust exist at the time of claim.In case of fire and accident insurance, insurable interest should be present both\nat the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses if\nthe family meets with an accident or undergoes hospitalisation. However, in\nmarine cargo insurance, insurable interest is required only at the time of loss as\nthe ownership of the goods would change hands when the cost is paid, which\ncan happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the loss\nor damage actually occurred and whether it is as a result of an insured peril. If the\nloss has been caused by the insured peril, the insurer is liable. If the immediate", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "B.", "chunk_id": "Final IC 38 - IA_English Common_017", "metadata": {"file_size": 6529, "chunk_index": 17, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["The subject matter of an insurance contract", "Time when insurable interest should be present:", "Diagram 1:", "Example", "Insurable interest according to common law"]}}
{"chunk": "insurable interest should be present both at the time of taking the policy and at\nthe time of claim with some exceptions like marine policies in which case itmust exist at the time of claim.In case of fire and accident insurance, insurable interest should be present both\nat the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses if\nthe family meets with an accident or undergoes hospitalisation. However, in\nmarine cargo insurance, insurable interest is required only at the time of loss as\nthe ownership of the goods would change hands when the cost is paid, which\ncan happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the loss\nor damage actually occurred and whether it is as a result of an insured peril. If the\nloss has been caused by the insured peril, the insurer is liable. If the immediate\ncause is an insured peril, the insurer is bound to make good the loss, otherwise he\nis not. This application of principle is practically more in respect of non-lifeinsurance claims.33When a loss occurs, there can often be a series of events leading up to the incident\nand so it is sometimes difficult to determine the nearest or proximate cause. Under\nthis rule, the insurer looks for the predominant cause which sets into motion the\nchain of events producing the loss. This may not necessarily be the last event that\nimmediately preceded the loss i.e. it is not necessarily an event which is closest to,\nor immediately responsible for causing the loss. For example, a fire might cause a\nwater pipe to burst. Despite the resultant loss being water damage, the fire would\nstill be considered the proximate cause of the incident. Other causes may be\nclassified as remote causes, which are separate from proximate causes. Remote\ncauses may be present but are not effectual in causing an event.**Definition**Proximate cause is defined as the active and efficient cause that sets in motion achain of events which brings about a result, without the intervention of any force\nstarted and working actively from a new and independent source.How does the principle of proximate cause apply to insurance contracts? Since\ninsurance provides for payment of a death benefit, regardless of the cause of death,\nthe principle of proximate cause would not usually apply. However many insurance\ncontracts may also have an accident benefit add-on wherein an additional sum\nassured is payable in the event of accidental death. In such a situation, it becomes\nnecessary to ascertain the cause - whether the death occurred as a result of an\naccident. The principle of proximate cause would become applicable in suchinstances.To understand the principle of proximate cause, consider the following situation:**Example****Scenario 1:** Mr. Ajay had parked his car in the garage and gone on a long vacation.\nSix months later, when he came back and started the car, he noticed that the airconditioning of the car was not working. Mr. Ajay filed a claim with the insurance\ncompany for the cost of repairing the air-conditioning and the insurance company\nrejected the claim. The reason given by the insurance company was that the damage\nwas due to the ‘normal wear and tear’ of the car and the air-conditioning system,\nwhich was an excluded peril in the insurance policy. Mr Ajay approached the Court\nand after examining the survey report which said that the car was 12 years old and\nneither the car nor the air-conditioning had been serviced/ repaired during the\nprevious 6 years, the damage was due to the ‘normal wear and tear’ and the\ninsurance company was not liable to pay the claim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the34immediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "e34", "section": "C.", "chunk_id": "Final IC 38 - IA_English Common_018", "metadata": {"file_size": 6529, "chunk_index": 18, "chunk_tokens": 935, "has_examples": true, "has_tables": false, "key_concepts": ["Scenario 1:", "Example", "Scenario 2:", "Definition", "Proximate Cause"]}}
{"chunk": "was due to the ‘normal wear and tear’ of the car and the air-conditioning system,\nwhich was an excluded peril in the insurance policy. Mr Ajay approached the Court\nand after examining the survey report which said that the car was 12 years old and\nneither the car nor the air-conditioning had been serviced/ repaired during the\nprevious 6 years, the damage was due to the ‘normal wear and tear’ and the\ninsurance company was not liable to pay the claim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the34immediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these\nlosses are customarily paid by business under fire insurance policies.Example of such losses can be – Damage to property caused by water used to extinguish fire Damage to property caused by fire brigade in execution of their duty Damage to property during its removal from a burning building to a safe place**Test Yourself 1**Mr. Pinto contracted pneumonia as a result of lying on wet ground after a horse\nriding accident. The pneumonia resulted in death of Mr. Pinto. What is the\nproximate cause of the death?I. PneumoniaII. HorseIII. Horse riding accidentIV. Bad luck**D.** **Indemnity**The Principle of Indemnity is applicable to Non-life insurance policies. **It means that**\n**the policyholder, who suffers a loss, is compensated so as to put him or her in**\n**the same financial position as he or she was before the occurrence of the loss**\n**event** . The insurance contract guarantees that the insured would be indemnified or\ncompensated up to the amount of loss and no more.The philosophy is that one should not make a profit through insuring one’s assets\nand recovering more than the loss. The insurer would assess the economic value of\nthe loss suffered and compensate accordingly.**Example**Ram has insured his house, worth Rs. 10 lakhs, for the full amount. He suffers loss\non account of fire estimated at Rs. 70,000. The insurance company would pay him\nan amount of Rs. 70,000. The insured can claim no further amount.The indemnity to be paid would depend on the type of insurance one\ntakes.Indemnity might take one or more of the following modes of settlement: Cash payment\n Repair of a damaged item\n Replacement of the lost or damaged item\n Reinstatement (Restoration). E.g. Rebuilding a house destroyed by fire35**Diagram 2:** **Indemnity****a)** **Agreed Value:** However, there is some subject matter whose value cannot beeasily estimated or ascertained at the time of loss. For instance, it may be\ndifficult to put a price in the case of family heirlooms or rare artefacts. Similarly\nin marine insurance policies it may be difficult to estimate the extent of loss\nsuffered in a ship accident half way around the world.In such instances, a principle known as the ‘Agreed Value’ is adopted. The\ninsurer and insured agree on the value of the property to be insured, at the\nbeginning of the insurance contract. In the event of total loss, the insurer agrees\nto pay the agreed amount of the policy. This type of policy is known as “ **Agreed**\n**Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss only\nin the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs. 5\nlakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this entire\namount. It is deemed that the house owner has insured only to the tune of half\nits value and he is thus entitled to claim just 50% [Rs. 30,000] of the amount ofloss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "e34", "section": "Scenario 2:", "chunk_id": "Final IC 38 - IA_English Common_019", "metadata": {"file_size": 6529, "chunk_index": 19, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Indemnity", "It means that", "Test Yourself 1", "Agreed Value:", "Agreed"]}}
{"chunk": "insurer and insured agree on the value of the property to be insured, at the\nbeginning of the insurance contract. In the event of total loss, the insurer agrees\nto pay the agreed amount of the policy. This type of policy is known as “ **Agreed**\n**Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss only\nin the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs. 5\nlakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this entire\namount. It is deemed that the house owner has insured only to the tune of half\nits value and he is thus entitled to claim just 50% [Rs. 30,000] of the amount ofloss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual\namount of loss i.e. the amount of money needed to replace lost or damaged\nproperty at current market prices less depreciation.**E.** **Subrogation**Subrogation means the transfer of all rights and remedies with respect to the\nsubject matter of insurance, from the insured to the insurer. Subrogation follows\nfrom the principle of Indemnity. Hence, it is often called a ‘corollary’ of Indemnity.In other words, if an insured suffers a loss and the loss has been indemnified by the\ninsurer, the insured’s right to get compensated by any third party for that loss,36would get shifted to the insurer. Note that the amount of damage that can be\ncollected by the insurance company is only to the extent of the amount paid by the\ninsurance company.**Important****Subrogation:** It is the process an insurance company uses to recover claim amounts\npaid to a policy holder from a negligent third party.Subrogation can also be defined as surrender of rights by the insured to an insurance\ncompany that has paid a claim against the third party.**Example**Mr. Kishore’s household goods were being carried in Sylvain Transport service. They\ngot damaged due to driver’s negligence, to the extent of Rs. 45,000 and the insurer\npaid an amount of Rs. 30,000 to Mr. Kishore. The insurer stands subrogated to the\nextent of only Rs. 30,000 and collect that amount from Sylvain Transports.In case the matter went into litigation and the Court directed Sylvain Transports to\npay Rs.35,000 as compensation to Mr. Kishore, he is liable to pay the insurer the\nclaim amount of Rs 30,000 under the subrogation clause, and to keep the balance\namount of Rs 5,000 with himself.The Subrogation Clause prevents the insured from collecting more than the loss from the insurance company and from any third party. Subrogation arises only in\ncase of contracts of indemnity and not against benefit policies like Life Insurance\nPolicy or Personal Accident Policy.**Example**Mr. Suresh dies in an air crash. His family is entitled to collect the full Sum Assured\nof Rs 50 lakhs from the insurer who has issued a Personal Accident Policy plus the\ncompensation paid by the airline, say, Rs 15 lakhs.**F.** **Contribution:**Like Subrogation, ‘Contribution’ also follows from the Principle of Indemnity.\nHence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be met when\nthe insured has taken insurance from more than one insurer. Contribution implies\nthat if the same property is insured with more than one insurance company, the\ncompensation paid by all the insurers together cannot exceed the actual loss\nsuffered. The policy holder can claim from each of the insurers only a portion of the\nloss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs. Suppose37a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he can claim anamount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise in", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "e37", "section": "Agreed", "chunk_id": "Final IC 38 - IA_English Common_020", "metadata": {"file_size": 6529, "chunk_index": 20, "chunk_tokens": 978, "has_examples": true, "has_tables": false, "key_concepts": ["Subrogation:", "Agreed", "Example", "Important", "Underinsurance:"]}}
{"chunk": "Hence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be met when\nthe insured has taken insurance from more than one insurer. Contribution implies\nthat if the same property is insured with more than one insurance company, the\ncompensation paid by all the insurers together cannot exceed the actual loss\nsuffered. The policy holder can claim from each of the insurers only a portion of the\nloss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs. Suppose37a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he can claim anamount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise in\nthe case of Life Insurance, because there is no upper limit that can be placed onthe losses suffered when there is a loss of life.**Test Yourself 2**Which among the following is an example of coercion?I. Ramesh signs a contract without having knowledge of the fine print\nII. Ramesh threatens to kill Mahesh if he does not sign the contract\nIII. Ramesh uses his professional standing to get Mahesh to sign a contract\nIV. Ramesh provides false information to get Mahesh to sign a contract**Test Yourself 3**Which among the following options cannot be insured by Ramesh?I. Ramesh’s houseII. Ramesh’s spouseIII. Ramesh’s friendIV. Ramesh’s parents**Test Yourself 4**What is the significance of the principle of contribution?I. It ensures that the insured also contributes a certain portion of the claim alongwith the insurerII. It ensures that all the insured who are a part of the pool, contribute to the claimmade by a participant of the pool, in the proportion of the premium paid bythemIII. It ensures that multiple insurers covering the same subject matter; cometogether and contribute the claim amount in proportion to their exposure to the\nsubject matter\nIV. It ensures that the premium is contributed by the insured in equal instalmentsover the year.**Summary**The special features of insurance policies include:i. Uberrima fides,\nii. Insurable interest,\niii. Proximate cause,\niv. Indemnity\nv. Subrogation38vi. Contribution**Key Terms**1. Non-Disclosure2. Misrepresentation3. Material facts4. Agreed Value5. Under Insurance**Answers to Test Yourself****Answer 1** - The correct option is III\n**Answer 2** - The correct option is II\n**Answer 3** - The correct option is III\n**Answer 4** - The correct option is III39### CHAPTER C-0 4 **FEATURES OF INSURANCE CONTRACTS****Chapter Introduction**In this chapter, we discuss the elements that govern the working and specialfeatures of an insurance contract.40**A.** **Insurance contracts – Legal aspects and special features.**The chapter also deals with the legal aspects and special features of an insurancecontract.**1.** **The Insurance Contract**Insurance involves a contractual agreement in which the insurer agrees to\nprovide financial protection against certain specified risks for a price or\nconsideration known as the premium. The contractual agreement takes the form\nof an insurance policy.**2.** **Legal aspects of an insurance contract**This section looks at some features of an insurance contract and considers thelegal principles that govern insurance contracts in general.**Important**A contract is an agreement between parties, enforceable at law. The provisions of\nthe Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**41**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said to\nmake an offer or proposal. Usually, the offer is made by the proposer, and\nacceptance made by the insurer.When a person to whom the offer is made signifies his assent thereto, this is deemed", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "e37", "section": "Test Yourself 2", "chunk_id": "Final IC 38 - IA_English Common_021", "metadata": {"file_size": 6529, "chunk_index": 21, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Insurance contract", "Test Yourself 4", "Chapter Introduction", "Diagram 2:"]}}
{"chunk": "the Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**41**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said to\nmake an offer or proposal. Usually, the offer is made by the proposer, and\nacceptance made by the insurer.When a person to whom the offer is made signifies his assent thereto, this is deemed\nto be an acceptance. Hence, when a proposal is accepted, it becomes a promise.\nThe acceptance needs to be communicated to the proposer which results in theformation of a contract.When a proposer accepts the terms of the insurance plan and signifies his/ her\nassent by paying the deposit amount, which, on acceptance of the proposal, gets\nconverted to the first premium, the proposal becomes a policy. If any condition is\nput, it becomes a counter offer. The policy bond becomes the evidence of thecontract.**2.** **Consideration**This means that the contract must contain some mutual benefit for the parties. The\npremium is the consideration from the insured, and the promise to indemnify, is theconsideration from the insurers.**3.** **Agreement between the parties (Consensus Ad-Idem)**Both the parties, the insurer and the policyholder, should agree to the same thing\nin the same sense. In other words, there should be “ **consensus ad-idem** ” between\nboth parties.42**4.** **Free consent**There should be free consent while entering into a contract. Consent is said to\nbe free when it is not caused by Coercion/ By Force\n Undue influence Fraud Misrepresentation\n MistakeWhen consent to an agreement is caused by coercion, fraud or\nmisrepresentation, the agreement is voidable.**5.** **Capacity of the parties**Both the parties to the contract must be legally competent to enter into the\ncontract. The policyholder must be legally an adult at the time of signing the\nproposal and should be of sound mind and not disqualified under law. For\nexample, minors cannot enter into insurance contracts.**6.** **Legality**The object of the contract must be legal, for example, no insurance can be had\nfor illegal acts. Every agreement of which the object or consideration is unlawful\nis void. The object of an insurance contract is a lawful object.Also one’s entering into an insurance contract should be done out of one’s free\nwill, without any kind of force, fear or mistake.**C.** **Paying Premium in Advance**As per Indian laws, Insurers are not allowed to assume risk unless they receive the\npremium in advance. In other words, insurance protection cannot be sold on creditbasis in India.Section 64 VB of the Insurance Act 1938 states, “No risk to be assumed unless\npremium is received in advance”. No insurer shall assume any risk unless and until\nthe premium is received in advance or is guaranteed to be paid or a deposit is made\nin advance in the prescribed manner. This is an important feature of the insurance\nindustry in India.The Insurance Rules, 1939, provide certain exceptions to this condition of advance\npayment of premium, in respect of particular categories of insurances. Section 59\nof the Insurance Rules allows accepting premiums in instalments in respect of\nSickness Insurance, Group Personal Accident Insurance Medical Benefits Insurance\nand Hospitalisation Insurance Schemes, subject to certain conditions. Section 59 of\nthe Insurance Rules allows relaxations for policies issued to Government and semiGovernment bodies, Fidelity Guarantee Insurance policies covering Government and43semi-Government employees, Workmen's Compensation policies, Cash in Transit\npolicies, and some other categories of insurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a proper\nunderstanding the product and not just bought/ sold. Hence, insurance is to be\n‘solicited’ or asked for by the customer. Traditionally, insurers declare that\n“Insurance is the subject matter of solicitation”. To elucidate, insurance is not\na ready-made product like a packet of biscuits or a bar of chocolate to be\nbought/ sold outright. Customers have to discuss their insurance needs with a", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "d43", "section": "Diagram 1:", "chunk_id": "Final IC 38 - IA_English Common_022", "metadata": {"file_size": 6529, "chunk_index": 22, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Legality", "Capacity of the parties", "Agreement between the parties (Consensus Ad-Idem)", "Paying Premium in Advance", "Diagram 1:"]}}
{"chunk": "in advance in the prescribed manner. This is an important feature of the insurance\nindustry in India.The Insurance Rules, 1939, provide certain exceptions to this condition of advance\npayment of premium, in respect of particular categories of insurances. Section 59\nof the Insurance Rules allows accepting premiums in instalments in respect of\nSickness Insurance, Group Personal Accident Insurance Medical Benefits Insurance\nand Hospitalisation Insurance Schemes, subject to certain conditions. Section 59 of\nthe Insurance Rules allows relaxations for policies issued to Government and semiGovernment bodies, Fidelity Guarantee Insurance policies covering Government and43semi-Government employees, Workmen's Compensation policies, Cash in Transit\npolicies, and some other categories of insurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a proper\nunderstanding the product and not just bought/ sold. Hence, insurance is to be\n‘solicited’ or asked for by the customer. Traditionally, insurers declare that\n“Insurance is the subject matter of solicitation”. To elucidate, insurance is not\na ready-made product like a packet of biscuits or a bar of chocolate to be\nbought/ sold outright. Customers have to discuss their insurance needs with a\nperson qualified for the same and based on professional advice, the right\ninsurance product is to be purchased. The Insurance product has to be\nunderstood and the offering most suited to the specific needs and requirements\nof the customer in terms of the policy coverage, exclusions, terms and\nconditions, is to be considered.‘Solicitation’ is usually initiated when an insurer or an authorised intermediary\napproaches a prospect with a view to understand his/ her insurance needs and\nprovides professional advice in selecting appropriate insurance products. The\nprospect solicits the proper solution and provides all requisite details to the\nadvisor. As per regulations of IRDAI, **Insurance Agents** are appointed by an\ninsurer for the purpose of engaging in the solicitation process and procuring\ninsurance business, including business relating to the continuance, renewal or\nrevival of policies of insurance. Only authorised employees of insurance\ncompanies, and specified persons of licensed intermediaries, who are trained\nand authorised for the purpose can be part of the process of solicitation andsales of insurance.**D.** **Enabling Provisions****1.** **Grace Period**Grace period is the specified period of time immediately following the premium\ndue date during which a payment can be made to renew or continue a policy in\nforce without loss of continuity benefits such as waiting periods and coverage of\npre-existing diseases. Coverage is not available for the period for which no\npremium is received. The days of grace are computed from the next day after the\ndue date fixed for payment of the premium.For **Life insurance**, if there is no grace period, a single delay in payment can\nlead to a policy lapse. This would be detrimental for the policyholder, the\ninsurer and the insurance industry in general. IRDAI Regulations allow a grace\nperiod of 15 days is applicable in case of Monthly mode of Premium collection and\n30 days in other modes.44In respect of **Health insurance** also, certain number of days as grace period is\nallowed for renewal of individual health policies. This period depends on the policy\nof the company and the product offered. All continuity benefits are maintained if\nthe policy is renewed within the grace period. However Claims, if any, during the\nbreak period will not be considered. As per IRDAI Regulations, the grace period is\n15 days in case of Monthly mode of Premium collection and 30 days in other modes.**Motor Policies** are usually valid for a period of one year and have to be renewed\nbefore the due date. Grace period for paying the premium do not apply. In case\na comprehensive policy lapses for more than 90 days, the accrued No Claim\nBonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condone delaysin renewal up to 30 days without deeming such condonation as a break in\npolicy. Insurers were requested to contact the policyholders well in\nadvance to avoid discontinuance in coverage.iii. As regards Motor Vehicle Third Party Insurance policies that fell due forrenewal and premiums could not be paid due to the Covid-19 situation,\nIRDAI allowed a grace period till 15th May, 2020.**2.** **Free-Look Period introduced by “IRDAI”**Insurance contracts are drafted by the insurer, and the other party has to adhere to", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "d43", "section": "Solicitation", "chunk_id": "Final IC 38 - IA_English Common_023", "metadata": {"file_size": 6529, "chunk_index": 23, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance Agents", "Health insurance", "Grace Period", "Motor Policies", "Solicitation"]}}
{"chunk": "before the due date. Grace period for paying the premium do not apply. In case\na comprehensive policy lapses for more than 90 days, the accrued No Claim\nBonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condone delaysin renewal up to 30 days without deeming such condonation as a break in\npolicy. Insurers were requested to contact the policyholders well in\nadvance to avoid discontinuance in coverage.iii. As regards Motor Vehicle Third Party Insurance policies that fell due forrenewal and premiums could not be paid due to the Covid-19 situation,\nIRDAI allowed a grace period till 15th May, 2020.**2.** **Free-Look Period introduced by “IRDAI”**Insurance contracts are drafted by the insurer, and the other party has to adhere to\nit if he/ she wants the insurance. Such contracts where someone has to accept the\ncontract as it is and cannot make any change to it are legally called Contracts of\nAdhesion. Because of this one-sided situation, the Courts always make insurers\nliable for any ambiguity or confusion that may arise in interpreting these terms andconditions.To reduce this one-sidedness and make insurance transactions more customerfriendly, IRDAI has built into its regulations a consumer-friendly provision called\n‘Free-Look Period’ whereby, if the customer is not satisfied with any term and\nconditions of the policy, he/ she can return it and get a refund. This provision\nwhereby policyholders are given the option of cancelling the policy within 15 days\n(30 days, in case of electronic policies and policies sourced through distance mode)\nafter receiving the policy document, in case they are not satisfied with the policy,\nhas been introduced for Life Insurance and Health Insurance policies (having a\ntenure of at least one year). The company has to be intimated in writing and the\npremium is refunded less, proportionate risk premium for the period of cover,\nexpenses and charges.45**Cancellation of Policies:** When policies are cancelled by the insurer, the proportion\nof the premium corresponding to the expired period of insurance is charged/\nretained by the insurer and the proportion corresponding to the unexpired period\nof insurance is returned to the insured, provided no claim has been paid under the\npolicy. Such proportionate calculation of premium is called Pro-rata premium.When annual policies are cancelled by the insured, insurers usually charge/ retain\npremiums at a higher rate and refund premiums at higher rates, instead of\ncalculating pro-rata premiums. This would prevent anti-selection against the\ninsurers and take care of the initial expenses of the insurer. Such rates are disclosed\nas part of the terms and conditions of the insurance contract and referred to as\nShort period scales.**Important****i.** **Coercion** - Involves pressure applied through criminal means.**ii.** **Undue influence** – using one’s position to dominate the will of another person,to obtain an undue advantage over that person.**iii.** **Fraud** – inducing another to act on a false belief that is caused by arepresentation one does not believe to be true. It can arise either from\ndeliberate concealment of facts or through misrepresenting them.**iv.** **Mistake** - Error in one’s knowledge or belief or interpretation of a thing or event.This can lead to an error in understanding and agreement about the subjectmatter of the contract.**Test Yourself 1**Which among the following cannot be an element in a valid insurance contract?I. Offer and AcceptanceII. CoercionIII. ConsiderationIV. Legality**Summary**i. Insurance involves a contractual agreement in which the insurer agrees toprovide financial protection against specified risks for a price or consideration\nknown as the premium.\nii. A contract is an agreement between parties, enforceable at law.iii. The elements of a valid contract include:Offer and acceptanceConsideration,Consensus ad-idem,- Free consentCapacity of the parties and46Legality of the object**Key Terms**1. Offer and Acceptance2. Lawful consideration3. Consensus ad idem**Test Yourself 2**During the Free-look period, if the policyholder, who has bought a policy through\nan Agent, disagrees to any of its terms and conditions, he/ she can return it and get\na refund subject to the following conditions:I. He/ she can exercise this option within 15 days of receiving the policy document\nII. He/ she has to communicate to the company in writing", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "d-19", "section": "Free-Look Period introduced by “IRDAI”", "chunk_id": "Final IC 38 - IA_English Common_024", "metadata": {"file_size": 6529, "chunk_index": 24, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Cancellation of Policies:", "Mistake", "Free-Look Period introduced by “IRDAI”", "Important"]}}
{"chunk": "known as the premium.\nii. A contract is an agreement between parties, enforceable at law.iii. The elements of a valid contract include:Offer and acceptanceConsideration,Consensus ad-idem,- Free consentCapacity of the parties and46Legality of the object**Key Terms**1. Offer and Acceptance2. Lawful consideration3. Consensus ad idem**Test Yourself 2**During the Free-look period, if the policyholder, who has bought a policy through\nan Agent, disagrees to any of its terms and conditions, he/ she can return it and get\na refund subject to the following conditions:I. He/ she can exercise this option within 15 days of receiving the policy document\nII. He/ she has to communicate to the company in writing\nIII. The premium refund will be adjusted for proportionate risk premium for theperiod on cover, expenses incurred by the insurer on medical examination and\nstamp duty chargesIV. All the above**Test Yourself 3**If the policyholder has bought a policy and does not want it, he/ she can return it\nduring the _________ period, and get a refund.I. Free evaluationII. Free-lookIII. CancellationIV. Free trial**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.47## CHAPTER C-05## UNDERWRITING AND RATING**Chapter Introduction**In this chapter you will learn the basics of underwriting and rating. You will learn\nabout the different methods of dealing with hazards in the process of rating of risks.\nYou will be able to appreciate the common aspects of underwriting, product\napproval and rating.**Learning Outcomes**After studying this chapter, you should be able to:1. Define the basics of underwriting2. Understand the basics of product approvals in India3. Appreciate rating factors and the importance of ratemaking48**A.** **Basics of Underwriting**In the previous chapters, we have seen that the concept of insurance involves\nmanaging risk through pooling. Insurers create a pool consisting of premiums that\nare made by several individuals/ commercial/ industrial firms/ organizations.This process of understanding risks, classifying risks, identifying which category they\nfall into, **deciding whether to accept the risk or not** and if so, how much premium\nthe insurer would require to accept the risk and whether any extra conditions are\nto be imposed on the risk - all these are part of **underwriting** .It is also important to know what rate is to be charged and how the rates are made.**Definition**Underwriting is the process of determining whether a risk offered for insurance is\nacceptable, and if so, at what rates, terms and conditions.Underwriting comprises the following steps:i. Assessment and evaluation of hazard and risk in terms of frequency andseverity of lossii. Formulation of policy coverage and terms and conditionsiii. Fixing of rates of premiumThe underwriter decides on whether or not to accept the riskThe next step would be to decide the **rates, terms and conditions** under which the\nrisk is to be accepted.Underwriting skills are acquired through a continuous learning process involving\nadequate training, field exposure and deep insights. To be a fire insurance\nunderwriter one needs to have a good knowledge of the likely causes of fire, impact\nof fire on various physical goods and property, the process involved in an industry,\ngeography, climatic conditions etc.Similarly a marine insurance underwriter must be aware about port/ road\nconditions, problems encountered by cargo/ goods in transit or storage, ships andtheir seaworthiness and so on.A health underwriter needs to understand the risk profile of the insured, age,\nmedical aspects, fitness levels and family history and measure the effect of each\nfactor affecting the risk.**Sources of information for underwriting**The first stage in any numerical (or statistical) analysis is the collection of data.\nWhen pricing a risk, an underwriter should gather as much information as possibleto aid accurate assessment.49**Sources of information are:**i. **Proposal form or underwriting presentation**ii. **Risk surveys**iii. **Historic claims experience data:** For some classes of business, such aspersonal and motor lines, underwriters often utilise historic claims\nexperience data to provide an indication of the likely future claims\nexperience, and to arrive at a suitable premium **.****Underwriting, equity and business sustainability**The need for careful underwriting and risk classification in insurance arises from the\nsimple fact that **all risks are not equal** . Each risk thus needs to be appropriately\nassessed and priced in accordance with the likelihood of loss occurrence and\nseverity.Since all risks are not equal, it would not be proper to ask all those who are to be", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "d46", "section": "Key Terms", "chunk_id": "Final IC 38 - IA_English Common_025", "metadata": {"file_size": 6529, "chunk_index": 25, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Sources of information for underwriting", "Answer 3", "Underwriting, equity and business sustainability"]}}
{"chunk": "medical aspects, fitness levels and family history and measure the effect of each\nfactor affecting the risk.**Sources of information for underwriting**The first stage in any numerical (or statistical) analysis is the collection of data.\nWhen pricing a risk, an underwriter should gather as much information as possibleto aid accurate assessment.49**Sources of information are:**i. **Proposal form or underwriting presentation**ii. **Risk surveys**iii. **Historic claims experience data:** For some classes of business, such aspersonal and motor lines, underwriters often utilise historic claims\nexperience data to provide an indication of the likely future claims\nexperience, and to arrive at a suitable premium **.****Underwriting, equity and business sustainability**The need for careful underwriting and risk classification in insurance arises from the\nsimple fact that **all risks are not equal** . Each risk thus needs to be appropriately\nassessed and priced in accordance with the likelihood of loss occurrence and\nseverity.Since all risks are not equal, it would not be proper to ask all those who are to be\ninsured, to pay equal premium. **The purpose of underwriting is to classify risks so**\n**that, depending on their characteristics and degree of risk posed, an appropriate**\n**rate of premium may be charged.** It is important for the underwriter to ensure\nthat the risk evaluation is done properly and the premium charged is neither too\nlow to cover the risk nor too high to make it non-competitive.The main features of underwriting are as followsi. To **identify risk** based upon the characteristicsii. To **determine the level** of risk presented by the proposerThe objectives of underwriting are achieved, in short, by deciding the level of\nacceptability, adequacy of premium and other terms.**B.** **Product Filing with IRDAI**Every Insurance product needs to be filed with IRDAI for approval before it is offered\nfor sale. IRDAI allots a Unique Identification number (UIN) for every insurance\nproduct. Once products are introduced in the market, there are guidelines to be\nfollowed for withdrawing the product as well.**1.** The Regulator asks for a clear commitment by the Board of the insurer that it iswilling to accept the risks in the policy and agrees to pay the claims. It also asks\nthe insurer to commit that the policy wordings are fair to the customer and that\nthe prices are decided on a scientific basis.**2.** The insurer should plan for the possibility of withdrawal of the products in thefuture and the options that would be available to the policyholder on such\nwithdrawal of the product.**3.** The withdrawn product shall not be offered to the prospective customers.50**C.** **Basics of Ratemaking**Insurance is based on transfer of risk to the insurer. By purchasing an insurance\npolicy, the insured is able to reduce the impact of financial losses arising from the\nperil against which the property is insured. The Insurer needs to adopt a process of\ncalculating a price to cover the future cost of insurance claims and expenses,\nincluding a margin for profit. This is known as **ratemaking.****A rate is the price of a given unit of insurance.** For example, a rate may be\nexpressed as Rs.1.00 per mile (per thousand) sum assured for earthquake coverage.\nEach rate is established after looking at past trends and changes in the current\nenvironment that may affect potential losses in the future.**Note that rates are not the same as premiums.****Premium = (Sum Insured) x (rate)****Example**Taking an example of health insurance, numerical or percentage assessments are\nmade on each component of the risk. Factors like age, race, occupation, habits etc.\nare examined and scored numerically based on predetermined criteria.The amount of premium to be paid by each depends on a rate, which is determined\nby two factors; The probability of loss due to a loss event (caused by an insured peril) and The estimated amount of loss that may arise due to the loss event**Example**Assume the average amount of a house being destroyed by fire is Rs 1,00,000.The probability of the loss of a house being destroyed by fire 1 out of 100 [or 0.01].\nThat is, the experience is that out of a 100 insured houses, one house gets destroyed\nby fire.The expected average loss would be Rs.1,00,000 x 0.01 = Rs. 1000.So, Insurers would need to charge a minimum of Rs.1000 to insure a house of\nRs.1,00,000 value.How can the insurer ensure that the pool is sufficient to compensate for the losses\nthat are actually incurred?As seen earlier, the whole mechanism of insurance involves pooling of many similar", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Sources of information for underwriting", "chunk_id": "Final IC 38 - IA_English Common_026", "metadata": {"file_size": 6529, "chunk_index": 26, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Product Filing with IRDAI", "Premium = (Sum Insured) x (rate)", "Sources of information for underwriting", "Underwriting, equity and business sustainability", "Example"]}}
{"chunk": "made on each component of the risk. Factors like age, race, occupation, habits etc.\nare examined and scored numerically based on predetermined criteria.The amount of premium to be paid by each depends on a rate, which is determined\nby two factors; The probability of loss due to a loss event (caused by an insured peril) and The estimated amount of loss that may arise due to the loss event**Example**Assume the average amount of a house being destroyed by fire is Rs 1,00,000.The probability of the loss of a house being destroyed by fire 1 out of 100 [or 0.01].\nThat is, the experience is that out of a 100 insured houses, one house gets destroyed\nby fire.The expected average loss would be Rs.1,00,000 x 0.01 = Rs. 1000.So, Insurers would need to charge a minimum of Rs.1000 to insure a house of\nRs.1,00,000 value.How can the insurer ensure that the pool is sufficient to compensate for the losses\nthat are actually incurred?As seen earlier, the whole mechanism of insurance involves pooling of many similar\nrisks so that the probability of the number of losses (frequency) as well as the extent\nof loss (severity) becomes predictable. This principle, referred to as ‘the law of\nlarge numbers’ states that as the sample size grows, the results come closer to the\nexpected value. Insurance companies need to sell more policies to more and more\npeople to make their expectations/ predictions work.51An example is that if a coin is tossed, the chances of getting ‘heads’ or ‘tails’ is\n50:50. However, if the coin is tossed only once, the result can be 100% heads and\n0% ‘tails’ or 0% ‘heads’ and or 100% tails. However, if one tosses a coin many times,\nthe chance of the average count of ‘heads’ and ‘tails’ being 100% and 0% reduces\nand will get closer to 50:50.**Example**In the field of property insurance, the chances of a wooden structure catching fire\nare more than stone structures; hence, a higher premium is required to insure thewooden structure.The same concept applies to Life and Health Insurance also. An individual suffering\nfrom high blood pressure or diabetes has higher chances of suffering a heart attack.**Test Yourself 1**Identify the two factors that affect insurance ratemaking.I. Probability and severity of riskII. Source and nature of riskIII. Source and timing of risk\nIV. Nature and impact of risk**1.** **Determining the rate of premium**The pure rate of premium is arrived at on the basis of past loss experience.\nTherefore, statistical data regarding past losses is most essential for purposes of\ncalculating rates. To fix the rates, it is necessary to give a ‘mathematical value’ tothe risks.**Example**If loss experience of a large number of motor cycles is collected for a period of say\n10 years, we will get the sum total of the losses resulting from damage to the\nvehicles. By expressing this amount of loss as percentage of the total value of motor\ncycles we can fix the ‘mathematical value’ of the risk. This may be expressed in the\nformula given below:Let us suppose that: The Value of a motor cycle: Rs. 50,000/  Loss experience: Out of 1000 motor cycles, 50 motor cycles get stolen over10 years\n On an average, 5 motor cycles become total losses due to theft every yearApplying the formula, the result will be:52Losses per year (Rs. 50,000 X 5) = Rs. 2,50,000**Total Values of 1000 motor vehicles (Rs.** 50,000 X 1000) **= Rs. 5,00,00,000**This means that average loss percentage per vehicle (L/ V) x 100= [2,50,000/\n5,00,00,000] x 100 = 0.5%Therefore the rate of premium that a motor cycle owner pays is half a percent of\nRs. 50,000/ - i.e. Rs. 250/ - per year. This is called the **‘Pure’ premium,** also known\nas ‘Burning Cost’.At the rate of Rs. 250 per motor cycle, Rs. 2.5 lakhs is collected which is paid outin claims on total losses of 5 vehicles.If the pure premium, which is arrived above, is collected it would constitute a fund\nwhich will be sufficient only to pay for losses.In the example above we can see that there is no surplus. But insurance operations", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "r10", "section": "Example", "chunk_id": "Final IC 38 - IA_English Common_027", "metadata": {"file_size": 6529, "chunk_index": 27, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Example", "Determining the rate of premium", "Total Values of 1000 motor vehicles (Rs."]}}
{"chunk": "5,00,00,000] x 100 = 0.5%Therefore the rate of premium that a motor cycle owner pays is half a percent of\nRs. 50,000/ - i.e. Rs. 250/ - per year. This is called the **‘Pure’ premium,** also known\nas ‘Burning Cost’.At the rate of Rs. 250 per motor cycle, Rs. 2.5 lakhs is collected which is paid outin claims on total losses of 5 vehicles.If the pure premium, which is arrived above, is collected it would constitute a fund\nwhich will be sufficient only to pay for losses.In the example above we can see that there is no surplus. But insurance operations\nalso involve costs of administration (expenses of management) and costs of\nprocurement of business (agency commission). It is also necessary to provide a\nmargin for unexpected heavy losses.Finally, since insurance is transacted on a commercial basis, like any other business,\nit is necessary to provide for a margin of profit which is a return on the capitalinvested in the business.**Therefore, the ‘pure premium’ is suitably loaded or increased by adding**\n**percentages to provide for expenses, reserves and profits.****The final rate of premium will consist of the following components:** Loss payments\n Loss expenses (e.g. survey fees)\n Agency commission\n Expenses of management\n Margin for reserves for unexpected heavy losses e.g. 7 total losses against 5expected\n Margin for profitsBy taking all the relevant rating factors into consideration, one can ensure the rates\nare adequate, excessive or unfairly discriminatory as between risks of similar type\nand quality.**Test Yourself 2**What is pure premium?I. Premium sufficiently big enough to pay for losses only\nII. Premium applicable to marginal members of the society\nIII. Premium after loading for administrative costs\nIV. Premium derived from the most recent loss experience period53**2.** **Deductible**‘Deductible’ or ‘excess’ is a cost-sharing provision between an insurer and insured.\nDeductibles provide that only the claims in excess of a particular threshold are\npayable by the insurer. In other words, the insurer will not be liable for claims below\na specified level. The level or the threshold would be set as a fixed amount, or a\npercentage or even as a specified period of time (when it is called time-excess.) In\ncase of health policies, there could be a condition that claims would be payable\nonly if the hospitalization is beyond a specified number of days/ hours. Deductibles\nare not used in life policies.In products such as property, motor and home insurances, deductibles are\npredetermined amounts that the insured must bear towards an indemnity claim.\nDeductibles can be compulsory for some policies or voluntary. Insurers generally\ncharge lower premiums when the insured voluntarily opt for higher deductibles. An\nagent must examine how specific deductibles work and inform the insured whether\nthe deductible is applicable on a ‘per year’ or ‘per event’ basis.There are various reasons for having deductibles. Corporate customers covering\nfactories, multiple cargo consignments, large groups of employee, public liability\nexposures etc. and having huge amounts of Sum Insured, may prefer to bear small\nclaims themselves and avoid the documentation to prove claims. For example, a\nlarge factory owner paying lakhs or rupees as premium may not be bothered about\na minor repair cost of a machine amounting to around Rs.2,000.Some type of policies may need the insured also to bear some part of the loss to\nensure that he/ she takes due care. For instance, health insurers may insist on a\ndeductible so that insured would not overspend on costly hospital rooms just\nbecause insurance is there. Some Insurers also may not prefer spending time on\nprocessing small claims. Also, in certain situations, insurers may not want to get\nexposed to the financial stress caused by accumulation of a large number of small\nlosses at one location. For example, a small flood in an industrial estate area can\ncause many low value claims from all the warehouses in the area.**Franchise:** Franchise refers to a threshold set, usually as a percentage of the sum\ninsured, below which no claim is admissible, as in the case of deductibles. However,\nwhen the claim amount is beyond the franchise limit, the entire claim is admissible\nby the insurer. In other words, franchise determines the minimum threshold of the\ninsurance companies' financial responsibility. Franchise will apply to the policy in\nthe same way and for the same reasons as a deductible in case of claims below the\nthreshold, but in the event of a claim exceeding the franchise, the full amount of", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "d53", "section": "Therefore, the ‘pure premium’ is suitably loaded or increased by adding", "chunk_id": "Final IC 38 - IA_English Common_028", "metadata": {"file_size": 6529, "chunk_index": 28, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Deductible", "Franchise:", "Test Yourself 2"]}}
{"chunk": "ensure that he/ she takes due care. For instance, health insurers may insist on a\ndeductible so that insured would not overspend on costly hospital rooms just\nbecause insurance is there. Some Insurers also may not prefer spending time on\nprocessing small claims. Also, in certain situations, insurers may not want to get\nexposed to the financial stress caused by accumulation of a large number of small\nlosses at one location. For example, a small flood in an industrial estate area can\ncause many low value claims from all the warehouses in the area.**Franchise:** Franchise refers to a threshold set, usually as a percentage of the sum\ninsured, below which no claim is admissible, as in the case of deductibles. However,\nwhen the claim amount is beyond the franchise limit, the entire claim is admissible\nby the insurer. In other words, franchise determines the minimum threshold of the\ninsurance companies' financial responsibility. Franchise will apply to the policy in\nthe same way and for the same reasons as a deductible in case of claims below the\nthreshold, but in the event of a claim exceeding the franchise, the full amount of\nthe loss will be paid.54**D.** **Rating factors**The relevant elements that are used to add up the rates and make the rating plan\nare referred to as **rating factors** . Insurers use ‘rating factors’ to determine the risk\nand to decide the price they will charge. The Insurer uses his assessments to establish a base rate. The Insurer then adjusts this rate with discounts applied for positive featuressuch as superior fire protection on property risk and loadings applied for\nadverse features such as presence of inflammable materials in the premises. In Life Insurance the usual practice is to apply loading for adverse health,habits, heredity or occupational factors.**Key Terms**- Deductibles- Franchise**Answers to Test Yourself****Answer 1** - The correct option is I.**Answer 2** - The correct option is I.55### CHAPTER C-0 6## CLAIMS PROCESSING**Chapter Introduction**The insured get to taste the benefit of insurance only when they are affected by\nlosses. The entire insurance industry is sensitive to the losses faced by insured and\ntry to settle the claims that arise as amicably as possible and as fast as possible.After studying this chapter, you should be able to understand:1. Claims settlement2. Importance of claim procedures56**A.** **Loss Assessment and Claim settlement**Claims Assessment (Loss Assessment) is the process of determining whether the loss\nsuffered by the insured is covered by the insurance policy, i.e. the loss does not fall\nunder any exclusion and there is no breach of warranty.Settlement of claims has to be based on considerations of fairness. For an Insurancecompany, expeditious settlement of claim is the benchmark of efficiency for its\nservices. Each company has internal guidelines about time taken in claims\nprocessing, which its employees follow.This is generally known by the term “Turnaround time” (TAT). Some insurers have\nalso put in place, facility for the insured to check claim status online from time to\ntime. Some insurance companies have also set up claims hub for speedy processingof claims.**Important aspects in an insurance claim**Although most companies are bound by their TAT it is important for an agent to\nknow the aspects that are looked into for settling a claim. Six of the most important\naspects for Non-life claims are given below.i. Whether the loss causing event is within the scope of the policyii. Whether the insured has complied with his part of the policy conditionsiii. Compliance with warranties. The survey report would indicate whether or notwarranties have been complied with.iv. Observance of utmost good faith by the proposer, during the currency of thepolicy.v. On the occurrence of a loss, the insured is expected to act as if he is uninsured.In other words, he has a duty to take measures to minimise the loss.vi. Determination of the amount payable. The amount of loss payable is subject tothe sum insured. However, the amount payable will also depend upon the\nfollowing: The extent of the insured’s insurable interest in the property affected\n The value of salvage\n Application of underinsurance\n Application of contribution and subrogation conditionsIn the matter of claims relating to life insurance, the insurer checks whether1) Conditions of policy have not been breached\n2) Utmost good faith has been followed and\n3) No material facts have been concealed fraudulently.57**B.** **Categories of claim**Insurance Claims fall into the following categories:**i.** **Standard claims**These are claims which are clearly within the terms and conditions of the policy.", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "C-0", "section": "Franchise:", "chunk_id": "Final IC 38 - IA_English Common_029", "metadata": {"file_size": 6529, "chunk_index": 29, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Categories of claim", "Rating factors", "Chapter Introduction"]}}
{"chunk": "following: The extent of the insured’s insurable interest in the property affected\n The value of salvage\n Application of underinsurance\n Application of contribution and subrogation conditionsIn the matter of claims relating to life insurance, the insurer checks whether1) Conditions of policy have not been breached\n2) Utmost good faith has been followed and\n3) No material facts have been concealed fraudulently.57**B.** **Categories of claim**Insurance Claims fall into the following categories:**i.** **Standard claims**These are claims which are clearly within the terms and conditions of the policy.\nThe assessment of claim is done keeping in view scope and the sum insured opted\nfor and other methods of indemnity laid down for various classes of insurance.**ii.** **Condition of average or average clause**This is a condition in some policies which penalises the insured for insuring his\nproperty at a sum insured less than its actual value known as underinsurance. In the\nevent of a claim the insured gets an amount that is proportionately reduced fromhis actual loss in accordance to the amount underinsured. Such situations occurmore in the case of non-life insurance.**iii.** **Act of God perils - Catastrophic losses**Natural perils like storm, cyclone, flood, inundation, and earthquake are termed as\n“Act of God” perils. These perils may result in losses to many policies of insurer in\nthe affected region. Surveyors are appointed for assessment of certain categoriesof non-life insurance claims.In such major and catastrophic losses, the surveyor is asked to proceed to the loss\nsite immediately for an early assessment and loss minimisation efforts.\nSimultaneously, insurers’ officials also visit the scene of loss particularly when the\namount involved is large. The purpose of the visit is to obtain an immediate, on the\nspot idea of the nature and extent of loss.Preliminary reports are also submitted if the surveyors face some problems in\nregards to the assessment and may desire guidance and instructions from insurers\nwho are thus given an opportunity to discuss the issues with the insured, ifnecessary.**iv.** **On account payment**In Non-life insurance claims, apart from preliminary reports, interim reports may be\nsubmitted from time to time where repairs and/ or replacements are made over a\nlong period. Interim reports also give the insurer an idea of the development of\nassessment of loss. It also helps in recommendation of \"On account payment\" of the\nclaim if desired by the insured. This usually happens if the loss is large and the\ncompletion of assessment may take some time.If the claim is found to be in order, payment is made to the claimant and entries\nmade in the company records. Appropriate recoveries are made from the co-insurers\nand reinsurers, if any. In some cases, the insured may not be the person to whom\nthe money is to be paid.58**v.** **Discharge vouchers**Settlement of the claim is made only after obtaining a discharge under the policy.\nA sample of discharge receipt for claims (under personal accident insurance) for\ninjuries is worded along the following lines: (may vary from company to company)Name of the InsuredClaim No. Policy No.Received from the Company Ltd.The sum of Rs. ___________ in full and final settlement of compensation due\nto me/ us on account of injuries sustained by me/ us due to accident which\noccurred on or about the___________ I/ we give this discharge receipt to the\nCompany in full and final settlement of all my/ our claim present or future\narising directly or indirectly in respect of the said claim.Date (Signature)vi. **Post settlement action**The action taken after settlement of the non-life claim in relation to underwritingvaries from one class of business to another.**Example**Sum insured under a fire policy stands reduced to the extent of the amount of\nclaim paid. However, it can be reinstated on payment of pro-rata premium, which\nis deducted from the amount of claim paid.On payment of the capital sum insured under a personal accident policy, the policy\nstands cancelled.Similarly, payment of a claim under individual fidelity guarantee policy\nautomatically terminates the policy.**vii.** **Salvage**Salvage generally refers to damaged property. On payment of loss, the salvage\nbelongs to insurers.**Example**When motor claims are settled on total loss basis, the damaged vehicle is taken over\nby insurers. Salvage can also arise in other non-life insurances like fire claims,\nmarine cargo claims etc.Salvage is disposed of according to the procedure laid down by the companies for\nthe purpose. Surveyors, who have assessed the loss, will also recommend methods", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "r1", "section": "B.", "chunk_id": "Final IC 38 - IA_English Common_030", "metadata": {"file_size": 6529, "chunk_index": 30, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Discharge vouchers", "On account payment", "Condition of average or average clause", "Example", "Act of God perils - Catastrophic losses"]}}
{"chunk": "arising directly or indirectly in respect of the said claim.Date (Signature)vi. **Post settlement action**The action taken after settlement of the non-life claim in relation to underwritingvaries from one class of business to another.**Example**Sum insured under a fire policy stands reduced to the extent of the amount of\nclaim paid. However, it can be reinstated on payment of pro-rata premium, which\nis deducted from the amount of claim paid.On payment of the capital sum insured under a personal accident policy, the policy\nstands cancelled.Similarly, payment of a claim under individual fidelity guarantee policy\nautomatically terminates the policy.**vii.** **Salvage**Salvage generally refers to damaged property. On payment of loss, the salvage\nbelongs to insurers.**Example**When motor claims are settled on total loss basis, the damaged vehicle is taken over\nby insurers. Salvage can also arise in other non-life insurances like fire claims,\nmarine cargo claims etc.Salvage is disposed of according to the procedure laid down by the companies for\nthe purpose. Surveyors, who have assessed the loss, will also recommend methods\nof disposal.**viii.** **Recoveries**After settlement of claims, the insurers under subrogation rights applicable to\ninsurance contracts, are entitled to the rights and remedies of the insured and to59recover the loss paid from a third party who may be responsible for the loss under\nrespective laws applicable. Thus, insurers can recover the loss from shipping\ncompanies, railways, road carriers, airlines, port trust authorities etc.**Example**In the case of non-delivery of consignment, the carriers are responsible for the loss.\nSimilarly, the port trust is liable for goods which are safely landed but subsequently\nmissing. For this purpose, a letter of subrogation duly stamped is obtained from theinsured before the settlement of the claim.**ix.** **Disputes related to claims**Despite best efforts, there could be delay in payment, non-payment (repudiation)\nof the claim, or the claim being admitted for a lesser amount, which might lead to\ndissatisfaction and dispute between Insurer and the insured.Apart from these, the most common reasons, to name a few are: Non-disclosure of material facts Lack of coverage Loss caused by excluded perils Lack of adequate sum insured Breach of warranty Issues regarding quantum due to underinsurance, depreciation, etc.All this could cause considerable grief to the insured at a time when he is already\nsuffering from financial constraints arising due to losses. In order to reduce his\nsufferings, grievance redressal and dispute handling procedures are well laid out in\nthe policy itself. Policies of fire or property have the condition of “Arbitration” in\nthe policy itself.**C.** **Arbitration**Arbitration is a method of settling disputes arising out of contracts. Arbitration is\ndone in accordance with the provisions of the Arbitration and Conciliation Act, 1996.\nThe normal method of enforcing a contract or settling a dispute there under would\nbe to go to a court of law. Such litigation, however, involves considerable delay and\nexpense. The Arbitration Act allows the parties to submit disputes under a contract\nto the more informal, less costly and private process of arbitration.Arbitration may be done by a single arbitrator or by more than one, chosen by the\nparties to the dispute themselves. In the event of a single arbitrator, the parties\nhave to agree about that person. Many commercial insurance policies contain an\n**arbitration clause** stating that disputes will be subject to arbitration. Fire and most\nmiscellaneous policies also contain an arbitration clause which provides that if the\nliability under the policy is admitted by the company, and there is a difference\nconcerning the quantum to be paid, such a difference must be referred to60arbitration. Normally the arbitrator’s decision is considered final and binding on\nboth the parties.The wording of the condition varies from policy to policy. Generally, it provides asfollows:i. The dispute is submitted to the decision of a single arbitrator to be appointedby the parties, or in the event of any disagreement between them upon\nappointment of a single arbitrator, to the decision of two arbitrators each\nappointed by the parties.ii. These two arbitrators shall appoint an Umpire, who presides at the meetings.The procedure during these meetings resembles that of a court of law. Each", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "o59", "section": "Post settlement action", "chunk_id": "Final IC 38 - IA_English Common_031", "metadata": {"file_size": 6529, "chunk_index": 31, "chunk_tokens": 954, "has_examples": true, "has_tables": false, "key_concepts": ["Disputes related to claims", "Arbitration", "Example", "Salvage", "Post settlement action"]}}
{"chunk": "parties to the dispute themselves. In the event of a single arbitrator, the parties\nhave to agree about that person. Many commercial insurance policies contain an\n**arbitration clause** stating that disputes will be subject to arbitration. Fire and most\nmiscellaneous policies also contain an arbitration clause which provides that if the\nliability under the policy is admitted by the company, and there is a difference\nconcerning the quantum to be paid, such a difference must be referred to60arbitration. Normally the arbitrator’s decision is considered final and binding on\nboth the parties.The wording of the condition varies from policy to policy. Generally, it provides asfollows:i. The dispute is submitted to the decision of a single arbitrator to be appointedby the parties, or in the event of any disagreement between them upon\nappointment of a single arbitrator, to the decision of two arbitrators each\nappointed by the parties.ii. These two arbitrators shall appoint an Umpire, who presides at the meetings.The procedure during these meetings resembles that of a court of law. Each\nparty states his case, if necessary, with the help of a counsel and witnesses areexamined.iii. If the two arbitrators do not agree on a decision, the matter is submitted beforethe Umpire, who makes his award.iv. Costs are awarded at the discretion of the arbitrator/ arbitrators or Umpiremaking the award.Disputes relating to question of liability are to be settled through litigation.**Example**If the insurers contend that the loss is not payable because it is not covered under\nthe policy, the matter has to be decided by a Court of Law. Again, if the insurers\nrefuse to pay the claim on the ground that the policy is void because it was obtained\nthrough fraudulent non-disclosure of material facts (breach of the legal duty of\n‘utmost good faith’), the issue has to be resolved through litigation.**D.** **Other dispute resolution mechanisms**As per IRDAI regulations, all policies have to mention about the grievance redressalmechanism available to the insured in the event the insured is dissatisfied with theservice of the insurer for any reason.In case of claims under personal lines of business, a dissatisfied insured can\napproach Insurance Ombudsman. The procedure is discussed in detail in Chapter 9.\nThe Office details of Insurance Ombudsman are given in the policy. Decision of\nOmbudsman is binding on Insurer but not on insured.Matters like the financial authority and the limitations of Ombudsmen are also\ndiscussed in detail in Chapter 9.61**Test Yourself 1**Which of the following activities would not be categorised under professionalsettlement of claims?I. Seeking information relating to the cause of the loss\nII. Approaching the claim with a prejudice\nIII. Ascertaining whether the loss was a result of an insured peril\nIV. Quantifying the amount payable under the claim**Answers to Test Yourself****Answer 1** - The correct option is II.**Key Terms**Turn Around TimeSalvageRecoveriesClaims Assessment62### CHAPTER C-0 7## DOCUMENTATION**Chapter Introduction**In the insurance industry we deal with a large number of forms and documents.\nThese are required for the purpose of bringing clarity in the relationship between\nthe insured and the insurer. In this chapter, we shall deal with the various\ndocuments that are involved at the proposal stage and their significance.**After learning this Chapter you will be able to:**Understand proposal stage documentation and its importanceFamiliarize with the purposes of the ProspectusUnderstand the importance of the Proposal formAppreciate Anti-Money Laundering (AML), Know Your Customer (KYC) norms\nand the important documents, commonly applicable for practically all\npoliciesImportance of Age Proof and acceptable documents.63**A.** **Prospectus**Prospectus is a proposal stage document. The prospectus is a formal legal document\nused by insurance companies that provides details about the product. It can mean\na document issued by the insurer in physical, electronic or any other format to sell\nor promote insurance products. For this purpose, Insurance products would also\ninclude the add-on covers/ riders offered, if any. The prospectus is like an\nintroductory document which helps the prospective policyholder to get familiar with\nthe company’s products.As per IRDAI’s (Protection of Policyholders’ Interests) Regulations, 2017 the\nprospectus should contain all facts that are necessary for a prospective policyholder\nto make an informed decision regarding purchase of a policy. It should contain the\nfollowing for each plan of insurance:The Unique Identification Number (UIN) allotted by the Authority for the", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "o60", "section": "Example", "chunk_id": "Final IC 38 - IA_English Common_032", "metadata": {"file_size": 6529, "chunk_index": 32, "chunk_tokens": 991, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus", "Test Yourself 1", "Example", "After learning this Chapter you will be able to:"]}}
{"chunk": "and the important documents, commonly applicable for practically all\npoliciesImportance of Age Proof and acceptable documents.63**A.** **Prospectus**Prospectus is a proposal stage document. The prospectus is a formal legal document\nused by insurance companies that provides details about the product. It can mean\na document issued by the insurer in physical, electronic or any other format to sell\nor promote insurance products. For this purpose, Insurance products would also\ninclude the add-on covers/ riders offered, if any. The prospectus is like an\nintroductory document which helps the prospective policyholder to get familiar with\nthe company’s products.As per IRDAI’s (Protection of Policyholders’ Interests) Regulations, 2017 the\nprospectus should contain all facts that are necessary for a prospective policyholder\nto make an informed decision regarding purchase of a policy. It should contain the\nfollowing for each plan of insurance:The Unique Identification Number (UIN) allotted by the Authority for the\nconcerned insurance product- The extent of insurance coverThe Scope of benefits/ entitlements – guaranteed and non-guaranteedWarranties, exclusions/ exceptions of the insurance cover with explanations- The terms and conditions of the insurance coverDescription of the contingency or contingencies to be covered by insuranceThe class or classes of lives or property eligible for insurance under the terms\nof such prospectusWhether the plan is participative or non-participativeThe allowable Add-on covers (also called Riders in Life insurance) on the productand their benefits are also stated.Other important information which a Prospectus includes:1. Any differences in covers and premium. E.g. for different age groups or fordifferent entry ages\n2. Renewal terms of the policy\n3. Terms of cancellation of policy under certain circumstances\n4. The details of any discounts or loading applicable under differentcircumstances5. The possibility of any revision or modification of the terms of the policyincluding the premium\n6. Any incentives to reward policyholders for early entry, continued renewals,favourable claims experience etc. with the same insurer.\n7. Prospectus shall necessarily contain the product UIN allotted by IRDAI648. IRDAI Regulations mandate that Prospectus shall contain a copy of Section 41.This section prohibits any direct or indirect inducement to any person for\nbuying a new insurance, continuing or renewing any kind of insurance relating\nto lives or property in India, including any rebate of the whole or part of the\ncommission payable on the policy.In particular the prospectus informs the proposer about the availability of facilityfor nomination.**Test Yourself 1**Which of the following it not usually part of the insurance prospectus?I. Name of OmbudsmanII. Date of Scope of benefitsIII. The EntitlementsIV. The Exceptions**B.** **Proposal Form**The insurance policy is a legal contract between the insurer and the policyholder.\nAs required for any contract, it has a proposal and its acceptance.The “Proposal form” is the application document that is used for making a proposal.\nIt is a form to be filled in by the proposer in written or electronic or any other\nformat approved by the Authority. It contains all information required by the insurer\nto decide whether to accept or reject to cover the risk. In case the risk is accepted,\nthe insurer can on the basis of this information, decide the rates, terms and\nconditions of the cover to be granted.The Principle of Utmost Good Faith and the Duty of Disclosure of material\ninformation begin with the Proposal Form for insurance. The proposer must provide\nall information correctly and completely as this document becomes the basis of\ngranting insurance and any wrong or concealed information could result in denial ofclaim.This duty to disclose continues beyond the proposal stage even after finalizing the\ninsurance contract. That is, any material change that happens anytime during the\nperiod of insurance needs to be disclosed in non-life policies.Information collected from the Proposal Form during the course of solicitation of an\ninsurance policy or issuance of an insurance policy are confidential and should not\nbe shared with any third party. Where a proposal deposit is refundable to a prospect\nfor any reason, the same shall be refunded within 15 days from the date of\nunderwriting decision on the proposal.65As per IRDAI guidelines, it is the duty of the insurer to furnish to the insured, free\nof charge, within 30 days of the acceptance of a proposal, a copy of the proposal\nsubmitted by the Insured. The agent is expected to keep track of these timelines,\nfollow up internally and communicate with the prospect/ insured as and when", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "s5", "section": "A.", "chunk_id": "Final IC 38 - IA_English Common_033", "metadata": {"file_size": 6529, "chunk_index": 33, "chunk_tokens": 957, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 1", "Prospectus", "Proposal Form"]}}
{"chunk": "conditions of the cover to be granted.The Principle of Utmost Good Faith and the Duty of Disclosure of material\ninformation begin with the Proposal Form for insurance. The proposer must provide\nall information correctly and completely as this document becomes the basis of\ngranting insurance and any wrong or concealed information could result in denial ofclaim.This duty to disclose continues beyond the proposal stage even after finalizing the\ninsurance contract. That is, any material change that happens anytime during the\nperiod of insurance needs to be disclosed in non-life policies.Information collected from the Proposal Form during the course of solicitation of an\ninsurance policy or issuance of an insurance policy are confidential and should not\nbe shared with any third party. Where a proposal deposit is refundable to a prospect\nfor any reason, the same shall be refunded within 15 days from the date of\nunderwriting decision on the proposal.65As per IRDAI guidelines, it is the duty of the insurer to furnish to the insured, free\nof charge, within 30 days of the acceptance of a proposal, a copy of the proposal\nsubmitted by the Insured. The agent is expected to keep track of these timelines,\nfollow up internally and communicate with the prospect/ insured as and when\nrequired by way of customer service.**a)** **Proposal Form - Details**The proposal form is first stage of documentation through which the insured informsthe insurer: Who he/ she is What kind of insurance he/ she needs Details of what he/ she wants to insure and For what period of time Details of the risk (E.g., for Life and Health insurances – details of health orany ailments suffered are to be given) Details would include the monetary value proposed on the subject matter ofinsurance and all **material facts** connected with the proposed insurance.In other words, the Proposal form collects details on the proposer’s identity such as\nname, father’s name, address and other identifying inputs. To determine the true\nidentity of their customers, documents like address proof, PAN card, photographs\netc. are collected with the proposal.In respect of Life and Health insurances, details of the proposers’ family members\n(including parents) indicating their longevity, status of health and ailments suffered\nby any of them are collected. Depending on the product, the medical details of the\nlife proposed for insurance, personal characteristics and his/ her personal history\nof disease may also be asked for.Details of the monetary value proposed on the subject matter of insurance and the\nmaterial facts connected with the proposed insurance would be collected for manylines of insurance.The insurance advisor’s recommendations including the reasons for such\nrecommendation may also be part of the proposal form. There would be a\ndeclaration that the recommended policy’s details have been fully explained to the\nproposer and the latter has acknowledged the same.A Proposal form may have the following Sections starting with details of the Insurer,\nthe Agent, the details of the product, the Sum Assured, the mode of payment of\npremiums etc. The form would also contain the signature of the proposer, as proof\nof the fact that he/ she has filled up the form and has submitted the proposal.66Other details asked for are the Proposer’s name, date of birth, contact details,\nmarital status, nationality, names of parents and spouse, educational qualifications,\nhabits and ID Proof, family particulars, employment details, bank details, name of\nnominee/ appointee; details of existing insurance and reasons for opting for the\npolicy.Depending on the Product, medical details of the life proposed for insurance,\npersonal characteristics and his/ her personal history of disease may be asked for.Aspects related to the personal financial planning of the life being proposed\nincluding his/ her work span, projected income and expenses, as well as needs for\nsavings and investment, health, retirement and insurance may also be enquiredabout.The Agents recommendations including the reasons for such recommendation may\nalso be part of the proposal form. In compliance to the IRDAI regulations mentioned\nabove, the Agent would make a declaration that the recommended policy’s details\nhave been fully explained to the proposer and the latter has acknowledged thesame.Proposal forms are printed by insurers usually with the insurance company’s name,\nlogo, address and the class/ type of insurance/ product that it is used for. It is\ncustomary for insurance companies to add a printed note in the proposal form,\nthough there is no standard format or practice in this regard.**b)** **Declaration in the Proposal Form**Insurance companies usually add a declaration at the end of the proposal form to\nbe signed by the proposer. This ensures that the insured takes the pain to fill up the\nform accurately and has understood the facts given therein, so that at the time of\na claim there is no scope for disagreements on account of misrepresentation of", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Proposal Form - Details", "chunk_id": "Final IC 38 - IA_English Common_034", "metadata": {"file_size": 6529, "chunk_index": 34, "chunk_tokens": 1009, "has_examples": false, "has_tables": false, "key_concepts": ["Proposal Form - Details", "Declaration in the Proposal Form"]}}
{"chunk": "including his/ her work span, projected income and expenses, as well as needs for\nsavings and investment, health, retirement and insurance may also be enquiredabout.The Agents recommendations including the reasons for such recommendation may\nalso be part of the proposal form. In compliance to the IRDAI regulations mentioned\nabove, the Agent would make a declaration that the recommended policy’s details\nhave been fully explained to the proposer and the latter has acknowledged thesame.Proposal forms are printed by insurers usually with the insurance company’s name,\nlogo, address and the class/ type of insurance/ product that it is used for. It is\ncustomary for insurance companies to add a printed note in the proposal form,\nthough there is no standard format or practice in this regard.**b)** **Declaration in the Proposal Form**Insurance companies usually add a declaration at the end of the proposal form to\nbe signed by the proposer. This ensures that the insured takes the pain to fill up the\nform accurately and has understood the facts given therein, so that at the time of\na claim there is no scope for disagreements on account of misrepresentation of\nfacts. Such declaration converts the common law principle of utmost good faith to\na contractual duty of utmost good faith.**Example**Examples of such declarations are:‘I/ We hereby declare and warrant that the above statements are true and complete\nin all respects and that there is no other information which is relevant to the\napplication for insurance that has not been disclosed to you.’‘I/ We agree that this proposal and the declarations shall be the basis of the contract\nbetween me/ us and (insurer’s name).’67**Test Yourself 2**Which of the following is not relevant in respect of a Proposal form?I. Utmost Good-faith\nII. Amount expected to be claimed\nIII. Duty to Disclose material facts\nIV. Confidentiality of details given**Some examples of such notes are:**‘Non-disclosure of facts material to the assessment of the risk, providing misleading\ninformation, fraud or non-co-operation by the insured will nullify the cover under\nthe policy issued’.‘The company will not be on risk until the proposal has been accepted by the\nCompany and full premium paid’.**C.** **Know Your Customer (KYC) Norms****Anti-Money Laundering and KYC Norms**Money Laundering is the process by which criminals transfer funds to conceal the\ntrue origin and ownership of the proceeds of criminal activities. Money laundering\nprocesses are used by criminals to make funds obtained through illegal activities\nappear legal money. In the process, they try to cover up the criminal origin of the\nmoney and make it appear valid.Criminals attempt to use financial services, including banks and insurance, to\nlaunder their money. They make transactions using false identities, for example, by\npurchasing some form of insurance and then managing to withdraw that money and\nthen disappearing once their purpose is served. Governments across the world,\nincluding India constantly try to prevent such money laundering attempts.**Definition**Money laundering is the process of bringing illegal money into an economy by hiding\nits illegal origin so that it appears to be legally acquired. The Government of India\nlaunched the PMLA, 2002 to rein in money-laundering activities.The Prevention of Money Laundering Act (PMLA), 2002 came into effect from 2005\nto control money laundering activities and to provide for confiscation of property\nderived from money-laundering.The Anti-Money Laundering guidelines issued by IRDAI soon after have indicated\nsuitable measures to determine the true identity of customers requesting for\ninsurance services, reporting of suspicious transactions and proper record keeping\nof cases involving or suspected of involving money laundering. It is necessary to be68vigilant and ensure, right at the beginning of the contract that it is not intended to\nbe a tool for money laundering of any sort.The Prevention of Money Laundering Act, 2002 (PMLA) was been brought into force\nby the Government of India with effect from 1st July 2005. As per the Act, every\nbanking company, financial institution (which includes Insurance companies) and\nintermediary shall have to maintain a record of all the transactions prescribed under\nthe PMLA. Accordingly, IRDAI issued the Guidelines on Anti-Money laundering/\nCounter Financing of Terrorism (AML/ CFT) 31st March 2006.Know your customer is the process used by a business to verify the identity of their\nclients. Banks and insurers are increasingly demanding their customers provide\ndetailed information to prevent identity theft, financial fraud and money\nlaundering. The objective of KYC guidelines is to prevent financial institutions from\nbeing used by criminal elements for money laundering activities.Insurers, hence, need to determine the true identity of their customers. Agents", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "e68", "section": "Declaration in the Proposal Form", "chunk_id": "Final IC 38 - IA_English Common_035", "metadata": {"file_size": 6529, "chunk_index": 35, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Example", "Some examples of such notes are:", "Definition", "Declaration in the Proposal Form", "Test Yourself 2"]}}
{"chunk": "of cases involving or suspected of involving money laundering. It is necessary to be68vigilant and ensure, right at the beginning of the contract that it is not intended to\nbe a tool for money laundering of any sort.The Prevention of Money Laundering Act, 2002 (PMLA) was been brought into force\nby the Government of India with effect from 1st July 2005. As per the Act, every\nbanking company, financial institution (which includes Insurance companies) and\nintermediary shall have to maintain a record of all the transactions prescribed under\nthe PMLA. Accordingly, IRDAI issued the Guidelines on Anti-Money laundering/\nCounter Financing of Terrorism (AML/ CFT) 31st March 2006.Know your customer is the process used by a business to verify the identity of their\nclients. Banks and insurers are increasingly demanding their customers provide\ndetailed information to prevent identity theft, financial fraud and money\nlaundering. The objective of KYC guidelines is to prevent financial institutions from\nbeing used by criminal elements for money laundering activities.Insurers, hence, need to determine the true identity of their customers. Agents\nshould ensure that proposers submit the proposal form along with the following as\npart of the KYC procedure:i. Proof of identity – driving license, passport, voter ID card, PAN card,Photographs etc.ii. Proof of address – driving license, passport, telephone bill, electricity bill,bank passbook etc. Different documentation are prescribed for individuals,\ncorporates, partnership firms, trusts and foundationsiii. Income proof documents and financial status, esp. in case of high-valuetransactionsiv. Purpose of insurance contract**a)** **Age Proof – for Personal Lines**While dealing with person related insurances like Life, Health, Personal Accident,\netc. Insurance companies use age as an important factor to determine the risk\nprofile of the insured. In life business, as age assumes great importance, life insurers\nused to follow more detailed norms of age related documentation. [However, the\nGovernment, the Reserve Bank of India and the IRDAI are becoming stricter on\nfollowing KYC norms.]An important part of the underwriting process is admission of\nage, after verifying the proof of age.**i.** **Standard Age Proofs**There are two types of age proofs that insurers come across as evidence of\nage. Valid age proofs may be standard or non-standard. Standard **age proofs** are normally issued by a public authority, like birthcertificate issued by a municipality or other government body, school\nleaving certificate, passport etc.69 Non-standard, when a standard age proof is not available (not to beaccepted readily)Some documents considered as standard age proofs are:i. School or college certificateii. Birth certificate extracted from municipal recordsiii. Passportiv. PAN cardv. Service registervi. Identity card in case of defence personnelvii. Marriage certificate issued by appropriate authority**ii.** **Non-standard age proofs**When standard age proofs like the above are not available, the life insurer\nmay allow submission of a non-standard age proof. Some documents\nconsidered as non-standard age proofs are:i. Horoscopeii. Ration cardiii. An affidavit by way of self-declarationiv. Certificate from village panchayat**Test Yourself 3**Which of the following is not acceptable as valid Age Proof?I. Birth certificate extracted from municipal recordsII. Birth Certificate issued by Member of Legislative AssemblyIII. PassportIV. PAN Card**Answers to Test Yourself****Answer 1** -The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** – The correct option is II.**Summary**Prospectus is a formal legal document used by insurance companies that\nprovides details about the product.The application document used for making the proposal is commonly known as\nthe ‘proposal form’.70Some documents considered as standard age proofs include school or college\ncertificate, birth certificate extracted from municipal records etc.Insurers need to determine the true identity of their customers. KYC documents\nlike address proof, PAN card and photographs etc. need to be collected as a part\nof the KYC procedure.**Key Terms**1. Prospectus\n2. Proposal form\n3. Moral hazard\n4. Know your Customer (KYC)\n5. Age Proof\n6. Standard and non-standard age proofs\n7. Free-look period71### CHAPTER C-0 8## CUSTOMER SERVICE**Chapter Introduction**In this chapter you will learn the importance of customer service. You will learn the", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "e68", "section": "Age Proof – for Personal Lines", "chunk_id": "Final IC 38 - IA_English Common_036", "metadata": {"file_size": 6529, "chunk_index": 36, "chunk_tokens": 960, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Test Yourself 3"]}}
{"chunk": "**Answer 2** - The correct option is II.\n**Answer 3** – The correct option is II.**Summary**Prospectus is a formal legal document used by insurance companies that\nprovides details about the product.The application document used for making the proposal is commonly known as\nthe ‘proposal form’.70Some documents considered as standard age proofs include school or college\ncertificate, birth certificate extracted from municipal records etc.Insurers need to determine the true identity of their customers. KYC documents\nlike address proof, PAN card and photographs etc. need to be collected as a part\nof the KYC procedure.**Key Terms**1. Prospectus\n2. Proposal form\n3. Moral hazard\n4. Know your Customer (KYC)\n5. Age Proof\n6. Standard and non-standard age proofs\n7. Free-look period71### CHAPTER C-0 8## CUSTOMER SERVICE**Chapter Introduction**In this chapter you will learn the importance of customer service. You will learn the\nrole of agents in providing service to customers. You will also learn how tocommunicate and relate with customers.After studying this chapter, you should be able to:Understand the importance of customer service1. Describe quality of service2. Examine the importance of service in the insurance industry3. Discuss the role of an insurance agent in providing good service4. Explain the process of communication5. Demonstrate the importance of non-verbal communication6. Recommend ethical behaviour72**A.** **Customer Service – General concepts****1.** **Why Customer Service?**Customers are the most important part of any industry and no enterprise can afford\nto treat them indifferently. The role of customer service and relationships is\nimportant in the service sector and more so for insurance.Every enterprise has a goal to delight its customers. This can be explained by\nexamining how buying insurance differs from buying a car.A car can be seen, touched, test driven and experienced, whereas the Insurance of\nthe car is just a promise to pay if there is loss or damage to the car due to an\naccident. This promise is intangible – it cannot be seen, touched or experienced.While the customer of the car will be able to understand and experience the car\neasily, the customer of insurance can evaluate and experience the insurance\nprotection that he buys only when a loss happens and the insurance company settles\nthe claim. All customers do not get the chance to experience this. In insurance,\nwhen such a situation arises, if the service exceeds expectations, the customer\nwould be delighted.**2.** **Quality of service**It is necessary for insurance companies and their personnel, which includes their\nagents, to render high quality service and delight the customer.**But what is high quality service? What are its attributes?**The well-known SERVQUAL approach to service quality of Zeithaml, Parasuraman\nand Berry highlights 5 major indicators of service quality:**a)** **Reliability** : The ability to perform the promised service dependably andaccurately is considered the most important indicator of good service. It isthe foundation on which trust is built.**b)** **Responsiveness** : Refers to the willingness and ability of service personnel tohelp customers and provide prompt response to the customer’s needs. It may\nbe measured by indicators like speed, accuracy, and attitude while givingthe service.**c)** **Assurance** : Refers to the knowledge, competence and courtesy displayed byan employee or agent in understanding and meeting the needs of a customer,\nthus conveying trust and confidence.**d)** **Empathy** : Empathy is described as the human touch. It is reflected in thecaring attitude and individualised attention provided to customers.**e)** **Tangibles** : Represent physical environmental factors like location, layoutand cleanliness as also the sense of professionalism that a customer feels\nwhen contacting a service provider. First impressions last long.73**3.** **Customer service and insurance**Leading sales producers in the insurance industry state that the secret of reaching\nthe top and staying there is in getting the patronage and support of a large number\nof existing clients with whose help the business gets built. These clients are a source\nof commissions from renewal of existing contracts. These can be a valuable source\nfor acquiring new customers.One great mantra of success in insurance selling is to be able to convert one’s\ncustomers into one’s clients. Customers are those who buy a product. Clients, on\nthe other hand are people with whom an agent relates for life, who continue to buy\nfrom him/ her as also help and possibly, support him/ her in reaching out to and\nselling to other customers.Clients are built by working with deep commitment to serving one’s customers. To\nunderstand how keeping a customer happy benefits the agent and the company, one", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "d71", "section": "Answer 2", "chunk_id": "Final IC 38 - IA_English Common_037", "metadata": {"file_size": 6529, "chunk_index": 37, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Answer 2", "Customer service and insurance", "Answer 3", "Reliability", "Chapter Introduction"]}}
{"chunk": "when contacting a service provider. First impressions last long.73**3.** **Customer service and insurance**Leading sales producers in the insurance industry state that the secret of reaching\nthe top and staying there is in getting the patronage and support of a large number\nof existing clients with whose help the business gets built. These clients are a source\nof commissions from renewal of existing contracts. These can be a valuable source\nfor acquiring new customers.One great mantra of success in insurance selling is to be able to convert one’s\ncustomers into one’s clients. Customers are those who buy a product. Clients, on\nthe other hand are people with whom an agent relates for life, who continue to buy\nfrom him/ her as also help and possibly, support him/ her in reaching out to and\nselling to other customers.Clients are built by working with deep commitment to serving one’s customers. To\nunderstand how keeping a customer happy benefits the agent and the company, one\nshould understand the concept of Customer’s Lifetime Value.**Customer Lifetime Value** may be defined as the sum of economic benefits that can\nbe derived from building a sound relationship with a customer over a long period oftime.**Diagram 1:** **Customer Lifetime Value**An agent who renders service and builds close relationships with her customers,\nbuilds goodwill and brand value, which helps in expanding the business.**Test Yourself 1**What is meant by customer lifetime value?I. Sum of costs incurred while servicing the customer over his lifetime\nII. Rank given to customer based on business generated\nIII. Sum of economic benefits that can be achieved by building a long termrelationship with the customerIV. Maximum insurance that can be attributed to the customer74**4.** **Customer Relationships and Service**While customer service is a key element in creating satisfied and loyal customers,\nit is also necessary to build a strong relationship with them. A Customer’s views\nabout an insurer depends on the service and relationships experience the insureroffers.What goes to make a healthy relationship? At its heart, of course, there is trust. At\nthe same time, there are other elements, which reinforce and promote that trust.Let us illustrate some of the elements.**Diagram 2:** **Elements for Trust**i. Every relationship begins with **attraction** : Attraction means being liked and beingable to build a rapport with the customer, starting with creating a great first\nimpression. Attraction is regarded the key to unlocking every heart. Without it a\nrelationship is hardly possible. A sales person cannot make much headway if he/\nshe is not liked by the customer.ii. The second element of a relationship is one’s presence, being there when needediii. **Communication:** Even if one is not fully present and unable to do full justice toall the expectations of one’s customers, one can still **maintain a strong**\n**relationship by communicating in a manner that is assuring, full of empathy**\n**and conveying a sense of responsibility.**The above dimensions of communication call for discipline and skills. They\nultimately reflect how one thinks and sees.Companies emphasise on customer relationship management, as the cost of\nretaining a customer is far lower than acquiring a new customer. A customer relation\nopportunity arises at various touch points e.g. while understanding customers\ninsurance needs, explaining coverage’s, handing over forms etc.**B.** **Insurance agent’s role in providing customer service.**Let us now consider how an agent can render great service to the customer. It is\nimportant to realise that from the moment a customer gets contacted by a sales\nperson to the final point of settlement of a claim, the customer goes on a journey\nof experience that we shall call the ‘ **Customer Journey’** . The agent needs to\npartner with the customer through the entire duration of the contract, hand holding75him/ her in each step of the journey to create memorable experiences at everystep.Let us look at some milestones in the journey and the role played at each step.**1.** **The Sale**It is said that selling is both an art and a science. It is a science because it calls for\na set process which, if consistently and properly followed, is likely to lead to\nsuccess. It is also an art in the sense that each sales person brings his or her\ndistinctive beliefs, style and personality into the process and the results depend on\nwhat each person puts into the process.- **Prospecting:** The Sales Process begins with **Prospecting**, which literally means\n‘searching’ for a prospective customer. Searching is important as ‘ _**One cannot**_\n_**find till one searches’,**_ it is the most important step in the process. An agent\ntypically begins with his or her natural market, made up of known and easily\napproachable people. The challenge lies in getting across to more networks of", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "r74", "section": "Customer service and insurance", "chunk_id": "Final IC 38 - IA_English Common_038", "metadata": {"file_size": 6529, "chunk_index": 38, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["One cannot", "Customer service and insurance", "Customer Journey’", "Prospecting:", "Diagram 1:"]}}
{"chunk": "of experience that we shall call the ‘ **Customer Journey’** . The agent needs to\npartner with the customer through the entire duration of the contract, hand holding75him/ her in each step of the journey to create memorable experiences at everystep.Let us look at some milestones in the journey and the role played at each step.**1.** **The Sale**It is said that selling is both an art and a science. It is a science because it calls for\na set process which, if consistently and properly followed, is likely to lead to\nsuccess. It is also an art in the sense that each sales person brings his or her\ndistinctive beliefs, style and personality into the process and the results depend on\nwhat each person puts into the process.- **Prospecting:** The Sales Process begins with **Prospecting**, which literally means\n‘searching’ for a prospective customer. Searching is important as ‘ _**One cannot**_\n_**find till one searches’,**_ it is the most important step in the process. An agent\ntypically begins with his or her natural market, made up of known and easily\napproachable people. The challenge lies in getting across to more networks of\npeople who are outside one’s immediate circle – getting to know them and be\nknown by them.All the people one knows and approaches may not be proper candidates for\ninsurance or they may not be interested in buying. It is thus necessary to **qualify**\nthem so that one targets only those who are likely to buy insurance. The\nprospecting process becomes successful only when an agent is able to build\nstrong relationships with the prospect. The first task of any sales person is thus\nto **sell trust and build confidence.**_**Invite for an Interview:**_ While personal relationships are the foundation on\nwhich insurance business is built, it is necessary to convert the goodwill one\nearns into a sale. This begins when the sales person sets up a formal appointment\nfor a detailed sales interview. This step is critical for establishing one’s\nprofessional credentials and also to separate business from casual discussions.- _**Determining the needs and recommending the Solution:**_ The heart of the Sales\nInterview is the steps wherein the sales agent determines and makes the\nprospective customer aware about the exact needs for which insurance is a\nsolution. A master sales person is distinguished by his/ her skill in guiding a\nprospect, through asking gentle questions, to understand the gaps in protection\nthat give rise to the needs for insurance.The Agent has the responsibility to provide _Best Advice_ to the Prospect about the\nright kind of insurance solutions to meet his/ her needs. Firstly one must determine\nand make the prospective customer aware about the exact needs for which\ninsurance is a solution. This also includes giving proper advice on the amount of\ninsurance to be purchased. For example the amount of life insurance to be76purchased by an individual needs to be linked to his/ her income and paying\ncapacity.It is also important to keep a basic percept in mind, especially when buying non-life\ninsurance: Do not recommend insuring where the risk can be managed otherwise.Whether insurance is needed or not, depends on the circumstances. If the premium\npayments are high compared to the loss involved, it may be advisable to just bear\nthe risk. On the other hand, if the loss consequences of a risk are likely to be severe,\nit is wise to insure against it.**Example**To a homeowner living in a flood prone area, purchasing an add-on cover against\nfloods would prove to be helpful. On the other hand, if the home owner owns a\nhome at a place where the risk of floods is negligible it may not be necessary toobtain such cover.Many customers may not be much concerned about getting maximum insurance per\nrupee spent, but would be interested in **reducing the cost of handling risk** . The\nconcern would be thus on identifying those risks which a customer cannot retainand hence must be insured.The agent becomes successful when he/ she renders best advice. The agent needs\nto constantly ask himself/ herself about his/ her role vis-à-vis the customer. He/\nshe should go to the customer not just to get a sale but to relate to the customer\nas a coach and partner who can help him/ her to manage his/ her risks more\neffectively?_**Handling Objections and Closing the Sale:**_ It may not be enough to give best\nadvice and recommendations to a customer about the right products to buy. One\nalso needs to persuade him/ her to take the decision to buy. Quite often the\ncustomer may have a number of questions and may raise objections that need\nto be addressed before he/ she decides to commit to the purchase. Whilst\nhandling these objections, it is vitally important to understand that the", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "g75", "section": "Customer Journey’", "chunk_id": "Final IC 38 - IA_English Common_039", "metadata": {"file_size": 6529, "chunk_index": 39, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["One cannot", "Customer Journey’", "Prospecting:", "Example", "Prospecting"]}}
{"chunk": "home at a place where the risk of floods is negligible it may not be necessary toobtain such cover.Many customers may not be much concerned about getting maximum insurance per\nrupee spent, but would be interested in **reducing the cost of handling risk** . The\nconcern would be thus on identifying those risks which a customer cannot retainand hence must be insured.The agent becomes successful when he/ she renders best advice. The agent needs\nto constantly ask himself/ herself about his/ her role vis-à-vis the customer. He/\nshe should go to the customer not just to get a sale but to relate to the customer\nas a coach and partner who can help him/ her to manage his/ her risks more\neffectively?_**Handling Objections and Closing the Sale:**_ It may not be enough to give best\nadvice and recommendations to a customer about the right products to buy. One\nalso needs to persuade him/ her to take the decision to buy. Quite often the\ncustomer may have a number of questions and may raise objections that need\nto be addressed before he/ she decides to commit to the purchase. Whilst\nhandling these objections, it is vitally important to understand that the\nobjections being voiced may reflect underlying concerns that need to beidentified and resolved.In sum, the role of an insurance agent is more than that of a mere sales person. He/\nshe also **needs to be a risk assessor, underwriter, risk management counsellor,**\n**designer of customised solutions and a relationship builder** (who thrives on\nbuilding trust and long-term relationships), all rolled into one.**2.** **The Proposal stage**The agent has to support the customer in filling out the proposal for insurance. The\ninsured is required to take responsibility for the statements made therein. The\nsalient aspects of a proposal form have been discussed in a later chapter.77The agent should explain and clarify to the proposer the details to be filled as\nanswers to each of the questions in the proposal form. A failure to give proper and\ncomplete information can jeopardise the customer’s claim.Sometimes, if additional information is required to complete the policy, the\ncompany may inform the customer directly or through the agent/ advisor. The agent\nshould help the customer in completing such formalities, explaining why they arenecessary.IRDAI (Issuance of e-Insurance Policies) Regulations, 2016, provide for e – Proposal\nforms that are similar to the physical proposal form and having a provision to the\nProspect to give his consent to the proposal, which can be validated by one time\npassword (mobile phone OTP).**3.** **Acceptance stage****a)** **Cover notes/ Certificates of Insurance**After underwriting is completed it may take some time before the policy is issued.\nPending the preparation of the policy or when the negotiations for insurance are\nin progress and it is necessary to provide cover on a provisional basis or when the\npremises are being inspected for determining the actual rate applicable, a cover\nnote is issued to confirm protection under the policy.As Cover notes and Certificates of Insurance are used predominantly in marine\nand motor classes of business, cover note is discussed in detail under the GeneralInsurance Section.It is the agent’s responsibility to ensure that the cover note is issued by the\ncompany, where applicable, to the insured. Promptness in this regardcommunicates to the client that his/ her interests are safe in the hands of theagent and the company.**b)** **Policy Document**The policy is a formal document which provides an evidence of the contract of\ninsurance. This document has to be stamped in accordance with the provisions\nof the Indian Stamp Act, 1899. The insurer is duty bound to give the policydocument to the insured.**4.** **Premium Payment****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance.A good agent takes active interest in ensuring that the insured pays the premium\nfor taking or continuing or renewing his policy and the customer is made aware\nof various options available for payment of premium.78**5.** **Method of payment of premium**The premium to be paid by any person proposing to take an insurance policy or by", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Handling Objections and Closing the Sale:", "chunk_id": "Final IC 38 - IA_English Common_040", "metadata": {"file_size": 6529, "chunk_index": 40, "chunk_tokens": 891, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Document", "Handling Objections and Closing the Sale:", "Premium", "Acceptance stage", "Cover notes/ Certificates of Insurance"]}}
{"chunk": "and motor classes of business, cover note is discussed in detail under the GeneralInsurance Section.It is the agent’s responsibility to ensure that the cover note is issued by the\ncompany, where applicable, to the insured. Promptness in this regardcommunicates to the client that his/ her interests are safe in the hands of theagent and the company.**b)** **Policy Document**The policy is a formal document which provides an evidence of the contract of\ninsurance. This document has to be stamped in accordance with the provisions\nof the Indian Stamp Act, 1899. The insurer is duty bound to give the policydocument to the insured.**4.** **Premium Payment****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance.A good agent takes active interest in ensuring that the insured pays the premium\nfor taking or continuing or renewing his policy and the customer is made aware\nof various options available for payment of premium.78**5.** **Method of payment of premium**The premium to be paid by any person proposing to take an insurance policy or by\nthe policyholder to an insurer may be made in any one or more of the followingmethods:a) Cashb) Any recognised banking negotiable instrument such as cheques, demanddrafts, pay order, banker’s cheques drawn on any schedule bank in India;c) Postal money order;d) Credit or debit cards;e) Bank guarantee or cash deposit;f) Internet;g) E-transferh) Direct credits via standing instruction of proposer or the policyholder or thelife insured through bank transfers;i) Any other method or payment as may be approved by the Authority fromtime to time;As per IRDA Regulations, in case the proposer/ policyholder opts for premium\npayment through net banking or credit/ debit card, the payment must be made\nonly through net banking account or credit/ debit card issued on the name of\nsuch proposer/ policyholder.**6.** **Service after issuance of Policy Document and Receipt for Premium**Once the premium is paid by the customer, the insurer is bound to issue a\nreceipt. A receipt is also to be issued even in case the premium is paid inadvance.The agent may approach the insured and enquire whether the Policy Document\nhas been received from the insurance company. It presents a great opportunity\nfor the agent to connect with the customer. The agent will be able to clear any\ndoubts and also explain the various policy provisions and policy holders’ rights\nand privileges. This demonstrates commitment to the customer and provides an\nopportunity to pledge continued support and service. One should also inform the\ncustomer about the free-look period provision, during which period, the policy\ncan be returned and refund of premium obtained.If the policy being purchased is an Electronic insurance policy, the agent can\nhelp the Customer to open an e-Insurance Account (e-I-A), through the\nRegistered Insurance Repository.79This also paves the way for the next step which is to ask the customer for the\nnames and particulars of other individuals he/ she knows, who can possibly\nbenefit from the agent’s services. It would be even better if the client itself\ncontacted these people and introduced the agent to them.**7.** **Policy Renewal**Most general Insurance policies have to be renewed each year. For general\ninsurance policies, at the time of each renewal, the customer has a choice to\ncontinue insuring with the same company or switch to another company. In case\nof Life Insurance, a policy would continue to be in force when the customer pays\nthe premium at regular intervals based on premium payment term. This does\nnot apply to one-time payments.General Insurers usually send a Renewal Notice, well in advance of the date of\nexpiry of the premium paying period, inviting renewal of the policy.The customer’s choice to renew or continue with the policy may often depend\non the trust and goodwill created by the agent and company and the agent needs\nto be in touch to remind the customer about the renewal or continuity of policywell before the due date.High producer agents constantly keep in touch with their clients, and win their\ntrust and loyalty through various acts of service and relationships – like greeting\ntheir clients on various occasions like festivals or family events and being with\nthem to share their joys and sorrows.**8.** **The claim stage**The crucial test comes at the time of claim settlement. The agent must ensure\nthat the incident giving rise to the claim is immediately informed to the insurer\nand that the customer carefully follows all the formalities. The agent may also\nassist in all the investigations that may need to be done to assess the loss. A\ngood agent assists the customers or his representatives in fulfilling the claim", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Policy Document", "chunk_id": "Final IC 38 - IA_English Common_041", "metadata": {"file_size": 6529, "chunk_index": 41, "chunk_tokens": 991, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Document", "Premium", "Premium Payment", "The claim stage", "Method of payment of premium"]}}
{"chunk": "the premium at regular intervals based on premium payment term. This does\nnot apply to one-time payments.General Insurers usually send a Renewal Notice, well in advance of the date of\nexpiry of the premium paying period, inviting renewal of the policy.The customer’s choice to renew or continue with the policy may often depend\non the trust and goodwill created by the agent and company and the agent needs\nto be in touch to remind the customer about the renewal or continuity of policywell before the due date.High producer agents constantly keep in touch with their clients, and win their\ntrust and loyalty through various acts of service and relationships – like greeting\ntheir clients on various occasions like festivals or family events and being with\nthem to share their joys and sorrows.**8.** **The claim stage**The crucial test comes at the time of claim settlement. The agent must ensure\nthat the incident giving rise to the claim is immediately informed to the insurer\nand that the customer carefully follows all the formalities. The agent may also\nassist in all the investigations that may need to be done to assess the loss. A\ngood agent assists the customers or his representatives in fulfilling the claim\nlodgement formalities quickly, correctly and completely.**Test Yourself 2**Identify the scenario where a debate on the need for insurance is not required.I. Property insurance\nII. Business liability insurance\nIII. Motor insurance for third party liabilityIV. Fire insurance80**C.** **Communication skills in customer service**An agent needs to possess soft skills for effective performance in the work place.S **oft skills relate to one’s ability to interact effectively with others, both at work**\n**and outside. Communication skills are the most important of these soft skills.****1.** **Process of communication**What is communication?All communications require a sender, who sends a message, and a person who\nreceived that message. The process is complete once the receiver has understood\nthe message of the sender.**Diagram 3:** **Forms of communication**Communication may be face to face, over the phone, or by mail or internet. It may\nbe formal or informal. Whatever the content or form of the message or the media\nused, the effectiveness of communication depends on whether or not the recipient\nhas understood what was sought to be communicated.Since an insurance policy is essentially a promise, it is important that what is\npromised by the insurer is clearly understood by the insured. The agent as an\nintermediary has to not only provide complete, accurate and unambiguous account\nof the terms of the insurance to the customer, but also seek and clarify doubts or\nqueries that a customer may have.**2.** **Barriers to effective communication**Different kinds of barriers to effective communication can arise at each step in the\nabove process, due to which communication can get distorted. The challenge is to\nvisualize, understand and remove the barriers.**Test Yourself 3**What does not go on to make a healthy relationship?I. AttractionII. TrustIII. CommunicationIV. Dislike81**D.** **Non-verbal Communication**Let us now look at some concepts that the agent needs to understand.**Important****1.** **Making a great first impression**The prospect judges an agent based on his appearance, body language, mannerisms,\ndress and speech. As attraction is the first pillar of a relationship and first\nimpressions last long, some tips for making a good first impression are given below:**i.** **Be on time always** . Plan to arrive a few minutes early, allowing flexibilityfor all kinds of possible delays.**ii.** **Present yourself appropriately** . The appearance should to create the right first impression\n The dress must be appropriate for the meeting or occasion\n The look must be clean and tidy – with good haircut and shave, clean andtidy clothes, neat and tidy make up**iii.** **A warm, confident and winning smile** puts a person and his/ her audienceimmediately at ease with one another.**iv.** **Being open, confident and positive** body language must project confidence and self-assurance stand tall, smile, make eye contact, greet with a firm handshake remain positive even in the face of some criticism or when the meeting isnot going as well as expected**v.** **Interest in the other person** - The most important thing is about beinggenuinely interested in the other person. Take some time to find out about the customer as a person Be caring and attentive to what he or she says Be totally present and available to your customer Not engaging in one’s mobile phone during the interview?**2.** **Body language**Body language refers to movements, gestures, facial expressions. The way we talk,", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "e80", "section": "The claim stage", "chunk_id": "Final IC 38 - IA_English Common_042", "metadata": {"file_size": 6529, "chunk_index": 42, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Being open, confident and positive", "Making a great first impression", "A warm, confident and winning smile", "Non-verbal Communication", "Barriers to effective communication"]}}
{"chunk": " The dress must be appropriate for the meeting or occasion\n The look must be clean and tidy – with good haircut and shave, clean andtidy clothes, neat and tidy make up**iii.** **A warm, confident and winning smile** puts a person and his/ her audienceimmediately at ease with one another.**iv.** **Being open, confident and positive** body language must project confidence and self-assurance stand tall, smile, make eye contact, greet with a firm handshake remain positive even in the face of some criticism or when the meeting isnot going as well as expected**v.** **Interest in the other person** - The most important thing is about beinggenuinely interested in the other person. Take some time to find out about the customer as a person Be caring and attentive to what he or she says Be totally present and available to your customer Not engaging in one’s mobile phone during the interview?**2.** **Body language**Body language refers to movements, gestures, facial expressions. The way we talk,\nwalk, sit and stand, all says something about us, and what is happening inside us.It is often said that people listen to only a small percentage of what is actually said.\nWhat we don’t say may speak a lot more about us in a louder way. Obviously, one\nneeds to be very careful about one’s body language.82**a)** **Confidence**Here are a few tips about how to appear confident and self-assured, giving the\nimpression of someone to be seriously listened to: Posture – standing tall with shoulders held back. Solid eye contact - with a \"smiling\" face Purposeful and deliberate gestures**b)** **Trust** Quite often, a sales person’s words fall on deaf ears because the audiencedoes not trust him/ her – his/ her body language does not give the assurance\nthat he/ she is sincere about what he/ she says**3.** **Listening skills**The third set of communication skills that one needs to be aware about and cultivateare listening skills. These follow from a well-known principle of personal\neffectiveness – ‘first try to understand before being understood’.Active listening calls for: Allowing the speaker to finish each point before asking questions Not interrupting the speaker with any counter arguments This may require that we reflect on the message and ask questions to clarifywhat was said Another way to provide feedback is to summarize the speaker’s words andrepeat it back to him or her periodically or at the end of the conversation.**Let us look at the skills required for active listening:****a)** **Demonstrating that one is listening:** For instance one may: Give an occasional nod and smile Adopt a posture that is open and draws out the other to speak freely Have small verbal comments like \"I understand\", \"I see\", \"yes\" and \"uh\".**b)** **Paying attention**One needs to give the speaker one’s undivided attention, and acknowledge him.\nSome aspects of paying attention are as follows:Look at the speaker directly Put aside distracting thoughts Don't mentally prepare a rebuttal83 Avoid all external distractions [for instance, keep your mobile on silentmode] \"Listen\" to the speaker's body language**c)** **Removing filters:**A lot of what we hear may get distorted by one’s personal filters, like the\nassumptions, judgments, and beliefs one carries.**Not being judgemental: If the listener is judgemental,** even if he hears what\nthe speaker is saying, he will understand only according to his biased\ninterpretation.**d)** **Empathetic listening:****Empathy implies hearing and listening patiently, and with full attention, to**\n**what the other person has to say, even when one does not agree with it. It**\n**is important to show the speaker acceptance, not necessarily agreement.****e)** **Responding appropriately:**Active listening implies much more than just hearing what a speaker says. The\ncommunication can be completed only when the listener responds in some way,\nthrough word or action. Certain rules need to be followed for ensuring that the\nspeaker is not put down but treated with respect.These include: Being candid, open, and honest in your response Asserting one’s opinions respectfully Treating another person in a way, one would like oneself to be treated**Example****Asking for clarity** – “I realize that we have not been able to clear about the benefits", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "l83", "section": "A warm, confident and winning smile", "chunk_id": "Final IC 38 - IA_English Common_043", "metadata": {"file_size": 6529, "chunk_index": 43, "chunk_tokens": 992, "has_examples": true, "has_tables": false, "key_concepts": ["Paying attention", "Being open, confident and positive", "A warm, confident and winning smile", "Removing filters:", "Interest in the other person"]}}
{"chunk": "assumptions, judgments, and beliefs one carries.**Not being judgemental: If the listener is judgemental,** even if he hears what\nthe speaker is saying, he will understand only according to his biased\ninterpretation.**d)** **Empathetic listening:****Empathy implies hearing and listening patiently, and with full attention, to**\n**what the other person has to say, even when one does not agree with it. It**\n**is important to show the speaker acceptance, not necessarily agreement.****e)** **Responding appropriately:**Active listening implies much more than just hearing what a speaker says. The\ncommunication can be completed only when the listener responds in some way,\nthrough word or action. Certain rules need to be followed for ensuring that the\nspeaker is not put down but treated with respect.These include: Being candid, open, and honest in your response Asserting one’s opinions respectfully Treating another person in a way, one would like oneself to be treated**Example****Asking for clarity** – “I realize that we have not been able to clear about the benefits\nof some of our health plans. Could you help us by asking us your doubts?”**Paraphrasing the speaker’s exact words** – “So, you are saying that ‘our health plans\nare not attractive enough’ – Have I understood you correctly?”**Test Yourself 4**Which among the following is not an element of active listening?I. Paying good attention\nII. Being extremely judgemental\nIII. Empathetic listening\nIV. Responding appropriately84**E.** **Ethical Behavior**In recent years, there are many reports of improper conduct, and serious concerns\nhave been raised about ethical behaviour in business causing betrayal of trust.This has led to discussions about concepts like accountability, corporate\ngovernance, and treating customers fairly in insurance, which form part of “Ethics”in business.It is not wrong to look after one’s interests. But it is wrong to do so at the cost ofthe interests of others. Unethical behaviour arises when there is no concern forothers and there is high concern for oneself.**Insurance is a business of trust** . Breach of trust amounts to cheating. When wrong\ninformation is given to prospects tempting them to buy insurance, or if the insurance\ngiven does not cater to the specific needs of the prospect, things go wrong.The Code of Ethics spelt out by the IRDAI in various regulations are directed towards\nethical behaviour. It is not enough just to know the code. What is more important\nfor the insurers and their representatives is to always keep the interests of the\nprospect/ policy holder as primary.**Characteristics:** Some characteristics of ethical behaviour are:a) Placing the best interests of the client above one’s own direct or indirectbenefitsb) Holding in strictest confidence and considering as privileged, all business andpersonal information pertaining to client’s affairsc) Making full and adequate disclosure of all facts to enable clients make informeddecisionsThere could be a likelihood of ethics being compromised in the following situations:a) Having to choose between two plans, one giving much less premium orcommission than the otherb) Temptation to recommend discontinuance of an existing policy and taking out anew onec) Being aware of circumstances that, if known to the insurer, could adverselyaffect the interests of the client or the beneficiaries of the claim.**Test Yourself 5**Which among the following is not a characteristic of ethical behaviour?\nI. Making adequate disclosures to enable the clients to make an informed decision\nII. Maintaining confidentiality of client’s business and personal information\nIII. Placing self-interest ahead of client’s interests\nIV. Placing client’s interest ahead of self interest85**Summary**a) The role of customer service and relationships is far more critical in the case ofinsurance than in other products.b) Five major indicators of service quality include reliability, responsiveness,assurance, empathy and tangibles.c) Customer lifetime value may be defined as the sum of economic benefits thatcan be derived from building a sound relationship with a customer over a long\nperiod of time.d) The role of an insurance agent in the area of customer service is absolutelycritical.e) Active listening involves paying attention, providing feedback and respondingappropriately.f) Ethical behaviour involves placing the customer’s interest before one’s own.**Key terms**a) Quality of serviceb) Empathyc) Body languaged) Active listeninge) Ethical behavior**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "y84", "section": "Not being judgemental: If the listener is judgemental,", "chunk_id": "Final IC 38 - IA_English Common_044", "metadata": {"file_size": 6529, "chunk_index": 44, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Ethical Behavior", "Paraphrasing the speaker’s exact words", "Insurance is a business of trust"]}}
{"chunk": "II. Maintaining confidentiality of client’s business and personal information\nIII. Placing self-interest ahead of client’s interests\nIV. Placing client’s interest ahead of self interest85**Summary**a) The role of customer service and relationships is far more critical in the case ofinsurance than in other products.b) Five major indicators of service quality include reliability, responsiveness,assurance, empathy and tangibles.c) Customer lifetime value may be defined as the sum of economic benefits thatcan be derived from building a sound relationship with a customer over a long\nperiod of time.d) The role of an insurance agent in the area of customer service is absolutelycritical.e) Active listening involves paying attention, providing feedback and respondingappropriately.f) Ethical behaviour involves placing the customer’s interest before one’s own.**Key terms**a) Quality of serviceb) Empathyc) Body languaged) Active listeninge) Ethical behavior**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is III.86### CHAPTER C-0 9## GRIEVANCE REDRESSAL MECHANISM**Chapter Introduction**Insurance industry is essentially a service industry where customer expectations are\nconstantly rising. There is dissatisfaction with the standard of services. Despite\ncontinuous product innovation and significant improvement in the level of customer\nservice, aided by use of modern technology, the industry suffers badly in terms of\ncustomer dissatisfaction and poor image. The Government and the regulator have\ntaken a number of initiatives to improve the situation.IRDAI Regulations on Protection of Policyholders’ Interests 2017 mandate that every\nInsurer shall have their own board approved policy for protection of policyholders’\ninterests which shall includei. Service parameters including turnaround times for various services rendered.\nii. Procedure for speedy resolution of complaints.**Learning Outcomes**87**A.** **Grievance Redressal**The time for high priority action is when the customer has a complaint. Remember\nthat in the case of a complaint, the customer is angry due to a failure of service.\nThis is only a part of the story.Many times, Customers get upset because they understand the situation wrongly.\nAll service failures causes two types of feelings:1. A feeling that the insurer was unfair (a feeling of being cheated)2. A feeling of hurt ego (being made to look and feel small)The customers want to feel valued and human touch is critical in this situation. Asa professional insurance advisor first of all, the agent would not allow such a\ncomplaint situation to happen. He would take up the matter with the appropriate\nofficer of the company.A complaint is a crucial “ **moment of truth** ” in the customer relationship. If the\nagent/ company can use the situation to clarify the position, the situation can\nactually improve customer loyalty.**Remember, no one else in the company has ownership of the client’s problems**\n**as much as an agent does** .Complaints/ grievances give us the chance to show how much we care for the\ncustomer’s interests. They are in fact the pillars on which an insurance agent builds\ngoodwill and business. **Word of mouth publicity (Good/ Bad) plays a significant**\n**role in selling and servicing** .The procedure for grievance redressal is detailed at the end of every policy\ndocument. This should be bought to the notice of customers. As per the regulations,\nany grievance of a policy holder should be first referred to the Insurer’s Grievance\nCell. If it is not satisfactorily resolved, the complainant may approach the Regulator\nthrough the Integrated Grievance Management System.**B.** **Integrated Grievance Management System (IGMS)**Each Insurer has its own grievance redressal mechanism. All operating/ controlling/\ncorporate offices of Insurance companies have Grievance Redressal Officers. A\npolicyholder can approach them directly for any grievance.IRDAI has launched an Integrated Grievance Management System (IGMS) which acts\nas an online consumer complaints registration system. Insurers have to register all\ngrievances that they receive in the system which is integrated with IGMS of IRDAI.\nIGMS helps IRDAI in monitoring grievance redress in the industry and also acts as a\ncentral repository of insurance grievance data.Policyholders can approach the respective insurer first for any grievance. If he does\nnot receive any response from the insurer or if the response/ resolution received is88not to his satisfaction, he can approach the Regulator under the IGMS. The\ncomplaint registration process involves two steps – (i) Registering oneself by", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "t85", "section": "Summary", "chunk_id": "Final IC 38 - IA_English Common_045", "metadata": {"file_size": 6529, "chunk_index": 45, "chunk_tokens": 1008, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Grievance Redressal", "Answer 3", "Chapter Introduction"]}}
{"chunk": "Cell. If it is not satisfactorily resolved, the complainant may approach the Regulator\nthrough the Integrated Grievance Management System.**B.** **Integrated Grievance Management System (IGMS)**Each Insurer has its own grievance redressal mechanism. All operating/ controlling/\ncorporate offices of Insurance companies have Grievance Redressal Officers. A\npolicyholder can approach them directly for any grievance.IRDAI has launched an Integrated Grievance Management System (IGMS) which acts\nas an online consumer complaints registration system. Insurers have to register all\ngrievances that they receive in the system which is integrated with IGMS of IRDAI.\nIGMS helps IRDAI in monitoring grievance redress in the industry and also acts as a\ncentral repository of insurance grievance data.Policyholders can approach the respective insurer first for any grievance. If he does\nnot receive any response from the insurer or if the response/ resolution received is88not to his satisfaction, he can approach the Regulator under the IGMS. The\ncomplaint registration process involves two steps – (i) Registering oneself by\nentering one’s policy details and (ii) Registering one’s complaints and viewing the\nstatus of the complaints. Complaints are then forwarded to the respective insurance\ncompanies and IRDAI facilitates disposal of Grievances.IGMS tracks complaints and the time taken for their redressal. The complaints can\nbe registered at the following URL: http://www.policyholder.gov.in/Integrated_\nGrievance_Management.aspx**C.** **Consumer Protection****The Consumer Protection Act, 2019:** This original Act of 1986 was passed _“to_\n_provide for better protection of the interest of consumers and to make provision_\n_for the establishment of consumer councils and other authorities for the_\n_settlement of consumer’s disputes”_ . The Act was amended by the Consumer\nProtection (Amendment) Act, 2002 and later on 2019.Some definitions provided in\nthe Act are as follows:“ **Service** ” means service of any description which is made available to potential\nusers and includes the provision of facilities in connection with banking, financing,\n**insurance**, transport, processing, supply of electrical or other energy, board or\nlodging or both, housing construction, entertainment, etc. **Insurance is included as**\n**a service.** However, “Service” does not include the rendering of any service free of\ncharge or under a contract of personal service.“ **Consumer** ” means any person who Buys goods for a consideration. It includes any user of such goods. (It does notinclude a person who obtains such goods for resale or for any commercial\npurpose) or\n Hires or avails of any services for a consideration. It includes the beneficiary ofsuch services. (It does not include any person who avails of such service for any\ncommercial purpose.)“ **Defect** ” means any fault, imperfection, shortcoming, inadequacy in the quality,\nnature and manner of performance which is required to be maintained by or under\nany law or has been undertaken to be performed by a person in pursuance of a\ncontract or otherwise in relation to any service.**“Complaint”** means any allegation in writing made by a complainant that: an unfair trade practice or restrictive trade practice has been adopted\n the goods bought by him suffer from one or more defects\n the services hired or availed of by him suffer from deficiency in any respect\n price charged is in excess of that fixed by law or displayed on package\n goods which will be hazardous to life and safety when used are being offeredfor sale to the public in contravention of the provisions of any law requiring\ntrader to display information in regard to the contents, manner and effect of\nuse of such goods.“ **Consumer dispute** ” means a dispute where the person against whom a complaint\nhas been made, denies and disputes the allegations contained in the complaint.89**D.** **Consumer** **disputes redressal agencies**Consumer disputes redressal agencies are established at district, state and national\nlevels.**i.** **District Consumer Disputes Redressal Commission** The District Consumer Disputes Redressal Commission (District Commission),has jurisdiction to entertain complaints, where value of the goods or services\ndoes not exceed Rs. 1 crore. The District Commission has the powers of a civil\ncourt.**ii.** **State Consumer Disputes Redressal Commission** The State Consumer Disputes Redressal Commission (State Commission) hasoriginal jurisdiction to entertain complaints where the value of goods/ service", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "s88", "section": "B.", "chunk_id": "Final IC 38 - IA_English Common_046", "metadata": {"file_size": 6529, "chunk_index": 46, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Consumer", "Integrated Grievance Management System (IGMS)", "Defect", "Consumer dispute", "State Consumer Disputes Redressal Commission"]}}
{"chunk": " price charged is in excess of that fixed by law or displayed on package\n goods which will be hazardous to life and safety when used are being offeredfor sale to the public in contravention of the provisions of any law requiring\ntrader to display information in regard to the contents, manner and effect of\nuse of such goods.“ **Consumer dispute** ” means a dispute where the person against whom a complaint\nhas been made, denies and disputes the allegations contained in the complaint.89**D.** **Consumer** **disputes redressal agencies**Consumer disputes redressal agencies are established at district, state and national\nlevels.**i.** **District Consumer Disputes Redressal Commission** The District Consumer Disputes Redressal Commission (District Commission),has jurisdiction to entertain complaints, where value of the goods or services\ndoes not exceed Rs. 1 crore. The District Commission has the powers of a civil\ncourt.**ii.** **State Consumer Disputes Redressal Commission** The State Consumer Disputes Redressal Commission (State Commission) hasoriginal jurisdiction to entertain complaints where the value of goods/ service\nand compensation, if any claimed exceeds Rs. 1 crore but does not exceed\nRs.10 crores.\n It also has appellate and supervisory jurisdiction to entertain appeals fromthe District Commission.\n Other powers and authority are similar to those of the District Commission.**iii.** **National Consumer Disputes Redressal Commission** The National Consumer Disputes Redressal Commission (National Commission)is the final authority established under the Act.\n It has original jurisdiction to entertain disputes, where goods/ services andthe compensation claimed exceeds Rs.10 crores.\n It has appellate as well as supervisory jurisdiction to hear the appeals fromthe orders passed by the State Commission.\nEvery order made by a District Commission, State Commission or the National\nCommission shall be enforced by it in the same manner as if it were a decree\nmade by a Court in a suit before it. Appeals against the orders of the National\nCommission have to be made only at the Supreme Court.90**Channels for Consumer Disputes Redressal**|Judicial Channels|Col2|\n|---|---|\n|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|\n|**Established by the**<br>**Central Government**|**Established by the**<br>**State Government**|**a)** **Procedure for filing a complaint**The procedure for filing a complaint is very simple in all the above three\nagencies. There is no fee for filing a complaint or filing an appeal whether before\nthe State Commission or National Commission. The complaint can be filed by\nthe complainant himself or by his authorised agent. It can be filed personally or\ncan even be sent by post. It may be noted that no advocate is necessary for the\npurpose of filing a complaint.**b)** **Consumer Commission Orders**If the Commission is satisfied (a) that the goods in question have the defects\nspecified in the complaint or (b) that the allegations about the services are\nproven; the Commission can issue orders directing the opposite party to do any\nof the following:", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "l2", "section": "Consumer dispute", "chunk_id": "Final IC 38 - IA_English Common_047", "metadata": {"file_size": 6529, "chunk_index": 47, "chunk_tokens": 995, "has_examples": false, "has_tables": true, "key_concepts": ["State Government", "Commission", "Procedure for filing a complaint", "Consumer Commission Orders", "Consumer"]}}
{"chunk": "|**Established by the**<br>**Central Government**|**Established by the**<br>**State Government**|**a)** **Procedure for filing a complaint**The procedure for filing a complaint is very simple in all the above three\nagencies. There is no fee for filing a complaint or filing an appeal whether before\nthe State Commission or National Commission. The complaint can be filed by\nthe complainant himself or by his authorised agent. It can be filed personally or\ncan even be sent by post. It may be noted that no advocate is necessary for the\npurpose of filing a complaint.**b)** **Consumer Commission Orders**If the Commission is satisfied (a) that the goods in question have the defects\nspecified in the complaint or (b) that the allegations about the services are\nproven; the Commission can issue orders directing the opposite party to do any\nof the following:\ni. To **return** to the complainant the **price** (or premium in case of insurance)and/ or charges paid by the complainant\nii. To award such amount as **compensation** to the consumers for any loss orinjury suffered by the consumer due to negligence of the opposite party\niii. To remove the defects or **deficiencies** in the services in question.\niv. To **discontinue the unfair trade practice** or the restrictive trade practiceor not to repeat them\nv. To provide for **adequate costs** to the complainants.**c)** **Nature of complaints**The **majority of consumer disputes** with the three Commissions relating to\ninsurance business fall in the following main categories:91i. Delay in settlement of claims\nii. Non-settlement of claims\niii. Repudiation of claims\niv. Amount or Quantum of loss\nv. Policy terms, conditions etc.**E.** **The Insurance Ombudsman**The Central Government under the powers of the Insurance Regulatory &\nDevelopment Authority Act, 1999 made **Insurance Ombudsman Rules 2017** by a\nnotification published in the official gazette on 25 [th] April 2017.Rules regarding Insurance Ombudsmen apply to all insurers and their agents and\nintermediaries in respect of complaints on all personal lines of insurance, group\ninsurance policies, policies issued to sole proprietorship and micro enterprises.[‘Personal lines’ here means insurances taken in an individual capacity, in contrast\nto insurances sold to corporate entities.] Complaints relating to (a) delay in\nsettlement of claims beyond the time specified by IRDAI, (b) partial or total\nrepudiation of claims by the insurer, (c) disputes about premium paid or payable in\nterms of insurance policy, (d) misrepresentation of policy terms and conditions at\nany time in the policy document or policy contract, (e) legal construction of\ninsurance policies that affect the claim; and (f) policy servicing and related\ngrievances against insurers and their agents and intermediaries.a) Issuance of life insurance policy, general insurance policy including healthinsurance policy which is not in conformity with the proposal form submitted\nby the proposer.\nb) Non issuance of insurance policy after receipt of premium in life insurance andgeneral insurance including health insurance and\nc) Any other matter resulting from the violation of provisions of the InsuranceAct, 1938 or the regulations, circulars, guidelines or instructions issued by the\nIRDAI from time to time or the terms and conditions of the policy contract, in\nso far as they relate to issues mentioned at clauses (a) to (f)\nThe objective of these rules is to resolve all types of complaints mentioned above,\nin a cost effective, and impartial manner.**The Ombudsman, by mutual agreement of the insured and the insurer can act as**\n**a mediator and counsellor within the terms of reference.****The decision of the Ombudsman, whether to accept or reject the complaint, is**\n**final.****a)** **Complaint to the Ombudsman**Any complaint made to the Ombudsman should be in writing, and must be signed\nby the insured or his legal heirs, nominee or assignee, and addressed to an\nOmbudsman within whose jurisdiction, the insurer has a branch/ office. It should\ncontain the facts giving rise to the complaint, supported by documents, the\nnature and extent of the loss caused to the complainant and the relief sought.92**Complaints can be made to the Ombudsman if:**i. The complainant had made a previous written representation to theinsurance company and:\n the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Established by the", "chunk_id": "Final IC 38 - IA_English Common_048", "metadata": {"file_size": 6529, "chunk_index": 48, "chunk_tokens": 999, "has_examples": false, "has_tables": true, "key_concepts": ["State Government", "Complaints can be made to the Ombudsman if:", "Procedure for filing a complaint", "Consumer Commission Orders", "The Insurance Ombudsman"]}}
{"chunk": "The objective of these rules is to resolve all types of complaints mentioned above,\nin a cost effective, and impartial manner.**The Ombudsman, by mutual agreement of the insured and the insurer can act as**\n**a mediator and counsellor within the terms of reference.****The decision of the Ombudsman, whether to accept or reject the complaint, is**\n**final.****a)** **Complaint to the Ombudsman**Any complaint made to the Ombudsman should be in writing, and must be signed\nby the insured or his legal heirs, nominee or assignee, and addressed to an\nOmbudsman within whose jurisdiction, the insurer has a branch/ office. It should\ncontain the facts giving rise to the complaint, supported by documents, the\nnature and extent of the loss caused to the complainant and the relief sought.92**Complaints can be made to the Ombudsman if:**i. The complainant had made a previous written representation to theinsurance company and:\n the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.\nii. The complainant is not satisfied with the reply given by the insurer\niii. The complaint is made within one year from the date of rejection by theinsurance company\niv. The complaint is not pending in any court or consumer Commission or inarbitration\nv. The value of the claim including expenses claimed is not above Rs 30 lakhs.**b)** **Recommendations by the Ombudsman**The Ombudsman will send copies of complaints to both the complainant and the\ninsurance company. The Ombudsman will make his recommendations within one\nmonth of the receipt of the complaint.**c)** **Award**The dispute can be settled by intermediation. If this is not possible, the\nOmbudsman will pass an award to the insured which he thinks is fair within a\nperiod of 3 months from the date of receipt of all requirements from the\ncomplainant and sending a copy of the award to the complainant and the\ninsurer.The insurer shall comply with the award within 30 days of the receipt of the\naward and intimate compliance of the same to the Ombudsman. The award of\nthe Ombudsman shall be binding on the insurer.**F.** **Right to Information**In addition to the rules and regulations that are specific for grievance redressal in\ninsurance, there are certain general laws common to everyone in the country. The\nRight to Information (RTI) Act, 2005 enacted by the Govt. of India is an important\nlaw that gives citizens of India access to the information available with public\nauthorities which promotes transparency and accountability in these organisations.\nThe Act provides for appointment of a Chief Public Information Officer (CPIO) to\ndeal with requests for information. IRDAI is obliged to provide information to\nmembers of public in accordance with the provisions of the said Act. Agents should\nbe aware that as per the RTI Act, IRDAI and Insurance Companies may have to reveal\ncertain information to customers and others; as also allow them to inspect the work,\ndocument, records, extracts or certified copies of documents/ records and also\ninformation stored in electronic form. However, there are certain categories of\ninformation that are exempt from disclosure.93**Test Yourself 1**The ______________ has jurisdiction to entertain complaints, where value of the\ngoods or services and the compensation claimed is up to Rs.20 lakhs.I. District CommissionII. State CommissionIII. Zilla ParishadIV. National Commission**Summary**IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as a central repository of insurance grievance data and as a tool for\nmonitoring grievance redress in the industry.Consumer disputes redressal agencies are established in each district and state\nand at national level.As far as insurance business is concerned, the majority of consumer disputes fall\nin categories such as delay in settlement of claims, non-settlement of claims,\nrepudiation of claims, quantum of loss and policy terms, conditions etc.The Ombudsman, by mutual agreement of the insured and the insurer can act\nas a mediator and counsellor within the terms of reference.- If the dispute is not settled by intermediation, the Ombudsman will pass award\nto the insured which he thinks is fair, and is not more than what is necessary\nto cover the loss of the insured.**Key Terms**1. Integrated Grievance Management System (IGMS)\n2. The Consumer Protection Act, 2019", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "The Ombudsman, by mutual agreement of the insured and the insurer can act as", "chunk_id": "Final IC 38 - IA_English Common_049", "metadata": {"file_size": 6529, "chunk_index": 49, "chunk_tokens": 980, "has_examples": false, "has_tables": false, "key_concepts": ["Complaints can be made to the Ombudsman if:", "Test Yourself 1", "Award", "Right to Information", "Key Terms"]}}
{"chunk": "goods or services and the compensation claimed is up to Rs.20 lakhs.I. District CommissionII. State CommissionIII. Zilla ParishadIV. National Commission**Summary**IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as a central repository of insurance grievance data and as a tool for\nmonitoring grievance redress in the industry.Consumer disputes redressal agencies are established in each district and state\nand at national level.As far as insurance business is concerned, the majority of consumer disputes fall\nin categories such as delay in settlement of claims, non-settlement of claims,\nrepudiation of claims, quantum of loss and policy terms, conditions etc.The Ombudsman, by mutual agreement of the insured and the insurer can act\nas a mediator and counsellor within the terms of reference.- If the dispute is not settled by intermediation, the Ombudsman will pass award\nto the insured which he thinks is fair, and is not more than what is necessary\nto cover the loss of the insured.**Key Terms**1. Integrated Grievance Management System (IGMS)\n2. The Consumer Protection Act, 2019\n3. District Commission4. State Commission5. National Commission6. Insurance Ombudsman**Answers to Test Yourself****Answer 1** -The correct answer is I.94### CHAPTER C- 10## REGULATORY ASPECTS FOR INSURANCE AGENTS**Chapter Introduction**In this chapter, we discuss Regulatory aspects of Insurance agents.**Learning Outcomes**95**A.** **Regulations of Insurance Agents**IRDAI (Appointment of Insurance Agents) Regulations, 2016 that came into force\nwith effect from 1 [st] April 2016 is discussed here.Learners are expected to read and understand the Regulations for Insurance Agents\nissued by IRDAI which have defined many related terms. As Regulations are amended\nfrom time to time, one needs to refer original and revised/ updated versions placedon the IRDAI website.**Definitions:**Many of the definitions applicable in the insurance market are defined in the\nRegulations. For instance, an \"Insurance Agent\" is defined as _“an individual_\n_appointed by an insurer for the purpose of soliciting or procuring insurance business_\n_including business relating to the continuance, renewal or revival of policies of__insurance”_ .The Regulations define a “Composite Insurance Agent” as _“an individual who is_\n_appointed as an insurance agent by two or more insurers subject to the condition_\n_that he/ she shall not act as insurance agent for more than one life insurer, one_\n_general insurer, one health insurer and one each of the mono-line insurers.”_**Important terms that an agent should know are also defined.**For example, “Appointment Letter” is defined as _“a letter of appointment issued_\n_by an insurer to any person to act as an insurance agent.”_Similarly, the “Designated Official” is also defined as “an officer authorised by the\nInsurer to make Appointment of an individual as an Insurance Agent.” On receipt of\nthe application, before appointing the Agent, the Designated Official shall satisfy\nhimself that the applicant (i) has furnished the Agency Application complete in all\nrespects; (ii) has submitted the PAN details along with the Agency Application Form;\n(iii) has passed the insurance examination as specified under the Regulations; (iv)\ndoes not suffer from any of the disqualifications mentioned in the Regulations; (v)\nhas the requisite knowledge to solicit and procure insurance business; and (vi)\ncapable of providing the necessary service to the policyholders;The designated official will verify the application form, and ascertain whether the\napplicant holds agency appointment with more than one life insurer, one general\ninsurer, one health insurer and one of each of the mono-line insurers. He will also\nverify the centralised list of agents maintained by the Authority and verify whether\nthe applicant is black listed. If satisfied, the designated official may appoint the\napplicant as an Insurance Agent within 15 days of receipt of all documents from the\napplicant, allot an agency code number and an identity card to the Agent prefixing\nthe abbreviation of the company name. If the applicant does not fulfil the\nprescribed conditions, the designated official may refuse to grant Agency\nAppointment, and communicate the reasons thereof to the applicant in writing,96within 21 days of receipt of the application. If an applicant is aggrieved by the\ndecision of the designated official regarding refusal of granting insurance agency\nhe/ she, may submit a review application to the insurer for review the decision.\nThe insurer shall consider the review application and communicate the final\ndecision within 15 days of receipt of the application.**Appeal Provision** : Insurers have “Appellate Officers” who are authorised by the", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "n4", "section": "Summary", "chunk_id": "Final IC 38 - IA_English Common_050", "metadata": {"file_size": 6529, "chunk_index": 50, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Appeal Provision", "Definitions:", "Chapter Introduction", "Key Terms"]}}
{"chunk": "applicant holds agency appointment with more than one life insurer, one general\ninsurer, one health insurer and one of each of the mono-line insurers. He will also\nverify the centralised list of agents maintained by the Authority and verify whether\nthe applicant is black listed. If satisfied, the designated official may appoint the\napplicant as an Insurance Agent within 15 days of receipt of all documents from the\napplicant, allot an agency code number and an identity card to the Agent prefixing\nthe abbreviation of the company name. If the applicant does not fulfil the\nprescribed conditions, the designated official may refuse to grant Agency\nAppointment, and communicate the reasons thereof to the applicant in writing,96within 21 days of receipt of the application. If an applicant is aggrieved by the\ndecision of the designated official regarding refusal of granting insurance agency\nhe/ she, may submit a review application to the insurer for review the decision.\nThe insurer shall consider the review application and communicate the final\ndecision within 15 days of receipt of the application.**Appeal Provision** : Insurers have “Appellate Officers” who are authorised by the\nInsurer to consider and dispose representations and appeals received from an\nappointed Insurance Agent. If an appointment is cancelled, an aggrieved agent can\nappeal to the Appellate Officer within 45 days of the order, and the Officer will give\nhis decision in the matter in writing within 30 days of the receipt of the appeal.The “Examination Body” is also defined as _“an Institution, which conducts pre-_\n_recruitment tests for insurance agents and which is duly recognised by the_\n_Authority.”_ [Note: As on 30 [th] September 2021, Insurance Institute of India is the\nonly ‘Examination Body’ approved by the IRDAI]**B.** **Regulatory Compliances for Agents**The procedure to become an Insurance Agent of an Insurer is discussed in detail.\nThe prescribed pre-qualifications that one should have before approaching an\ninsurer are discussed in detail. The processes involved are also stated in the\nRegulations.In order to make the Agent aware of his rights, the mode and manner in which the\nappointment process shall be done and the processes to be followed by the\nInsurance Company are also specified.In case an Applicant is aggrieved at some stage of the process, procedures for\ncomplaining are specified. Provisions on how such complaints have to be addressed\nby the company. In case the Applicant is still aggrieved, the provisions for appealing\nagainst the company’s decisions are also discussed.The Regulations provide details relating to appearing for the Insurance Agency\nExamination conducted by the ‘Examination Body’ in the subjects of Life, General,\nor Health Insurance as the case may be, as per the syllabus prescribed by the\nAuthority to be eligible for appointment as an insurance agent. The duties of the\ninsurer in providing the Applicant the necessary assistance and guidance to equip\nthem with adequate insurance knowledge required to qualify in the agency\nexamination are also spelt out.The applicant who has successfully passed the Insurance Agency Examination shall\nbe issued a pass certificate by the Examination Body. The pass certificate shall be\nin force for a period of twelve months, for seeking appointment as an agent with\nany insurer for the first time.A candidate can be eligible for appointment as an agent only after qualifying in the\nInsurance Agency examination and holding a valid pass certificate issued by the\nExamination Body.97**C.** **Code of Conduct for Agents**The Code of Conduct that every Agent shall adhere to are discussed in detail.\nMatters like identifying oneself and one’s Insurer properly by showing the agency\nidentity card and the duty to disclose the agency appointment letter to the prospecton demand are discussed.The code of conduct specifies the duties of Agents in detail. Some of the important\nduties that Agent Applicants need to know are listed below: Giving necessary information about insurance products offered for sale by hisinsurer and consider the needs of the prospect while recommending a specific\ninsurance plan; Explaining the premium to be charged by the insurer for the insurance productoffered for sale; Disclosing the scales of commission in respect of the insurance product offeredfor sale; Care to be taken when representing more than one insurer offering same line ofproducts; Explaining to the prospect the nature of information required in the proposalform by the insurer, and the importance of disclosing material information in\nthe purchase of an insurance contract; Obtaining the requisite documents at the time of filing the proposal form withthe insurer; and other documents subsequently asked for by the insurer for\ncompletion of the proposal; Informing the insurer every fact about the prospect relevant to insuranceunderwriting, including any adverse habits or income inconsistency of the", "source_file": "Final IC 38 - IA_English Common.md", "chapter": null, "section": "Appeal Provision", "chunk_id": "Final IC 38 - IA_English Common_051", "metadata": {"file_size": 6529, "chunk_index": 51, "chunk_tokens": 996, "has_examples": true, "has_tables": false, "key_concepts": ["Appeal Provision", "Code of Conduct for Agents", "Regulatory Compliances for Agents"]}}
{"chunk": "Matters like identifying oneself and one’s Insurer properly by showing the agency\nidentity card and the duty to disclose the agency appointment letter to the prospecton demand are discussed.The code of conduct specifies the duties of Agents in detail. Some of the important\nduties that Agent Applicants need to know are listed below: Giving necessary information about insurance products offered for sale by hisinsurer and consider the needs of the prospect while recommending a specific\ninsurance plan; Explaining the premium to be charged by the insurer for the insurance productoffered for sale; Disclosing the scales of commission in respect of the insurance product offeredfor sale; Care to be taken when representing more than one insurer offering same line ofproducts; Explaining to the prospect the nature of information required in the proposalform by the insurer, and the importance of disclosing material information in\nthe purchase of an insurance contract; Obtaining the requisite documents at the time of filing the proposal form withthe insurer; and other documents subsequently asked for by the insurer for\ncompletion of the proposal; Informing the insurer every fact about the prospect relevant to insuranceunderwriting, including any adverse habits or income inconsistency of the\nprospect, within the knowledge of the agent; Advising every prospect to effect nomination under the policy; Informing the prospect about the acceptance or rejection of the proposal by theinsurer, in a prompt manner; Assisting and advising one’s customers/ policyholders on policy servicing mattersincluding assignment of policy, change of address or exercise of options under\nthe policy or any other policy service, as required; Assisting one’s customers/ policyholders/ claimants/ beneficiaries in claimssettlement related procedures.The code of conduct specifies what the Agents should not do as well. There are\nsome important prohibitions that Agent Applicants need to be aware of:**Insurance agents are prohibited from** Soliciting or procuring insurance business without being duly authorized by theinsurer98 Inducing the prospect to omit any material information or submit wronginformation in the proposal form; Resorting to multilevel marketing for soliciting and procuring insurance policiesand/ or inducting any prospect/ policyholder into multilevel marketing schemes. Offering different rates, advantages, terms and conditions other than thoseoffered by one’s insurer; Demand or receive a share of proceeds from the beneficiary under an insurancecontract; Issuing Insurance advertisements without the express approval of the InsuranceCompany.Agents should alert policyholders orally and issue notices to them so that the\nbusiness procured are conserved.**Action against Agents:**An Agent’s appointment can be cancelled or suspended for multiple reasons. Someof the serious reasons are mentioned below.The Agent would attract action if he/ she: violates relevant provisions under the Acts, Rules or Regulations as amendedfrom time to time, fails to comply with the stipulated code of conduct, violates the terms of appointment, furnishes wrong or false information, conceals or fails to disclose material facts in the application submitted forappointment of Insurance Agent does not submit periodical returns as required by the Insurer/ Authority does not co-operate with any inspection or enquiry conducted by theAuthority fails to resolve the complaints of the policyholders. either directly or indirectly involves in embezzlement of premiums/ cashcollected from policyholders/ prospects on behalf of insurer.The procedure to be followed for such Cancellation/ Suspension of Agency and the\neffects thereof are given in detail in the Insurance Regulatory and Development\nAuthority of India (Appointment of Insurance Agents) Regulations, 2016. There is a\nprovision for black listing agents whose appointment is cancelled/ suspended by a\ndesignated official of the insurer on grounds of violation of the Code of Conduct\nand/ or fraud. If the agency of the insurance agent is cancelled, he/ she shall cease\nto act as an insurance agent from the date of the order. The Authority maintains a\n“Centralised list of black listed agents” whose appointment is cancelled/99suspended. In case the suspension is revoked, the name is removed from the black\nlist. The procedure in respect of resignation/ surrender of appointment by an\ninsurance agent is also specified.The Regulations allow IRDAI to call for any information pertaining to the insurance\nbusiness undertaken by the Insurance Agent and he/ she shall submit the same\nwithin the time lines. IRDAI can appoint an “Investigating Officer” to undertake\ninspection of the affairs of an Insurance Agent, to ascertain and see whether the\nbusiness is carried on by him/ her as per the Act, Regulations and the instructions\nissued by the Authority from time to time, and also to inspect the books of accounts,", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "r98", "section": "Insurance agents are prohibited from", "chunk_id": "Final IC 38 - IA_English Common_052", "metadata": {"file_size": 6529, "chunk_index": 52, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Action against Agents:", "Insurance agents are prohibited from"]}}
{"chunk": "Authority of India (Appointment of Insurance Agents) Regulations, 2016. There is a\nprovision for black listing agents whose appointment is cancelled/ suspended by a\ndesignated official of the insurer on grounds of violation of the Code of Conduct\nand/ or fraud. If the agency of the insurance agent is cancelled, he/ she shall cease\nto act as an insurance agent from the date of the order. The Authority maintains a\n“Centralised list of black listed agents” whose appointment is cancelled/99suspended. In case the suspension is revoked, the name is removed from the black\nlist. The procedure in respect of resignation/ surrender of appointment by an\ninsurance agent is also specified.The Regulations allow IRDAI to call for any information pertaining to the insurance\nbusiness undertaken by the Insurance Agent and he/ she shall submit the same\nwithin the time lines. IRDAI can appoint an “Investigating Officer” to undertake\ninspection of the affairs of an Insurance Agent, to ascertain and see whether the\nbusiness is carried on by him/ her as per the Act, Regulations and the instructions\nissued by the Authority from time to time, and also to inspect the books of accounts,\nrecords and documents of the Agent.**Key Terms**1. Regulatory Compliances for agents2. Code of Conduct for Agents**Test Yourself 1**Which of the following statements is incorrect**An insurance agent shall not -**I. Solicit or procure insurance business without being appointed to act as such\nby the insurer\nII. Induce the prospect to omit any material information in the proposal form;\nIII. Disclose the scales of commission in respect of the insurance product offered\nfor sale, if asked by the prospect\nIV. Offer different rates, advantages, terms and conditions other than those\noffered by his insurer**Test Yourself 2**Pick the right answer**An insurance agent is allowed to**\nI. Interfere with any proposal introduced by any other insurance agent\nII. Resort to multilevel marketing for soliciting and procuring insurance policies\nIII. Receive a share of proceeds from the beneficiary under an insurance contract\nIV. Indicate the premium to be charged by the insurer for the insurance product\noffered for sale**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is IV.100", "source_file": "Final IC 38 - IA_English Common.md", "chapter": "s2", "section": "Key Terms", "chunk_id": "Final IC 38 - IA_English Common_053", "metadata": {"file_size": 6529, "chunk_index": 53, "chunk_tokens": 489, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Test Yourself 1", "Key Terms", "Answer 1"]}}
{"chunk": "## IC - 38 **WEB AGGREGATORS** **COMPOSITE****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory**\n**and Development Authority of India (IRDAI) and prepared by Insurance**\n**Institute of India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## WEB AGGREGATORS **COMPOSITE** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This\ncourse is designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express\nwritten permission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to\nctd@iii.org.in mentioning the subject title and unique publication number\nmentioned on the cover pageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nCorporate Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in\npreparing the course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate\ntheir professional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that\nInsurance agents need to know. Separate sections are provided for those aspiring\nto become (2) Life Insurance Agents, (3) General Insurance Agents and (4) Health\nInsurance Agents.A set of model questions are included in the course to give students an idea of\nthe examination format and the types of objective questions that may be asked.\nThe model questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**COMMON CHAPTERS **|**COMMON CHAPTERS **|\n|C-01|Introduction to Insurance|2|\n|C-02|Core Elements of Insurance|19|\n|C-03|Principles of Insurance|29|\n|C-04|Features of Insurance Contracts|43|\n|C-05|Underwriting and Rating|52|\n|C-06|Claims Processing|60|\n|C-07|Documentation|67|\n|C-08|Customer Service|76|\n|C-09|Grievance Redressal Mechanism|93|\n|C-10|Regulatory Aspects for Web Aggregators|101|\n|**SECTION **|**LIFE INSURANCE **|**LIFE INSURANCE **|\n|L-01|What Life Insurance Involves|116|\n|L-02|Financial Planning|123|\n|L-03|Life Insurance Products: Traditional|137|\n|L-04|Life insurance products: Non-Traditional|148|\n|L-05|Applications of Life Insurance|154|\n|L-06|Pricing and Valuation in Life Insurance|159|\n|L-07|Life Insurance Documentation|168|\n|L-08|Life Insurance Underwriting|182|\n|L-09|Life Insurance Claims|196|\n|**SECTION **|**HEALTH INSURANCE **|**HEALTH INSURANCE **|\n|H-01|Introduction to Health Insurance|205|", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "C-46", "section": "WEB AGGREGATORS", "chunk_id": "Final IC 38 - WA_Composite  - English_000", "metadata": {"file_size": 20885, "chunk_index": 0, "chunk_tokens": 987, "has_examples": false, "has_tables": true, "key_concepts": ["LIFE INSURANCE", "Institute of India, Mumbai.", "IC - 38", "WEB AGGREGATORS", "COMMON CHAPTERS"]}}
{"chunk": "|C-06|Claims Processing|60|\n|C-07|Documentation|67|\n|C-08|Customer Service|76|\n|C-09|Grievance Redressal Mechanism|93|\n|C-10|Regulatory Aspects for Web Aggregators|101|\n|**SECTION **|**LIFE INSURANCE **|**LIFE INSURANCE **|\n|L-01|What Life Insurance Involves|116|\n|L-02|Financial Planning|123|\n|L-03|Life Insurance Products: Traditional|137|\n|L-04|Life insurance products: Non-Traditional|148|\n|L-05|Applications of Life Insurance|154|\n|L-06|Pricing and Valuation in Life Insurance|159|\n|L-07|Life Insurance Documentation|168|\n|L-08|Life Insurance Underwriting|182|\n|L-09|Life Insurance Claims|196|\n|**SECTION **|**HEALTH INSURANCE **|**HEALTH INSURANCE **|\n|H-01|Introduction to Health Insurance|205|\n|H-02|Health Insurance Documentation|213|\n|H-03|Health Insurance Products|221|\n|H-04|Health Insurance Underwriting|248|\n|H-05|Health Insurance Claims|264|\n|**SECTION **|**GENERAL INSURANCE **|**GENERAL INSURANCE **|\n|G-01|General Insurance Documentation|281|\n|G-02|Underwriting and Rate Making|297|\n|G-03|Personal and Retail Insurance|307|\n|G-04|Commercial Insurance|317|\n|G-05|General Insurance Claims|341|\n|**SECTION **|**ANNEXURES **|**ANNEXURES **|\n|A-01|Annexures – Specimen Proposal forms and Claims Forms for filling up|351|iv## SECTION **AN OVERVIEW**1## CHAPTER C-01## INTRODUCTION TO INSURANCE**Chapter Introduction**This chapter aims to introduce the basics of insurance, trace its evolution and\nhow it works. It intends to teach how insurance provides protection against\neconomic losses arising as a result of unforeseen events and serves as aninstrument of risk transfer.2**A.** **Insurance – History and Evolution**We live in a world of uncertainty. We hear about: Trains colliding Floods destroying entire communities Earthquakes destroying buildings Young people dying unexpectedly**Diagram 1:** **Events happening around us**Why do these events make people anxious and afraid?The reason is simple.**i.** Firstly these **events are unpredictable.** If one can anticipate and predictan event, one can prepare for it.**ii.** Secondly, such unpredictable and untoward events are often a **cause of****economic loss and grief** .The people around can come to the aid of individuals who are affected by such\nevents, by having a system of sharing and mutual support. The idea of insurance\nis thousands of years old. Yet, the present form of insurance, is only two or threecenturies old.**1.** **History of insurance**Insurance has existed in some form or other since 3000 BC. Many civilisations,\nhave practiced the concept of pooling and sharing among themselves, all the\nlosses suffered by some members of the community. Let us take a look at some\nof the ways in which this concept was applied.3**2.** **Insurance through the ages – Some instances**|Bottomry Loans|Traders of Babylon paid extra money to their lenders to write<br>off their loans if shipment was lost or stolen.<br>Traders of Bharuch and Surat also had similar practices.|\n|---|---|\n|**Benevolent**<br>**Societies/**<br>**Friendly**<br>**Societies**|Greeks of 7th Cy. AD, used to pay in advance to take care of the<br>family of members who died and also the funeral expenses of the<br>member.<br>Similar practices were followed in England as well.|\n|**Rhodes**|Traders of Rhodes who were sending goods by sea, were sharing<br>losses if any of them lost their goods due to jettison1.|\n|**Chinese Traders**|**Chinese traders**in ancient days used to send their goods in<br>different ships, so that even if some boats sank, their loss would<br>be partial.|**3.** **Modern concepts of insurance**In India the principle of life insurance was reflected in the joint-family\nsystem. Losses arising from the demise of a member were shared by various", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "C-06", "section": "SECTION", "chunk_id": "Final IC 38 - WA_Composite  - English_001", "metadata": {"file_size": 20885, "chunk_index": 1, "chunk_tokens": 984, "has_examples": false, "has_tables": true, "key_concepts": ["Rhodes", "ANNEXURES", "AN OVERVIEW", "Modern concepts of insurance", "Societies/"]}}
{"chunk": "|---|---|\n|**Benevolent**<br>**Societies/**<br>**Friendly**<br>**Societies**|Greeks of 7th Cy. AD, used to pay in advance to take care of the<br>family of members who died and also the funeral expenses of the<br>member.<br>Similar practices were followed in England as well.|\n|**Rhodes**|Traders of Rhodes who were sending goods by sea, were sharing<br>losses if any of them lost their goods due to jettison1.|\n|**Chinese Traders**|**Chinese traders**in ancient days used to send their goods in<br>different ships, so that even if some boats sank, their loss would<br>be partial.|**3.** **Modern concepts of insurance**In India the principle of life insurance was reflected in the joint-family\nsystem. Losses arising from the demise of a member were shared by various\nfamily members so that each member of the family continued to feel secure.The break-up of the joint family system and emergence of the nuclear family\nin the modern era, coupled with the stress of daily life has made it necessary\nto evolve alternative systems for security. This highlights the importance oflife insurance to an individual.**i.** **Lloyds** : The origins of modern commercial insurance started at Lloyd’sCoffee House in London, where traders agreed to share losses they\nsuffered due to various perils at sea.**ii.** **Amicable Society for a Perpetual Assurance** founded in 1706 in Londonis considered to be the first life insurance company in the world.**4.** **History of insurance in India****a)** **India** : Modern insurance in India began in early 1800 or thereabouts, with\nagencies of foreign insurers starting marine insurance business.|The Oriental Life<br>Insurance Co. Ltd|The first life insurance company to be set up in India<br>was an English company|\n|---|---|\n|**Triton Insurance Co. Ltd.**|The first non-life insurer to be established in India|1 Jettison/ Jettisoning’ refers to throwing away some of the cargo to reduce the weight of the ship while at sea.4|Bombay Mutual<br>Assurance Society Ltd.|The first Indian insurance company. It was formed<br>in 1870 in Mumbai|\n|---|---|\n|**National Insurance**<br>**Company Ltd.**|The oldest insurance company in India. It was<br>founded in 1906|Many other Indian companies were set up subsequently as a result of the Swadeshi\nmovement at the turn of the century.**Important**a) The **Insurance Act 1938** was the first legislation to regulate the conduct ofinsurance companies in India. This Act, as amended from time to timecontinues to be in force.b) Life insurance business was nationalised on 1st September 1956 and the **Life****Insurance Corporation of India (LIC)** was formed. From 1956 to 1999, the LIC\nheld exclusive rights to do life insurance business in India.c) In 1972, the non-life insurance business was also nationalised and the **General****Insurance Corporation of India (GIC) and its four subsidiaries** were set up.d) **The Malhotra Committee, in its report submitted in 1994, recommended**opening of the market for competitione) The Insurance market was liberalised in 2000, with the passing of the InsuranceRegulatory & Development Act, 1999 (IRDAI), which also established the\nInsurance Regulatory and Development Authority of India (IRDAI) in April 2000\nas a statutory regulatory body for the insurance industry.f) An amendment of the Insurance Act in 2021, has allowed Foreign investors, tohold up to 74% of the paid up equity capital in an Indian Insurance company.\nForeign insurers can now establish branches in India to do reinsurance.**a.** **Insurance industry today (As on 30** **[th]** **September 2021)**a) There are 24 Life insurance companies operating in India. Of these, LifeInsurance Corporation (LIC) of India is a public sector company (PSU) and\nthe remaining 23 life insurance companies are in the private sector.b) There are 34 General Insurance companies of which 4 - National InsuranceCo. Ltd, The New India Assurance Co. Ltd., The Oriental Insurance Co. Ltd\nand United India Insurance Co. Ltd. are PSU Companies dealing with all\nlines of general insurance. 26 Private Companies also deal with all lines of\ngeneral insurance. 6General Insurers deal only in Health insurance. 2 are\nspecialised insurers - Agricultural Insurance Company [AIC] and Export", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "n1", "section": "Benevolent", "chunk_id": "Final IC 38 - WA_Composite  - English_002", "metadata": {"file_size": 20885, "chunk_index": 2, "chunk_tokens": 1007, "has_examples": true, "has_tables": true, "key_concepts": ["Rhodes", "National Insurance", "Modern concepts of insurance", "Insurance industry today (As on 30", "September 2021)"]}}
{"chunk": "Insurance Regulatory and Development Authority of India (IRDAI) in April 2000\nas a statutory regulatory body for the insurance industry.f) An amendment of the Insurance Act in 2021, has allowed Foreign investors, tohold up to 74% of the paid up equity capital in an Indian Insurance company.\nForeign insurers can now establish branches in India to do reinsurance.**a.** **Insurance industry today (As on 30** **[th]** **September 2021)**a) There are 24 Life insurance companies operating in India. Of these, LifeInsurance Corporation (LIC) of India is a public sector company (PSU) and\nthe remaining 23 life insurance companies are in the private sector.b) There are 34 General Insurance companies of which 4 - National InsuranceCo. Ltd, The New India Assurance Co. Ltd., The Oriental Insurance Co. Ltd\nand United India Insurance Co. Ltd. are PSU Companies dealing with all\nlines of general insurance. 26 Private Companies also deal with all lines of\ngeneral insurance. 6General Insurers deal only in Health insurance. 2 are\nspecialised insurers - Agricultural Insurance Company [AIC] and Export\nCredit and Guarantees Corporation [ECGC], both set up as Public sectorentities.5c) There is one Reinsurance Company – The General Insurance Corporationof India [GIC Re] and 11 foreign Reinsurers that operate through branchoffices.d) The Department of Posts (called as India Post) of the Government of India,also transacts life insurance known as Postal Life Insurance. India post is\nexempt from the purview of the Insurance Regulator.**Test Yourself 1**Which among the following is the regulatory body for the insurance industry in\nIndia?I. Insurance Authority of IndiaII. Insurance Regulatory and Development Authority of IndiaIII. Life Insurance Corporation of IndiaIV. General Insurance Corporation of India**How insurance works**Modern commerce was founded on the principle of ownership of property. When\nan asset loses value (by loss or destruction), the owner of the asset suffers an\neconomic loss. This loss can be compensated from a common fund made up of\nsmall contributions from many similar asset owners. This process of transferring\nthe chance and consequence of a loss making event is insurance.This mechanism of pooling risks works differently in the case of death and\ndisability as there is no loss/ destruction of a commercial asset.**Definition**Insurance may thus be considered as a process by which the losses of a few are\nshared amongst many of those exposed to similar uncertain events/ situations.**Diagram 2:** **How insurance works**6There are however some questions that need to be answered.i. Would people agree to part with their hard earned money, to create sucha common fund?ii. How could they trust that their contributions are actually being used forthe desired purpose?iii. How would they know if they are paying too much or too little?iv. Who would take the responsibility of managing these funds and payingthose who suffer the loss?The need for an Insurer comes as an answer to all these questions. The Insurer\nassesses the risk, decides and collects the individual contributions (called\npremium), pools the risks and premiums, and arranges to pay to those who suffer\nthe loss. The insurer must also win the trust of the individuals and the community.**1.** **Insurance is about value**a) Firstly, there must be an asset which has an economic value. The **Asset** maybe:i. P **hysical** (like a car or a building) orii. N **on-physical** (like reputation, goodwill, liability to pay to someone)oriii. P **ersonal** (like one’s eyes, limbs, body and physical capabilities).b) The asset may lose its value if a certain event happens. This chance of loss iscalled as **risk** . The cause of the risk event is known as **peril** .c) There is a principle known as **pooling** . This consists of collecting numerousindividual contributions (known as premiums) from various persons. These\npersons have similar assets which are exposed to similar risks. Their assets\nare also referred to as ‘risks’ in many contexts.d) This pool of funds is used to compensate the few who might suffer the lossescaused by a **peril** .e) This process of pooling funds and compensating the unfortunate few is carriedout through an institution known as the **insurer** (Insurance Company).f) The insurer enters into an insurance **contract** with each person who seeks toparticipate in this mechanism of pooling. The persons who participate are\nknown as **insured.****2.** **Insurance reduces Risk Burden**The burden of risk refers to the costs, losses and disabilities one has to bear as a", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Insurance industry today (As on 30", "chunk_id": "Final IC 38 - WA_Composite  - English_003", "metadata": {"file_size": 20885, "chunk_index": 3, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Asset", "Insurance is about value", "Insurance industry today (As on 30", "Definition"]}}
{"chunk": "persons have similar assets which are exposed to similar risks. Their assets\nare also referred to as ‘risks’ in many contexts.d) This pool of funds is used to compensate the few who might suffer the lossescaused by a **peril** .e) This process of pooling funds and compensating the unfortunate few is carriedout through an institution known as the **insurer** (Insurance Company).f) The insurer enters into an insurance **contract** with each person who seeks toparticipate in this mechanism of pooling. The persons who participate are\nknown as **insured.****2.** **Insurance reduces Risk Burden**The burden of risk refers to the costs, losses and disabilities one has to bear as a\nresult of being exposed to a given loss situation/ event.**Diagram 3:** **Risk burdens that one carries**7There are two types of risk burdens that one carries – **primary and secondary** .**a)** **Primary burden of risk**The **primary burden of risk** consists of losses that are actually suffered by\nhouseholds (and business units), as a result of pure risk events. These losses\nare often direct and measurable; and can be easily compensated for byinsurance.**Example**When a factory gets destroyed by fire, the actual value of goods damaged or\ndestroyed can be estimated and the compensation can be paid to the owner\nof the factory who has suffered the loss.Similarly, if an individual undergoes a heart surgery, the medical cost of the\nsame is known and compensated. In addition there may be some indirectlosses.**Example**A fire may interrupt business operations and lead to loss of profits which also\ncan be estimated and the compensation can be paid to the one who sufferssuch a loss.Someone whose scooter hits a pedestrian is liable to pay the victim the\ncompensation that the Court decides.**b)** **Secondary burden of risk**Even when no such event occurs and there is no loss, the people who are\nexposed to the peril carry some burden. That is, apart from the primary\nburden, one also carries a secondary burden of risk.The **secondary burden of risk** consists of costs and strains that one has to\nbear, even if the said event does not occur, from the mere fact that one is\nexposed to a loss situation.Let us understand some of these burdens:8i. Firstly there is **physical and mental strain caused by fear and anxiety** .\nThis can cause stress and affect a person’s wellbeing.ii. Secondly when one is **uncertain about whether a loss would occur or****not**, it would be prudent to keep a reserve fund to meet such an\neventuality. Such funds may be held in liquid form and yield low returns.By transferring the risk to an insurer, it becomes possible to enjoy peace of mind\nand also invest one’s funds more effectively. It is precisely for these reasons thatinsurance is needed.In India, one must purchase third party insurance if he/ she owns a vehicle\nbecause it is mandatory if one wants to drive on a public road. At the same time\nit would be prudent to cover the possibility of loss of own damage to the car\nthough it is not mandatory. It is also compulsory to have a Personal Accident coverfor the Owner-Driver.**Test Yourself 2**Which among the following is a secondary burden of risk?\nI. Business interruption cost\nII. Goods damaged cost\nIII. Setting aside reserves as a provision for meeting potential losses in the future\nIV. Hospitalisation costs as a result of heart attack**B.** **The Principle of Risk Pooling**Insurance companies enter into contracts with different entities – policyholders,\nwho can be individuals or corporates. The benefits they pay to policyholders are\ncontractual obligations. Insurance contracts are meaningful only if the Insurers\nare financially capable of taking over the risks and compensating for the losses,\nif and when they occur. The structure arises from application of the mutuality or\nthe pooling principle.**Mutuality** and Diversification are two important ways to reduce risk in financial\nmarkets. They are fundamentally different.|Diversification|Mutuality|\n|---|---|\n|Here the funds are spread out among<br>various assets (eggs are placed in different<br>baskets).|Under mutuality or pooling, the funds of<br>various individuals are combined (all eggs<br>are placed in one basket).|\n|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|9**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured\nimmediately creates a large quantity of funds ( corpus)that is available to him/", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Insurance reduces Risk Burden", "chunk_id": "Final IC 38 - WA_Composite  - English_004", "metadata": {"file_size": 20885, "chunk_index": 4, "chunk_tokens": 1007, "has_examples": true, "has_tables": true, "key_concepts": ["Mutuality", "The Principle of Risk Pooling", "Example", "Primary burden of risk", "Secondary burden of risk"]}}
{"chunk": "who can be individuals or corporates. The benefits they pay to policyholders are\ncontractual obligations. Insurance contracts are meaningful only if the Insurers\nare financially capable of taking over the risks and compensating for the losses,\nif and when they occur. The structure arises from application of the mutuality or\nthe pooling principle.**Mutuality** and Diversification are two important ways to reduce risk in financial\nmarkets. They are fundamentally different.|Diversification|Mutuality|\n|---|---|\n|Here the funds are spread out among<br>various assets (eggs are placed in different<br>baskets).|Under mutuality or pooling, the funds of<br>various individuals are combined (all eggs<br>are placed in one basket).|\n|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|9**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured\nimmediately creates a large quantity of funds ( corpus)that is available to him/\nher in the event of a loss arising due to the insured risk. This potential corpus of\nmoney is what makes insurance unique and without any substitutes among all\nfinancial products.**C.** **Risk Management Techniques**One may also ask whether insurance is the right solution to all kinds of risksituations. The answer is ‘No’.Insurance is only one of the methods by which individuals may seek to manage\ntheir risks. Here they transfer the risks they face to an insurance company.\nHowever there are other methods of dealing with risks, which are explainedbelow:**1.** **Risk avoidance**Reducing risk by avoiding a loss situation is known as risk avoidance. Thus one\nmay try to avoid activities or situations, or avoid dealing with property or persons\ndue to which there can be an exposure.**Example**i. One may avoid certain manufacturing risks by contracting out the\nmanufacturing to someone else.ii. One may not venture outside the house for fear of meeting with an accidentor may not travel at all for fear of falling ill when abroad.Risk avoidance is considered a negative way to handle risk. Individuals and\nsocieties need to take some risks for doing activities for their progress. Avoiding\nsuch risk taking activities would lead to losing the benefits from such activity.**2.** **Risk retention**One tries to manage the impact of risk and decides to bear the risk and its effects\nby oneself. This is known as self-insurance.10**Example**A business house may decide, based on experience about its capacity to bear\nsmall losses upto a certain limit, to retain the risk with itself.**3.** **Risk reduction and control**This is a more practical and relevant approach than risk avoidance. It means\ntaking steps to lower the chance of occurrence of a loss and/ or to reduce severity\nof its impact if such loss should occur.**Important**Measures to reduce the chance of occurrence of loss causing events are known as\n‘ **Loss Prevention** ’. The measures to reduce the degree of loss, in case a loss\nhappens, are called ‘ **Loss Reduction** ’/ Loss Minimisation.Risk reduction involves reducing the frequency and/ or sizes of losses through:**a)** **Education and training of various types of employees in proper risk****practices – e.g.** (i) participating in ‘fire drills’; (ii)wearing of seatbeltshelmets on cars.**b)** **Making Environmental changes –** like improving physical conditions - e.g.(i) installing fire alarms; (ii) spraying chemicals to kill mosquitoes to reduce\nspread of Malaria.**c)** **Changes made in dangerous or hazardous operations,** while usingmachinery and equipment or in the performance of other task - e.g. (i)\nwearing helmets inside construction sites; (ii) wearing gloves and face\nshields while handling chemicals.**d)** **Leading a healthy lifestyle** - helps in reduce the incidence of falling ill\ne.g. (i) undergoing regular medical check-ups; (ii) practicing yoga\nregularly.**e)** **Separation**, or spreading out various items of property into varied locationsrather than concentrating them, to reduce impact of mishap in any one\nlocation - e.g. (i) storing large quantities of flammable substances at\nseparate locations; (ii) fixing fire proof doors in hazardous areas offactories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself asthey occur. The firm assumes and finances its own risk, either through its", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Mutuality", "chunk_id": "Final IC 38 - WA_Composite  - English_005", "metadata": {"file_size": 20885, "chunk_index": 5, "chunk_tokens": 1001, "has_examples": true, "has_tables": true, "key_concepts": ["Mutuality", "Making Environmental changes –", "Changes made in dangerous or hazardous operations,", "Leading a healthy lifestyle", "Separation"]}}
{"chunk": "spread of Malaria.**c)** **Changes made in dangerous or hazardous operations,** while usingmachinery and equipment or in the performance of other task - e.g. (i)\nwearing helmets inside construction sites; (ii) wearing gloves and face\nshields while handling chemicals.**d)** **Leading a healthy lifestyle** - helps in reduce the incidence of falling ill\ne.g. (i) undergoing regular medical check-ups; (ii) practicing yoga\nregularly.**e)** **Separation**, or spreading out various items of property into varied locationsrather than concentrating them, to reduce impact of mishap in any one\nlocation - e.g. (i) storing large quantities of flammable substances at\nseparate locations; (ii) fixing fire proof doors in hazardous areas offactories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself asthey occur. The firm assumes and finances its own risk, either through its\nown or borrowed funds, this is known as **self-insurance** .11**b)** **Risk retention within a bigger group:** If the risk is part of a bigger group,like a parent company, the risk can be retained within the larger group\nwhich would finance the losses. This can be a group formed by mutualconsent as well.**c)** **Risk transfer** is an alternative to risk retention. It involves transferringthe responsibility for losses to another party.**Insurance is one of the major forms of risk transfer. Instead of facing the**\n**uncertainty of many of the other forms, people prefer Insurance as it**\n**provides certainty and peace of mind.****5.** **Insurance vs Assurance**Insurance is used for most General insurance contracts which provide\nprotection against an event that may or may not happen, and where the loss\namount can be assessed only after the event.Assurance refers to financial coverage for extended periods or until death. In\nthe case of life, the happening of death (the loss making event), is certain.\nOnly the timing is uncertain. Further, it is not possible to estimate the amount\nof economic loss suffered when a person dies. The loss amount that is to be\npaid, must be fixed in advance. This is why people use the term ‘Assurance’in case of Life insurance.**Though there are such subtle technical differences, the terms ‘Insurance’**\n**and ‘Assurance’ are used interchangeably in most markets, including India.**_[One of the biggest general insurers in India carries the name – New India_\n_**Assurance**_ _Company Ltd. and no life company in India is using the word_\n_**‘Assurance’**_ _in its name!]_12**Diagram 5:** **How insurance indemnifies the insured****Test Yourself 3**Which among the following is a method of risk transfer?\nI. Bank Fixed DepositII. InsuranceIII. Equity sharesIV. Real Estate**D.** **Insurance as a tool for managing risk**The term ‘Risk’ refers not to a loss that has actually been suffered but a loss that\nis likely to occur. It is thus an expected loss. The cost of this expected loss is the\nproduct of two factors:i. The **probability** that the peril being insured against may happen, leadingto the lossii. The **severity (impact)** or the amount of loss that may be suffered as aresult.The cost of risk would increase in direct proportion with both the **probability** and\nthe **severity** (amount of loss). This works in different ways – (a) If the amount of\nloss is very high, and the probability of its occurrence is small, the cost of the\nrisk would be low as such instances may be very few. (b) Even if the amount of13loss is small, if the probability of its occurrence is very high, the cost of the risk\nwould be high, as there would be many such occurrences. Insurance can be seen\nas a powerful tool for managing one’s risk. It protects one from the financial\nimpact of losing one’s assets/ wealth due to an insured loss.**Diagram 6:** **Considerations before opting for insurance****E.** **Considerations before opting for Insurance**When deciding whether to insure or not, one needs to evaluate the cost of\ntransferring the risk [the insurance premium] against the cost of bearing it\noneself. Insurance would be most required where the loss impact could be very\nhigh, but the probability (and hence the premium), is very low. E.g. (i) the chance", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f13", "section": "Changes made in dangerous or hazardous operations,", "chunk_id": "Final IC 38 - WA_Composite  - English_006", "metadata": {"file_size": 20885, "chunk_index": 6, "chunk_tokens": 963, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance vs Assurance", "Considerations before opting for insurance", "Risk financing", "Changes made in dangerous or hazardous operations,", "Separation"]}}
{"chunk": "the **severity** (amount of loss). This works in different ways – (a) If the amount of\nloss is very high, and the probability of its occurrence is small, the cost of the\nrisk would be low as such instances may be very few. (b) Even if the amount of13loss is small, if the probability of its occurrence is very high, the cost of the risk\nwould be high, as there would be many such occurrences. Insurance can be seen\nas a powerful tool for managing one’s risk. It protects one from the financial\nimpact of losing one’s assets/ wealth due to an insured loss.**Diagram 6:** **Considerations before opting for insurance****E.** **Considerations before opting for Insurance**When deciding whether to insure or not, one needs to evaluate the cost of\ntransferring the risk [the insurance premium] against the cost of bearing it\noneself. Insurance would be most required where the loss impact could be very\nhigh, but the probability (and hence the premium), is very low. E.g. (i) the chance\nof an earthquake; (ii) the chance of a ship sinking.**a)** **Do not risk a lot for a little** : A reasonable relationship must be therebetween the cost of transferring the risk and the value derived.Would it make sense to insure an ordinary ball pen?**b)** **Do not risk more than one can afford to lose:** If the loss that can arise as aresult of an event is large enough to cause bankruptcy, retention of the risk\nwould not be appropriate.If a large oil refinery gets destroyed, the owners cannot afford to bear theloss.**c)** **Consider the likely outcomes of the risk carefully:** It is best to insure thoseassets for which the probability of occurrence (frequency) of a loss is low but\nthe possible impact (severity), is high.The loss of a space satellite can be so costly that it has to be insured.**Test Yourself 4**Which among the following scenarios needs insurance?I. The sole bread winner of a family might die untimely\nII. A person may lose his wallet\nIII. Stock prices may fall drastically14IV. A house may lose value due to natural wear and tear**F.** **Insurance Market Players**The Insurance Companies (Insurers) are the major players in the insurance\nindustry. In addition to insurers, there are multiple parties who are part of the\nInsurance value chain. There is the Insurance Regulator, which regulates theentire market.Intermediaries like Agents, Brokers, Banks (through Bancassurance) Insurance\nMarketing Firms and Point of Sales Persons are in the field of interacting with the\nprospects/ insured finding out their needs, giving them information about the\npolicies available for covering their needs.Surveyors and Loss Assessors/ Adjusters go into assessing claims and ancillary\nwork. Third Party Administrators deal with Health and Travel Insurance Claims.\nRegulations provides that all intermediaries have a responsibility towards thecustomer.Agents, being intermediaries between the insurance company and the insured\nhave the responsibility to ensure all material information about the risk is\nprovided by the insured to insurer.**Important****Duty of an Insurance Agent/ Intermediary towards the Prospect (Customer)**IRDAI regulations provides that intermediaries have certain responsibilities\ntowards the prospect. The intermediary has a responsibility towards the insureras well.The regulation states that where the prospect depends upon the advice of the\ninsurer or his agent or an insurance intermediary, such a person must advise the\nprospect in a fair manner. It also says that “An insurer or its agent or other\nintermediary shall provide all material information in respect of a proposed cover\nto the prospect to enable the prospect to decide on the best cover that would bein his or her interest”.If the proposal and other connected papers are not filled by the customer, a\ncertificate may be incorporated at the end of proposal form from the customer\nthat the contents of the form and documents have been fully explained to him\nand that he has fully understood the importance of the proposed contract.When the customer pays the insurer towards premium, the insurer is bound to\nissue a receipt. That is, even if the premium is paid in advance.15**G.** **Role of Insurance in the Society**Insurance companies play an important role in a country’s economic\ndevelopment. They ensure that the wealth of the country is protected and\npreserved. Some of their contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunatefew members who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f13", "section": "Diagram 6:", "chunk_id": "Final IC 38 - WA_Composite  - English_007", "metadata": {"file_size": 20885, "chunk_index": 7, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Considerations before opting for insurance", "Considerations before opting for Insurance", "Test Yourself 4", "Do not risk more than one can afford to lose:", "Important"]}}
{"chunk": "to the prospect to enable the prospect to decide on the best cover that would bein his or her interest”.If the proposal and other connected papers are not filled by the customer, a\ncertificate may be incorporated at the end of proposal form from the customer\nthat the contents of the form and documents have been fully explained to him\nand that he has fully understood the importance of the proposed contract.When the customer pays the insurer towards premium, the insurer is bound to\nissue a receipt. That is, even if the premium is paid in advance.15**G.** **Role of Insurance in the Society**Insurance companies play an important role in a country’s economic\ndevelopment. They ensure that the wealth of the country is protected and\npreserved. Some of their contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunatefew members who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly\ninvested in speculative ventures.c) Insurance provides the benefit of protection to numerous insured - bothindividuals and enterprises –against losses caused by accidents or\nfortuitous events. It preserves capital and releases it for development of\nbusiness and industry, which helps the country’s growth.d) Insurance enables investment of capital leading to commercial andindustrial development. It also helps in removing the fear, worry and\nanxiety associated with entrepreneurship.e) Many Banks and Financial institutions do not advance loans on propertyunless it is insured against loss or damage. Many of them insist on assigning\nthe policy as collateral security.f) Before accepting large complicated risks, general insurers arrange forinspection of the property by qualified engineers/ other experts. They\nassess the risk and suggest risk management measures to reduce the risk\nand help in rating.g) Insurance earns foreign exchange for the country like trade, shipping andbanking services.h) Insurers are associated with institutions engaged in fire loss prevention,cargo loss prevention, industrial safety and road safety.i) Entrepreneurs get the confidence to invest in new or relatively unknownfields with the protection offered by Insurance.**Information****Insurance and Social Security**a) Social security is an obligation of the State. Social security schemes of theState involve the use of compulsory or voluntary insurance, as a tool of16social security. The Employees State Insurance Act, 1948 provides for\n**Employees State Insurance Corporation** to pay for the expenses of\nsickness, disablement, maternity and death for industrial employees and\ntheir families, who are covered.b) Insurers play an important role in social security schemes sponsored by theGovernment such as1. PMJJBY –Pradhan Mantri Jeevan Jyoti Bima Yojana\n2. PMSBY – Pradhan Mantri Suraksha Bima Yojana\n3. PMFBY- Pradhan Mantri Fasal Bima Yojana\n4. PMJAY – Pradhan Mantri Jan Arogya Yojana (Ayushmaan Bharat)\n5. PMVVY - Pradhan Mantri Vaya Vandana Yojana – a Pension plan\n6. APY - Atal Pension YojanaThese, and other Government schemes have been benefiting the Indian\nsociety/ community.c) In addition to supporting Government schemes, the insurance industryoffers insurance covers on a commercial basis which have the ultimateobjective of providing social security. The **rural insurance schemes**,\noperated on a commercial basis, are designed to provide social security tothe rural families.**Test Yourself 5**Which of the following insurance schemes are sponsored by the Government of\nIndia?I. PM Jan Arogya Yojana - Ayushmaan Bharat\nII. PM Fasal Bima Yojana\nIII. PM Suraksha Bima Yojana\nIV. All of the above**Summary**Insurance is risk transfer through risk pooling.Commercial insurance business as practiced today started at the Lloyd’sCoffee House in London.An insurance arrangement involves the following: Asset,\n Risk,\n Peril,\n Contract,\n Insurer and\n Insured17When persons having similar assets, exposed to similar risks, contribute into\na common pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,\n Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f16", "section": "G.", "chunk_id": "Final IC 38 - WA_Composite  - English_008", "metadata": {"file_size": 20885, "chunk_index": 8, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance and Social Security", "Information", "Test Yourself 5", "Employees State Insurance Corporation", "Summary"]}}
{"chunk": "India?I. PM Jan Arogya Yojana - Ayushmaan Bharat\nII. PM Fasal Bima Yojana\nIII. PM Suraksha Bima Yojana\nIV. All of the above**Summary**Insurance is risk transfer through risk pooling.Commercial insurance business as practiced today started at the Lloyd’sCoffee House in London.An insurance arrangement involves the following: Asset,\n Risk,\n Peril,\n Contract,\n Insurer and\n Insured17When persons having similar assets, exposed to similar risks, contribute into\na common pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,\n Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and\n Do not risk a lot for a little**Key Terms**1. Risk2. Pooling3. Asset4. Burden of risk5. Risk avoidance6. Risk control7. Risk retention8. Risk financing9. Risk transfer**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is I.\n**Answer 5** - The correct option is IV.18## CHAPTER C-02## CORE ELEMENTS OF INSURANCE**Chapter Introduction**In this chapter, we shall learn about the various key elements and principles of\ninsurance that govern the working of insurance.**Learning Outcomes**After studying this chapter, one should be able to:1. Understand Assets are2. Understand Risk, Hazards and Perils3. Appreciate Risk Management4. Understand Risk Pooling in insurance19**A.** **Elements of insurance**We have seen that the process of insurance has four elements Asset Risk Risk poolingLet us now look at the various elements of the insurance process in some detail.**1.** **Asset****Definition**An asset may be defined as ‘anything that confers some benefits and has aneconomic value to its owner’.An asset must have the following features: **Economic value:** An asset must have economic value. Value can arise in twoways.**a)** **Income generation** : Asset may be productive and generate income.**Example**A machine used to manufacture biscuits, or a cow that yields milk, both generate\nincome for their owner. A healthy worker is an asset to an organization.**b)** **Serving needs** : An asset could also add value by satisfying one or a group ofneeds.**Example**A refrigerator cools and preserves food while a car provides comfort and\nconvenience in transportation, similarly a body free of illness adds value to\noneself and family also. **Scarcity and Ownership**What about air and sunlight? Are they not assets? - **The answer is ‘No’.**Few things are as valuable as air and sunlight. We cannot live without them. Yet\nthey are not considered as assets in the economic sense of the term.There are two reasons for this: Their supply is abundant and not scarce.\n They are not owned by any one individual but are freely available to all.20This implies that an asset must satisfy two more conditions to qualify as such - its\nscarcity and its ownership or possession by someone. **Insurance of assets**Insurance provides protection only against financial losses arising from\nunexpected events and not natural wear and tear, of assets due to usage overtime.We must note that **insurance cannot protect an asset from loss or damage** . An\nearthquake will destroy a house whether it is insured or not. The insurer can only\npay a sum of money, which would reduce the economic impact of the loss.Losses can arise in the event of breach of an agreement.**Example**An exporter would lose a great deal if the importer on the other side refused to\naccept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives\nand those of our loved ones. Our lives can be seriously affected when subjectedto an accident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death ordisability.These kinds of losses are covered by insurances of the person or personal lines of", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d17", "section": "Summary", "chunk_id": "Final IC 38 - WA_Composite  - English_009", "metadata": {"file_size": 20885, "chunk_index": 9, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Income generation", "Key Terms", "Answer 5", "Life insurance", "Serving needs"]}}
{"chunk": "scarcity and its ownership or possession by someone. **Insurance of assets**Insurance provides protection only against financial losses arising from\nunexpected events and not natural wear and tear, of assets due to usage overtime.We must note that **insurance cannot protect an asset from loss or damage** . An\nearthquake will destroy a house whether it is insured or not. The insurer can only\npay a sum of money, which would reduce the economic impact of the loss.Losses can arise in the event of breach of an agreement.**Example**An exporter would lose a great deal if the importer on the other side refused to\naccept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives\nand those of our loved ones. Our lives can be seriously affected when subjectedto an accident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death ordisability.These kinds of losses are covered by insurances of the person or personal lines of\ninsurance. Insurance is possible for anyone who has assets that have value [i.e.\nwhich generate income or meet some needs]; the loss of which [due to fortuitous\nor accidental events] cause financial loss that can be [measured in terms of\nmoney].Thus these assets are commonly referred to as subject matter of insurance in\ninsurance parlance.**2.** **Risk**The second element in the process of insurance is the concept of risk. Risk can\nbe defined as the **chance of a loss** . Risk thus refers to the likely loss or damage\nthat can arise on account of happening of an event. [Risk is sometimes used to\nrefer the subject matter of insurance, as well.] One do not usually expect one’s\nhouse to burn or one’s car to have an accident. Yet it can happen.21Examples of risks are the possibility of economic loss arising from the burning of\na house or a burglary or an accident which results in the loss of a limb.This has two implications.**i.** **Firstly,** it means that that the loss may or may not happen.**ii.** **Secondly,** the event, the occurrence of which actually leads to the loss,is known as a **peril** . It is the cause of the loss.**Example**Examples of perils are fire, earthquakes, floods, lightning, burglary, heart attacketc.**Natural wear and tear**It is true that nothing lasts forever. Every asset has a finite lifetime during which\nit is functional and yields benefits. This is a natural process and one discards or\nchanges one’s mobiles, washing machines and clothes when they are worn out.\nTherefore losses arising out of normal wear and tear are not covered in insurance.**Exposure to risk** : Occurrence of a peril need not necessarily lead to a loss. A\nperson staying in Mumbai does not suffer any loss due to a flood in coastal Andhra.\nFor loss to happen the asset must be exposed to the peril. Exposure to risk alone\nis not enough ground for insurance compensation.ExampleA fire may break out in factory premises without causing actual damage.\nInsurance comes into play only if there is an actual economic (financial) loss as a\nresult of a peril.**Degree of Risk Exposure:**Two assets may be exposed to the same peril but the likelihood of loss or the\namount of loss may vary greatly. A vehicle carrying explosives can yield far\ngreater loss from fire than tanker carrying water.**3.** **Risk Management** **Extent of damage likely to be suffered**This is given by the degree of loss and its impact on an individual or business.\nOn this basis one may identify three types of risk events or situations: **Critical**Where losses are of such a magnitude; that may result in total loss or\nbankruptcy. Losses can be critical when the accident results in significant and22severe impact, disability, damage to equipment and the environment, which\nmay be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.\n A torpedo from a pirate ship sinks an entire passenger ship but mostpassengers are saved.\n A major accident resulting in a kidney damage necessitating a kidneytransplant operation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of\npeople, widespread loss of assets, having significant environmental impact", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d22", "section": "Insurance of assets", "chunk_id": "Final IC 38 - WA_Composite  - English_010", "metadata": {"file_size": 20885, "chunk_index": 10, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Secondly,", "Insurance of assets", "Example: Critical", "Risk Management", "Critical"]}}
{"chunk": "On this basis one may identify three types of risk events or situations: **Critical**Where losses are of such a magnitude; that may result in total loss or\nbankruptcy. Losses can be critical when the accident results in significant and22severe impact, disability, damage to equipment and the environment, which\nmay be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.\n A torpedo from a pirate ship sinks an entire passenger ship but mostpassengers are saved.\n A major accident resulting in a kidney damage necessitating a kidneytransplant operation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of\npeople, widespread loss of assets, having significant environmental impact\nwhich are practically irreversible. Catastrophic losses usually signify disasters\nthat are sudden, widespread and unstoppable.**Example: Catastrophic** An earthquake or flood that completely destroys a few villages\n A major fire that completely destroys a multi crore installation over a largeterritory\n The terrorist attack of 9/ 11 on World Trade Centre which caused injuries toa large number of people\n A pandemic like Covid – 19 causing disease to people across the globe. **Marginal/ Insignificant**Where the possible losses are insignificant and can be easily met from an\nindividual or a firm’s existing assets or current income without imposing anyundue financial strain.**Example** A minor car accident results in the side being slightly grazed due to whichsome of the paint is damaged and a fender is slightly bent.\n An individual suffering from common cold and cough..**4.** **Hazards and Perils**The condition or conditions which increase the probability of a loss or its severity,\nand thus impact(s) the risk is known as hazard. When insurers make an assessment23of the risk, it is generally with reference to the hazards to which the asset is\nsubject.The term hazard in insurance language refers to those conditions or features or\ncharacteristics which create or increase the chance of loss arising from a given\nperil. A thorough knowledge of various hazards to which a risk is exposed to is\nmost essential for underwriting. Examples of the link between assets, peril and\nhazards are given below.|Asset|Peril|Hazard|\n|---|---|---|\n|**Life**|Cancer|Excessive Smoking|\n|**Factory**|Fire|Explosive material left Unattended|\n|**Car**|Car<br>Accident|Careless driving by driver|\n|**Cargo**|Storm|Water seeping in cargo and spoiling; Cargo not packaged in<br>waterproof containers|**Important** **Types of hazards****a)** **Physical hazard** is a physical condition that increases the chance of loss.**Example**i. Defective wiring in a building\nii. Indulging in water sports\niii. Leading a sedentary lifestyle**b)** **Moral hazard** refers to dishonesty or character defects in an individual thatinfluence the frequency or severity of the loss. A dishonest individual may\nattempt to commit fraud and make money by misusing the facility ofinsurance.**Example**If one deliberately sets a fire to one’s property and collects claims against losses\nunder the policy, such claims are clearly fraudulent and could be justifiably\nrejectedA classic instance of moral hazard is purchasing insurance for a factory and then\nburning it down to collect the insurance amount or buying health insurance after\nonset of a major ailment.24**c)** **Legal hazard** is more prevalent in cases involving a liability to pay fordamages. It arises when certain features of the legal system or regulatory\nenvironment can increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of\naccidents can raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the\nprice [premiums] charged for insurance coverage would increase if the\nsusceptibility to loss, arising as a result of the presence of associated hazards, is\nhigh.**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d22", "section": "Critical", "chunk_id": "Final IC 38 - WA_Composite  - English_011", "metadata": {"file_size": 20885, "chunk_index": 11, "chunk_tokens": 1013, "has_examples": true, "has_tables": true, "key_concepts": ["Example: Critical", "Moral hazard", "Factory", "Types of hazards", "Physical hazard"]}}
{"chunk": "under the policy, such claims are clearly fraudulent and could be justifiably\nrejectedA classic instance of moral hazard is purchasing insurance for a factory and then\nburning it down to collect the insurance amount or buying health insurance after\nonset of a major ailment.24**c)** **Legal hazard** is more prevalent in cases involving a liability to pay fordamages. It arises when certain features of the legal system or regulatory\nenvironment can increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of\naccidents can raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the\nprice [premiums] charged for insurance coverage would increase if the\nsusceptibility to loss, arising as a result of the presence of associated hazards, is\nhigh.**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause\nan average loss of Rs. 50000. If the chance of a house catching fire is 2 in 1000[or 2/ 1000 = 0.002] it would mean that the total amount of loss suffered would\nbe Rs 10000000 [= 50000x 0.002 x 100000].If an insurer were to get the owners of each of the 100000 houses to contribute\nRs 100 and if these contributions (100000 x 100 = Rs.10000000) were to be pooled\ninto a single fund, it would be enough to pay for the loss of the unfortunate fewwho suffered from the fire.To ensure that there is equity [fairness] among all those being insured, it is\nnecessary that the houses should all be similarly exposed to the risk. In the above\nexample risk exposure to mud houses will be different.**a)** **How exactly does the principle work in insurance?**It is by pooling number of risks of all the insured similarly placed and exposed\nto possibility of loss due to a peril that the insurer is able to assume that risk\nand its financial impact.25|Large<br>number<br>of people|Paying<br>Premium|Premium|Paying Claims to a<br>few who suffered<br>loss|\n|---|---|---|---|\n|**Many**<br>**people**<br>**pay**|**Small**<br>**amounts of**<br>**money as**<br>**Premiums**|**These small amounts are pooled**<br>**together as a Common Pool, big**<br>**enough to pay a statistically**<br>**estimated number of claims**|**Big amounts are**<br>**paid to those who**<br>**suffer a loss**|**b)** **Risk pooling and the law of large numbers**The probability of damage [derived as 2 out of 1000 or 0.002 in the example\nabove] forms the basis on which the premium is determined. The insurer\nwould face no risk of loss if the actual experience was as expected. In such a\nsituation the premiums of the numerous insured would be sufficient to\ncompletely compensate for the losses of those who have been affected by the\nperil. The insurer would however face a risk if the actual experience was more\nadverse than expected and the premiums collected were not sufficient to paythe claims.How can the insurer be sure about its predictions? This becomes possible\nbecause of a principle known as the “Law of large numbers”. It states that\nthe larger the size of the pool of risks, the actual average of losses would be\ncloser to the estimated or expected average loss.**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have\nthe sufficient money, they are considered solvent and if they do not have\nmoney to meet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or\nsolvency margin) to meet unforeseen deviations between expected and actual\nclaims situations. Solvency Ratio assesses the extent to which assets are\navailable to cover the insurers’ commitments towards future payments.\nDifferent countries use different measures to assess Solvency Ratio. In India,\nIRDAI has mandated that insurers are required to maintain a minimum", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Legal hazard", "chunk_id": "Final IC 38 - WA_Composite  - English_012", "metadata": {"file_size": 20885, "chunk_index": 12, "chunk_tokens": 1015, "has_examples": true, "has_tables": true, "key_concepts": ["How exactly does the principle work in insurance?", "Premiums", "These small amounts are pooled", "Example", "Legal hazard"]}}
{"chunk": "because of a principle known as the “Law of large numbers”. It states that\nthe larger the size of the pool of risks, the actual average of losses would be\ncloser to the estimated or expected average loss.**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have\nthe sufficient money, they are considered solvent and if they do not have\nmoney to meet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or\nsolvency margin) to meet unforeseen deviations between expected and actual\nclaims situations. Solvency Ratio assesses the extent to which assets are\navailable to cover the insurers’ commitments towards future payments.\nDifferent countries use different measures to assess Solvency Ratio. In India,\nIRDAI has mandated that insurers are required to maintain a minimum\nsolvency ratio of 1.5.26**Example**To give a simple illustration, the probability of getting heads on a toss of the coin\nis 1 out of 2. But one cannot be sure to actually get 2 heads if a coin is tossedfour times.Only when the number of tosses gets very large and closer to infinity, the chance\nof getting heads once for every two tosses will become closer to one.It follows that insurers can be sure of their ground only when they have been able\nto insure a large number of insured. An insurer who has insured only a few\nhundred houses, likely would be worse affected than one who has insured severalthousand houses.**Important****Conditions for insuring a risk**When does it make sense to insure a risk from the insurer’s point of view?Six broad requirements for a risk to be considered insurable are given below.**i.** **A sufficiently large number of homogenously [similar] exposed units** tomake the losses reasonably predictable. This follows from the **law of large**\n**numbers** . Without this it would be difficult to make predictions.**ii.** **Loss produced by the risk must be definite and measurable** . It is difficultto decide the compensation if one cannot say for sure that a loss has occurredand how much it is.**iii.** **Loss must be fortuitous or accidental** . It must be the result of an event thatmay or may not happen. The event must be beyond the control of insured. No\ninsurer would cover a loss that is intentionally caused by the insured.**iv.** **Sharing of losses of the few by many** can work only if a small percentage ofthe insured group suffers loss at any given period of time.**v.** **Economic feasibility:** The cost of insurance must not be high in relation tothe possible loss; otherwise the insurance would be economically unviable.**vi.** **Public policy:** Finally the contract should not be contrary to public policy andmorality.**Test Yourself 1**Which one of the following does not represent an insurable risk?I. FireII. Stolen goods\nIII. Burglary27IV. Loss of goods due to ship capsizing**Summary**a) The process of insurance has four elements (asset, risk, risk pooling and aninsurance contract).b) An asset may be anything that confers some benefit and is of economic valueto its owner.c) A chance of loss represents risk.d) Condition or conditions that increase the probability or severity of the lossare referred to as hazards.e) The mathematical principle, that makes insurance possible is known asprinciple of risk pooling.**Key terms**a) Asset\nb) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.28## CHAPTER C-03## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk\nbeing proposed, whether requested or not\". All insurance contracts are based\non the principle of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss\non the occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y27", "section": "Insurance Companies to remain Solvent:", "chunk_id": "Final IC 38 - WA_Composite  - English_013", "metadata": {"file_size": 20885, "chunk_index": 13, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Sharing of losses of the few by many", "Conditions for insuring a risk", "Public policy:", "Test Yourself 1"]}}
{"chunk": "b) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.28## CHAPTER C-03## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk\nbeing proposed, whether requested or not\". All insurance contracts are based\non the principle of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss\non the occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to\nthe subject matter of insurance, from the insured to the insurer.e) The principle of contribution implies that if the same property is insured with\nmore than one insurance company, the compensation paid by all the insurers\ntogether cannot exceed the actual loss suffered.f) Proximate cause is a key principle of insurance and is concerned with how\nthe loss or damage actually occurred and whether it is indeed as a result of\nan insured peril.29**A.** **Uberrima Fides**Insurance contracts have various special features that are discussed below:**1.** **Utmost Good Faith or** _**‘Uberrima Fides’**_Utmost Good Faith or \"Uberrima fides\", one of the fundamental principles of an\ninsurance contract, is defined as “a positive duty to voluntarily disclose,\naccurately and fully, all facts material to the risk being proposed, whether\nrequested or not\".All commercial contracts are based on Good Faith in so much as there shall be nofraud or deceit when giving information or doing the transaction. The rule\nobserved here is that of **“Caveat Emptor”** which means **Buyer Beware** . The\nparties to the contract are expected to examine the subject matter of the\ncontract and so long as one party does not mislead the other and the answers are\ngiven truthfully, there is no question of the other party avoiding the contract.Insurance contracts stand on a different footing as the subject matter of the\ncontract is intangible and cannot be easily known to the insurer. Again, there are\nmany facts, which may be known only to the proposer. The insurer has to rely\nentirely on the proposer for information. Hence the proposer has a legal duty to\ndisclose all material information about the subject matter of insurance to the\ninsurers. That is, the insured should not make any misrepresentation regarding\nany fact that is material for the insurance contract. This higher obligation of full\nrepresentation and full disclosure in respect of Insurance contracts makes themcontracts of Utmost Good Faith.**If Utmost Good Faith is not observed by either party, the contract may be**\n**avoided by the other.** This follows from the logic that no one should be allowed\nto take advantage of his own wrong especially while entering into a contract ofinsurance.**a)** **Material fact** has been defined as a fact that would affect the judgment of aninsurance underwriter in deciding whether to accept the risk and if so, the rate\nof premium and the terms and conditions. The insured has an obligation to\nfully and accurately disclose all facts that are material to an insurancecontract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk?30 If so, at what rate of premium and subject to what terms and conditions?This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to\nmaterial facts which he ought to know. There is a corresponding duty of the\ninsurer not to withhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer\nshould disclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "C-03", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 - WA_Composite  - English_014", "metadata": {"file_size": 20885, "chunk_index": 14, "chunk_tokens": 967, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Material fact", "Example", "Utmost Good Faith or", "Chapter Introduction"]}}
{"chunk": "of premium and the terms and conditions. The insured has an obligation to\nfully and accurately disclose all facts that are material to an insurancecontract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk?30 If so, at what rate of premium and subject to what terms and conditions?This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to\nmaterial facts which he ought to know. There is a corresponding duty of the\ninsurer not to withhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer\nshould disclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age,\nhobbies, financial information like income details of proposer, preexisting life insurance policies, occupation etc.**ii.** **Fire Insurance:** Construction, location/ situation of risk and usage ofbuilding, age of the building, nature of goods in premises etc.**iii.** **Marine Insurance:** Description of goods, method of packing and mode oftransit etc.**iv.** **Motor Insurance:** Description of vehicle, date of purchase and RegionalRegistration authority etc.**v.** **Health Insurance:** Pre-existing disease, age etc.**b)** **When a Fact becomes ‘Material’: Some types of material facts that one**needs to disclose are those indicating that the particular risk represents a\ngreater exposure than can be normally expected.**Example**Hazardous nature of cargo being sent by a ship, past history of illness, past history\nburglary of a house.i. Existence of policies taken from all insurers and their present statusii. All questions in the proposal form or application for insurance areconsidered to be material, as these relate to various aspects of the subject\nmatter of insurance and its exposure to risk. They need to be answered\ntruthfully and be full in all respects.The following are some scenarios wherein material facts need not be disclosed.**Information**a. **Material Facts that need not be disclosed:** Unless there is a specific enquiryby underwriters, the proposer has no obligation to disclose facts like:31**i.** **Measures implemented to reduce the risk. E.g.:** The presence of a fireextinguisher**ii.** **Facts which the insured does not know or is unaware of. E.g.:** Anindividual, who had high blood pressure but was not aware about the same\nat the time of taking the policy, cannot be charged with non-disclosure ofthis fact.**iii.** **Which could be discovered, by reasonable diligence.** It is not necessaryto disclose every minute material fact. The underwriters must be\nconscious enough to ask for the same if they require further information.\nE.g.: When insuring a textile shop one does not need to specifically say\nthat some of the synthetic clothes in the shop are highly combustible.**iv.** **Matters of law** : Everybody is supposed to know the law of the land. **E.g.:**Municipal laws about storing of explosives**v.** **About which insurer appears to be indifferent (or has waived the need****for further information)**In such cases, the insurer cannot later disclaim responsibility on grounds that the\nanswers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is\naccepted and a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose\nany material facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo\nsome surgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to_", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_015", "metadata": {"file_size": 20885, "chunk_index": 15, "chunk_tokens": 957, "has_examples": true, "has_tables": false, "key_concepts": ["Information", "Motor Insurance:", "Health Insurance:", "Example", "Matters of law"]}}
{"chunk": "answers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is\naccepted and a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose\nany material facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo\nsome surgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to_\n_disclose all facts that are material and relevant, as though it is a new policy.]_In the case he has Health Insurance, at the time of renewing the policy, Mr. Rajanhas to inform the insurer about this health issue.Similarly, in the case of General Insurance, at the time of renewing the Fire policy\nfor an enterprise/ factory, the insured has to inform the insurer if a change was\nmade in the occupancy of the building.32At the time of renewing the Hull policy for a ship, the insured has to inform the\ninsurer if the ship was modified to carry a different type cargo; say, hazardous\nchemicals instead of pulses.c. **Situations of Non-Disclosure** may arise when the insured is silent aboutmaterial facts because the insurer has not raised any specific enquiry. Such\nsituations may also arise through evasive answers to queries raised by theinsurer.Often non-disclosure may be inadvertent (meaning that it may be made\nwithout one’s knowledge or intention) or because the proposer thought that afact was not material. In such a case it is innocent.When a fact is intentionally suppressed it is treated as concealment. Here,there is the intent to deceive.d. **Misrepresentation:** Any statement made during negotiation of a contract ofinsurance is called representation. A representation may be a definite\nstatement of fact or a statement of belief, intention or expectation. It is\nexpected that the statement must be substantially correct. Representations\nthat concern matters of belief or expectation must be made in good faith.\nMisrepresentation is of two kinds:**i.** **Innocent Misrepresentation** relates to inaccurate statements, which aremade without any fraudulent intention.**ii.** **Fraudulent Misrepresentation** on the other hand refers to false statementsthat are made with deliberate intent to deceive the insurer or are maderecklessly without due regard for truth.An insurance contract generally becomes void when there is a clear case of\nconcealment with intent to deceive, or when there is fraudulent\nmisrepresentation.Amendments (March, 2015) to Insurance Act, 1938 have provided certain\nguidelines about the conditions under which a policy can be called into\nquestion for fraud. The new provisions are as followse. **Fraud:** The term “Fraud” has been specified under **Section 45 (2) of the****Insurance Act (amended in 2015).** Accordingly, a Life Insurance policy can be\ncalled in question on the ground of Fraud by the insurer only within a time\nperiod and not later. However, Insurers can do so only within three years from\n(a) the date of issuance of the policy (b) the date of commencement of risk,\n(c) the date of revival of the policy or (d) the date of the rider to the policy,whichever is later.33The insurer needs to communicate the reasons on which the policy is\nquestioned in writing to the insured or his/ her legal representatives, nominees\nor assignees.The expression \"fraud\" means any act committed by the insured, with theintent to deceive the insurer or to induce the insurer to issue an insurancepolicy. It is also provided that in case the policyholder is not alive, the onus of\ndisproving fraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Duty to Disclose:", "chunk_id": "Final IC 38 - WA_Composite  - English_016", "metadata": {"file_size": 20885, "chunk_index": 16, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Misrepresentation:", "Innocent Misrepresentation", "Section 45 (2) of the", "Fraud:", "Situations of Non-Disclosure"]}}
{"chunk": "(c) the date of revival of the policy or (d) the date of the rider to the policy,whichever is later.33The insurer needs to communicate the reasons on which the policy is\nquestioned in writing to the insured or his/ her legal representatives, nominees\nor assignees.The expression \"fraud\" means any act committed by the insured, with theintent to deceive the insurer or to induce the insurer to issue an insurancepolicy. It is also provided that in case the policyholder is not alive, the onus of\ndisproving fraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom\nof liability. By the same token, he must stand to lose financially by any loss,\ndamage, injury or creation of liability.Let us see how insurance differs from a gambling or wager agreement.**a)** **Gambling and insurance:** Unlike a card game, where one could win or lose, afire can have only one consequence – loss to the owner of the house.The owner takes insurance to ensure that the loss suffered is compensated\nfor in some way.In other words, Insurable Interest is the interest the insured has in the subjectmatter of insurance. Insurable interest makes an insurance contract valid andenforceable under the law.**Example**If Mr. Patel has brought a house with a mortgage loan of Rs 15 lakhs from a bank\nand he has repaid 12 lakhs of this amount, the bank’s interest would be only to\nthe tune of the balance three lakhs which is outstanding.Thus the bank also has an insurable interest financially in the house for the\nbalance amount of loan that is unpaid and would ensure that it is made a co\ninsured in the policy34Mr. Patel owns a house for which he has taken a mortgage loan of Rs. 15 lakhs\nfrom a bank. Ponder over the questions below: Does he have an insurable interest in the house? Does the bank have an insurable interest in the house? What about his neighbour?Mr. Dass has a family consisting of spouse, two kids and old parents. Ponder over\nthe below questions: Does he have an insurable interest in their well-being? Does he stand to financially lose if any of them are hospitalised? What about his neighbour’s kids? Would he have an insurable interest inthem?It would be relevant here to make a distinction between the subject matter of\ninsurance and the subject matter of an insurance contract.**The subject matter of insurance** relates to property being insured against, whichhas an intrinsic value of its own.**The subject matter of an insurance contract** on the other hand is the insured’s\nfinancial interest in that property. It is only when the insured has such an interest\nin the property that he/ she has the legal right to insure. The insurance policy in\nthe strictest sense covers not the property per se, but the insured’s financial\ninterest in the property.**Diagram 1:** **Insurable interest according to common law****b)** **Time when insurable interest should be present:** In life insurance, insurableinterest should be present at the time of taking the policy. In general\ninsurance, insurable interest should be present both at the time of taking the\npolicy and at the time of claim with some exceptions like marine policies inwhich case it must exist at the time of claim.35In case of fire and accident insurance, insurable interest should be present\nboth at the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses\nif the family meets with an accident or undergoes hospitalisation. However,\nin marine cargo insurance, insurable interest is required only at the time of\nloss as the ownership of the goods would change hands when the cost is paid,\nwhich can happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the\nloss or damage actually occurred and whether it is as a result of an insured peril.\nIf the loss has been caused by the insured peril, the insurer is liable. If the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y34", "section": "B.", "chunk_id": "Final IC 38 - WA_Composite  - English_017", "metadata": {"file_size": 20885, "chunk_index": 17, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["The subject matter of an insurance contract", "Time when insurable interest should be present:", "Diagram 1:", "Example", "Insurable interest according to common law"]}}
{"chunk": "insurance, insurable interest should be present both at the time of taking the\npolicy and at the time of claim with some exceptions like marine policies inwhich case it must exist at the time of claim.35In case of fire and accident insurance, insurable interest should be present\nboth at the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses\nif the family meets with an accident or undergoes hospitalisation. However,\nin marine cargo insurance, insurable interest is required only at the time of\nloss as the ownership of the goods would change hands when the cost is paid,\nwhich can happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the\nloss or damage actually occurred and whether it is as a result of an insured peril.\nIf the loss has been caused by the insured peril, the insurer is liable. If the\nimmediate cause is an insured peril, the insurer is bound to make good the loss,\notherwise he is not. This application of principle is practically more in respect ofnon-life insurance claims.When a loss occurs, there can often be a series of events leading up to the\nincident and so it is sometimes difficult to determine the nearest or proximate\ncause. Under this rule, the insurer looks for the predominant cause which sets\ninto motion the chain of events producing the loss. This may not necessarily be\nthe last event that immediately preceded the loss i.e. it is not necessarily an\nevent which is closest to, or immediately responsible for causing the loss. For\nexample, a fire might cause a water pipe to burst. Despite the resultant loss being\nwater damage, the fire would still be considered the proximate cause of the\nincident. Other causes may be classified as remote causes, which are separate\nfrom proximate causes. Remote causes may be present but are not effectual in\ncausing an event.**Definition**Proximate cause is defined as the active and efficient cause that sets in motiona chain of events which brings about a result, without the intervention of any\nforce started and working actively from a new and independent source.How does the principle of proximate cause apply to insurance contracts? Since\ninsurance provides for payment of a death benefit, regardless of the cause of\ndeath, the principle of proximate cause would not usually apply. However many\ninsurance contracts may also have an accident benefit add-on wherein an\nadditional sum assured is payable in the event of accidental death. In such a\nsituation, it becomes necessary to ascertain the cause - whether the death\noccurred as a result of an accident. The principle of proximate cause would\nbecome applicable in such instances.36To understand the principle of proximate cause, consider the following situation:**Example****Scenario 1:** Mr. Ajay had parked his car in the garage and gone on a long vacation.\nSix months later, when he came back and started the car, he noticed that the\nair-conditioning of the car was not working. Mr. Ajay filed a claim with the\ninsurance company for the cost of repairing the air-conditioning and the insurance\ncompany rejected the claim. The reason given by the insurance company was that\nthe damage was due to the ‘normal wear and tear’ of the car and the airconditioning system, which was an excluded peril in the insurance policy. Mr Ajay\napproached the Court and after examining the survey report which said that the\ncar was 12 years old and neither the car nor the air-conditioning had been\nserviced/ repaired during the previous 6 years, the damage was due to the\n‘normal wear and tear’ and the insurance company was not liable to pay theclaim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the\nimmediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "C.", "chunk_id": "Final IC 38 - WA_Composite  - English_018", "metadata": {"file_size": 20885, "chunk_index": 18, "chunk_tokens": 942, "has_examples": true, "has_tables": false, "key_concepts": ["Scenario 1:", "Example", "Scenario 2:", "Definition", "Proximate Cause"]}}
{"chunk": "the damage was due to the ‘normal wear and tear’ of the car and the airconditioning system, which was an excluded peril in the insurance policy. Mr Ajay\napproached the Court and after examining the survey report which said that the\ncar was 12 years old and neither the car nor the air-conditioning had been\nserviced/ repaired during the previous 6 years, the damage was due to the\n‘normal wear and tear’ and the insurance company was not liable to pay theclaim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the\nimmediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these\nlosses are customarily paid by business under fire insurance policies.Example of such losses can be – Damage to property caused by water used to extinguish fire Damage to property caused by fire brigade in execution of their duty Damage to property during its removal from a burning building to a safeplace**Test Yourself 1**Mr. Pinto contracted pneumonia as a result of lying on wet ground after a horse\nriding accident. The pneumonia resulted in death of Mr. Pinto. What is the\nproximate cause of the death?I. PneumoniaII. HorseIII. Horse riding accidentIV. Bad luck37**D.** **Indemnity**The Principle of Indemnity is applicable to Non-life insurance policies. **It means**\n**that the policyholder, who suffers a loss, is compensated so as to put him or**\n**her in the same financial position as he or she was before the occurrence of**\n**the loss event** . The insurance contract guarantees that the insured would be\nindemnified or compensated up to the amount of loss and no more.The philosophy is that one should not make a profit through insuring one’s assets\nand recovering more than the loss. The insurer would assess the economic value\nof the loss suffered and compensate accordingly.**Example**Ram has insured his house, worth Rs. 10 lakhs, for the full amount. He suffers loss\non account of fire estimated at Rs. 70,000. The insurance company would pay\nhim an amount of Rs. 70,000. The insured can claim no further amount.The indemnity to be paid would depend on the type of insurance one\ntakes.Indemnity might take one or more of the following modes of settlement: Cash payment\n Repair of a damaged item\n Replacement of the lost or damaged item\n Reinstatement (Restoration). E.g. Rebuilding a house destroyed by fire**Diagram 2:** **Indemnity****a)** **Agreed Value:** However, there is some subject matter whose value cannot beeasily estimated or ascertained at the time of loss. For instance, it may be\ndifficult to put a price in the case of family heirlooms or rare artefacts.\nSimilarly in marine insurance policies it may be difficult to estimate the\nextent of loss suffered in a ship accident half way around the world.In such instances, a principle known as the ‘Agreed Value’ is adopted. The\ninsurer and insured agree on the value of the property to be insured, at the38beginning of the insurance contract. In the event of total loss, the insurer\nagrees to pay the agreed amount of the policy. This type of policy is known\nas “ **Agreed Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss\nonly in the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs.\n5 lakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this\nentire amount. It is deemed that the house owner has insured only to the\ntune of half its value and he is thus entitled to claim just 50% [Rs. 30,000] ofthe amount of loss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "k37", "section": "Scenario 2:", "chunk_id": "Final IC 38 - WA_Composite  - English_019", "metadata": {"file_size": 20885, "chunk_index": 19, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Indemnity", "Agreed Value Policy", "Test Yourself 1", "Agreed Value:", "Example"]}}
{"chunk": "insurer and insured agree on the value of the property to be insured, at the38beginning of the insurance contract. In the event of total loss, the insurer\nagrees to pay the agreed amount of the policy. This type of policy is known\nas “ **Agreed Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss\nonly in the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs.\n5 lakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this\nentire amount. It is deemed that the house owner has insured only to the\ntune of half its value and he is thus entitled to claim just 50% [Rs. 30,000] ofthe amount of loss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual\namount of loss i.e. the amount of money needed to replace lost or damaged\nproperty at current market prices less depreciation.**E.** **Subrogation**Subrogation means the transfer of all rights and remedies with respect to the\nsubject matter of insurance, from the insured to the insurer. Subrogation follows\nfrom the principle of Indemnity. Hence, it is often called a ‘corollary’ of\nIndemnity.In other words, if an insured suffers a loss and the loss has been indemnified by\nthe insurer, the insured’s right to get compensated by any third party for that\nloss, would get shifted to the insurer. Note that the amount of damage that can\nbe collected by the insurance company is only to the extent of the amount paid\nby the insurance company.**Important****Subrogation:** It is the process an insurance company uses to recover claim\namounts paid to a policy holder from a negligent third party.Subrogation can also be defined as surrender of rights by the insured to an\ninsurance company that has paid a claim against the third party.**Example**Mr. Kishore’s household goods were being carried in Sylvain Transport service.\nThey got damaged due to driver’s negligence, to the extent of Rs. 45,000 and the\ninsurer paid an amount of Rs. 30,000 to Mr. Kishore. The insurer stands subrogated\nto the extent of only Rs. 30,000 and collect that amount from Sylvain Transports.39In case the matter went into litigation and the Court directed Sylvain Transports\nto pay Rs.35,000 as compensation to Mr. Kishore, he is liable to pay the insurer\nthe claim amount of Rs 30,000 under the subrogation clause, and to keep the\nbalance amount of Rs 5,000 with himself.The Subrogation Clause prevents the insured from collecting more than the loss from the insurance company and from any third party. Subrogation arises only in\ncase of contracts of indemnity and not against benefit policies like Life Insurance\nPolicy or Personal Accident Policy.**Example**Mr. Suresh dies in an air crash. His family is entitled to collect the full Sum Assured\nof Rs 50 lakhs from the insurer who has issued a Personal Accident Policy plus the\ncompensation paid by the airline, say, Rs 15 lakhs.**F.** **Contribution:**Like Subrogation, ‘Contribution’ also follows from the Principle of Indemnity.\nHence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be metwhen the insured has taken insurance from more than one insurer. Contributionimplies that if the same property is insured with more than one insurance\ncompany, the compensation paid by all the insurers together cannot exceed the\nactual loss suffered. The policy holder can claim from each of the insurers only a\nportion of the loss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs.\nSuppose a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he canclaim an amount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e38", "section": "Agreed Value Policy", "chunk_id": "Final IC 38 - WA_Composite  - English_020", "metadata": {"file_size": 20885, "chunk_index": 20, "chunk_tokens": 974, "has_examples": true, "has_tables": false, "key_concepts": ["Subrogation:", "Agreed Value Policy", "Example", "Important", "Underinsurance:"]}}
{"chunk": "compensation paid by the airline, say, Rs 15 lakhs.**F.** **Contribution:**Like Subrogation, ‘Contribution’ also follows from the Principle of Indemnity.\nHence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be metwhen the insured has taken insurance from more than one insurer. Contributionimplies that if the same property is insured with more than one insurance\ncompany, the compensation paid by all the insurers together cannot exceed the\nactual loss suffered. The policy holder can claim from each of the insurers only a\nportion of the loss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs.\nSuppose a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he canclaim an amount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise\nin the case of Life Insurance, because there is no upper limit that can be placedon the losses suffered when there is a loss of life.**Test Yourself 2**Which among the following is an example of coercion?I. Ramesh signs a contract without having knowledge of the fine print\nII. Ramesh threatens to kill Mahesh if he does not sign the contract\nIII. Ramesh uses his professional standing to get Mahesh to sign a contract\nIV. Ramesh provides false information to get Mahesh to sign a contract40**Test Yourself 3**Which among the following options cannot be insured by Ramesh?I. Ramesh’s houseII. Ramesh’s spouseIII. Ramesh’s friendIV. Ramesh’s parents**Test Yourself 4**What is the significance of the principle of contribution?I. It ensures that the insured also contributes a certain portion of the claimalong with the insurer\nII. It ensures that all the insured who are a part of the pool, contribute to theclaim made by a participant of the pool, in the proportion of the premium\npaid by them\nIII. It ensures that multiple insurers covering the same subject matter; cometogether and contribute the claim amount in proportion to their exposure to\nthe subject matter\nIV. It ensures that the premium is contributed by the insured in equal instalmentsover the year.**Summary**The special features of insurance policies include:i. Uberrima fides,\nii. Insurable interest,\niii. Proximate cause,\niv. Indemnity\nv. Subrogationvi. Contribution**Key Terms**1. Non-Disclosure2. Misrepresentation3. Material facts4. Agreed Value5. Under Insurance41**Answers to Test Yourself****Answer 1** - The correct option is III\n**Answer 2** - The correct option is II\n**Answer 3** - The correct option is III\n**Answer 4** - The correct option is III42## CHAPTER C-04 **FEATURES OF INSURANCE CONTRACTS****Chapter Introduction**In this chapter, we discuss the elements that govern the working and specialfeatures of an insurance contract.43**A.** **Insurance contracts – Legal aspects and special features.**The chapter also deals with the legal aspects and special features of an insurancecontract.**1.** **The Insurance Contract**Insurance involves a contractual agreement in which the insurer agrees to\nprovide financial protection against certain specified risks for a price or\nconsideration known as the premium. The contractual agreement takes the\nform of an insurance policy.**2.** **Legal aspects of an insurance contract**This section looks at some features of an insurance contract and considers thelegal principles that govern insurance contracts in general.**Important**A contract is an agreement between parties, enforceable at law. The provisions\nof the Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**44**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t40", "section": "F.", "chunk_id": "Final IC 38 - WA_Composite  - English_021", "metadata": {"file_size": 20885, "chunk_index": 21, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Insurance contract", "Contribution:", "Test Yourself 4", "Chapter Introduction"]}}
{"chunk": "provide financial protection against certain specified risks for a price or\nconsideration known as the premium. The contractual agreement takes the\nform of an insurance policy.**2.** **Legal aspects of an insurance contract**This section looks at some features of an insurance contract and considers thelegal principles that govern insurance contracts in general.**Important**A contract is an agreement between parties, enforceable at law. The provisions\nof the Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**44**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said\nto make an offer or proposal. Usually, the offer is made by the proposer, and\nacceptance made by the insurer.When a person to whom the offer is made signifies his assent thereto, this is\ndeemed to be an acceptance. Hence, when a proposal is accepted, it becomes a\npromise. The acceptance needs to be communicated to the proposer whichresults in the formation of a contract.When a proposer accepts the terms of the insurance plan and signifies his/ her\nassent by paying the deposit amount, which, on acceptance of the proposal, gets\nconverted to the first premium, the proposal becomes a policy. If any condition\nis put, it becomes a counter offer. The policy bond becomes the evidence of thecontract.**2.** **Consideration**This means that the contract must contain some mutual benefit for the parties.\nThe premium is the consideration from the insured, and the promise to indemnify,is the consideration from the insurers.45**3.** **Agreement between the parties (Consensus Ad-Idem)**Both the parties, the insurer and the policyholder, should agree to the same thing\nin the same sense. In other words, there should be “ **consensus ad-idem** ” between\nboth parties.**4.** **Free consent**There should be free consent while entering into a contract. Consent is said\nto be free when it is not caused by Coercion/ By Force\n Undue influence Fraud Misrepresentation\n MistakeWhen consent to an agreement is caused by coercion, fraud or\nmisrepresentation, the agreement is voidable.**5.** **Capacity of the parties**Both the parties to the contract must be legally competent to enter into the\ncontract. The policyholder must be legally an adult at the time of signing the\nproposal and should be of sound mind and not disqualified under law. For\nexample, minors cannot enter into insurance contracts.**6.** **Legality**The object of the contract must be legal, for example, no insurance can be\nhad for illegal acts. Every agreement of which the object or consideration is\nunlawful is void. The object of an insurance contract is a lawful object.Also one’s entering into an insurance contract should be done out of one’s\nfree will, without any kind of force, fear or mistake.**C.** **Paying Premium in Advance**As per Indian laws, Insurers are not allowed to assume risk unless they receive\nthe premium in advance. In other words, insurance protection cannot be sold oncredit basis in India.Section 64 VB of the Insurance Act 1938 states, “No risk to be assumed unless\npremium is received in advance”. No insurer shall assume any risk unless and until\nthe premium is received in advance or is guaranteed to be paid or a deposit is\nmade in advance in the prescribed manner. This is an important feature of the\ninsurance industry in India.46The Insurance Rules, 1939, provide certain exceptions to this condition of\nadvance payment of premium, in respect of particular categories of insurances.\nSection 59 of the Insurance Rules allows accepting premiums in instalments in\nrespect of Sickness Insurance, Group Personal Accident Insurance Medical\nBenefits Insurance and Hospitalisation Insurance Schemes, subject to certain\nconditions. Section 59 of the Insurance Rules allows relaxations for policies issued\nto Government and semi-Government bodies, Fidelity Guarantee Insurance\npolicies covering Government and semi-Government employees, Workmen's\nCompensation policies, Cash in Transit policies, and some other categories of\ninsurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Legal aspects of an insurance contract", "chunk_id": "Final IC 38 - WA_Composite  - English_022", "metadata": {"file_size": 20885, "chunk_index": 22, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Legality", "Capacity of the parties", "Agreement between the parties (Consensus Ad-Idem)", "Paying Premium in Advance", "Diagram 1:"]}}
{"chunk": "the premium in advance. In other words, insurance protection cannot be sold oncredit basis in India.Section 64 VB of the Insurance Act 1938 states, “No risk to be assumed unless\npremium is received in advance”. No insurer shall assume any risk unless and until\nthe premium is received in advance or is guaranteed to be paid or a deposit is\nmade in advance in the prescribed manner. This is an important feature of the\ninsurance industry in India.46The Insurance Rules, 1939, provide certain exceptions to this condition of\nadvance payment of premium, in respect of particular categories of insurances.\nSection 59 of the Insurance Rules allows accepting premiums in instalments in\nrespect of Sickness Insurance, Group Personal Accident Insurance Medical\nBenefits Insurance and Hospitalisation Insurance Schemes, subject to certain\nconditions. Section 59 of the Insurance Rules allows relaxations for policies issued\nto Government and semi-Government bodies, Fidelity Guarantee Insurance\npolicies covering Government and semi-Government employees, Workmen's\nCompensation policies, Cash in Transit policies, and some other categories of\ninsurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a\nproper understanding the product and not just bought/ sold. Hence, insurance\nis to be ‘solicited’ or asked for by the customer. Traditionally, insurers declare\nthat “Insurance is the subject matter of solicitation”. To elucidate, insurance\nis not a ready-made product like a packet of biscuits or a bar of chocolate to\nbe bought/ sold outright. Customers have to discuss their insurance needs\nwith a person qualified for the same and based on professional advice, the\nright insurance product is to be purchased. The Insurance product has to be\nunderstood and the offering most suited to the specific needs and\nrequirements of the customer in terms of the policy coverage, exclusions,\nterms and conditions, is to be considered.‘Solicitation’ is usually initiated when an insurer or an authorised\nintermediary approaches a prospect with a view to understand his/ her\ninsurance needs and provides professional advice in selecting appropriate\ninsurance products. The prospect solicits the proper solution and provides all\nrequisite details to the advisor. As per regulations of IRDAI, **Insurance Agents**\nare appointed by an insurer for the purpose of engaging in the solicitation\nprocess and procuring insurance business, including business relating to the\ncontinuance, renewal or revival of policies of insurance. Only authorised\nemployees of insurance companies, and specified persons of licensed\nintermediaries, who are trained and authorised for the purpose can be part\nof the process of solicitation and sales of insurance.**D.** **Enabling Provisions****1.** **Grace Period**Grace period is the specified period of time immediately following the\npremium due date during which a payment can be made to renew or continue47a policy in force without loss of continuity benefits such as waiting periods\nand coverage of pre-existing diseases. Coverage is not available for the period\nfor which no premium is received. The days of grace are computed from the\nnext day after the due date fixed for payment of the premium.For **Life insurance**, if there is no grace period, a single delay in payment can\nlead to a policy lapse. This would be detrimental for the policyholder, the\ninsurer and the insurance industry in general. IRDAI Regulations allow a grace\nperiod of 15 days is applicable in case of Monthly mode of Premium collection\nand 30 days in other modes.In respect of **Health insurance** also, certain number of days as grace period is\nallowed for renewal of individual health policies. This period depends on the\npolicy of the company and the product offered. All continuity benefits are\nmaintained if the policy is renewed within the grace period. However Claims, if\nany, during the break period will not be considered. As per IRDAI Regulations, the\ngrace period is 15 days in case of Monthly mode of Premium collection and 30\ndays in other modes.**Motor Policies** are usually valid for a period of one year and have to be\nrenewed before the due date. Grace period for paying the premium do not\napply. In case a comprehensive policy lapses for more than 90 days, the\naccrued No Claim Bonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condonedelays in renewal up to 30 days without deeming such condonation as\na break in policy. Insurers were requested to contact the policyholders", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e47", "section": "Solicitation", "chunk_id": "Final IC 38 - WA_Composite  - English_023", "metadata": {"file_size": 20885, "chunk_index": 23, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance Agents", "Health insurance", "Grace Period", "Motor Policies", "Solicitation"]}}
{"chunk": "policy of the company and the product offered. All continuity benefits are\nmaintained if the policy is renewed within the grace period. However Claims, if\nany, during the break period will not be considered. As per IRDAI Regulations, the\ngrace period is 15 days in case of Monthly mode of Premium collection and 30\ndays in other modes.**Motor Policies** are usually valid for a period of one year and have to be\nrenewed before the due date. Grace period for paying the premium do not\napply. In case a comprehensive policy lapses for more than 90 days, the\naccrued No Claim Bonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condonedelays in renewal up to 30 days without deeming such condonation as\na break in policy. Insurers were requested to contact the policyholders\nwell in advance to avoid discontinuance in coverage.iii. As regards Motor Vehicle Third Party Insurance policies that fell duefor renewal and premiums could not be paid due to the Covid-19\nsituation, IRDAI allowed a grace period till 15th May, 2020.**2.** **Free-Look Period introduced by “IRDAI”**Insurance contracts are drafted by the insurer, and the other party has to adhere\nto it if he/ she wants the insurance. Such contracts where someone has to accept\nthe contract as it is and cannot make any change to it are legally called Contracts\nof Adhesion. Because of this one-sided situation, the Courts always make insurers48liable for any ambiguity or confusion that may arise in interpreting these termsand conditions.To reduce this one-sidedness and make insurance transactions more customerfriendly, IRDAI has built into its regulations a consumer-friendly provision called\n‘Free-Look Period’ whereby, if the customer is not satisfied with any term and\nconditions of the policy, he/ she can return it and get a refund. This provision\nwhereby policyholders are given the option of cancelling the policy within 15 days\n(30 days, in case of electronic policies and policies sourced through distance\nmode) after receiving the policy document, in case they are not satisfied with\nthe policy, has been introduced for Life Insurance and Health Insurance policies\n(having a tenure of at least one year). The company has to be intimated in writing\nand the premium is refunded less, proportionate risk premium for the period of\ncover, expenses and charges.**Cancellation of Policies:** When policies are cancelled by the insurer, the\nproportion of the premium corresponding to the expired period of insurance is\ncharged/ retained by the insurer and the proportion corresponding to the\nunexpired period of insurance is returned to the insured, provided no claim has\nbeen paid under the policy. Such proportionate calculation of premium is called\nPro-rata premium.When annual policies are cancelled by the insured, insurers usually charge/ retain\npremiums at a higher rate and refund premiums at higher rates, instead of\ncalculating pro-rata premiums. This would prevent anti-selection against the\ninsurers and take care of the initial expenses of the insurer. Such rates are\ndisclosed as part of the terms and conditions of the insurance contract and\nreferred to as Short period scales.**Important****i.** **Coercion** - Involves pressure applied through criminal means.**ii.** **Undue influence** – using one’s position to dominate the will of anotherperson, to obtain an undue advantage over that person.**iii.** **Fraud** – inducing another to act on a false belief that is caused by arepresentation one does not believe to be true. It can arise either from\ndeliberate concealment of facts or through misrepresenting them.**iv.** **Mistake** - Error in one’s knowledge or belief or interpretation of a thing orevent. This can lead to an error in understanding and agreement about the\nsubject matter of the contract.49**Test Yourself 1**Which among the following cannot be an element in a valid insurance contract?I. Offer and AcceptanceII. CoercionIII. ConsiderationIV. Legality**Summary**i. Insurance involves a contractual agreement in which the insurer agrees toprovide financial protection against specified risks for a price or consideration\nknown as the premium.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d-19", "section": "Motor Policies", "chunk_id": "Final IC 38 - WA_Composite  - English_024", "metadata": {"file_size": 20885, "chunk_index": 24, "chunk_tokens": 957, "has_examples": true, "has_tables": false, "key_concepts": ["Motor Policies", "Test Yourself 1", "Cancellation of Policies:", "Mistake", "Free-Look Period introduced by “IRDAI”"]}}
{"chunk": "disclosed as part of the terms and conditions of the insurance contract and\nreferred to as Short period scales.**Important****i.** **Coercion** - Involves pressure applied through criminal means.**ii.** **Undue influence** – using one’s position to dominate the will of anotherperson, to obtain an undue advantage over that person.**iii.** **Fraud** – inducing another to act on a false belief that is caused by arepresentation one does not believe to be true. It can arise either from\ndeliberate concealment of facts or through misrepresenting them.**iv.** **Mistake** - Error in one’s knowledge or belief or interpretation of a thing orevent. This can lead to an error in understanding and agreement about the\nsubject matter of the contract.49**Test Yourself 1**Which among the following cannot be an element in a valid insurance contract?I. Offer and AcceptanceII. CoercionIII. ConsiderationIV. Legality**Summary**i. Insurance involves a contractual agreement in which the insurer agrees toprovide financial protection against specified risks for a price or consideration\nknown as the premium.\nii. A contract is an agreement between parties, enforceable at law.iii. The elements of a valid contract include:Offer and acceptanceConsideration,Consensus ad-idem,- Free consentCapacity of the parties andLegality of the object**Key Terms**1. Offer and Acceptance2. Lawful consideration3. Consensus ad idem**Test Yourself 2**During the Free-look period, if the policyholder, who has bought a policy through\nan Agent, disagrees to any of its terms and conditions, he/ she can return it and\nget a refund subject to the following conditions:I. He/ she can exercise this option within 15 days of receiving the policydocumentII. He/ she has to communicate to the company in writing\nIII. The premium refund will be adjusted for proportionate risk premium for theperiod on cover, expenses incurred by the insurer on medical examination and\nstamp duty chargesIV. All the above50**Test Yourself 3**If the policyholder has bought a policy and does not want it, he/ she can return\nit during the _________ period, and get a refund.I. Free evaluationII. Free-lookIII. CancellationIV. Free trial**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.51## CHAPTER C-05## UNDERWRITING AND RATING**Chapter Introduction**In this chapter you will learn the basics of underwriting and rating. You will learn\nabout the different methods of dealing with hazards in the process of rating of\nrisks. You will be able to appreciate the common aspects of underwriting, product\napproval and rating.**Learning Outcomes**After studying this chapter, you should be able to:1. Define the basics of underwriting2. Understand the basics of product approvals in India3. Appreciate rating factors and the importance of ratemaking52**A.** **Basics of Underwriting**In the previous chapters, we have seen that the concept of insurance involves\nmanaging risk through pooling. Insurers create a pool consisting of premiums that\nare made by several individuals/ commercial/ industrial firms/ organizations.This process of understanding risks, classifying risks, identifying which category\nthey fall into, **deciding whether to accept the risk or not** and if so, how much\npremium the insurer would require to accept the risk and whether any extra\nconditions are to be imposed on the risk - all these are part of **underwriting** .It is also important to know what rate is to be charged and how the rates aremade.**Definition**Underwriting is the process of determining whether a risk offered for insurance\nis acceptable, and if so, at what rates, terms and conditions.Underwriting comprises the following steps:i. Assessment and evaluation of hazard and risk in terms of frequency andseverity of lossii. Formulation of policy coverage and terms and conditionsiii. Fixing of rates of premiumThe underwriter decides on whether or not to accept the riskThe next step would be to decide the **rates, terms and conditions** under which\nthe risk is to be accepted.Underwriting skills are acquired through a continuous learning process involving\nadequate training, field exposure and deep insights. To be a fire insurance\nunderwriter one needs to have a good knowledge of the likely causes of fire,\nimpact of fire on various physical goods and property, the process involved in an\nindustry, geography, climatic conditions etc.Similarly a marine insurance underwriter must be aware about port/ road", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e2", "section": "Important", "chunk_id": "Final IC 38 - WA_Composite  - English_025", "metadata": {"file_size": 20885, "chunk_index": 25, "chunk_tokens": 989, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Test Yourself 1", "Answer 3", "Mistake"]}}
{"chunk": "premium the insurer would require to accept the risk and whether any extra\nconditions are to be imposed on the risk - all these are part of **underwriting** .It is also important to know what rate is to be charged and how the rates aremade.**Definition**Underwriting is the process of determining whether a risk offered for insurance\nis acceptable, and if so, at what rates, terms and conditions.Underwriting comprises the following steps:i. Assessment and evaluation of hazard and risk in terms of frequency andseverity of lossii. Formulation of policy coverage and terms and conditionsiii. Fixing of rates of premiumThe underwriter decides on whether or not to accept the riskThe next step would be to decide the **rates, terms and conditions** under which\nthe risk is to be accepted.Underwriting skills are acquired through a continuous learning process involving\nadequate training, field exposure and deep insights. To be a fire insurance\nunderwriter one needs to have a good knowledge of the likely causes of fire,\nimpact of fire on various physical goods and property, the process involved in an\nindustry, geography, climatic conditions etc.Similarly a marine insurance underwriter must be aware about port/ road\nconditions, problems encountered by cargo/ goods in transit or storage, ships andtheir seaworthiness and so on.A health underwriter needs to understand the risk profile of the insured, age,\nmedical aspects, fitness levels and family history and measure the effect of each\nfactor affecting the risk.53**Sources of information for underwriting**The first stage in any numerical (or statistical) analysis is the collection of data.\nWhen pricing a risk, an underwriter should gather as much information as possibleto aid accurate assessment.**Sources of information are:**i. **Proposal form or underwriting presentation**ii. **Risk surveys**iii. **Historic claims experience data:** For some classes of business, such aspersonal and motor lines, underwriters often utilise historic claims\nexperience data to provide an indication of the likely future claims\nexperience, and to arrive at a suitable premium **.****Underwriting, equity and business sustainability**The need for careful underwriting and risk classification in insurance arises from\nthe simple fact that **all risks are not equal** . Each risk thus needs to be\nappropriately assessed and priced in accordance with the likelihood of loss\noccurrence and severity.Since all risks are not equal, it would not be proper to ask all those who are to\nbe insured, to pay equal premium. **The purpose of underwriting is to classify**\n**risks so that, depending on their characteristics and degree of risk posed, an**\n**appropriate rate of premium may be charged.** It is important for the\nunderwriter to ensure that the risk evaluation is done properly and the premium\ncharged is neither too low to cover the risk nor too high to make it noncompetitive.The main features of underwriting are as followsi. To **identify risk** based upon the characteristicsii. To **determine the level** of risk presented by the proposerThe objectives of underwriting are achieved, in short, by deciding the level of\nacceptability, adequacy of premium and other terms.**B.** **Product Filing with IRDAI**Every Insurance product needs to be filed with IRDAI for approval before it is\noffered for sale. IRDAI allots a Unique Identification number (UIN) for every\ninsurance product. Once products are introduced in the market, there are\nguidelines to be followed for withdrawing the product as well.**1.** The Regulator asks for a clear commitment by the Board of the insurer that itis willing to accept the risks in the policy and agrees to pay the claims. It also54asks the insurer to commit that the policy wordings are fair to the customer\nand that the prices are decided on a scientific basis.**2.** The insurer should plan for the possibility of withdrawal of the products in thefuture and the options that would be available to the policyholder on such\nwithdrawal of the product.**3.** The withdrawn product shall not be offered to the prospective customers.**C.** **Basics of Ratemaking**Insurance is based on transfer of risk to the insurer. By purchasing an insurance\npolicy, the insured is able to reduce the impact of financial losses arising from\nthe peril against which the property is insured. The Insurer needs to adopt a\nprocess of calculating a price to cover the future cost of insurance claims and\nexpenses, including a margin for profit. This is known as **ratemaking.****A rate is the price of a given unit of insurance.** For example, a rate may be\nexpressed as Rs.1.00 per mile (per thousand) sum assured for earthquake\ncoverage. Each rate is established after looking at past trends and changes in the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "o54", "section": "Definition", "chunk_id": "Final IC 38 - WA_Composite  - English_026", "metadata": {"file_size": 20885, "chunk_index": 26, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Product Filing with IRDAI", "Sources of information for underwriting", "Underwriting, equity and business sustainability", "Sources of information are:", "The purpose of underwriting is to classify"]}}
{"chunk": "and that the prices are decided on a scientific basis.**2.** The insurer should plan for the possibility of withdrawal of the products in thefuture and the options that would be available to the policyholder on such\nwithdrawal of the product.**3.** The withdrawn product shall not be offered to the prospective customers.**C.** **Basics of Ratemaking**Insurance is based on transfer of risk to the insurer. By purchasing an insurance\npolicy, the insured is able to reduce the impact of financial losses arising from\nthe peril against which the property is insured. The Insurer needs to adopt a\nprocess of calculating a price to cover the future cost of insurance claims and\nexpenses, including a margin for profit. This is known as **ratemaking.****A rate is the price of a given unit of insurance.** For example, a rate may be\nexpressed as Rs.1.00 per mile (per thousand) sum assured for earthquake\ncoverage. Each rate is established after looking at past trends and changes in the\ncurrent environment that may affect potential losses in the future.**Note that rates are not the same as premiums.****Premium = (Sum Insured) x (rate)****Example**Taking an example of health insurance, numerical or percentage assessments are\nmade on each component of the risk. Factors like age, race, occupation, habits\netc. are examined and scored numerically based on predetermined criteria.The amount of premium to be paid by each depends on a rate, which is\ndetermined by two factors; The probability of loss due to a loss event (caused by an insured peril) and The estimated amount of loss that may arise due to the loss event**Example**Assume the average amount of a house being destroyed by fire is Rs 1,00,000.The probability of the loss of a house being destroyed by fire 1 out of 100 [or\n0.01]. That is, the experience is that out of a 100 insured houses, one house gets\ndestroyed by fire.The expected average loss would be Rs.1,00,000 x 0.01 = Rs. 1000.So, Insurers would need to charge a minimum of Rs.1000 to insure a house of\nRs.1,00,000 value.55How can the insurer ensure that the pool is sufficient to compensate for the losses\nthat are actually incurred?As seen earlier, the whole mechanism of insurance involves pooling of many\nsimilar risks so that the probability of the number of losses (frequency) as well as\nthe extent of loss (severity) becomes predictable. This principle, referred to as\n‘the law of large numbers’ states that as the sample size grows, the results come\ncloser to the expected value. Insurance companies need to sell more policies to\nmore and more people to make their expectations/ predictions work.An example is that if a coin is tossed, the chances of getting ‘heads’ or ‘tails’ is\n50:50. However, if the coin is tossed only once, the result can be 100% heads and\n0% ‘tails’ or 0% ‘heads’ and or 100% tails. However, if one tosses a coin many\ntimes, the chance of the average count of ‘heads’ and ‘tails’ being 100% and 0%\nreduces and will get closer to 50:50.**Example**In the field of property insurance, the chances of a wooden structure catching\nfire are more than stone structures; hence, a higher premium is required to insurethe wooden structure.The same concept applies to Life and Health Insurance also. An individual\nsuffering from high blood pressure or diabetes has higher chances of suffering aheart attack.**Test Yourself 1**Identify the two factors that affect insurance ratemaking.I. Probability and severity of riskII. Source and nature of riskIII. Source and timing of risk\nIV. Nature and impact of risk**1.** **Determining the rate of premium**The pure rate of premium is arrived at on the basis of past loss experience.\nTherefore, statistical data regarding past losses is most essential for purposes of\ncalculating rates. To fix the rates, it is necessary to give a ‘mathematical value’to the risks.**Example**If loss experience of a large number of motor cycles is collected for a period of\nsay 10 years, we will get the sum total of the losses resulting from damage to the\nvehicles. By expressing this amount of loss as percentage of the total value of56motor cycles we can fix the ‘mathematical value’ of the risk. This may be", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f56", "section": "C.", "chunk_id": "Final IC 38 - WA_Composite  - English_027", "metadata": {"file_size": 20885, "chunk_index": 27, "chunk_tokens": 968, "has_examples": true, "has_tables": false, "key_concepts": ["Premium = (Sum Insured) x (rate)", "Determining the rate of premium", "Test Yourself 1", "Example", "A rate is the price of a given unit of insurance."]}}
{"chunk": "fire are more than stone structures; hence, a higher premium is required to insurethe wooden structure.The same concept applies to Life and Health Insurance also. An individual\nsuffering from high blood pressure or diabetes has higher chances of suffering aheart attack.**Test Yourself 1**Identify the two factors that affect insurance ratemaking.I. Probability and severity of riskII. Source and nature of riskIII. Source and timing of risk\nIV. Nature and impact of risk**1.** **Determining the rate of premium**The pure rate of premium is arrived at on the basis of past loss experience.\nTherefore, statistical data regarding past losses is most essential for purposes of\ncalculating rates. To fix the rates, it is necessary to give a ‘mathematical value’to the risks.**Example**If loss experience of a large number of motor cycles is collected for a period of\nsay 10 years, we will get the sum total of the losses resulting from damage to the\nvehicles. By expressing this amount of loss as percentage of the total value of56motor cycles we can fix the ‘mathematical value’ of the risk. This may be\nexpressed in the formula given below:Let us suppose that: The Value of a motor cycle: Rs. 50,000/  Loss experience: Out of 1000 motor cycles, 50 motor cycles get stolen over10 years\n On an average, 5 motor cycles become total losses due to theft every yearApplying the formula, the result will be:Losses per year (Rs. 50,000 X 5) = Rs. 2,50,000**Total Values of 1000 motor vehicles (Rs.** 50,000 X 1000) **= Rs. 5,00,00,000**This means that average loss percentage per vehicle (L/ V) x 100= [2,50,000/\n5,00,00,000] x 100 = 0.5%Therefore the rate of premium that a motor cycle owner pays is half a percent of\nRs. 50,000/ - i.e. Rs. 250/ - per year. This is called the **‘Pure’ premium,** also\nknown as ‘Burning Cost’.At the rate of Rs. 250 per motor cycle, Rs. 2.5 lakhs is collected which is paid outin claims on total losses of 5 vehicles.If the pure premium, which is arrived above, is collected it would constitute a\nfund which will be sufficient only to pay for losses.In the example above we can see that there is no surplus. But insurance\noperations also involve costs of administration (expenses of management) and\ncosts of procurement of business (agency commission). It is also necessary to\nprovide a margin for unexpected heavy losses.Finally, since insurance is transacted on a commercial basis, like any other\nbusiness, it is necessary to provide for a margin of profit which is a return on the\ncapital invested in the business.**Therefore, the ‘pure premium’ is suitably loaded or increased by adding**\n**percentages to provide for expenses, reserves and profits.****The final rate of premium will consist of the following components:** Loss payments\n Loss expenses (e.g. survey fees)\n Agency commission\n Expenses of management57 Margin for reserves for unexpected heavy losses e.g. 7 total losses against5 expected\n Margin for profitsBy taking all the relevant rating factors into consideration, one can ensure the\nrates are adequate, excessive or unfairly discriminatory as between risks of\nsimilar type and quality.**Test Yourself 2**What is pure premium?I. Premium sufficiently big enough to pay for losses only\nII. Premium applicable to marginal members of the society\nIII. Premium after loading for administrative costs\nIV. Premium derived from the most recent loss experience period**2.** **Deductible**‘Deductible’ or ‘excess’ is a cost-sharing provision between an insurer and\ninsured. Deductibles provide that only the claims in excess of a particular\nthreshold are payable by the insurer. In other words, the insurer will not be liable\nfor claims below a specified level. The level or the threshold would be set as a\nfixed amount, or a percentage or even as a specified period of time (when it is\ncalled time-excess.) In case of health policies, there could be a condition that\nclaims would be payable only if the hospitalization is beyond a specified number\nof days/ hours. Deductibles are not used in life policies.In products such as property, motor and home insurances, deductibles are\npredetermined amounts that the insured must bear towards an indemnity claim.\nDeductibles can be compulsory for some policies or voluntary. Insurers generally", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f56", "section": "Test Yourself 1", "chunk_id": "Final IC 38 - WA_Composite  - English_028", "metadata": {"file_size": 20885, "chunk_index": 28, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Determining the rate of premium", "Test Yourself 1", "Example", "Deductible", "Total Values of 1000 motor vehicles (Rs."]}}
{"chunk": "similar type and quality.**Test Yourself 2**What is pure premium?I. Premium sufficiently big enough to pay for losses only\nII. Premium applicable to marginal members of the society\nIII. Premium after loading for administrative costs\nIV. Premium derived from the most recent loss experience period**2.** **Deductible**‘Deductible’ or ‘excess’ is a cost-sharing provision between an insurer and\ninsured. Deductibles provide that only the claims in excess of a particular\nthreshold are payable by the insurer. In other words, the insurer will not be liable\nfor claims below a specified level. The level or the threshold would be set as a\nfixed amount, or a percentage or even as a specified period of time (when it is\ncalled time-excess.) In case of health policies, there could be a condition that\nclaims would be payable only if the hospitalization is beyond a specified number\nof days/ hours. Deductibles are not used in life policies.In products such as property, motor and home insurances, deductibles are\npredetermined amounts that the insured must bear towards an indemnity claim.\nDeductibles can be compulsory for some policies or voluntary. Insurers generally\ncharge lower premiums when the insured voluntarily opt for higher deductibles.\nAn agent must examine how specific deductibles work and inform the insured\nwhether the deductible is applicable on a ‘per year’ or ‘per event’ basis.There are various reasons for having deductibles. Corporate customers covering\nfactories, multiple cargo consignments, large groups of employee, public liability\nexposures etc. and having huge amounts of Sum Insured, may prefer to bear small\nclaims themselves and avoid the documentation to prove claims. For example, a\nlarge factory owner paying lakhs or rupees as premium may not be bothered about\na minor repair cost of a machine amounting to around Rs.2,000.Some type of policies may need the insured also to bear some part of the loss to\nensure that he/ she takes due care. For instance, health insurers may insist on a\ndeductible so that insured would not overspend on costly hospital rooms just\nbecause insurance is there. Some Insurers also may not prefer spending time on58processing small claims. Also, in certain situations, insurers may not want to get\nexposed to the financial stress caused by accumulation of a large number of small\nlosses at one location. For example, a small flood in an industrial estate area can\ncause many low value claims from all the warehouses in the area.**Franchise:** Franchise refers to a threshold set, usually as a percentage of the sum\ninsured, below which no claim is admissible, as in the case of deductibles.\nHowever, when the claim amount is beyond the franchise limit, the entire claim\nis admissible by the insurer. In other words, franchise determines the minimum\nthreshold of the insurance companies' financial responsibility. Franchise will\napply to the policy in the same way and for the same reasons as a deductible in\ncase of claims below the threshold, but in the event of a claim exceeding the\nfranchise, the full amount of the loss will be paid.**D.** **Rating factors**The relevant elements that are used to add up the rates and make the rating plan\nare referred to as **rating factors** . Insurers use ‘rating factors’ to determine the\nrisk and to decide the price they will charge. The Insurer uses his assessments to establish a base rate. The Insurer then adjusts this rate with discounts applied for positivefeatures such as superior fire protection on property risk and loadings\napplied for adverse features such as presence of inflammable materials in\nthe premises. In Life Insurance the usual practice is to apply loading for adverse health,habits, heredity or occupational factors.**Key Terms**- Deductibles- Franchise**Answers to Test Yourself****Answer 1** - The correct option is I.**Answer 2** - The correct option is I.59#### CHAPTER C-0 6## CLAIMS PROCESSING**Chapter Introduction**The insured get to taste the benefit of insurance only when they are affected by\nlosses. The entire insurance industry is sensitive to the losses faced by insured\nand try to settle the claims that arise as amicably as possible and as fast as\npossible.After studying this chapter, you should be able to understand:1. Claims settlement2. Importance of claim procedures60**A.** **Loss Assessment and Claim settlement**Claims Assessment (Loss Assessment) is the process of determining whether the\nloss suffered by the insured is covered by the insurance policy, i.e. the loss does\nnot fall under any exclusion and there is no breach of warranty.Settlement of claims has to be based on considerations of fairness. For anInsurance company, expeditious settlement of claim is the benchmark of", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "n58", "section": "Test Yourself 2", "chunk_id": "Final IC 38 - WA_Composite  - English_029", "metadata": {"file_size": 20885, "chunk_index": 29, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Rating factors", "Chapter Introduction", "Key Terms"]}}
{"chunk": "the premises. In Life Insurance the usual practice is to apply loading for adverse health,habits, heredity or occupational factors.**Key Terms**- Deductibles- Franchise**Answers to Test Yourself****Answer 1** - The correct option is I.**Answer 2** - The correct option is I.59#### CHAPTER C-0 6## CLAIMS PROCESSING**Chapter Introduction**The insured get to taste the benefit of insurance only when they are affected by\nlosses. The entire insurance industry is sensitive to the losses faced by insured\nand try to settle the claims that arise as amicably as possible and as fast as\npossible.After studying this chapter, you should be able to understand:1. Claims settlement2. Importance of claim procedures60**A.** **Loss Assessment and Claim settlement**Claims Assessment (Loss Assessment) is the process of determining whether the\nloss suffered by the insured is covered by the insurance policy, i.e. the loss does\nnot fall under any exclusion and there is no breach of warranty.Settlement of claims has to be based on considerations of fairness. For anInsurance company, expeditious settlement of claim is the benchmark of\nefficiency for its services. Each company has internal guidelines about time taken\nin claims processing, which its employees follow.This is generally known by the term “Turnaround time” (TAT). Some insurers have\nalso put in place, facility for the insured to check claim status online from time\nto time. Some insurance companies have also set up claims hub for speedy\nprocessing of claims.**Important aspects in an insurance claim**Although most companies are bound by their TAT it is important for an agent to\nknow the aspects that are looked into for settling a claim. Six of the most\nimportant aspects for Non-life claims are given below.i. Whether the loss causing event is within the scope of the policyii. Whether the insured has complied with his part of the policy conditionsiii. Compliance with warranties. The survey report would indicate whether or notwarranties have been complied with.iv. Observance of utmost good faith by the proposer, during the currency of thepolicy.v. On the occurrence of a loss, the insured is expected to act as if he isuninsured. In other words, he has a duty to take measures to minimise theloss.vi. Determination of the amount payable. The amount of loss payable is subjectto the sum insured. However, the amount payable will also depend upon the\nfollowing: The extent of the insured’s insurable interest in the property affected\n The value of salvage\n Application of underinsurance\n Application of contribution and subrogation conditionsIn the matter of claims relating to life insurance, the insurer checks whether1) Conditions of policy have not been breached\n2) Utmost good faith has been followed and613) No material facts have been concealed fraudulently.**B.** **Categories of claim**Insurance Claims fall into the following categories:**i.** **Standard claims**These are claims which are clearly within the terms and conditions of the policy.\nThe assessment of claim is done keeping in view scope and the sum insured opted\nfor and other methods of indemnity laid down for various classes of insurance.**ii.** **Condition of average or average clause**This is a condition in some policies which penalises the insured for insuring his\nproperty at a sum insured less than its actual value known as underinsurance. In\nthe event of a claim the insured gets an amount that is proportionately reducedfrom his actual loss in accordance to the amount underinsured. Such situationsoccur more in the case of non-life insurance.**iii.** **Act of God perils - Catastrophic losses**Natural perils like storm, cyclone, flood, inundation, and earthquake are termed\nas “Act of God” perils. These perils may result in losses to many policies of insurer\nin the affected region. Surveyors are appointed for assessment of certain\ncategories of non-life insurance claims.In such major and catastrophic losses, the surveyor is asked to proceed to the loss\nsite immediately for an early assessment and loss minimisation efforts.\nSimultaneously, insurers’ officials also visit the scene of loss particularly when\nthe amount involved is large. The purpose of the visit is to obtain an immediate,\non the spot idea of the nature and extent of loss.Preliminary reports are also submitted if the surveyors face some problems in\nregards to the assessment and may desire guidance and instructions from insurers\nwho are thus given an opportunity to discuss the issues with the insured, ifnecessary.**iv.** **On account payment**In Non-life insurance claims, apart from preliminary reports, interim reports may\nbe submitted from time to time where repairs and/ or replacements are made\nover a long period. Interim reports also give the insurer an idea of the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "C-0", "section": "Key Terms", "chunk_id": "Final IC 38 - WA_Composite  - English_030", "metadata": {"file_size": 20885, "chunk_index": 30, "chunk_tokens": 1018, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Categories of claim", "On account payment", "Condition of average or average clause"]}}
{"chunk": "as “Act of God” perils. These perils may result in losses to many policies of insurer\nin the affected region. Surveyors are appointed for assessment of certain\ncategories of non-life insurance claims.In such major and catastrophic losses, the surveyor is asked to proceed to the loss\nsite immediately for an early assessment and loss minimisation efforts.\nSimultaneously, insurers’ officials also visit the scene of loss particularly when\nthe amount involved is large. The purpose of the visit is to obtain an immediate,\non the spot idea of the nature and extent of loss.Preliminary reports are also submitted if the surveyors face some problems in\nregards to the assessment and may desire guidance and instructions from insurers\nwho are thus given an opportunity to discuss the issues with the insured, ifnecessary.**iv.** **On account payment**In Non-life insurance claims, apart from preliminary reports, interim reports may\nbe submitted from time to time where repairs and/ or replacements are made\nover a long period. Interim reports also give the insurer an idea of the\ndevelopment of assessment of loss. It also helps in recommendation of \"On\naccount payment\" of the claim if desired by the insured. This usually happens if\nthe loss is large and the completion of assessment may take some time.If the claim is found to be in order, payment is made to the claimant and entries\nmade in the company records. Appropriate recoveries are made from the co62insurers and reinsurers, if any. In some cases, the insured may not be the person\nto whom the money is to be paid.**v.** **Discharge vouchers**Settlement of the claim is made only after obtaining a discharge under the policy.\nA sample of discharge receipt for claims (under personal accident insurance) for\ninjuries is worded along the following lines: (may vary from company to company)Name of the InsuredClaim No. Policy No.Received from the Company Ltd.The sum of Rs. ___________ in full and final settlement of compensation due\nto me/ us on account of injuries sustained by me/ us due to accident which\noccurred on or about the___________ I/ we give this discharge receipt to the\nCompany in full and final settlement of all my/ our claim present or future\narising directly or indirectly in respect of the said claim.Date (Signature)vi. **Post settlement action**The action taken after settlement of the non-life claim in relation to underwritingvaries from one class of business to another.**Example**Sum insured under a fire policy stands reduced to the extent of the amount of\nclaim paid. However, it can be reinstated on payment of pro-rata premium,\nwhich is deducted from the amount of claim paid.On payment of the capital sum insured under a personal accident policy, the\npolicy stands cancelled.Similarly, payment of a claim under individual fidelity guarantee policy\nautomatically terminates the policy.**vii.** **Salvage**Salvage generally refers to damaged property. On payment of loss, the salvage\nbelongs to insurers.**Example**When motor claims are settled on total loss basis, the damaged vehicle is taken\nover by insurers. Salvage can also arise in other non-life insurances like fire\nclaims, marine cargo claims etc.63Salvage is disposed of according to the procedure laid down by the companies for\nthe purpose. Surveyors, who have assessed the loss, will also recommend methods\nof disposal.**viii.** **Recoveries**After settlement of claims, the insurers under subrogation rights applicable to\ninsurance contracts, are entitled to the rights and remedies of the insured and to\nrecover the loss paid from a third party who may be responsible for the loss under\nrespective laws applicable. Thus, insurers can recover the loss from shipping\ncompanies, railways, road carriers, airlines, port trust authorities etc.**Example**In the case of non-delivery of consignment, the carriers are responsible for the\nloss. Similarly, the port trust is liable for goods which are safely landed but\nsubsequently missing. For this purpose, a letter of subrogation duly stamped isobtained from the insured before the settlement of the claim.**ix.** **Disputes related to claims**Despite best efforts, there could be delay in payment, non-payment (repudiation)\nof the claim, or the claim being admitted for a lesser amount, which might lead\nto dissatisfaction and dispute between Insurer and the insured.Apart from these, the most common reasons, to name a few are: Non-disclosure of material facts Lack of coverage Loss caused by excluded perils Lack of adequate sum insured Breach of warranty Issues regarding quantum due to underinsurance, depreciation, etc.All this could cause considerable grief to the insured at a time when he is already", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "o62", "section": "On account payment", "chunk_id": "Final IC 38 - WA_Composite  - English_031", "metadata": {"file_size": 20885, "chunk_index": 31, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Discharge vouchers", "Disputes related to claims", "On account payment", "Example", "Salvage"]}}
{"chunk": "respective laws applicable. Thus, insurers can recover the loss from shipping\ncompanies, railways, road carriers, airlines, port trust authorities etc.**Example**In the case of non-delivery of consignment, the carriers are responsible for the\nloss. Similarly, the port trust is liable for goods which are safely landed but\nsubsequently missing. For this purpose, a letter of subrogation duly stamped isobtained from the insured before the settlement of the claim.**ix.** **Disputes related to claims**Despite best efforts, there could be delay in payment, non-payment (repudiation)\nof the claim, or the claim being admitted for a lesser amount, which might lead\nto dissatisfaction and dispute between Insurer and the insured.Apart from these, the most common reasons, to name a few are: Non-disclosure of material facts Lack of coverage Loss caused by excluded perils Lack of adequate sum insured Breach of warranty Issues regarding quantum due to underinsurance, depreciation, etc.All this could cause considerable grief to the insured at a time when he is already\nsuffering from financial constraints arising due to losses. In order to reduce his\nsufferings, grievance redressal and dispute handling procedures are well laid out\nin the policy itself. Policies of fire or property have the condition of “Arbitration”\nin the policy itself.**C.** **Arbitration**Arbitration is a method of settling disputes arising out of contracts. Arbitration is\ndone in accordance with the provisions of the Arbitration and Conciliation Act,\n1996. The normal method of enforcing a contract or settling a dispute there under\nwould be to go to a court of law. Such litigation, however, involves considerable\ndelay and expense. The Arbitration Act allows the parties to submit disputes64under a contract to the more informal, less costly and private process ofarbitration.Arbitration may be done by a single arbitrator or by more than one, chosen by\nthe parties to the dispute themselves. In the event of a single arbitrator, the\nparties have to agree about that person. Many commercial insurance policies\ncontain an **arbitration clause** stating that disputes will be subject to arbitration.\nFire and most miscellaneous policies also contain an arbitration clause which\nprovides that if the liability under the policy is admitted by the company, and\nthere is a difference concerning the quantum to be paid, such a difference must\nbe referred to arbitration. Normally the arbitrator’s decision is considered final\nand binding on both the parties.The wording of the condition varies from policy to policy. Generally, it providesas follows:i. The dispute is submitted to the decision of a single arbitrator to be appointedby the parties, or in the event of any disagreement between them upon\nappointment of a single arbitrator, to the decision of two arbitrators each\nappointed by the parties.ii. These two arbitrators shall appoint an Umpire, who presides at the meetings.The procedure during these meetings resembles that of a court of law. Each\nparty states his case, if necessary, with the help of a counsel and witnessesare examined.iii. If the two arbitrators do not agree on a decision, the matter is submittedbefore the Umpire, who makes his award.iv. Costs are awarded at the discretion of the arbitrator/ arbitrators or Umpiremaking the award.Disputes relating to question of liability are to be settled through litigation.**Example**If the insurers contend that the loss is not payable because it is not covered under\nthe policy, the matter has to be decided by a Court of Law. Again, if the insurers\nrefuse to pay the claim on the ground that the policy is void because it was\nobtained through fraudulent non-disclosure of material facts (breach of the legal\nduty of ‘utmost good faith’), the issue has to be resolved through litigation.**D.** **Other dispute resolution mechanisms**As per IRDAI regulations, all policies have to mention about the grievanceredressal mechanism available to the insured in the event the insured isdissatisfied with the service of the insurer for any reason.65In case of claims under personal lines of business, a dissatisfied insured can\napproach Insurance Ombudsman. The procedure is discussed in detail in Chapter\n9. The Office details of Insurance Ombudsman are given in the policy. Decision of\nOmbudsman is binding on Insurer but not on insured.Matters like the financial authority and the limitations of Ombudsmen are also\ndiscussed in detail in Chapter 9.**Test Yourself 1**Which of the following activities would not be categorised under professionalsettlement of claims?I. Seeking information relating to the cause of the loss\nII. Approaching the claim with a prejudice", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s64", "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_032", "metadata": {"file_size": 20885, "chunk_index": 32, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Disputes related to claims", "Arbitration", "Test Yourself 1", "Example", "Other dispute resolution mechanisms"]}}
{"chunk": "refuse to pay the claim on the ground that the policy is void because it was\nobtained through fraudulent non-disclosure of material facts (breach of the legal\nduty of ‘utmost good faith’), the issue has to be resolved through litigation.**D.** **Other dispute resolution mechanisms**As per IRDAI regulations, all policies have to mention about the grievanceredressal mechanism available to the insured in the event the insured isdissatisfied with the service of the insurer for any reason.65In case of claims under personal lines of business, a dissatisfied insured can\napproach Insurance Ombudsman. The procedure is discussed in detail in Chapter\n9. The Office details of Insurance Ombudsman are given in the policy. Decision of\nOmbudsman is binding on Insurer but not on insured.Matters like the financial authority and the limitations of Ombudsmen are also\ndiscussed in detail in Chapter 9.**Test Yourself 1**Which of the following activities would not be categorised under professionalsettlement of claims?I. Seeking information relating to the cause of the loss\nII. Approaching the claim with a prejudice\nIII. Ascertaining whether the loss was a result of an insured peril\nIV. Quantifying the amount payable under the claim**Answers to Test Yourself****Answer 1** - The correct option is II.**Key Terms**Turn Around TimeSalvageRecoveriesClaims Assessment66## CHAPTER C-07## DOCUMENTATION**Chapter Introduction**In the insurance industry we deal with a large number of forms and documents.\nThese are required for the purpose of bringing clarity in the relationship between\nthe insured and the insurer. In this chapter, we shall deal with the various\ndocuments that are involved at the proposal stage and their significance.**After learning this Chapter you will be able to:**Understand proposal stage documentation and its importanceFamiliarize with the purposes of the ProspectusUnderstand the importance of the Proposal formAppreciate Anti-Money Laundering (AML), Know Your Customer (KYC) norms\nand the important documents, commonly applicable for practically all\npoliciesImportance of Age Proof and acceptable documents.67**A.** **Prospectus**Prospectus is a proposal stage document. The prospectus is a formal legal\ndocument used by insurance companies that provides details about the product.\nIt can mean a document issued by the insurer in physical, electronic or any other\nformat to sell or promote insurance products. For this purpose, Insurance\nproducts would also include the add-on covers/ riders offered, if any. The\nprospectus is like an introductory document which helps the prospective\npolicyholder to get familiar with the company’s products.As per IRDAI’s (Protection of Policyholders’ Interests) Regulations, 2017 the\nprospectus should contain all facts that are necessary for a prospective\npolicyholder to make an informed decision regarding purchase of a policy. It\nshould contain the following for each plan of insurance:The Unique Identification Number (UIN) allotted by the Authority for the\nconcerned insurance product- The extent of insurance coverThe Scope of benefits/ entitlements – guaranteed and non-guaranteedWarranties, exclusions/ exceptions of the insurance cover with\nexplanations- The terms and conditions of the insurance coverDescription of the contingency or contingencies to be covered byinsuranceThe class or classes of lives or property eligible for insurance under the\nterms of such prospectusWhether the plan is participative or non-participativeThe allowable Add-on covers (also called Riders in Life insurance) on the productand their benefits are also stated.Other important information which a Prospectus includes:1. Any differences in covers and premium. E.g. for different age groups or fordifferent entry ages\n2. Renewal terms of the policy\n3. Terms of cancellation of policy under certain circumstances\n4. The details of any discounts or loading applicable under differentcircumstances5. The possibility of any revision or modification of the terms of the policyincluding the premium686. Any incentives to reward policyholders for early entry, continued renewals,favourable claims experience etc. with the same insurer.\n7. Prospectus shall necessarily contain the product UIN allotted by IRDAI\n8. IRDAI Regulations mandate that Prospectus shall contain a copy of Section41. This section prohibits any direct or indirect inducement to any person\nfor buying a new insurance, continuing or renewing any kind of insurance\nrelating to lives or property in India, including any rebate of the whole or", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t66", "section": "D.", "chunk_id": "Final IC 38 - WA_Composite  - English_033", "metadata": {"file_size": 20885, "chunk_index": 33, "chunk_tokens": 947, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus", "Test Yourself 1", "After learning this Chapter you will be able to:", "Other dispute resolution mechanisms"]}}
{"chunk": "terms of such prospectusWhether the plan is participative or non-participativeThe allowable Add-on covers (also called Riders in Life insurance) on the productand their benefits are also stated.Other important information which a Prospectus includes:1. Any differences in covers and premium. E.g. for different age groups or fordifferent entry ages\n2. Renewal terms of the policy\n3. Terms of cancellation of policy under certain circumstances\n4. The details of any discounts or loading applicable under differentcircumstances5. The possibility of any revision or modification of the terms of the policyincluding the premium686. Any incentives to reward policyholders for early entry, continued renewals,favourable claims experience etc. with the same insurer.\n7. Prospectus shall necessarily contain the product UIN allotted by IRDAI\n8. IRDAI Regulations mandate that Prospectus shall contain a copy of Section41. This section prohibits any direct or indirect inducement to any person\nfor buying a new insurance, continuing or renewing any kind of insurance\nrelating to lives or property in India, including any rebate of the whole or\npart of the commission payable on the policy.In particular the prospectus informs the proposer about the availability of facilityfor nomination.**Test Yourself 1**Which of the following it not usually part of the insurance prospectus?I. Name of OmbudsmanII. Date of Scope of benefitsIII. The EntitlementsIV. The Exceptions**B.** **Proposal Form**The insurance policy is a legal contract between the insurer and the policyholder.\nAs required for any contract, it has a proposal and its acceptance.The “Proposal form” is the application document that is used for making a\nproposal. It is a form to be filled in by the proposer in written or electronic or\nany other format approved by the Authority. It contains all information required\nby the insurer to decide whether to accept or reject to cover the risk. In case the\nrisk is accepted, the insurer can on the basis of this information, decide the rates,\nterms and conditions of the cover to be granted.The Principle of Utmost Good Faith and the Duty of Disclosure of material\ninformation begin with the Proposal Form for insurance. The proposer must\nprovide all information correctly and completely as this document becomes the\nbasis of granting insurance and any wrong or concealed information could resultin denial of claim.This duty to disclose continues beyond the proposal stage even after finalizing\nthe insurance contract. That is, any material change that happens anytime during\nthe period of insurance needs to be disclosed in non-life policies.Information collected from the Proposal Form during the course of solicitation of\nan insurance policy or issuance of an insurance policy are confidential and should69not be shared with any third party. Where a proposal deposit is refundable to a\nprospect for any reason, the same shall be refunded within 15 days from the date\nof underwriting decision on the proposal.As per IRDAI guidelines, it is the duty of the insurer to furnish to the insured, free\nof charge, within 30 days of the acceptance of a proposal, a copy of the proposal\nsubmitted by the Insured. The agent is expected to keep track of these timelines,\nfollow up internally and communicate with the prospect/ insured as and when\nrequired by way of customer service.**a)** **Proposal Form - Details**The proposal form is first stage of documentation through which the insuredinforms the insurer: Who he/ she is What kind of insurance he/ she needs Details of what he/ she wants to insure and For what period of time Details of the risk (E.g., for Life and Health insurances – details of healthor any ailments suffered are to be given) Details would include the monetary value proposed on the subject matterof insurance and all **material facts** connected with the proposedinsurance.In other words, the Proposal form collects details on the proposer’s identity such\nas name, father’s name, address and other identifying inputs. To determine the\ntrue identity of their customers, documents like address proof, PAN card,\nphotographs etc. are collected with the proposal.In respect of Life and Health insurances, details of the proposers’ family members\n(including parents) indicating their longevity, status of health and ailments\nsuffered by any of them are collected. Depending on the product, the medical\ndetails of the life proposed for insurance, personal characteristics and his/ her\npersonal history of disease may also be asked for.Details of the monetary value proposed on the subject matter of insurance and\nthe material facts connected with the proposed insurance would be collected for\nmany lines of insurance.The insurance advisor’s recommendations including the reasons for such\nrecommendation may also be part of the proposal form. There would be a\ndeclaration that the recommended policy’s details have been fully explained to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s5", "section": "Test Yourself 1", "chunk_id": "Final IC 38 - WA_Composite  - English_034", "metadata": {"file_size": 20885, "chunk_index": 34, "chunk_tokens": 1006, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 1", "Proposal Form - Details", "Proposal Form"]}}
{"chunk": "as name, father’s name, address and other identifying inputs. To determine the\ntrue identity of their customers, documents like address proof, PAN card,\nphotographs etc. are collected with the proposal.In respect of Life and Health insurances, details of the proposers’ family members\n(including parents) indicating their longevity, status of health and ailments\nsuffered by any of them are collected. Depending on the product, the medical\ndetails of the life proposed for insurance, personal characteristics and his/ her\npersonal history of disease may also be asked for.Details of the monetary value proposed on the subject matter of insurance and\nthe material facts connected with the proposed insurance would be collected for\nmany lines of insurance.The insurance advisor’s recommendations including the reasons for such\nrecommendation may also be part of the proposal form. There would be a\ndeclaration that the recommended policy’s details have been fully explained to\nthe proposer and the latter has acknowledged the same.70A Proposal form may have the following Sections starting with details of the\nInsurer, the Agent, the details of the product, the Sum Assured, the mode of\npayment of premiums etc. The form would also contain the signature of the\nproposer, as proof of the fact that he/ she has filled up the form and has\nsubmitted the proposal.Other details asked for are the Proposer’s name, date of birth, contact details,\nmarital status, nationality, names of parents and spouse, educational\nqualifications, habits and ID Proof, family particulars, employment details, bank\ndetails, name of nominee/ appointee; details of existing insurance and reasons\nfor opting for the policy.Depending on the Product, medical details of the life proposed for insurance,\npersonal characteristics and his/ her personal history of disease may be askedfor.Aspects related to the personal financial planning of the life being proposed\nincluding his/ her work span, projected income and expenses, as well as needs\nfor savings and investment, health, retirement and insurance may also be\nenquired about.The Agents recommendations including the reasons for such recommendation may\nalso be part of the proposal form. In compliance to the IRDAI regulations\nmentioned above, the Agent would make a declaration that the recommended\npolicy’s details have been fully explained to the proposer and the latter has\nacknowledged the same.Proposal forms are printed by insurers usually with the insurance company’s\nname, logo, address and the class/ type of insurance/ product that it is used for.\nIt is customary for insurance companies to add a printed note in the proposal\nform, though there is no standard format or practice in this regard.**b)** **Declaration in the Proposal Form**Insurance companies usually add a declaration at the end of the proposal form to\nbe signed by the proposer. This ensures that the insured takes the pain to fill up\nthe form accurately and has understood the facts given therein, so that at the\ntime of a claim there is no scope for disagreements on account of\nmisrepresentation of facts. Such declaration converts the common law principle\nof utmost good faith to a contractual duty of utmost good faith.71**Example**Examples of such declarations are:‘I/ We hereby declare and warrant that the above statements are true and\ncomplete in all respects and that there is no other information which is relevant\nto the application for insurance that has not been disclosed to you.’‘I/ We agree that this proposal and the declarations shall be the basis of the\ncontract between me/ us and (insurer’s name).’**Test Yourself 2**Which of the following is not relevant in respect of a Proposal form?I. Utmost Good-faith\nII. Amount expected to be claimed\nIII. Duty to Disclose material facts\nIV. Confidentiality of details given**Some examples of such notes are:**‘Non-disclosure of facts material to the assessment of the risk, providing\nmisleading information, fraud or non-co-operation by the insured will nullify the\ncover under the policy issued’.‘The company will not be on risk until the proposal has been accepted by the\nCompany and full premium paid’.**C.** **Know Your Customer (KYC) Norms****Anti-Money Laundering and KYC Norms**Money Laundering is the process by which criminals transfer funds to conceal the\ntrue origin and ownership of the proceeds of criminal activities. Money laundering\nprocesses are used by criminals to make funds obtained through illegal activities\nappear legal money. In the process, they try to cover up the criminal origin of\nthe money and make it appear valid.Criminals attempt to use financial services, including banks and insurance, to\nlaunder their money. They make transactions using false identities, for example,\nby purchasing some form of insurance and then managing to withdraw that money\nand then disappearing once their purpose is served. Governments across the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Declaration in the Proposal Form", "chunk_id": "Final IC 38 - WA_Composite  - English_035", "metadata": {"file_size": 20885, "chunk_index": 35, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Example", "Some examples of such notes are:", "Declaration in the Proposal Form", "Test Yourself 2", "Anti-Money Laundering and KYC Norms"]}}
{"chunk": "II. Amount expected to be claimed\nIII. Duty to Disclose material facts\nIV. Confidentiality of details given**Some examples of such notes are:**‘Non-disclosure of facts material to the assessment of the risk, providing\nmisleading information, fraud or non-co-operation by the insured will nullify the\ncover under the policy issued’.‘The company will not be on risk until the proposal has been accepted by the\nCompany and full premium paid’.**C.** **Know Your Customer (KYC) Norms****Anti-Money Laundering and KYC Norms**Money Laundering is the process by which criminals transfer funds to conceal the\ntrue origin and ownership of the proceeds of criminal activities. Money laundering\nprocesses are used by criminals to make funds obtained through illegal activities\nappear legal money. In the process, they try to cover up the criminal origin of\nthe money and make it appear valid.Criminals attempt to use financial services, including banks and insurance, to\nlaunder their money. They make transactions using false identities, for example,\nby purchasing some form of insurance and then managing to withdraw that money\nand then disappearing once their purpose is served. Governments across the\nworld, including India constantly try to prevent such money laundering attempts.72**Definition**Money laundering is the process of bringing illegal money into an economy by\nhiding its illegal origin so that it appears to be legally acquired. The Government\nof India launched the PMLA, 2002 to rein in money-laundering activities.The Prevention of Money Laundering Act (PMLA), 2002 came into effect from 2005\nto control money laundering activities and to provide for confiscation of property\nderived from money-laundering.The Anti-Money Laundering guidelines issued by IRDAI soon after have indicated\nsuitable measures to determine the true identity of customers requesting for\ninsurance services, reporting of suspicious transactions and proper record keeping\nof cases involving or suspected of involving money laundering. It is necessary to\nbe vigilant and ensure, right at the beginning of the contract that it is not\nintended to be a tool for money laundering of any sort.The Prevention of Money Laundering Act, 2002 (PMLA) was been brought into\nforce by the Government of India with effect from 1st July 2005. As per the Act,\nevery banking company, financial institution (which includes Insurance\ncompanies) and intermediary shall have to maintain a record of all the\ntransactions prescribed under the PMLA. Accordingly, IRDAI issued the Guidelines\non Anti-Money laundering/ Counter Financing of Terrorism (AML/ CFT) 31st March2006.Know your customer is the process used by a business to verify the identity of\ntheir clients. Banks and insurers are increasingly demanding their customers\nprovide detailed information to prevent identity theft, financial fraud and money\nlaundering. The objective of KYC guidelines is to prevent financial institutions\nfrom being used by criminal elements for money laundering activities.Insurers, hence, need to determine the true identity of their customers. Agents\nshould ensure that proposers submit the proposal form along with the following\nas part of the KYC procedure:i. Proof of identity – driving license, passport, voter ID card, PAN card,Photographs etc.ii. Proof of address – driving license, passport, telephone bill, electricity bill,bank passbook etc. Different documentation are prescribed for\nindividuals, corporates, partnership firms, trusts and foundationsiii. Income proof documents and financial status, esp. in case of high-valuetransactionsiv. Purpose of insurance contract73**a)** **Age Proof – for Personal Lines**While dealing with person related insurances like Life, Health, Personal Accident,\netc. Insurance companies use age as an important factor to determine the risk\nprofile of the insured. In life business, as age assumes great importance, life\ninsurers used to follow more detailed norms of age related documentation.[However, the Government, the Reserve Bank of India and the IRDAI are becoming\nstricter on following KYC norms.]An important part of the underwriting process is\nadmission of age, after verifying the proof of age.**i.** **Standard Age Proofs**There are two types of age proofs that insurers come across as evidence\nof age. Valid age proofs may be standard or non-standard. Standard **age proofs** are normally issued by a public authority, like birthcertificate issued by a municipality or other government body, school", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "h2006", "section": "Some examples of such notes are:", "chunk_id": "Final IC 38 - WA_Composite  - English_036", "metadata": {"file_size": 20885, "chunk_index": 36, "chunk_tokens": 938, "has_examples": true, "has_tables": false, "key_concepts": ["Definition", "Some examples of such notes are:", "Standard Age Proofs", "Age Proof – for Personal Lines", "Anti-Money Laundering and KYC Norms"]}}
{"chunk": "individuals, corporates, partnership firms, trusts and foundationsiii. Income proof documents and financial status, esp. in case of high-valuetransactionsiv. Purpose of insurance contract73**a)** **Age Proof – for Personal Lines**While dealing with person related insurances like Life, Health, Personal Accident,\netc. Insurance companies use age as an important factor to determine the risk\nprofile of the insured. In life business, as age assumes great importance, life\ninsurers used to follow more detailed norms of age related documentation.[However, the Government, the Reserve Bank of India and the IRDAI are becoming\nstricter on following KYC norms.]An important part of the underwriting process is\nadmission of age, after verifying the proof of age.**i.** **Standard Age Proofs**There are two types of age proofs that insurers come across as evidence\nof age. Valid age proofs may be standard or non-standard. Standard **age proofs** are normally issued by a public authority, like birthcertificate issued by a municipality or other government body, school\nleaving certificate, passport etc. Non-standard, when a standard age proof is not available (not to beaccepted readily)Some documents considered as standard age proofs are:i. School or college certificateii. Birth certificate extracted from municipal recordsiii. Passportiv. PAN cardv. Service registervi. Identity card in case of defence personnelvii. Marriage certificate issued by appropriate authority**ii.** **Non-standard age proofs**When standard age proofs like the above are not available, the life insurer\nmay allow submission of a non-standard age proof. Some documents\nconsidered as non-standard age proofs are:i. Horoscopeii. Ration cardiii. An affidavit by way of self-declarationiv. Certificate from village panchayat74**Test Yourself 3**Which of the following is not acceptable as valid Age Proof?I. Birth certificate extracted from municipal recordsII. Birth Certificate issued by Member of Legislative AssemblyIII. PassportIV. PAN Card**Answers to Test Yourself****Answer 1** -The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** – The correct option is II.**Summary**Prospectus is a formal legal document used by insurance companies that\nprovides details about the product.The application document used for making the proposal is commonly known\nas the ‘proposal form’.Some documents considered as standard age proofs include school or college\ncertificate, birth certificate extracted from municipal records etc.Insurers need to determine the true identity of their customers. KYC\ndocuments like address proof, PAN card and photographs etc. need to be\ncollected as a part of the KYC procedure.**Key Terms**1. Prospectus\n2. Proposal form\n3. Moral hazard\n4. Know your Customer (KYC)\n5. Age Proof\n6. Standard and non-standard age proofs\n7. Free-look period75#### CHAPTER C-0 8## CUSTOMER SERVICE**Chapter Introduction**In this chapter you will learn the importance of customer service. You will learn\nthe role of agents in providing service to customers. You will also learn how tocommunicate and relate with customers.After studying this chapter, you should be able to:Understand the importance of customer service1. Describe quality of service2. Examine the importance of service in the insurance industry3. Discuss the role of an insurance agent in providing good service4. Explain the process of communication5. Demonstrate the importance of non-verbal communication6. Recommend ethical behaviour76**A.** **Customer Service – General concepts****1.** **Why Customer Service?**Customers are the most important part of any industry and no enterprise can\nafford to treat them indifferently. The role of customer service and relationships\nis important in the service sector and more so for insurance.Every enterprise has a goal to delight its customers. This can be explained by\nexamining how buying insurance differs from buying a car.A car can be seen, touched, test driven and experienced, whereas the Insurance\nof the car is just a promise to pay if there is loss or damage to the car due to an\naccident. This promise is intangible – it cannot be seen, touched or experienced.While the customer of the car will be able to understand and experience the car\neasily, the customer of insurance can evaluate and experience the insurance\nprotection that he buys only when a loss happens and the insurance company\nsettles the claim. All customers do not get the chance to experience this. In\ninsurance, when such a situation arises, if the service exceeds expectations, the\ncustomer would be delighted.**2.** **Quality of service**It is necessary for insurance companies and their personnel, which includes their", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t73", "section": "Age Proof – for Personal Lines", "chunk_id": "Final IC 38 - WA_Composite  - English_037", "metadata": {"file_size": 20885, "chunk_index": 37, "chunk_tokens": 993, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Customer Service – General concepts"]}}
{"chunk": "afford to treat them indifferently. The role of customer service and relationships\nis important in the service sector and more so for insurance.Every enterprise has a goal to delight its customers. This can be explained by\nexamining how buying insurance differs from buying a car.A car can be seen, touched, test driven and experienced, whereas the Insurance\nof the car is just a promise to pay if there is loss or damage to the car due to an\naccident. This promise is intangible – it cannot be seen, touched or experienced.While the customer of the car will be able to understand and experience the car\neasily, the customer of insurance can evaluate and experience the insurance\nprotection that he buys only when a loss happens and the insurance company\nsettles the claim. All customers do not get the chance to experience this. In\ninsurance, when such a situation arises, if the service exceeds expectations, the\ncustomer would be delighted.**2.** **Quality of service**It is necessary for insurance companies and their personnel, which includes their\nagents, to render high quality service and delight the customer.**But what is high quality service? What are its attributes?**The well-known SERVQUAL approach to service quality of Zeithaml, Parasuraman\nand Berry highlights 5 major indicators of service quality:**a)** **Reliability** : The ability to perform the promised service dependably andaccurately is considered the most important indicator of good service. Itis the foundation on which trust is built.**b)** **Responsiveness** : Refers to the willingness and ability of service personnelto help customers and provide prompt response to the customer’s needs.\nIt may be measured by indicators like speed, accuracy, and attitude while\ngiving the service.**c)** **Assurance** : Refers to the knowledge, competence and courtesy displayedby an employee or agent in understanding and meeting the needs of a\ncustomer, thus conveying trust and confidence.**d)** **Empathy** : Empathy is described as the human touch. It is reflected in thecaring attitude and individualised attention provided to customers.77**e)** **Tangibles** : Represent physical environmental factors like location, layoutand cleanliness as also the sense of professionalism that a customer feels\nwhen contacting a service provider. First impressions last long.**3.** **Customer service and insurance**Leading sales producers in the insurance industry state that the secret of reaching\nthe top and staying there is in getting the patronage and support of a large\nnumber of existing clients with whose help the business gets built. These clients\nare a source of commissions from renewal of existing contracts. These can be a\nvaluable source for acquiring new customers.One great mantra of success in insurance selling is to be able to convert one’s\ncustomers into one’s clients. Customers are those who buy a product. Clients, on\nthe other hand are people with whom an agent relates for life, who continue to\nbuy from him/ her as also help and possibly, support him/ her in reaching out to\nand selling to other customers.Clients are built by working with deep commitment to serving one’s customers.\nTo understand how keeping a customer happy benefits the agent and the\ncompany, one should understand the concept of Customer’s Lifetime Value.**Customer Lifetime Value** may be defined as the sum of economic benefits that\ncan be derived from building a sound relationship with a customer over a long\nperiod of time.**Diagram 1:** **Customer Lifetime Value**An agent who renders service and builds close relationships with her customers,\nbuilds goodwill and brand value, which helps in expanding the business.**Test Yourself 1**What is meant by customer lifetime value?I. Sum of costs incurred while servicing the customer over his lifetime78II. Rank given to customer based on business generated\nIII. Sum of economic benefits that can be achieved by building a long termrelationship with the customerIV. Maximum insurance that can be attributed to the customer**4.** **Customer Relationships and Service**While customer service is a key element in creating satisfied and loyal customers,\nit is also necessary to build a strong relationship with them. A Customer’s views\nabout an insurer depends on the service and relationships experience the insureroffers.What goes to make a healthy relationship? At its heart, of course, there is trust.\nAt the same time, there are other elements, which reinforce and promote thattrust. Let us illustrate some of the elements.**Diagram 2:** **Elements for Trust**i. Every relationship begins with **attraction** : Attraction means being liked andbeing able to build a rapport with the customer, starting with creating a great\nfirst impression. Attraction is regarded the key to unlocking every heart.\nWithout it a relationship is hardly possible. A sales person cannot make much", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e78", "section": "Quality of service", "chunk_id": "Final IC 38 - WA_Composite  - English_038", "metadata": {"file_size": 20885, "chunk_index": 38, "chunk_tokens": 986, "has_examples": true, "has_tables": false, "key_concepts": ["Customer service and insurance", "Diagram 1:", "Test Yourself 1", "Customer Lifetime Value", "Diagram 2:"]}}
{"chunk": "builds goodwill and brand value, which helps in expanding the business.**Test Yourself 1**What is meant by customer lifetime value?I. Sum of costs incurred while servicing the customer over his lifetime78II. Rank given to customer based on business generated\nIII. Sum of economic benefits that can be achieved by building a long termrelationship with the customerIV. Maximum insurance that can be attributed to the customer**4.** **Customer Relationships and Service**While customer service is a key element in creating satisfied and loyal customers,\nit is also necessary to build a strong relationship with them. A Customer’s views\nabout an insurer depends on the service and relationships experience the insureroffers.What goes to make a healthy relationship? At its heart, of course, there is trust.\nAt the same time, there are other elements, which reinforce and promote thattrust. Let us illustrate some of the elements.**Diagram 2:** **Elements for Trust**i. Every relationship begins with **attraction** : Attraction means being liked andbeing able to build a rapport with the customer, starting with creating a great\nfirst impression. Attraction is regarded the key to unlocking every heart.\nWithout it a relationship is hardly possible. A sales person cannot make much\nheadway if he/ she is not liked by the customer.ii. The second element of a relationship is one’s presence, being there whenneedediii. **Communication:** Even if one is not fully present and unable to do full justiceto all the expectations of one’s customers, one can still **maintain a strong**\n**relationship by communicating in a manner that is assuring, full of empathy**\n**and conveying a sense of responsibility.**The above dimensions of communication call for discipline and skills. They\nultimately reflect how one thinks and sees.Companies emphasise on customer relationship management, as the cost of\nretaining a customer is far lower than acquiring a new customer. A customer79relation opportunity arises at various touch points e.g. while understanding\ncustomers insurance needs, explaining coverage’s, handing over forms etc.**B.** **Insurance agent’s role in providing customer service.**Let us now consider how an agent can render great service to the customer. It is\nimportant to realise that from the moment a customer gets contacted by a sales\nperson to the final point of settlement of a claim, the customer goes on a journey\nof experience that we shall call the ‘ **Customer Journey’** . The agent needs to\npartner with the customer through the entire duration of the contract, hand\nholding him/ her in each step of the journey to create memorable experiences atevery step.Let us look at some milestones in the journey and the role played at each step.**1.** **The Sale**It is said that selling is both an art and a science. It is a science because it calls\nfor a set process which, if consistently and properly followed, is likely to lead to\nsuccess. It is also an art in the sense that each sales person brings his or her\ndistinctive beliefs, style and personality into the process and the results depend\non what each person puts into the process.- **Prospecting:** The Sales Process begins with **Prospecting**, which literally\nmeans ‘searching’ for a prospective customer. Searching is important as ‘ _**One**_\n_**cannot find till one searches’,**_ it is the most important step in the process.\nAn agent typically begins with his or her natural market, made up of known\nand easily approachable people. The challenge lies in getting across to more\nnetworks of people who are outside one’s immediate circle – getting to know\nthem and be known by them.All the people one knows and approaches may not be proper candidates for\ninsurance or they may not be interested in buying. It is thus necessary to\n**qualify** them so that one targets only those who are likely to buy insurance.\nThe prospecting process becomes successful only when an agent is able to\nbuild strong relationships with the prospect. The first task of any sales person\nis thus to **sell trust and build confidence.**_**Invite for an Interview:**_ While personal relationships are the foundation on\nwhich insurance business is built, it is necessary to convert the goodwill one\nearns into a sale. This begins when the sales person sets up a formal\nappointment for a detailed sales interview. This step is critical for establishing\none’s professional credentials and also to separate business from casualdiscussions.80- _**Determining the needs and recommending the Solution:**_ The heart of the\nSales Interview is the steps wherein the sales agent determines and makes\nthe prospective customer aware about the exact needs for which insurance is\na solution. A master sales person is distinguished by his/ her skill in guiding a\nprospect, through asking gentle questions, to understand the gaps in", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e78", "section": "Test Yourself 1", "chunk_id": "Final IC 38 - WA_Composite  - English_039", "metadata": {"file_size": 20885, "chunk_index": 39, "chunk_tokens": 995, "has_examples": true, "has_tables": false, "key_concepts": ["Customer Journey’", "Prospecting:", "Test Yourself 1", "Communication:", "Customer Relationships and Service"]}}
{"chunk": "them and be known by them.All the people one knows and approaches may not be proper candidates for\ninsurance or they may not be interested in buying. It is thus necessary to\n**qualify** them so that one targets only those who are likely to buy insurance.\nThe prospecting process becomes successful only when an agent is able to\nbuild strong relationships with the prospect. The first task of any sales person\nis thus to **sell trust and build confidence.**_**Invite for an Interview:**_ While personal relationships are the foundation on\nwhich insurance business is built, it is necessary to convert the goodwill one\nearns into a sale. This begins when the sales person sets up a formal\nappointment for a detailed sales interview. This step is critical for establishing\none’s professional credentials and also to separate business from casualdiscussions.80- _**Determining the needs and recommending the Solution:**_ The heart of the\nSales Interview is the steps wherein the sales agent determines and makes\nthe prospective customer aware about the exact needs for which insurance is\na solution. A master sales person is distinguished by his/ her skill in guiding a\nprospect, through asking gentle questions, to understand the gaps in\nprotection that give rise to the needs for insurance.The Agent has the responsibility to provide _Best Advice_ to the Prospect about the\nright kind of insurance solutions to meet his/ her needs. Firstly one must\ndetermine and make the prospective customer aware about the exact needs for\nwhich insurance is a solution. This also includes giving proper advice on the\namount of insurance to be purchased. For example the amount of life insurance\nto be purchased by an individual needs to be linked to his/ her income and paying\ncapacity.It is also important to keep a basic percept in mind, especially when buying nonlife insurance: Do not recommend insuring where the risk can be managedotherwise.Whether insurance is needed or not, depends on the circumstances. If the\npremium payments are high compared to the loss involved, it may be advisable\nto just bear the risk. On the other hand, if the loss consequences of a risk are\nlikely to be severe, it is wise to insure against it.**Example**To a homeowner living in a flood prone area, purchasing an add-on cover against\nfloods would prove to be helpful. On the other hand, if the home owner owns a\nhome at a place where the risk of floods is negligible it may not be necessary toobtain such cover.Many customers may not be much concerned about getting maximum insurance\nper rupee spent, but would be interested in **reducing the cost of handling risk** .\nThe concern would be thus on identifying those risks which a customer cannotretain and hence must be insured.The agent becomes successful when he/ she renders best advice. The agent needs\nto constantly ask himself/ herself about his/ her role vis-à-vis the customer. He/\nshe should go to the customer not just to get a sale but to relate to the customer\nas a coach and partner who can help him/ her to manage his/ her risks more\neffectively?_**Handling Objections and Closing the Sale:**_ It may not be enough to give best\nadvice and recommendations to a customer about the right products to buy.\nOne also needs to persuade him/ her to take the decision to buy. Quite often81the customer may have a number of questions and may raise objections that\nneed to be addressed before he/ she decides to commit to the purchase.\nWhilst handling these objections, it is vitally important to understand that the\nobjections being voiced may reflect underlying concerns that need to beidentified and resolved.In sum, the role of an insurance agent is more than that of a mere sales person.\nHe/ she also **needs to be a risk assessor, underwriter, risk management**\n**counsellor, designer of customised solutions and a relationship builder** (who\nthrives on building trust and long-term relationships), all rolled into one.**2.** **The Proposal stage**The agent has to support the customer in filling out the proposal for insurance.\nThe insured is required to take responsibility for the statements made therein.\nThe salient aspects of a proposal form have been discussed in a later chapter.The agent should explain and clarify to the proposer the details to be filled as\nanswers to each of the questions in the proposal form. A failure to give proper\nand complete information can jeopardise the customer’s claim.Sometimes, if additional information is required to complete the policy, the\ncompany may inform the customer directly or through the agent/ advisor. The\nagent should help the customer in completing such formalities, explaining why\nthey are necessary.IRDAI (Issuance of e-Insurance Policies) Regulations, 2016, provide for e – Proposal\nforms that are similar to the physical proposal form and having a provision to the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "n81", "section": "Invite for an Interview:", "chunk_id": "Final IC 38 - WA_Composite  - English_040", "metadata": {"file_size": 20885, "chunk_index": 40, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Handling Objections and Closing the Sale:", "The Proposal stage", "Invite for an Interview:", "Example"]}}
{"chunk": "He/ she also **needs to be a risk assessor, underwriter, risk management**\n**counsellor, designer of customised solutions and a relationship builder** (who\nthrives on building trust and long-term relationships), all rolled into one.**2.** **The Proposal stage**The agent has to support the customer in filling out the proposal for insurance.\nThe insured is required to take responsibility for the statements made therein.\nThe salient aspects of a proposal form have been discussed in a later chapter.The agent should explain and clarify to the proposer the details to be filled as\nanswers to each of the questions in the proposal form. A failure to give proper\nand complete information can jeopardise the customer’s claim.Sometimes, if additional information is required to complete the policy, the\ncompany may inform the customer directly or through the agent/ advisor. The\nagent should help the customer in completing such formalities, explaining why\nthey are necessary.IRDAI (Issuance of e-Insurance Policies) Regulations, 2016, provide for e – Proposal\nforms that are similar to the physical proposal form and having a provision to the\nProspect to give his consent to the proposal, which can be validated by one time\npassword (mobile phone OTP).**3.** **Acceptance stage****a)** **Cover notes/ Certificates of Insurance**After underwriting is completed it may take some time before the policy is issued.\nPending the preparation of the policy or when the negotiations for insurance are\nin progress and it is necessary to provide cover on a provisional basis or when\nthe premises are being inspected for determining the actual rate applicable,\na cover note is issued to confirm protection under the policy.As Cover notes and Certificates of Insurance are used predominantly in marine\nand motor classes of business, cover note is discussed in detail under theGeneral Insurance Section.It is the agent’s responsibility to ensure that the cover note is issued by the\ncompany, where applicable, to the insured. Promptness in this regard82communicates to the client that his/ her interests are safe in the hands of theagent and the company.**b)** **Policy Document**The policy is a formal document which provides an evidence of the contract\nof insurance. This document has to be stamped in accordance with the\nprovisions of the Indian Stamp Act, 1899. The insurer is duty bound to give\nthe policy document to the insured.**4.** **Premium Payment****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance.A good agent takes active interest in ensuring that the insured pays the\npremium for taking or continuing or renewing his policy and the customer is\nmade aware of various options available for payment of premium.**5.** **Method of payment of premium**The premium to be paid by any person proposing to take an insurance policy or\nby the policyholder to an insurer may be made in any one or more of the followingmethods:a) Cashb) Any recognised banking negotiable instrument such as cheques, demanddrafts, pay order, banker’s cheques drawn on any schedule bank in India;c) Postal money order;d) Credit or debit cards;e) Bank guarantee or cash deposit;f) Internet;g) E-transferh) Direct credits via standing instruction of proposer or the policyholder orthe life insured through bank transfers;i) Any other method or payment as may be approved by the Authority fromtime to time;As per IRDA Regulations, in case the proposer/ policyholder opts for premium\npayment through net banking or credit/ debit card, the payment must be\nmade only through net banking account or credit/ debit card issued on the\nname of such proposer/ policyholder.83**6.** **Service after issuance of Policy Document and Receipt for Premium**Once the premium is paid by the customer, the insurer is bound to issue a\nreceipt. A receipt is also to be issued even in case the premium is paid inadvance.The agent may approach the insured and enquire whether the Policy\nDocument has been received from the insurance company. It presents a great\nopportunity for the agent to connect with the customer. The agent will be\nable to clear any doubts and also explain the various policy provisions and\npolicy holders’ rights and privileges. This demonstrates commitment to the\ncustomer and provides an opportunity to pledge continued support and\nservice. One should also inform the customer about the free-look period\nprovision, during which period, the policy can be returned and refund of\npremium obtained.If the policy being purchased is an Electronic insurance policy, the agent can\nhelp the Customer to open an e-Insurance Account (e-I-A), through the\nRegistered Insurance Repository.This also paves the way for the next step which is to ask the customer for the\nnames and particulars of other individuals he/ she knows, who can possibly", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d82", "section": "The Proposal stage", "chunk_id": "Final IC 38 - WA_Composite  - English_041", "metadata": {"file_size": 20885, "chunk_index": 41, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Document", "Premium", "Acceptance stage", "Cover notes/ Certificates of Insurance", "Premium Payment"]}}
{"chunk": "name of such proposer/ policyholder.83**6.** **Service after issuance of Policy Document and Receipt for Premium**Once the premium is paid by the customer, the insurer is bound to issue a\nreceipt. A receipt is also to be issued even in case the premium is paid inadvance.The agent may approach the insured and enquire whether the Policy\nDocument has been received from the insurance company. It presents a great\nopportunity for the agent to connect with the customer. The agent will be\nable to clear any doubts and also explain the various policy provisions and\npolicy holders’ rights and privileges. This demonstrates commitment to the\ncustomer and provides an opportunity to pledge continued support and\nservice. One should also inform the customer about the free-look period\nprovision, during which period, the policy can be returned and refund of\npremium obtained.If the policy being purchased is an Electronic insurance policy, the agent can\nhelp the Customer to open an e-Insurance Account (e-I-A), through the\nRegistered Insurance Repository.This also paves the way for the next step which is to ask the customer for the\nnames and particulars of other individuals he/ she knows, who can possibly\nbenefit from the agent’s services. It would be even better if the client itself\ncontacted these people and introduced the agent to them.**7.** **Policy Renewal**Most general Insurance policies have to be renewed each year. For general\ninsurance policies, at the time of each renewal, the customer has a choice to\ncontinue insuring with the same company or switch to another company. In\ncase of Life Insurance, a policy would continue to be in force when the\ncustomer pays the premium at regular intervals based on premium payment\nterm. This does not apply to one-time payments.General Insurers usually send a Renewal Notice, well in advance of the date\nof expiry of the premium paying period, inviting renewal of the policy.The customer’s choice to renew or continue with the policy may often depend\non the trust and goodwill created by the agent and company and the agent\nneeds to be in touch to remind the customer about the renewal or continuity\nof policy well before the due date.High producer agents constantly keep in touch with their clients, and win their\ntrust and loyalty through various acts of service and relationships – like84greeting their clients on various occasions like festivals or family events and\nbeing with them to share their joys and sorrows.**8.** **The claim stage**The crucial test comes at the time of claim settlement. The agent must ensure\nthat the incident giving rise to the claim is immediately informed to the\ninsurer and that the customer carefully follows all the formalities. The agent\nmay also assist in all the investigations that may need to be done to assess\nthe loss. A good agent assists the customers or his representatives in fulfilling\nthe claim lodgement formalities quickly, correctly and completely.**Test Yourself 2**Identify the scenario where a debate on the need for insurance is not required.I. Property insurance\nII. Business liability insurance\nIII. Motor insurance for third party liabilityIV. Fire insurance85**C.** **Communication skills in customer service**An agent needs to possess soft skills for effective performance in the work place.S **oft skills relate to one’s ability to interact effectively with others, both at**\n**work and outside. Communication skills are the most important of these soft**\n**skills.****1.** **Process of communication**What is communication?All communications require a sender, who sends a message, and a person who\nreceived that message. The process is complete once the receiver has understood\nthe message of the sender.**Diagram 3:** **Forms of communication**Communication may be face to face, over the phone, or by mail or internet. It\nmay be formal or informal. Whatever the content or form of the message or the\nmedia used, the effectiveness of communication depends on whether or not the\nrecipient has understood what was sought to be communicated.Since an insurance policy is essentially a promise, it is important that what is\npromised by the insurer is clearly understood by the insured. The agent as an\nintermediary has to not only provide complete, accurate and unambiguous\naccount of the terms of the insurance to the customer, but also seek and clarify\ndoubts or queries that a customer may have.**2.** **Barriers to effective communication**Different kinds of barriers to effective communication can arise at each step in\nthe above process, due to which communication can get distorted. The challenge", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e84", "section": "Service after issuance of Policy Document and Receipt for Premium", "chunk_id": "Final IC 38 - WA_Composite  - English_042", "metadata": {"file_size": 20885, "chunk_index": 42, "chunk_tokens": 939, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Renewal", "Barriers to effective communication", "Communication skills in customer service", "Diagram 3:", "Forms of communication"]}}
{"chunk": "**work and outside. Communication skills are the most important of these soft**\n**skills.****1.** **Process of communication**What is communication?All communications require a sender, who sends a message, and a person who\nreceived that message. The process is complete once the receiver has understood\nthe message of the sender.**Diagram 3:** **Forms of communication**Communication may be face to face, over the phone, or by mail or internet. It\nmay be formal or informal. Whatever the content or form of the message or the\nmedia used, the effectiveness of communication depends on whether or not the\nrecipient has understood what was sought to be communicated.Since an insurance policy is essentially a promise, it is important that what is\npromised by the insurer is clearly understood by the insured. The agent as an\nintermediary has to not only provide complete, accurate and unambiguous\naccount of the terms of the insurance to the customer, but also seek and clarify\ndoubts or queries that a customer may have.**2.** **Barriers to effective communication**Different kinds of barriers to effective communication can arise at each step in\nthe above process, due to which communication can get distorted. The challenge\nis to visualize, understand and remove the barriers.**Test Yourself 3**What does not go on to make a healthy relationship?I. AttractionII. TrustIII. CommunicationIV. Dislike86**D.** **Non-verbal Communication**Let us now look at some concepts that the agent needs to understand.**Important****1.** **Making a great first impression**The prospect judges an agent based on his appearance, body language,\nmannerisms, dress and speech. As attraction is the first pillar of a relationship\nand first impressions last long, some tips for making a good first impression are\ngiven below:**i.** **Be on time always** . Plan to arrive a few minutes early, allowing flexibilityfor all kinds of possible delays.**ii.** **Present yourself appropriately** . The appearance should to create the right first impression\n The dress must be appropriate for the meeting or occasion\n The look must be clean and tidy – with good haircut and shave, clean andtidy clothes, neat and tidy make up**iii.** **A warm, confident and winning smile** puts a person and his/ heraudience immediately at ease with one another.**iv.** **Being open, confident and positive** body language must project confidence and self-assurance stand tall, smile, make eye contact, greet with a firm handshake remain positive even in the face of some criticism or when the meetingis not going as well as expected**v.** **Interest in the other person** - The most important thing is about beinggenuinely interested in the other person. Take some time to find out about the customer as a person Be caring and attentive to what he or she says Be totally present and available to your customer Not engaging in one’s mobile phone during the interview?**2.** **Body language**Body language refers to movements, gestures, facial expressions. The way we\ntalk, walk, sit and stand, all says something about us, and what is happeninginside us.87It is often said that people listen to only a small percentage of what is actually\nsaid. What we don’t say may speak a lot more about us in a louder way. Obviously,\none needs to be very careful about one’s body language.**a)** **Confidence**Here are a few tips about how to appear confident and self-assured, giving\nthe impression of someone to be seriously listened to: Posture – standing tall with shoulders held back. Solid eye contact - with a \"smiling\" face Purposeful and deliberate gestures**b)** **Trust** Quite often, a sales person’s words fall on deaf ears because the audiencedoes not trust him/ her – his/ her body language does not give the\nassurance that he/ she is sincere about what he/ she says**3.** **Listening skills**The third set of communication skills that one needs to be aware about andcultivate are listening skills. These follow from a well-known principle of personal", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e86", "section": "Process of communication", "chunk_id": "Final IC 38 - WA_Composite  - English_043", "metadata": {"file_size": 20885, "chunk_index": 43, "chunk_tokens": 904, "has_examples": false, "has_tables": false, "key_concepts": ["Being open, confident and positive", "Making a great first impression", "A warm, confident and winning smile", "Non-verbal Communication", "Barriers to effective communication"]}}
{"chunk": "talk, walk, sit and stand, all says something about us, and what is happeninginside us.87It is often said that people listen to only a small percentage of what is actually\nsaid. What we don’t say may speak a lot more about us in a louder way. Obviously,\none needs to be very careful about one’s body language.**a)** **Confidence**Here are a few tips about how to appear confident and self-assured, giving\nthe impression of someone to be seriously listened to: Posture – standing tall with shoulders held back. Solid eye contact - with a \"smiling\" face Purposeful and deliberate gestures**b)** **Trust** Quite often, a sales person’s words fall on deaf ears because the audiencedoes not trust him/ her – his/ her body language does not give the\nassurance that he/ she is sincere about what he/ she says**3.** **Listening skills**The third set of communication skills that one needs to be aware about andcultivate are listening skills. These follow from a well-known principle of personal\neffectiveness – ‘first try to understand before being understood’.Active listening calls for: Allowing the speaker to finish each point before asking questions Not interrupting the speaker with any counter arguments This may require that we reflect on the message and ask questions toclarify what was said Another way to provide feedback is to summarize the speaker’s words andrepeat it back to him or her periodically or at the end of the conversation.**Let us look at the skills required for active listening:****a)** **Demonstrating that one is listening:** For instance one may: Give an occasional nod and smile Adopt a posture that is open and draws out the other to speak freely Have small verbal comments like \"I understand\", \"I see\", \"yes\" and \"uh\".88**b)** **Paying attention**One needs to give the speaker one’s undivided attention, and acknowledge\nhim. Some aspects of paying attention are as follows:Look at the speaker directly Put aside distracting thoughts Don't mentally prepare a rebuttal Avoid all external distractions [for instance, keep your mobile on silentmode] \"Listen\" to the speaker's body language**c)** **Removing filters:**A lot of what we hear may get distorted by one’s personal filters, like the\nassumptions, judgments, and beliefs one carries.**Not being judgemental: If the listener is judgemental,** even if he hears what\nthe speaker is saying, he will understand only according to his biased\ninterpretation.**d)** **Empathetic listening:****Empathy implies hearing and listening patiently, and with full attention,**\n**to what the other person has to say, even when one does not agree with**\n**it. It is important to show the speaker acceptance, not necessarily****agreement.****e)** **Responding appropriately:**Active listening implies much more than just hearing what a speaker says. The\ncommunication can be completed only when the listener responds in some\nway, through word or action. Certain rules need to be followed for ensuring\nthat the speaker is not put down but treated with respect.These include: Being candid, open, and honest in your response Asserting one’s opinions respectfully Treating another person in a way, one would like oneself to be treated**Example****Asking for clarity** – “I realize that we have not been able to clear about the\nbenefits of some of our health plans. Could you help us by asking us your doubts?”89**Paraphrasing the speaker’s exact words** – “So, you are saying that ‘our health\nplans are not attractive enough’ – Have I understood you correctly?”**Test Yourself 4**Which among the following is not an element of active listening?I. Paying good attention\nII. Being extremely judgemental\nIII. Empathetic listening\nIV. Responding appropriately**E.** **Ethical Behavior**In recent years, there are many reports of improper conduct, and serious concerns\nhave been raised about ethical behaviour in business causing betrayal of trust.This has led to discussions about concepts like accountability, corporate\ngovernance, and treating customers fairly in insurance, which form part of“Ethics” in business.It is not wrong to look after one’s interests. But it is wrong to do so at the cost ofthe interests of others. Unethical behaviour arises when there is no concern forothers and there is high concern for oneself.**Insurance is a business of trust** . Breach of trust amounts to cheating. When\nwrong information is given to prospects tempting them to buy insurance, or if the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Confidence", "chunk_id": "Final IC 38 - WA_Composite  - English_044", "metadata": {"file_size": 20885, "chunk_index": 44, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Paying attention", "Ethical Behavior", "Paraphrasing the speaker’s exact words", "Removing filters:", "Test Yourself 4"]}}
{"chunk": "benefits of some of our health plans. Could you help us by asking us your doubts?”89**Paraphrasing the speaker’s exact words** – “So, you are saying that ‘our health\nplans are not attractive enough’ – Have I understood you correctly?”**Test Yourself 4**Which among the following is not an element of active listening?I. Paying good attention\nII. Being extremely judgemental\nIII. Empathetic listening\nIV. Responding appropriately**E.** **Ethical Behavior**In recent years, there are many reports of improper conduct, and serious concerns\nhave been raised about ethical behaviour in business causing betrayal of trust.This has led to discussions about concepts like accountability, corporate\ngovernance, and treating customers fairly in insurance, which form part of“Ethics” in business.It is not wrong to look after one’s interests. But it is wrong to do so at the cost ofthe interests of others. Unethical behaviour arises when there is no concern forothers and there is high concern for oneself.**Insurance is a business of trust** . Breach of trust amounts to cheating. When\nwrong information is given to prospects tempting them to buy insurance, or if the\ninsurance given does not cater to the specific needs of the prospect, things gowrong.The Code of Ethics spelt out by the IRDAI in various regulations are directed\ntowards ethical behaviour. It is not enough just to know the code. What is more\nimportant for the insurers and their representatives is to always keep the\ninterests of the prospect/ policy holder as primary.**Characteristics:** Some characteristics of ethical behaviour are:a) Placing the best interests of the client above one’s own direct or indirectbenefitsb) Holding in strictest confidence and considering as privileged, all business andpersonal information pertaining to client’s affairsc) Making full and adequate disclosure of all facts to enable clients makeinformed decisionsThere could be a likelihood of ethics being compromised in the followingsituations:90a) Having to choose between two plans, one giving much less premium orcommission than the otherb) Temptation to recommend discontinuance of an existing policy and taking outa new onec) Being aware of circumstances that, if known to the insurer, could adverselyaffect the interests of the client or the beneficiaries of the claim.**Test Yourself 5**Which among the following is not a characteristic of ethical behaviour?\nI. Making adequate disclosures to enable the clients to make an informeddecision\nII. Maintaining confidentiality of client’s business and personal information\nIII. Placing self-interest ahead of client’s interests\nIV. Placing client’s interest ahead of self interest**Summary**a) The role of customer service and relationships is far more critical in the caseof insurance than in other products.b) Five major indicators of service quality include reliability, responsiveness,assurance, empathy and tangibles.c) Customer lifetime value may be defined as the sum of economic benefits thatcan be derived from building a sound relationship with a customer over a long\nperiod of time.d) The role of an insurance agent in the area of customer service is absolutelycritical.e) Active listening involves paying attention, providing feedback and respondingappropriately.f) Ethical behaviour involves placing the customer’s interest before one’s own.**Key terms**a) Quality of serviceb) Empathyc) Body languaged) Active listening91e) Ethical behavior**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is III.92## CHAPTER C-09## GRIEVANCE REDRESSAL MECHANISM**Chapter Introduction**Insurance industry is essentially a service industry where customer expectations\nare constantly rising. There is dissatisfaction with the standard of services.\nDespite continuous product innovation and significant improvement in the level\nof customer service, aided by use of modern technology, the industry suffers\nbadly in terms of customer dissatisfaction and poor image. The Government and\nthe regulator have taken a number of initiatives to improve the situation.IRDAI Regulations on Protection of Policyholders’ Interests 2017 mandate that\nevery Insurer shall have their own board approved policy for protection of\npolicyholders’ interests which shall includei. Service parameters including turnaround times for various servicesrendered.\nii. Procedure for speedy resolution of complaints.**Learning Outcomes**93**A.** **Grievance Redressal**The time for high priority action is when the customer has a complaint.\nRemember that in the case of a complaint, the customer is angry due to a failure\nof service. This is only a part of the story.Many times, Customers get upset because they understand the situation wrongly.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "g91", "section": "Paraphrasing the speaker’s exact words", "chunk_id": "Final IC 38 - WA_Composite  - English_045", "metadata": {"file_size": 20885, "chunk_index": 45, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Grievance Redressal", "Ethical Behavior", "Paraphrasing the speaker’s exact words"]}}
{"chunk": "**Answer 5** - The correct option is III.92## CHAPTER C-09## GRIEVANCE REDRESSAL MECHANISM**Chapter Introduction**Insurance industry is essentially a service industry where customer expectations\nare constantly rising. There is dissatisfaction with the standard of services.\nDespite continuous product innovation and significant improvement in the level\nof customer service, aided by use of modern technology, the industry suffers\nbadly in terms of customer dissatisfaction and poor image. The Government and\nthe regulator have taken a number of initiatives to improve the situation.IRDAI Regulations on Protection of Policyholders’ Interests 2017 mandate that\nevery Insurer shall have their own board approved policy for protection of\npolicyholders’ interests which shall includei. Service parameters including turnaround times for various servicesrendered.\nii. Procedure for speedy resolution of complaints.**Learning Outcomes**93**A.** **Grievance Redressal**The time for high priority action is when the customer has a complaint.\nRemember that in the case of a complaint, the customer is angry due to a failure\nof service. This is only a part of the story.Many times, Customers get upset because they understand the situation wrongly.\nAll service failures causes two types of feelings:1. A feeling that the insurer was unfair (a feeling of being cheated)2. A feeling of hurt ego (being made to look and feel small)The customers want to feel valued and human touch is critical in this situation.As a professional insurance advisor first of all, the agent would not allow such a\ncomplaint situation to happen. He would take up the matter with the appropriate\nofficer of the company.A complaint is a crucial “ **moment of truth** ” in the customer relationship. If the\nagent/ company can use the situation to clarify the position, the situation can\nactually improve customer loyalty.**Remember, no one else in the company has ownership of the client’s problems**\n**as much as an agent does** .Complaints/ grievances give us the chance to show how much we care for the\ncustomer’s interests. They are in fact the pillars on which an insurance agent\nbuilds goodwill and business. **Word of mouth publicity (Good/ Bad) plays a**\n**significant role in selling and servicing** .The procedure for grievance redressal is detailed at the end of every policy\ndocument. This should be bought to the notice of customers. As per the\nregulations, any grievance of a policy holder should be first referred to the\nInsurer’s Grievance Cell. If it is not satisfactorily resolved, the complainant may\napproach the Regulator through the Integrated Grievance Management System.**B.** **Integrated Grievance Management System (IGMS)**Each Insurer has its own grievance redressal mechanism. All operating/\ncontrolling/ corporate offices of Insurance companies have Grievance Redressal\nOfficers. A policyholder can approach them directly for any grievance.IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as an online consumer complaints registration system. Insurers have to\nregister all grievances that they receive in the system which is integrated with\nIGMS of IRDAI. IGMS helps IRDAI in monitoring grievance redress in the industry\nand also acts as a central repository of insurance grievance data.94Policyholders can approach the respective insurer first for any grievance. If he\ndoes not receive any response from the insurer or if the response/ resolution\nreceived is not to his satisfaction, he can approach the Regulator under the IGMS.\nThe complaint registration process involves two steps – (i) Registering oneself by\nentering one’s policy details and (ii) Registering one’s complaints and viewing the\nstatus of the complaints. Complaints are then forwarded to the respective\ninsurance companies and IRDAI facilitates disposal of Grievances.IGMS tracks complaints and the time taken for their redressal. The complaints\ncan be registered at the following URL:\nhttp://www.policyholder.gov.in/Integrated_ Grievance_Management.aspx**C.** **Consumer Protection****The Consumer Protection Act, 2019:** This original Act of 1986 was passed _“to_\n_provide for better protection of the interest of consumers and to make provision_\n_for the establishment of consumer councils and other authorities for the_\n_settlement of consumer’s disputes”_ . The Act was amended by the Consumer\nProtection (Amendment) Act, 2002 and later on 2019.Some definitions provided\nin the Act are as follows:“ **Service** ” means service of any description which is made available to potential\nusers and includes the provision of facilities in connection with banking,\nfinancing, **insurance**, transport, processing, supply of electrical or other energy,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "C-09", "section": "Answer 5", "chunk_id": "Final IC 38 - WA_Composite  - English_046", "metadata": {"file_size": 20885, "chunk_index": 46, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Grievance Redressal", "Word of mouth publicity (Good/ Bad) plays a", "Chapter Introduction", "Integrated Grievance Management System (IGMS)", "Answer 5"]}}
{"chunk": "The complaint registration process involves two steps – (i) Registering oneself by\nentering one’s policy details and (ii) Registering one’s complaints and viewing the\nstatus of the complaints. Complaints are then forwarded to the respective\ninsurance companies and IRDAI facilitates disposal of Grievances.IGMS tracks complaints and the time taken for their redressal. The complaints\ncan be registered at the following URL:\nhttp://www.policyholder.gov.in/Integrated_ Grievance_Management.aspx**C.** **Consumer Protection****The Consumer Protection Act, 2019:** This original Act of 1986 was passed _“to_\n_provide for better protection of the interest of consumers and to make provision_\n_for the establishment of consumer councils and other authorities for the_\n_settlement of consumer’s disputes”_ . The Act was amended by the Consumer\nProtection (Amendment) Act, 2002 and later on 2019.Some definitions provided\nin the Act are as follows:“ **Service** ” means service of any description which is made available to potential\nusers and includes the provision of facilities in connection with banking,\nfinancing, **insurance**, transport, processing, supply of electrical or other energy,\nboard or lodging or both, housing construction, entertainment, etc. **Insurance is**\n**included as a service.** However, “Service” does not include the rendering of any\nservice free of charge or under a contract of personal service.“ **Consumer** ” means any person who Buys goods for a consideration. It includes any user of such goods. (It does notinclude a person who obtains such goods for resale or for any commercial\npurpose) or\n Hires or avails of any services for a consideration. It includes the beneficiaryof such services. (It does not include any person who avails of such service for\nany commercial purpose.)“ **Defect** ” means any fault, imperfection, shortcoming, inadequacy in the quality,\nnature and manner of performance which is required to be maintained by or under\nany law or has been undertaken to be performed by a person in pursuance of a\ncontract or otherwise in relation to any service.**“Complaint”** means any allegation in writing made by a complainant that: an unfair trade practice or restrictive trade practice has been adopted\n the goods bought by him suffer from one or more defects\n the services hired or availed of by him suffer from deficiency in any respect\n price charged is in excess of that fixed by law or displayed on package\n goods which will be hazardous to life and safety when used are being offeredfor sale to the public in contravention of the provisions of any law requiring95trader to display information in regard to the contents, manner and effect of\nuse of such goods.“ **Consumer dispute** ” means a dispute where the person against whom a\ncomplaint has been made, denies and disputes the allegations contained in the\ncomplaint.**D.** **Consumer** **disputes redressal agencies**Consumer disputes redressal agencies are established at district, state and\nnational levels.**i.** **District Consumer Disputes Redressal Commission** The District Consumer Disputes Redressal Commission (District\nCommission), has jurisdiction to entertain complaints, where value of the\ngoods or services does not exceed Rs. 1 crore. The District Commission has\nthe powers of a civil court.**ii.** **State Consumer Disputes Redressal Commission** The State Consumer Disputes Redressal Commission (State Commission) hasoriginal jurisdiction to entertain complaints where the value of goods/\nservice and compensation, if any claimed exceeds Rs. 1 crore but does not\nexceed Rs.10 crores.\n It also has appellate and supervisory jurisdiction to entertain appeals fromthe District Commission.\n Other powers and authority are similar to those of the District Commission.**iii.** **National Consumer Disputes Redressal Commission** The National Consumer Disputes Redressal Commission (NationalCommission) is the final authority established under the Act.\n It has original jurisdiction to entertain disputes, where goods/ services andthe compensation claimed exceeds Rs.10 crores.\n It has appellate as well as supervisory jurisdiction to hear the appeals fromthe orders passed by the State Commission.\nEvery order made by a District Commission, State Commission or the National\nCommission shall be enforced by it in the same manner as if it were a decree\nmade by a Court in a suit before it. Appeals against the orders of the National\nCommission have to be made only at the Supreme Court.96**Channels for Consumer Disputes Redressal**|Judicial Channels|Col2|", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "g95", "section": "C.", "chunk_id": "Final IC 38 - WA_Composite  - English_047", "metadata": {"file_size": 20885, "chunk_index": 47, "chunk_tokens": 1005, "has_examples": true, "has_tables": true, "key_concepts": ["Consumer", "Defect", "Consumer dispute", "State Consumer Disputes Redressal Commission", "Channels for Consumer Disputes Redressal"]}}
{"chunk": "service and compensation, if any claimed exceeds Rs. 1 crore but does not\nexceed Rs.10 crores.\n It also has appellate and supervisory jurisdiction to entertain appeals fromthe District Commission.\n Other powers and authority are similar to those of the District Commission.**iii.** **National Consumer Disputes Redressal Commission** The National Consumer Disputes Redressal Commission (NationalCommission) is the final authority established under the Act.\n It has original jurisdiction to entertain disputes, where goods/ services andthe compensation claimed exceeds Rs.10 crores.\n It has appellate as well as supervisory jurisdiction to hear the appeals fromthe orders passed by the State Commission.\nEvery order made by a District Commission, State Commission or the National\nCommission shall be enforced by it in the same manner as if it were a decree\nmade by a Court in a suit before it. Appeals against the orders of the National\nCommission have to be made only at the Supreme Court.96**Channels for Consumer Disputes Redressal**|Judicial Channels|Col2|\n|---|---|\n|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|\n|**Established by the**<br>**Central Government**|**Established by the**<br>**State Government**|**a)** **Procedure for filing a complaint**The procedure for filing a complaint is very simple in all the above three\nagencies. There is no fee for filing a complaint or filing an appeal whether\nbefore the State Commission or National Commission. The complaint can be\nfiled by the complainant himself or by his authorised agent. It can be filed\npersonally or can even be sent by post. It may be noted that no advocate is\nnecessary for the purpose of filing a complaint.**b)** **Consumer Commission Orders**If the Commission is satisfied (a) that the goods in question have the defects\nspecified in the complaint or (b) that the allegations about the services are\nproven; the Commission can issue orders directing the opposite party to do\nany of the following:\ni. To **return** to the complainant the **price** (or premium in case of insurance)and/ or charges paid by the complainant\nii. To award such amount as **compensation** to the consumers for any loss orinjury suffered by the consumer due to negligence of the opposite party\niii. To remove the defects or **deficiencies** in the services in question.\niv. To **discontinue the unfair trade practice** or the restrictive trade practiceor not to repeat them\nv. To provide for **adequate costs** to the complainants.97**c)** **Nature of complaints**The **majority of consumer disputes** with the three Commissions relating to\ninsurance business fall in the following main categories:i. Delay in settlement of claims\nii. Non-settlement of claims\niii. Repudiation of claims\niv. Amount or Quantum of loss\nv. Policy terms, conditions etc.**E.** **The Insurance Ombudsman**The Central Government under the powers of the Insurance Regulatory &\nDevelopment Authority Act, 1999 made **Insurance Ombudsman Rules 2017** by a", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "l2", "section": "National Consumer Disputes Redressal Commission", "chunk_id": "Final IC 38 - WA_Composite  - English_048", "metadata": {"file_size": 20885, "chunk_index": 48, "chunk_tokens": 984, "has_examples": false, "has_tables": true, "key_concepts": ["State Government", "Commission", "Procedure for filing a complaint", "Consumer Commission Orders", "The Insurance Ombudsman"]}}
{"chunk": "any of the following:\ni. To **return** to the complainant the **price** (or premium in case of insurance)and/ or charges paid by the complainant\nii. To award such amount as **compensation** to the consumers for any loss orinjury suffered by the consumer due to negligence of the opposite party\niii. To remove the defects or **deficiencies** in the services in question.\niv. To **discontinue the unfair trade practice** or the restrictive trade practiceor not to repeat them\nv. To provide for **adequate costs** to the complainants.97**c)** **Nature of complaints**The **majority of consumer disputes** with the three Commissions relating to\ninsurance business fall in the following main categories:i. Delay in settlement of claims\nii. Non-settlement of claims\niii. Repudiation of claims\niv. Amount or Quantum of loss\nv. Policy terms, conditions etc.**E.** **The Insurance Ombudsman**The Central Government under the powers of the Insurance Regulatory &\nDevelopment Authority Act, 1999 made **Insurance Ombudsman Rules 2017** by a\nnotification published in the official gazette on 25 [th] April 2017.Rules regarding Insurance Ombudsmen apply to all insurers and their agents and\nintermediaries in respect of complaints on all personal lines of insurance, group\ninsurance policies, policies issued to sole proprietorship and micro enterprises.[‘Personal lines’ here means insurances taken in an individual capacity, in\ncontrast to insurances sold to corporate entities.] Complaints relating to (a) delay\nin settlement of claims beyond the time specified by IRDAI, (b) partial or total\nrepudiation of claims by the insurer, (c) disputes about premium paid or payable\nin terms of insurance policy, (d) misrepresentation of policy terms and conditions\nat any time in the policy document or policy contract, (e) legal construction of\ninsurance policies that affect the claim; and (f) policy servicing and related\ngrievances against insurers and their agents and intermediaries.a) Issuance of life insurance policy, general insurance policy including healthinsurance policy which is not in conformity with the proposal form submitted\nby the proposer.\nb) Non issuance of insurance policy after receipt of premium in life insuranceand general insurance including health insurance and\nc) Any other matter resulting from the violation of provisions of the InsuranceAct, 1938 or the regulations, circulars, guidelines or instructions issued by\nthe IRDAI from time to time or the terms and conditions of the policy\ncontract, in so far as they relate to issues mentioned at clauses (a) to (f)\nThe objective of these rules is to resolve all types of complaints mentioned above,\nin a cost effective, and impartial manner.**The Ombudsman, by mutual agreement of the insured and the insurer can act**\n**as a mediator and counsellor within the terms of reference.****The decision of the Ombudsman, whether to accept or reject the complaint,**\n**is final.****a)** **Complaint to the Ombudsman**Any complaint made to the Ombudsman should be in writing, and must be\nsigned by the insured or his legal heirs, nominee or assignee, and addressed98to an Ombudsman within whose jurisdiction, the insurer has a branch/ office.\nIt should contain the facts giving rise to the complaint, supported by\ndocuments, the nature and extent of the loss caused to the complainant and\nthe relief sought.**Complaints can be made to the Ombudsman if:**i. The complainant had made a previous written representation to theinsurance company and:\n the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.\nii. The complainant is not satisfied with the reply given by the insurer\niii. The complaint is made within one year from the date of rejection by theinsurance company\niv. The complaint is not pending in any court or consumer Commission or inarbitration\nv. The value of the claim including expenses claimed is not above Rs 30 lakhs.**b)** **Recommendations by the Ombudsman**The Ombudsman will send copies of complaints to both the complainant and\nthe insurance company. The Ombudsman will make his recommendations\nwithin one month of the receipt of the complaint.**c)** **Award**The dispute can be settled by intermediation. If this is not possible, the\nOmbudsman will pass an award to the insured which he thinks is fair within a\nperiod of 3 months from the date of receipt of all requirements from the\ncomplainant and sending a copy of the award to the complainant and the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d98", "section": "Nature of complaints", "chunk_id": "Final IC 38 - WA_Composite  - English_049", "metadata": {"file_size": 20885, "chunk_index": 49, "chunk_tokens": 1013, "has_examples": false, "has_tables": false, "key_concepts": ["Complaints can be made to the Ombudsman if:", "Award", "The Insurance Ombudsman", "Nature of complaints", "Insurance Ombudsman Rules 2017"]}}
{"chunk": " the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.\nii. The complainant is not satisfied with the reply given by the insurer\niii. The complaint is made within one year from the date of rejection by theinsurance company\niv. The complaint is not pending in any court or consumer Commission or inarbitration\nv. The value of the claim including expenses claimed is not above Rs 30 lakhs.**b)** **Recommendations by the Ombudsman**The Ombudsman will send copies of complaints to both the complainant and\nthe insurance company. The Ombudsman will make his recommendations\nwithin one month of the receipt of the complaint.**c)** **Award**The dispute can be settled by intermediation. If this is not possible, the\nOmbudsman will pass an award to the insured which he thinks is fair within a\nperiod of 3 months from the date of receipt of all requirements from the\ncomplainant and sending a copy of the award to the complainant and the\ninsurer.The insurer shall comply with the award within 30 days of the receipt of the\naward and intimate compliance of the same to the Ombudsman. The award\nof the Ombudsman shall be binding on the insurer.**F.** **Right to Information**In addition to the rules and regulations that are specific for grievance redressal\nin insurance, there are certain general laws common to everyone in the country.\nThe Right to Information (RTI) Act, 2005 enacted by the Govt. of India is an\nimportant law that gives citizens of India access to the information available with\npublic authorities which promotes transparency and accountability in these\norganisations. The Act provides for appointment of a Chief Public Information\nOfficer (CPIO) to deal with requests for information. IRDAI is obliged to provide\ninformation to members of public in accordance with the provisions of the said\nAct. Agents should be aware that as per the RTI Act, IRDAI and Insurance\nCompanies may have to reveal certain information to customers and others; as\nalso allow them to inspect the work, document, records, extracts or certified99copies of documents/ records and also information stored in electronic form.\nHowever, there are certain categories of information that are exempt from\ndisclosure.**Test Yourself 1**The ______________ has jurisdiction to entertain complaints, where value of the\ngoods or services and the compensation claimed is up to Rs.20 lakhs.I. District CommissionII. State CommissionIII. Zilla ParishadIV. National Commission**Summary**IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as a central repository of insurance grievance data and as a tool for\nmonitoring grievance redress in the industry.Consumer disputes redressal agencies are established in each district and\nstate and at national level.As far as insurance business is concerned, the majority of consumer disputes\nfall in categories such as delay in settlement of claims, non-settlement of\nclaims, repudiation of claims, quantum of loss and policy terms, conditions\netc.The Ombudsman, by mutual agreement of the insured and the insurer can act\nas a mediator and counsellor within the terms of reference.- If the dispute is not settled by intermediation, the Ombudsman will pass\naward to the insured which he thinks is fair, and is not more than what is\nnecessary to cover the loss of the insured.**Key Terms**1. Integrated Grievance Management System (IGMS)\n2. The Consumer Protection Act, 2019\n3. District Commission4. State Commission5. National Commission6. Insurance Ombudsman**Answers to Test Yourself****Answer 1** -The correct answer is I.100## CHAPTER C-10## REGULATORY ASPECTS FOR WEB AGGREGATORS**Chapter Introduction**In this chapter, we discuss Regulatory aspects of Web Aggregators.**Learning Outcomes**A. Regulations of Web Aggregators.101A. **Web Aggregators**The Web Aggregator regulations came into effect from 3 [rd] December 2013.The following definitions are relevant.**1.** **Definitions:****a.** “Act” means the Insurance Act, 1938 (4 of 1938), as amended from timeto time.\n**b.** “Agreement” for the purpose of these regulations means an agreemententered into between a web aggregator and an Insurer;\n**c.** “Authorised Verifier” for the purpose of these Regulations is a personemployed by the Insurance Web Aggregator or a Tele-marketer for\ninsurance solicitation and procurement through Telemarketing and\nDistance Marketing mode and who has undergone training and passed the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d99", "section": "Recommendations by the Ombudsman", "chunk_id": "Final IC 38 - WA_Composite  - English_050", "metadata": {"file_size": 20885, "chunk_index": 50, "chunk_tokens": 1011, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 1", "Award", "Definitions:", "Right to Information"]}}
{"chunk": "2. The Consumer Protection Act, 2019\n3. District Commission4. State Commission5. National Commission6. Insurance Ombudsman**Answers to Test Yourself****Answer 1** -The correct answer is I.100## CHAPTER C-10## REGULATORY ASPECTS FOR WEB AGGREGATORS**Chapter Introduction**In this chapter, we discuss Regulatory aspects of Web Aggregators.**Learning Outcomes**A. Regulations of Web Aggregators.101A. **Web Aggregators**The Web Aggregator regulations came into effect from 3 [rd] December 2013.The following definitions are relevant.**1.** **Definitions:****a.** “Act” means the Insurance Act, 1938 (4 of 1938), as amended from timeto time.\n**b.** “Agreement” for the purpose of these regulations means an agreemententered into between a web aggregator and an Insurer;\n**c.** “Authorised Verifier” for the purpose of these Regulations is a personemployed by the Insurance Web Aggregator or a Tele-marketer for\ninsurance solicitation and procurement through Telemarketing and\nDistance Marketing mode and who has undergone training and passed the\nexamination as specified by the Authority;\n**d.** “Authority” means the Insurance Regulatory and Development Authorityestablished under the provisions of Section 3 of the Insurance Regulatory\nand Development Authority Act, 1999 (41 of 1999);\n**e.** “Distance Marketing” for the purpose of these regulations refers to theprocess of solicitation or sale of insurance products or services where the\nconsumer is physically not present at the point of solicitation or sale or\nthe conclusion of the sale, and the process is accomplished through\ntelephone or Short Messaging Service (SMS) or e-mail or Internet or web\nservices;\n**f.** “Key Management Personnel” for the purposes of these regulations meansChief Executive Officer, Chief Operating Officer, Chief Marketing Officer,\nChief Financial Officer, Head - Technical, Head – IT.\n**g.** “Lead” for the purpose of these regulations means information pertainingto a person who has accessed the website of a web aggregator and has\nsubmitted contact information of any kind, for obtaining information on\nprices or features/benefits of insurance products;\n**h.** “Lead Generation” for the purpose of these Regulations, is the process ofcollecting the details of the prospects to ascertain their intention to\npurchase insurance, before proceeding with solicitation of insurance\nproducts;\n**i.** “Lead Management System” (LMS) for the purpose of these Regulationsrefers to the Software implemented by the Web Aggregator for recording,\nfiltering, validating, grading, distribution, follow up and closure of leads\nfrom the enquiries received on the website of the Web Aggregator;\n**j.** “Outsourcing”: for the purpose of these Regulations means activitieswhich can be carried out by the Web Aggregators to the extent as specified\nby the Authority.\n**k.** “Person” means**1.** **A company formed under the Companies Act, 2013 (18 of 2013);**or1021. A limited liability partnership formed under the Limited LiabilityPartnership Act, 2008 (6 of 2009) with no partner being a non-resident\nentity/person resident outside India as defined in clause (w) of section\n2 of the Foreign Exchange Management Act, 1999 (42 of 1999) FEMA,\nand not being a foreign limited liability partnership registered there\nunder; or\n2. Any other person recognized by the Authority to act as a WebAggregator;**l.** \"Principal Officer\" means1. A director / partner, who is responsible for the activities of the WebAggregator in the case of a body corporate; or\n2. The chief executive officer appointed exclusively to carry out thefunctions of a Web Aggregator;\n**m.** “Solicitation” for the purpose of these Regulations is defined as theapproach of a Prospect by an insurer or an intermediary with a view to\nconvince the Prospect to purchase an insurance policy;\n**n.** “Telemarketer” for the purpose of these Regulations, is an entityregistered with Telecom Regulatory Authority of India under Chapter III of\nThe Telecom Commercial Communications Customer Preference\nRegulations, 2010 (as amended from time to time);\n**o.** “Web Aggregator” for the purpose of these regulations is a person licensedby the Authority under these Regulations;\n**p.** “Website” is a set of related web pages served from a single web domain.A website is hosted on at least one web server, accessible via a network\nsuch as the Internet or a private local area network through an Internet\naddress known as a Uniform resource locator. The word “website”", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "n4", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 - WA_Composite  - English_051", "metadata": {"file_size": 20885, "chunk_index": 51, "chunk_tokens": 997, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Definitions:", "Chapter Introduction", "Answer 1", "Learning Outcomes"]}}
{"chunk": "2. The chief executive officer appointed exclusively to carry out thefunctions of a Web Aggregator;\n**m.** “Solicitation” for the purpose of these Regulations is defined as theapproach of a Prospect by an insurer or an intermediary with a view to\nconvince the Prospect to purchase an insurance policy;\n**n.** “Telemarketer” for the purpose of these Regulations, is an entityregistered with Telecom Regulatory Authority of India under Chapter III of\nThe Telecom Commercial Communications Customer Preference\nRegulations, 2010 (as amended from time to time);\n**o.** “Web Aggregator” for the purpose of these regulations is a person licensedby the Authority under these Regulations;\n**p.** “Website” is a set of related web pages served from a single web domain.A website is hosted on at least one web server, accessible via a network\nsuch as the Internet or a private local area network through an Internet\naddress known as a Uniform resource locator. The word “website”\nincludes a web portal and/or a mobile site for the purpose of these\nregulations;\n**q.** “Designated Website” for the purpose of these regulations is a website(s)with domain name(s) registered, owned by and used exclusively for the\nfunctions of the Web Aggregator;\n**r.** Words and expressions used and not defined in these Regulations butdefined in the Insurance Act, 1938 (4 of 1938), the Insurance Regulatory\nand Development Authority Act, 1999 or in any of the Regulations made\nthere under shall have the meanings respectively assigned to them in\nthose Acts or Regulations.**2. Eligibility criteria for License of the Web Aggregator:****a.** For the grant of License / Renewal of license of the web aggregator, theapplicant shall ensure the fulfilment of the conditions including but not\nlimited to the following:i. The applicant is a person as defined under regulation 1 (i).\nii. The Memorandum of Association of the company or such other\ndocuments of applicants shall have the business of web aggregation\nof Insurance Products only as its main object.103iii. The applicant is not engaged in any other business other than the\nmain object (Web Aggregation of Insurance Products) of the\napplicant;\niv. The applicant shall not be licensed / registered as an insurance\nagent, corporate agent, micro-insurance agent, TPA, surveyor, Loss\nassessor or any other Insurance Intermediary under the relevant\nRegulations framed by the Authority.\nv. The applicant shall not have a referral arrangement with an Insurer.\nvi. The applicant shall not be a related party of an insurer, insurance\nbroker, corporate agent, micro-insurance agent, TPA, Surveyor or a\nloss assessor or other insurance intermediary at any time.\n**b.** The Principal Officer shall possess the required qualification as specifiedby the regulator\n**c.** The Principal Officer of the Web Aggregator should have undergone 50hours of training initially and 25 hours of renewal training at the end of\nevery three years thereafter.\n**d.** The Principal Officer / Directors / Promoter(s) / Shareholders / Partners/ Key Management Personnel should fulfil the conditions in the FIT and\nPROPER criteria notified by the authority from time to time.\n**e.** The Authorised Verifier has undergone the prescribed training and passedthe examination as specified by the Authority.\n**f.** The web aggregator should not have violated the obligations and the codeof conduct as specified by the regulator.\n**g.** The Authority is of the opinion that the grant of license will be in theinterest of policyholders.**3. Application seeking Grant of License.****a.** An applicant, seeking grant of License as Web Aggregator shall make anapplication to the Authority in **the application Form A (Application for**\n**grant of certificate of registration to an Insurance Web Aggregator) of**\n**Schedule I of these Regulations.****b.** **The application shall be accompanied by a non-refundable fee of****rupees ten thousand plus applicable taxes paid by way of a demand**\n**draft drawn in favour of ‘Insurance Regulatory and Development**\n**Authority of India’ payable at Hyderabad or by recognised electronic**\n**funds transfer to Insurance Regulatory and Development Authority of**\n**India.****No application shall be processed without the application fee.**Applicants seeking permission for Outsourcing and Telemarketing\nfunctions/facility shall mention the same specifically in the application\nForm.104**The documents to be submitted along with the application for grant of**\n**certificate of registration as Insurance Web Aggregator are mentioned in**\n**Form B (Forms to be attached with the Application Form A) of Schedule I**", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Schedule I of these Regulations.", "chunk_id": "Final IC 38 - WA_Composite  - English_052", "metadata": {"file_size": 20885, "chunk_index": 52, "chunk_tokens": 972, "has_examples": false, "has_tables": false, "key_concepts": ["Schedule I of these Regulations.", "India."]}}
{"chunk": "**g.** The Authority is of the opinion that the grant of license will be in theinterest of policyholders.**3. Application seeking Grant of License.****a.** An applicant, seeking grant of License as Web Aggregator shall make anapplication to the Authority in **the application Form A (Application for**\n**grant of certificate of registration to an Insurance Web Aggregator) of**\n**Schedule I of these Regulations.****b.** **The application shall be accompanied by a non-refundable fee of****rupees ten thousand plus applicable taxes paid by way of a demand**\n**draft drawn in favour of ‘Insurance Regulatory and Development**\n**Authority of India’ payable at Hyderabad or by recognised electronic**\n**funds transfer to Insurance Regulatory and Development Authority of**\n**India.****No application shall be processed without the application fee.**Applicants seeking permission for Outsourcing and Telemarketing\nfunctions/facility shall mention the same specifically in the application\nForm.104**The documents to be submitted along with the application for grant of**\n**certificate of registration as Insurance Web Aggregator are mentioned in**\n**Form B (Forms to be attached with the Application Form A) of Schedule I**\n**of these Regulations.****c.** **The applicant seeking grant of certificate of registration as Insurance****Web Aggregator shall fulfil all the requirements for consideration of**\n**application as specified under Regulation 7 and fulfil the conditions**\n**mentioned in these Regulations****d.** The application for grant of license as Web Aggregator shall be dealt bythe authority as per the applicable provisions and under these Regulations.\n**e.** On the applicant fulfilling all the eligibility criteria and requirementsmentioned in these Regulations; the authority shall grant License to the\napplicant to function as a Web aggregator\n**f.** A license once issued shall be valid for a period of three years from thedate of its issue, unless the same is suspended or cancelled pursuant to\nthese Regulations.\n**g.** An application, which is not complete in all respects, shall be liable to berejected.**4. Application seeking Renewal of License:****a.** Web Aggregators interested in continuing in the business shall apply withthe Authority for renewal of the License at least THIRTY DAYS before\nexpiry of the previous License. The application for renewal of license\nshould be accompanied by a fee of rupees ten thousand Applicants seeking\npermission for Outsourcing and Telemarketing functions / facility shall\nmention the same specifically in the application Form.\n**b.** No Web Aggregator shall be allowed to carry out the functions of the WebAggregator, after expiry of the license.\nNote: A Web Aggregator is permitted to submit the renewal application withinninety days before expiry of the license.\n**c.** The application for renewal of license as Web Aggregator shall be dealtwith by the authority as per the applicable provisions and under these\nRegulations.\n**d.** A Web Aggregator, before seeking a renewal of license, shall ensure thattheir Principal Officer has received at least twenty-five hours of\ntheoretical and practical training from an institution recognized by the\nAuthority from time to time.\n**e.** The Authority, on being satisfied that the applicant fulfils all theconditions specified for renewal of a license, shall renew the license for a\nperiod of three years and send intimation to that effect to the applicant.\n**f.** Wherever it is found that the Web Aggregator is not doing any amount ofbusiness during the entire/part of the previous licensed period, the\nAuthority may refuse to renew the license.105**5. Employees of the Web Aggregator:****a.** The employees of the Web Aggregator involved in insurance solicitationand verification should have completed the fifty hours of theoretical and\npractical training on insurance from an institution recognized by the\nAuthority from time to time and passed an examination, at the end of the\nperiod of training mentioned above, conducted by the National Insurance\nAcademy, Pune or any other examining body recognized by the Authority.\n**b.** Tele-callers deployed by Web Aggregators to solicit business should beemployees on the rolls of the Web aggregator and should have undergone\ntraining as prescribed by Authority.\n**c.** Web Aggregators shall be responsible for all acts of commission andomission of the employees deployed on their behalf.**6. Annual Fees:****a.** Every Web Aggregator shall pay annual license fees of Rs. 5,000/-.\n**b.** The annual license fee shall be paid within 15 days of the finalization ofannual audited accounts of the Web Aggregator or 30th of September,\nwhichever is earlier.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Schedule I of these Regulations.", "chunk_id": "Final IC 38 - WA_Composite  - English_053", "metadata": {"file_size": 20885, "chunk_index": 53, "chunk_tokens": 962, "has_examples": true, "has_tables": false, "key_concepts": ["Schedule I of these Regulations.", "India."]}}
{"chunk": "Authority may refuse to renew the license.105**5. Employees of the Web Aggregator:****a.** The employees of the Web Aggregator involved in insurance solicitationand verification should have completed the fifty hours of theoretical and\npractical training on insurance from an institution recognized by the\nAuthority from time to time and passed an examination, at the end of the\nperiod of training mentioned above, conducted by the National Insurance\nAcademy, Pune or any other examining body recognized by the Authority.\n**b.** Tele-callers deployed by Web Aggregators to solicit business should beemployees on the rolls of the Web aggregator and should have undergone\ntraining as prescribed by Authority.\n**c.** Web Aggregators shall be responsible for all acts of commission andomission of the employees deployed on their behalf.**6. Annual Fees:****a.** Every Web Aggregator shall pay annual license fees of Rs. 5,000/-.\n**b.** The annual license fee shall be paid within 15 days of the finalization ofannual audited accounts of the Web Aggregator or 30th of September,\nwhichever is earlier.\n**c.** The fees shall be payable by an Account Payee draft in favour of “TheInsurance Regulatory and Development Authority” payable at Hyderabad.**7. Requirements of Capital and Net worth****[a] Capital Requirements**i. An applicant seeking to become an Insurance Web Aggregator underthese regulations shall have a minimum paid up capital/ contribution\nof rupees twenty five lakhs.ii. The capital of the Insurance Web Aggregator shall be issued andsubscribed in the form of Equity Shares where the Insurance Web\nAggregator is a company registered under Companies Act, 2013.iii. The contribution of partners in case of LLP shall be only in cashiv. The applicant shall also comply with the Rule, Regulation, Circular,Guidelines, etc. issued in respect of Indian owned and controlled.v. The shares of the Insurance Web Aggregator held as capital shall notbe pledged in any form or manner to secure credit or any other facility\nand shall at all times be unencumbered.**[b] Manner of calculation of equity capital held by foreign investors**The aggregate holdings of equity shares or contribution of the Insurance Web\nAggregator by foreign investors, including portfolio investors, shall not\nexceed forty-nine per cent of paid-up equity capital of Insurance Web106Aggregator at any time or such foreign investment limit as prescribed by theCentral Government.[ **c] Net-worth requirements**i. The net-worth of an Insurance Web Aggregator shall at no time during theperiod of certificate of registration period fall below 100% of the minimum\ncapital requirements or contribution specified under sub-regulation (a)(i)above._[Explanation: For the purposes of these regulations, “net worth” shall have the_\n_meaning assigned to it in Companies Act 2013 and as amended from to time.]_**ii.** Every Insurance Web Aggregator shall review the status of the net-worthspecified in sub-regulation (i) above, every half year as at 30th September,\nand 31stMarch every year and report non-compliance, if any, to the Authority\nwithin 15 days thereon and shall restore the requirements within 30 days\nthereafter and confirm compliance to the Authority.iii. In case the Insurance Web Aggregator is not able to maintain the minimumnet-worth even after 30 days, then he shall immediately stop doing\ninsurance related business/ activity.iv. The Insurance Web Aggregator shall submit to the Authority a net worthcertificate duly certified by a Chartered Accountant every year afterfinalization of books of accounts.**[d]** **Transfer of shares****i.** The beneficial ownership and control of the shares or contribution shalltotally and completely rest with the entity/individual approved by the\nAuthority.ii. The process of transfer of shares of Web Aggregator shall be as given in FormAB (Transfer of shares) of Schedule XII of these regulations.**8. Grant of registration certificate by IRDA****i.** When the application is filed after fulfilling all the required conditions andafter submitting all the required documents, the IRDA will accept the\napplication and grant the registration certificate to the applicant107ii. The certificate of registration issued holds validity for a period of three yearsfrom the date of its issue unless the same is suspended or cancelled by theIRDA.iii. An incomplete application is liable for rejection. However, before rejection,an opportunity will be given to complete the formalities within 30 days. If no\nintimation is received within 30 days, the application will be rejected,**9.** **Policy of Board**Every Insurance Web Aggregator shall have a policy on “manner of soliciting\ninsurance products” approved by the Board, which shall be reviewed at least once", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "b106", "section": "Transfer of shares", "chunk_id": "Final IC 38 - WA_Composite  - English_054", "metadata": {"file_size": 20885, "chunk_index": 54, "chunk_tokens": 1002, "has_examples": false, "has_tables": false, "key_concepts": ["Policy of Board", "Transfer of shares"]}}
{"chunk": "Authority.ii. The process of transfer of shares of Web Aggregator shall be as given in FormAB (Transfer of shares) of Schedule XII of these regulations.**8. Grant of registration certificate by IRDA****i.** When the application is filed after fulfilling all the required conditions andafter submitting all the required documents, the IRDA will accept the\napplication and grant the registration certificate to the applicant107ii. The certificate of registration issued holds validity for a period of three yearsfrom the date of its issue unless the same is suspended or cancelled by theIRDA.iii. An incomplete application is liable for rejection. However, before rejection,an opportunity will be given to complete the formalities within 30 days. If no\nintimation is received within 30 days, the application will be rejected,**9.** **Policy of Board**Every Insurance Web Aggregator shall have a policy on “manner of soliciting\ninsurance products” approved by the Board, which shall be reviewed at least once\nin three years.**10.** **Professional indemnity insurance**\nEvery Web Aggregator shall take out and maintain and continue to maintain a\nprofessional indemnity insurance cover throughout the validity of the period of\nthe license granted to them by the Authority. The Professional Indemnity Policy\nshall be obtained from the Insurer licensed by the Authority.Provided that the Authority shall in suitable cases allow a newly licensed Web\nAggregator to produce such a guarantee within six months from the date of issue\nof original license.**11.** **Change in name of an Insurance Web Aggregator** : An Insurance WebAggregator shall take the prior approval of the Authority for change of itsname.**12. Arrangements with insurers for distribution of products**No arrangements shall be made by the Insurance Web Aggregators with the\ninsurers which are against the interests of policyholders;**13.** **Conflict of interest –**While soliciting and procuring the insurance business, the Insurance Web\nAggregator shall comply with the following:(a) The Insurance Web Aggregator having tie-ups with more than one insurer in aparticular line of business, shall display to the prospective customer the list\nof insurers, with whom they have arrangements to distribute the products and\nprovide them with the details such as scope of coverage, term of policy,\npremium payable, premium terms and any other information which the\ncustomer seeks on all products available with them;108(b) The product to be sold shall be based on the need analysis of the prospect.(c) No Insurance Web Aggregator shall promote or push a particular product of aparticular company either through its web-site or through distance marketing\napproaches\n14. **Role and responsibilities of the Authorised Verifier.**a) Insurance Web Aggregator shall be responsible for all acts of commission andomission of the authorised verifier deployed on their behalf.b) The Authorised Verifier shall:i. be on the rolls of either the Insurance Web Aggregator or the Telemarketer.\nii. solicit insurance business only through tele-marketing mode.\niii. receive inbound telephone calls from prospects/ policyholders seeking\nassistance or clarifications on the insurance products they want to buy.\niv. sell an insurance product based on the need analysis of the prospect.\nv. explain the main features of the similar insurance product of other\ncompanies to help customer make a choice.\nvi. not make any unsolicited outbound telephone calls for solicitation of\ninsurance products\nvii. not make false promise or lure the prospects by exaggerating the benefits\nunder the insurance productc) An Insurance Web Aggregator shall tag every insurance policy sold by theAuthorised Verifier to his identity for tracking sales and complaints if any\nwhich shall be given access to the Authority on remote basis.d) An Authorised Verifier may shift from one insurance Web Aggregator/ Tele\nmarketer to another after obtaining a No Objection Certificate from his\nprevious employer or 30 days of requesting for the same whichever is earlier.**15.** **Duties and Functions of web Aggregators.****a)** **The Web Aggregator shall**i. Display Information pertaining to the Insurers who have signed\nagreement with the Web Aggregators.\nii. Carryout the activities for the purpose of Lead Generation for insurers.\niii. Ensure that the information systems, (both hardware and software)\nincluding the aggregation website(s) / portals, Lead Management\nSystem and the Data Centers hosting the website(s) / Portal(s) / Lead\nManagement System are in compliance with the generally accepted\ninformation security standards and procedures in force in India from\ntime to time.109iv. Ensure that the leads and other data is transmitted to the insurers and\nothers using secured layer data encryption technologies like 128 bit\nencryption.\nv. Use only RBI licensed payment gateways for collection and transfer of\npremium to insurers when the web aggregator is authorized by the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t107", "section": "Policy of Board", "chunk_id": "Final IC 38 - WA_Composite  - English_055", "metadata": {"file_size": 20885, "chunk_index": 55, "chunk_tokens": 1005, "has_examples": false, "has_tables": false, "key_concepts": ["Conflict of interest –", "Change in name of an Insurance Web Aggregator", "Professional indemnity insurance", "Duties and Functions of web Aggregators.", "The Web Aggregator shall"]}}
{"chunk": "which shall be given access to the Authority on remote basis.d) An Authorised Verifier may shift from one insurance Web Aggregator/ Tele\nmarketer to another after obtaining a No Objection Certificate from his\nprevious employer or 30 days of requesting for the same whichever is earlier.**15.** **Duties and Functions of web Aggregators.****a)** **The Web Aggregator shall**i. Display Information pertaining to the Insurers who have signed\nagreement with the Web Aggregators.\nii. Carryout the activities for the purpose of Lead Generation for insurers.\niii. Ensure that the information systems, (both hardware and software)\nincluding the aggregation website(s) / portals, Lead Management\nSystem and the Data Centers hosting the website(s) / Portal(s) / Lead\nManagement System are in compliance with the generally accepted\ninformation security standards and procedures in force in India from\ntime to time.109iv. Ensure that the leads and other data is transmitted to the insurers and\nothers using secured layer data encryption technologies like 128 bit\nencryption.\nv. Use only RBI licensed payment gateways for collection and transfer of\npremium to insurers when the web aggregator is authorized by the\ninsurer to collect the premium on behalf of the insurer.\nvi. Ensure to get the information systems (both hardware and software)\nincluding the aggregation website(s) / portals, Lead Management\nSystem and the Data Centers hosting the website(s) / Portal(s) / Lead\nManagement System Audited by CERT-In empanelled Information\nSecurity Auditing organisations once in a financial year and submit a\ncopy of the Audit Certificate/Report to IRDA and the insurers with\nwhom the web aggregator has entered into an agreement, within 15\ndays from the date of receipt of the same.**b) The Web Aggregators shall not:**i. Display any information pertaining to products or services of other\nfinancial institutions / FMCG or any product or service on the website\nii. Display advertising of any sort, either pertaining to any product or\nservice including insurance product or service, other financial products\nor service / or any other product or service in the Web Aggregators\nWebsite.\niii. Operate multiple websites or tie up with other\napproved/unapproved/unlicensed entities/websites for lead\ngeneration / comparison of product etc. subject to few exceptions.\niv. Operate the websites of other Financial / Commercial / marketing or\nsales or service entities or use other Social Media sites etc. for\ncomparison of products etc.\nv. Operate in any other manner for the purpose of transmitting leads to\nany entity engaged in insurance business except these following\nregulations.**c) Nomenclature of Web Aggregators**i) All Web Aggregators shall have the word `Insurance Web Aggregator’ or‘Insurance Web Aggregators` in the name of the Insurance Broking\nCompany to reflect its line of activity and to enable the public to\ndifferentiate IRDA licensed insurance Web Aggregator from other nonlicensed insurance related entities. The application of the new applicant\ncompanies making an application to seek the license to act as web\naggregator shall not be considered in the absence of the compliance of\nthe nomenclature requirement.ii) Every licensed insurance Web Aggregator shall display in all itscorrespondences with all stakeholders its name registered with the110Authority, address of the Registered and Corporate Office, IRDA license\nnumber and validity period of the license.iii) Insurance web aggregators are not permitted to use any other name intheir correspondence/literature/letter heads without the prior approval\nof the Authority.**16. Agreement of Insurer with a Web Aggregator:****a.** An Insurer desirous of obtaining leads from web aggregator shall enter intoan “agreement” with the web aggregator approved by the Authority which\nshall necessarily include details relating to, though not limited to, the\nfollowing:\ni) Time-frame and mode of transmission of leads to be shared\nii) Onus of complying with regulatory and other legal requirements onboth the parties to the agreement\niii) Identifying the different data elements to be shared (viz., name ofprospect / client (visitor of the web site), contact details etc)\niv) The timeframe for providing the premium and feature tables of theagreed products to the Web Aggregator after concluding the\nagreement and keeping them up to date.\n**b.** The agreement between an insurer and web aggregator shall be valid fora period of three years from its date, subject to the validity of license of\nweb aggregator.\n**c.** The web aggregator shall file the agreement with the Authority withinfifteen days from the date of entering the agreement.**17. Display of product comparisons on the web site:****a.** Web aggregators shall disclose prominently on the home page, a noticethat:", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e110", "section": "Duties and Functions of web Aggregators.", "chunk_id": "Final IC 38 - WA_Composite  - English_056", "metadata": {"file_size": 20885, "chunk_index": 56, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["The Web Aggregator shall", "Duties and Functions of web Aggregators."]}}
{"chunk": "shall necessarily include details relating to, though not limited to, the\nfollowing:\ni) Time-frame and mode of transmission of leads to be shared\nii) Onus of complying with regulatory and other legal requirements onboth the parties to the agreement\niii) Identifying the different data elements to be shared (viz., name ofprospect / client (visitor of the web site), contact details etc)\niv) The timeframe for providing the premium and feature tables of theagreed products to the Web Aggregator after concluding the\nagreement and keeping them up to date.\n**b.** The agreement between an insurer and web aggregator shall be valid fora period of three years from its date, subject to the validity of license of\nweb aggregator.\n**c.** The web aggregator shall file the agreement with the Authority withinfifteen days from the date of entering the agreement.**17. Display of product comparisons on the web site:****a.** Web aggregators shall disclose prominently on the home page, a noticethat:\ni. The Prospect’s / visitor’s particulars could be shared with insurers.\nii. “Insurance is the subject matter of solicitation”\niii. “the information displayed on this website is of the insurers with whom\nour company has an agreement”\n**b.** Product information displayed by web aggregators shall be authentic andbe based solely on information received from insurers.\n**c.** Web aggregators shall not display ratings, rankings, endorsements orbestsellers of insurance products on their website. The content of the\nwebsites of the web aggregators shall be unbiased and factual in nature;\nthey shall desist from commenting on insurers or their products in their\neditorials or at any other location in their websites.**18. Remuneration.**\nRemuneration in any form shall be payable to web aggregators by insurers in\ncompliance with the following provisions:**a.** Web aggregator will put in place a robust LMS and transmit leads to theinsurers as outlined in Regulation 14 above. No charges should be paid for\nsuch leads by the Insurer.111**b.** A flat fee of not exceeding Fifty thousand per year towards each productdisplayed by the web aggregator in the comparison charts of its web site.\n**c.** Web Aggregator can undertake Outsourcing functions to provide‘Insurance Services’ in respect of policies procured through them. In such\ninstances; the insurer may pay the web aggregators, reasonable service\ncharges at rates fixed in the service agreements with the web aggregators.\n**d.** Web Aggregator can use the Telemarketing / Distance Marketing modes,as per the instructions outlined by the Authority, for solicitation of\nInsurance based on the leads generated from its aggregation website. The\nRemuneration paid by the Insurer towards a policy procured through such\nservices of the Web Aggregator, including the remuneration paid towards\nprocuring such a policy to any other insurance intermediary deployed by\nthe insurer, shall not exceed the limits prescribed by the Authority from\ntime to time in terms of the Sec. 42-E of the Insurance Act, 1938.**19. Cancellation or suspension of license with notice —****a.** The license of a Web Aggregator may be cancelled or suspended after duenotice and after giving him a reasonable opportunity of being heard if he—\ni) Violates the provisions of the Insurance Act,1938 (4 of 1938), InsuranceRegulatory And Development Authority Act, 1999 (41 of 1999) or rules\nor regulations, made there under;\nii) Fails to act in accordance with the Obligations of the Web Aggregatorsand in conducting telemarketing and distance marketing activities;\niii) Fails to adhere to the Code of Conduct specified above.\niv) Furnishes wrong or false information for obtaining a license; or concealsor fails to disclose material facts in the application submitted for\nobtaining a license;\nv) Fails to furnish any information relating to his activities as an insuranceWeb Aggregator as required by the Authority or furnishes wrong or false\ninformation or conceals or fails to disclose material facts to the\nAuthority during the validity of license;\nvi) Does not submit periodical returns as required by the Authority;\nvii) Does not co-operate with any inspection or enquiry conducted by theAuthority;\nviii) Fails to resolve the complaints of the policy holders or fails to give asatisfactory reply to the Authority in this behalf;\nix) Indulges in rebates or inducements in cash or kind to a Prospect or anyof the Prospect’s directors or other employees or any person acting as\nan introducer;\nx) Fails to pay the fees required as specified by Authority.\nxi) Fails to maintain the capital requirements in accordance with theprovisions specified by Authority.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": null, "chunk_id": "Final IC 38 - WA_Composite  - English_057", "metadata": {"file_size": 20885, "chunk_index": 57, "chunk_tokens": 1000, "has_examples": false, "has_tables": false, "key_concepts": []}}
{"chunk": "iii) Fails to adhere to the Code of Conduct specified above.\niv) Furnishes wrong or false information for obtaining a license; or concealsor fails to disclose material facts in the application submitted for\nobtaining a license;\nv) Fails to furnish any information relating to his activities as an insuranceWeb Aggregator as required by the Authority or furnishes wrong or false\ninformation or conceals or fails to disclose material facts to the\nAuthority during the validity of license;\nvi) Does not submit periodical returns as required by the Authority;\nvii) Does not co-operate with any inspection or enquiry conducted by theAuthority;\nviii) Fails to resolve the complaints of the policy holders or fails to give asatisfactory reply to the Authority in this behalf;\nix) Indulges in rebates or inducements in cash or kind to a Prospect or anyof the Prospect’s directors or other employees or any person acting as\nan introducer;\nx) Fails to pay the fees required as specified by Authority.\nxi) Fails to maintain the capital requirements in accordance with theprovisions specified by Authority.\nxii) If the principal officer does fulfil the conditions mentioned in theregulation\nxiii) If the Web Aggregator indulges in sourcing of business by themselves orthrough call centers by way of misleading calls or spurious calls;112**b.** In the circumstances where the Authority feels that the establishment ofa Web Aggregator is only to divert funds within a group of companies or\ntheir associates, it can after due enquiries made by it cancel the license\ngranted to the Web Aggregator.\n**c.** A Web Aggregator whose license is suspended after due notice and aftergiving him a reasonable opportunity of being heard, shall not solicit any\nnew business or carry out any other functions of web aggregator for which\nthe License was granted, from the date of receipt of such Suspension\nOrder till such time the suspension is revoked.**20. Maintenance of books of account, records, etc** .**a.** Every Web Aggregator shall prepare for every accounting year —i) A balance sheet or a statement of affairs as at the end of eachaccounting period;\nii) A profit and loss account for that period;\niii) A statement of cash/fund flow;\niv) Additional statements on Web Aggregators business as may be requiredby the Authority.\nNote: For purposes of these Regulations, the accounting year shall be a period of\n12 months (or less where a business is started after 1st April) commencing on the\nfirst day of the April of an year and ending on the 31st day of March of the year\nfollowing, and the accounts shall be maintained on accrual basis.**b.** Every Web Aggregator shall submit to the Authority, a copy of the auditedfinancial statements along with the auditor’s report thereon within ninety\ndays from the close of the accounting year along with the remarks or\nobservations of the auditors, if any, on the conduct of the business, state\nof accounts, etc., and a suitable explanation on such observations shall\nbe appended to such accounts filed with the Authority.\n**c.** Every Web Aggregator shall, within ninety days from the date of theAuditor’s report take steps to rectify any deficiencies, made out in the\nauditor’s report and inform the Authority accordingly.\n**d.** All the books of account, statements, document, etc., shall be maintainedat the head office of the Web Aggregator or such other branch office as\nmay be designated by them and notified to the Authority, and shall be\navailable on all working days to such officers of the Authority, authorised\nin this behalf by it for an inspection.\n**e.** All the Electronic Records, books and documents, statements, contractnotes etc., referred to in these Regulations and maintained by the Web\nAggregator shall be retained for a period of at least ten years from the\nend of the year to which they relate. However the Digital Records /\ndocuments pertaining to the cases of legal disputes reported and the\ndisposal of the same is pending for a decision from courts the Records are\nrequired to be maintained till the disposal of the cases by the court.\n**f.** Every Web Aggregator shall maintain the Insurer wise records of :i) Leads generated and transmitted\nii) Leads converted into policies113iii) Complaints received and disposed\niv) Products Displayed on the website for comparison\nv) Remuneration received for Products displayed\nvi) Remuneration received for leads converted to policies\nvii) Remuneration received from outsourcing activities", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s113", "section": null, "chunk_id": "Final IC 38 - WA_Composite  - English_058", "metadata": {"file_size": 20885, "chunk_index": 58, "chunk_tokens": 953, "has_examples": false, "has_tables": false, "key_concepts": []}}
{"chunk": "may be designated by them and notified to the Authority, and shall be\navailable on all working days to such officers of the Authority, authorised\nin this behalf by it for an inspection.\n**e.** All the Electronic Records, books and documents, statements, contractnotes etc., referred to in these Regulations and maintained by the Web\nAggregator shall be retained for a period of at least ten years from the\nend of the year to which they relate. However the Digital Records /\ndocuments pertaining to the cases of legal disputes reported and the\ndisposal of the same is pending for a decision from courts the Records are\nrequired to be maintained till the disposal of the cases by the court.\n**f.** Every Web Aggregator shall maintain the Insurer wise records of :i) Leads generated and transmitted\nii) Leads converted into policies113iii) Complaints received and disposed\niv) Products Displayed on the website for comparison\nv) Remuneration received for Products displayed\nvi) Remuneration received for leads converted to policies\nvii) Remuneration received from outsourcing activities\nviii) Any other Remuneration received from Insurers (mention details)**21. Action against a person acting as a Web Aggregator without a valid license—**i) From the date of commencement of these Regulations no person canfunction as a Web Aggregator unless a license has been granted to him\nby the Authority under these Regulations.\nii) Notwithstanding and without prejudice to initiation of any criminalproceedings against any person, who acts as a Web Aggregator without\nholding a valid license issued under these Regulations, the Authority\nmay invoke against such a person penal action under the Act.**22. Certification of Compliance**\nThe Principal Officer of each Web Aggregator shall submit to the Authority, at\nthe end of each financial year, a certificate confirming that the Web Aggregator\nhas complied with all the provisions of these Regulations during the financialyear.114## SECTION## LIFE INSURANCE115## CHAPTER L-01## WHAT LIFE INSURANCE INVOLVES**Chapter Introduction**We have seen some aspects related to Insurance in the common chapters.\nHowever, when it comes to Life insurance, we need to look at them more deeply. An asset\n The risk insured against\n The principle of pooling\n The contractLet us now examine the features of life insurance. This chapter will take a brief\nlook at the various components of life insurance mentioned above.**Learning Outcomes**116**A.** **Life insurance business – Components, human life value, mutuality****a)** **The Asset – Human Life Value (HLV)**We have already seen that an asset is a kind of property that yields value or a\nreturn. For most kinds of property both the value and loss of value amounts can\nbe measured in precise monetary terms.**Example**If the estimated damage of a car meeting an accident is Rs 50000, the insurer will\ncompensate the owner for this loss.How do we estimate the amount of loss when a person dies?Is he worth Rs. 50,000 or Rs. 5,00,000?An Agent must be able to answer the above question when meeting a customer.\nBased on this the agent can determine how much insurance to recommend to the\ncustomer. It is in fact the first lesson a life insurance agent must learn.Luckily we have a measure, developed almost seventy years ago by Prof. Hubener.\nIt is known as **Human Life Value (HLV)** and is used worldwide.The HLV concept considers human life as a kind of property or asset that earns\nan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings. Net earnings means the income a person expects\nto earn each year in the future, less the amount he would spend on himself. It\nthus indicates the economic loss a family would suffer if the wage earner were to\ndie prematurely. These earnings are capitalised, using an appropriate interest\nrate to discount them.Although there are multiple parameters used to calculate HLV including taking\ninto account inflation, wage rise, future earning capacity etc., a simple thumb\nrule to calculate HLV is to determine the amount that would generate the annual\nincome the family would be needing by way of interest. In other words HLV is the\nannual contribution for the family by the breadwinner divided by the prevailing\nrate of interest.**Example**Mr. Rajan earns Rs. 1,20,000 a year and spends Rs. 24,000 on himself. The net\nearnings his family would lose, were he to die prematurely, would be Rs. 96,000", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s113", "section": "Chapter Introduction", "chunk_id": "Final IC 38 - WA_Composite  - English_059", "metadata": {"file_size": 20885, "chunk_index": 59, "chunk_tokens": 970, "has_examples": true, "has_tables": false, "key_concepts": ["The Asset – Human Life Value (HLV)", "Example", "Chapter Introduction", "Learning Outcomes", "Human Life Value (HLV)"]}}
{"chunk": "It is known as **Human Life Value (HLV)** and is used worldwide.The HLV concept considers human life as a kind of property or asset that earns\nan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings. Net earnings means the income a person expects\nto earn each year in the future, less the amount he would spend on himself. It\nthus indicates the economic loss a family would suffer if the wage earner were to\ndie prematurely. These earnings are capitalised, using an appropriate interest\nrate to discount them.Although there are multiple parameters used to calculate HLV including taking\ninto account inflation, wage rise, future earning capacity etc., a simple thumb\nrule to calculate HLV is to determine the amount that would generate the annual\nincome the family would be needing by way of interest. In other words HLV is the\nannual contribution for the family by the breadwinner divided by the prevailing\nrate of interest.**Example**Mr. Rajan earns Rs. 1,20,000 a year and spends Rs. 24,000 on himself. The net\nearnings his family would lose, were he to die prematurely, would be Rs. 96,000\nper year. Suppose the rate of interest is 8% (expressed as 0.08).**Human-Life-Value (HLV) = Annual Contribution for Dependents ÷ Rate of****Interest**HLV = 96000/ 0.08 = Rs. 12,00,000117HLV helps to determine how much insurance one should have for full protection.\nIt also tells us the upper limit beyond which providing life insurance may not be\nreasonable.In general, the amount of insurance should be around 10 to 15 times one’s annual\nincome. Thus one should grow suspicious if Mr. Rajan was to ask insurance of Rs.\n2 crores, while earning only Rs. 1.2 lakhs a year. The actual amount of insurance\npurchased would depend on factors like how much insurance one can afford and\nwould like to buy.**B.** **Risk and Life Insurance**As we have seen above, life insurance provides protection against those risk\nevents that can destroy or reduce the value of human life as an asset. There are\nthree kinds of situations where such loss can occur. They are typical concerns\nwhich ordinary people face.**Diagram 1:** Typical concerns faced by ordinary peopleGeneral insurance on the other hand typically deals with risks that affect property\n– like fire, loss of cargo while at sea, theft and burglary and motor accidents.\nThey also cover events leading to loss of name and goodwill. These are covered\nby liability insurance.Finally there are risks that can affect the person. Termed as personal risks, these\nmay also be covered by general insurance.**Example**Accident insurance which protects against losses suffered due to an accident.**a)** **How exactly does life insurance differ from general insurance?**|General Insurance|Life Insurance|\n|---|---|\n| Indemnity: General insurance policies,<br>with the exception of Personal Accident<br>Insurance, are usually contracts of<br>indemnity i.e. after an event like fire,<br>the insurer assesses the exact amount of<br>loss that has occurred and compensates<br>only that amount of loss – no more, no<br>less.| **Assurance:** Life insurance policies<br>are contracts of assurance.<br> The amount of benefit to be paid in<br>the event of death is fixed at the<br>beginning of the contract.|118|Col1| An assured sum is paid to the<br>nominees or beneficiaries of the<br>insured when he dies.|\n|---|---|\n| Duration: The contract is generally short<br>period or for one year renewable basis| The contract is generally long term<br>though some one year renewable<br>contracts are also prevalent|\n| Uncertainty: In general insurance<br>contracts, the concerned risk event is<br>uncertain. No one can be certain about<br>whether a house would catch fire or a<br>car meet an accident.| There is no such question Death is<br>certain once a person is born. What<br>is uncertain is the time of death.<br>Life insurance offers protection<br>against the risk of premature death.|\n| Increase in probability: In case of<br>General insurance perils like fire or<br>earthquake, the probability of happening<br>of the event does not increase with<br>time.| In life insurance the probability of<br>death increases with age.|**b)** **Nature of life insurance risk**Since probability of death increases with age, lower premiums are charged for", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "l1", "section": "Human Life Value (HLV)", "chunk_id": "Final IC 38 - WA_Composite  - English_060", "metadata": {"file_size": 20885, "chunk_index": 60, "chunk_tokens": 1001, "has_examples": true, "has_tables": true, "key_concepts": ["Nature of life insurance risk", "Interest", "Diagram 1:", "Example", "Assurance:"]}}
{"chunk": "|---|---|\n| Duration: The contract is generally short<br>period or for one year renewable basis| The contract is generally long term<br>though some one year renewable<br>contracts are also prevalent|\n| Uncertainty: In general insurance<br>contracts, the concerned risk event is<br>uncertain. No one can be certain about<br>whether a house would catch fire or a<br>car meet an accident.| There is no such question Death is<br>certain once a person is born. What<br>is uncertain is the time of death.<br>Life insurance offers protection<br>against the risk of premature death.|\n| Increase in probability: In case of<br>General insurance perils like fire or<br>earthquake, the probability of happening<br>of the event does not increase with<br>time.| In life insurance the probability of<br>death increases with age.|**b)** **Nature of life insurance risk**Since probability of death increases with age, lower premiums are charged for\nthose who are young and higher premiums for older people. One result was that\nold individuals who were in good health, tended to withdraw while unhealthy\nmembers remained in the scheme. Insurance companies faced serious problems\nas a result. Their attempts to develop life insurance policies that people could\nafford led to the development of level premiums.**c)** **Level premiums**The level premium is fixed such that it does not increase with age but remains\nconstant throughout the contract period. This means premiums collected in early\nyears is more than the amount needed to cover death claims of those dying when\nyoung, while premiums collected in later years are less than what is needed to\nmeet claims of those dying at higher ages. The level premium is an average of\nboth. The excess premiums of earlier ages compensate for the deficit of\npremiums in later ages. The level premium feature is illustrated below.119**Diagram 2:** **Level Premium**Level premiums are required because life insurance contracts are long term\ninsurance contracts that run for 10, 20 or many more years. The concept of level\npremiums, do not arise for general insurance policies, which are typically short\nterm and expire annually.**Example**The level premium rate is arrived at by the insurers based on the mortality\n(probability of death) during the term of the policy as the age of the insured\nwould increase every year. The rate once decided shall be constant for the entire\nterm of the policy.**d)** **The Principle of Risk Pooling and Life Insurance**We have already discussed the Principle of Pooling and Mutuality earlier. The\npooling principle plays two specific roles in life insurance.i. It **provides protection against the economic loss arising as a result of one’s****untimely death** . This is done by creating a fund that pools the contributions\nof many who have purchased a life insurance contract.**e)** **The Life Insurance Contract**The Policy document is the **evidence of the insurance contract** which a details\nall the terms and conditions of the **insurance** .The contract states the sum assured of the life insurance policy. Life insurance is\nregarded a **financial security** as the sum Insured is guaranteed by the contract.\nThe guarantee implies that life insurance is managed efficiently and\nconservatively; strongly regulated and strictly supervised.Since Life insurance contracts involve both risk cover and savings, they are often\ncompared with financial products. They are also seen as a way of holding wealth\nthan as protection. Indeed, many life insurance products have a large cash value\nor savings component which can form a significant part of an individual’s savings.120Some do argue that it may be better to buy only Term Insurance from an insurance\ncompany and invest the balance premiums in instruments that yield higher\nreturns.Let us consider the arguments for and against traditional cash value insurance\ncontracts.**a)** **Advantages**i. Insurance has historically been proven as a **safe and secure investment**\n**offering** a minimum guaranteed rate of return, which may increase with\ncontract duration.ii. Regularity of premium payments requires compulsory planning of one’s\nsavings and results in savings **discipline** .iii. The Insurer takes care of professional investment management and **frees**the **individual** of this responsibilityiv. Insurance **provides liquidity** . The insured can take a loan on or surrenderthe policy and convert it into cash.v. Both cash value type life insurance and annuities may enjoy some **income**\n**tax advantages.**vi. Insurance may be **safe from creditors’ claims**, generally in the event ofthe insured’s bankruptcy or death.**b)** **Disadvantages**i. As insurance gives relatively fixed and stable returns, it can be seriously\naffected by inflation.ii. High marketing and other initial costs reduces the amount of cash value", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Nature of life insurance risk", "chunk_id": "Final IC 38 - WA_Composite  - English_061", "metadata": {"file_size": 20885, "chunk_index": 61, "chunk_tokens": 1009, "has_examples": true, "has_tables": true, "key_concepts": ["Nature of life insurance risk", "The Life Insurance Contract", "Level premiums", "Example", "Advantages"]}}
{"chunk": "company and invest the balance premiums in instruments that yield higher\nreturns.Let us consider the arguments for and against traditional cash value insurance\ncontracts.**a)** **Advantages**i. Insurance has historically been proven as a **safe and secure investment**\n**offering** a minimum guaranteed rate of return, which may increase with\ncontract duration.ii. Regularity of premium payments requires compulsory planning of one’s\nsavings and results in savings **discipline** .iii. The Insurer takes care of professional investment management and **frees**the **individual** of this responsibilityiv. Insurance **provides liquidity** . The insured can take a loan on or surrenderthe policy and convert it into cash.v. Both cash value type life insurance and annuities may enjoy some **income**\n**tax advantages.**vi. Insurance may be **safe from creditors’ claims**, generally in the event ofthe insured’s bankruptcy or death.**b)** **Disadvantages**i. As insurance gives relatively fixed and stable returns, it can be seriously\naffected by inflation.ii. High marketing and other initial costs reduces the amount of cash value\naccumulated in earlier years of life insurance policies.iii. The guaranteed yield may be below that of other financial instruments**Test Yourself 1**How does diversification reduce risks in financial markets?I. Collecting funds from multiple sources and investing them in one placeII. Investing funds across various asset classesIII. Maintaining time difference between investmentsIV. Investing in safe assets**Summary**a) Asset is a kind of property that yields value or a return.121b) The HLV concept considers human life as a kind of property or asset that earnsan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings.c) The level premium is a premium fixed such that it does not increase with agebut remains constant throughout the contract period.d) Mutuality is one of the important ways to reduce risk in financial markets, theother being diversification.e) The element of guarantee in a life insurance contract implies that lifeinsurance is subject to stringent regulation and strict supervision.**Key Terms**1. Asset2. Human Life Value3. Level premium4. Mutuality5. Diversification**Answers to Test Yourself****Answer 1** - The correct answer is II.122## CHAPTER L-02## FINANCIAL PLANNING**Chapter Introduction**In previous chapters we discussed life insurance and its role in providing financial\nprotection. Security is only one of the concerns of individuals who seek to allocate\ntheir income and wealth to meet various needs of the present and the future.\nLife insurance must be understood in the wider context of “Personal Financial\nPlanning”. The purpose of this chapter is to introduce the subject of financial\nplanning.**Learning Outcomes**123**A.** **Financial planning and the individual life cycle****1.** **What is financial planning?**Most of us spend a major part of our lives working to make money. Financial\nplanning is a smart way to make money work for us.**Definition**Financial planning is a process of identifying one’s life’s goals, translating these\ngoals into financial goals and managing one’s finances to achieve those goals.Financial planning involves preparing a roadmap to meet both current and future\nneeds, which may be unforeseen. It plays a crucial role in building a life with less\nworry. Careful planning can help to set one’s priorities and work to achieve your\nvarious goals.**Diagram 1:** **Types of Goals**i. Goals may be **short term** : Buying an LCD TV set or a family vacationii. They could be **medium term** : Buying a house or a vacation abroadiii. The **long term** goals may include: Education or marriage of one’s child orpost retirement provision**2.** **Individual’s life cycle**From the day a person is born till the day of his/ her death, he/ she goes through\nvarious stages in life, during which he/ she is expected to play a series of roles\nThese stages are illustrated in the diagram given below.**Diagram 2:** **The Economic Life Cycle**124**Life Stages and Priorities****a)** **Learner (till say age 20 -25)** :The stage when one is preparing for hisfuture byimproving his or her knowledge and skills. Funds are\nrequired for financing one’s education. For instance, meeting the\nhigh cost of fees for Medical or Management Education.**b)** **Earner (from 25 onwards)** :When one has found employment andperhaps earns enough to meet his or her needs and has some surplus\nto spare.There are family responsibilities and one may also save and\ninvest in order to have money to meet the needs that may arise in\nthe immediate future.For instance, a young man takes a housing loan", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t2", "section": "Advantages", "chunk_id": "Final IC 38 - WA_Composite  - English_062", "metadata": {"file_size": 20885, "chunk_index": 62, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Financial planning and the individual life cycle", "Key Terms", "What is financial planning?", "The Economic Life Cycle"]}}
{"chunk": "various stages in life, during which he/ she is expected to play a series of roles\nThese stages are illustrated in the diagram given below.**Diagram 2:** **The Economic Life Cycle**124**Life Stages and Priorities****a)** **Learner (till say age 20 -25)** :The stage when one is preparing for hisfuture byimproving his or her knowledge and skills. Funds are\nrequired for financing one’s education. For instance, meeting the\nhigh cost of fees for Medical or Management Education.**b)** **Earner (from 25 onwards)** :When one has found employment andperhaps earns enough to meet his or her needs and has some surplus\nto spare.There are family responsibilities and one may also save and\ninvest in order to have money to meet the needs that may arise in\nthe immediate future.For instance, a young man takes a housing loan\nand invests in a house.**c)** **Partner(on getting marriage at say 28 - 30)** : The stage when one ismarried and has a family of one’s own.This creates new needs like\nhaving a house of one’s own, perhaps a car, consumer durables,\nplanning for children’s future etc.**d)** **Parent(say 28 to 35)** : The years when one becomes the parent ofone or more children.One now has to worry about their health and\neducation - getting them into good schools etc.**e)** **Provider(say age 35 to 55)** : The stage when children have grown intoteenagers, and includes their high school and college years. One is\nconcerned about the high cost of education to make the child\nqualified to face the challenges of life.For instance, consider the\namount that needs to be set up to finance a medical course that runs\nfor five years.In many Indian homes, making provision for marriage\nand settlement of girl children is a critical area of concern.Indeed,\nmarriage and education of children is a prime motive for savings for\nmost Indian families today.**f)** **Empty Nester(age 55 to 65):** The term ‘empty nester’ implies thatthe offspring have flown away leaving the nest [the household]\nempty.This is the period when children have married and sometimes\nhave migrated to other places for work, leaving the\nparents.Hopefully by this stage, one has liquidated one’sliabilities[like housing loan and other mortgages] and has built up a fund for125reirement.It is also the period when ailments like BP and Diabetes\nbegin to manifest and plague one’s life.Health care,financial\nindependence and security of income become very important at this\nstage.**g)** **Retirement – the twilight years (age 60 and beyond):** The age whenone has retired from active work and spends one’s savings to meet\nthe needs of life.The living needs of the husband and wife as long as\nboth are alive is the focus.One is concerned abouthealth\nissues,adequateincome and loneliness.This is also the period when\none would seek to enhance the quality of life and enjoy many of the\nthings that one had dreamt of but could not achieve – like pursuing a\nhobby or going on a vacation or a pilgrimage.Whether one ages\ngracefully or in poverty would depend on how much one has provided\nfor these years.As we can see above, the economic life cycle has three phases: a student or Pre\n– job phase; the working phase that begins between ages 18 to 25 and lasts for 35\nto 40 years; and the retirement years that begin after one has stopped working.**3.** **Why does one need to save and purchase various financial assets?**The reason is that during each stage in an individual’s life, when one performs a\nparticular role, a number of needs come up for which funds have to be provided.**Example**When a person gets married and starts a family of his own, he may need to have\nhis own house. As children grow older, funds are needed for their higher\neducation. As an individual goes well past middle age, the concern is for having\nmoney to meet health costs and post retirement savings so that one does not\nneed to depend on one’s children and become a burden. Living with\nindependence and dignity becomes important.The Savings – Investment process may be considered as being made of two\ndecisions.**i.** **Postponement of consumption:** an allocation of resources between presentand future consumption.**ii.** **Parting with liquidity** (or ready purchasing power) in exchange for less liquidassets. For instance, purchase of a life insurance policy would mean\nexchanging money for a contract which is less liquid.Financial planning includes both kinds of decisions. One needs to plan in order to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "r125", "section": "Diagram 2:", "chunk_id": "Final IC 38 - WA_Composite  - English_063", "metadata": {"file_size": 20885, "chunk_index": 63, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["The Economic Life Cycle", "Life Stages and Priorities", "Diagram 2:", "Empty Nester(age 55 to 65):", "Example"]}}
{"chunk": "particular role, a number of needs come up for which funds have to be provided.**Example**When a person gets married and starts a family of his own, he may need to have\nhis own house. As children grow older, funds are needed for their higher\neducation. As an individual goes well past middle age, the concern is for having\nmoney to meet health costs and post retirement savings so that one does not\nneed to depend on one’s children and become a burden. Living with\nindependence and dignity becomes important.The Savings – Investment process may be considered as being made of two\ndecisions.**i.** **Postponement of consumption:** an allocation of resources between presentand future consumption.**ii.** **Parting with liquidity** (or ready purchasing power) in exchange for less liquidassets. For instance, purchase of a life insurance policy would mean\nexchanging money for a contract which is less liquid.Financial planning includes both kinds of decisions. One needs to plan in order to\nsave for the future and also must invest wisely in appropriate assets to meet the\nvarious needs that will arise in future.**4.** **Individual needs**If we look at the stages of the life cycle that has been discussed above, we would\nsee that three types of needs can arise. These give rise to three types of financial\nproducts.126a) **Enabling future transactions**The first set of needs arise from funds for meeting a range of anticipated\nexpenditures that are expected to arise at different stages of the life cycle.\nThere are two types of such needs:**i.** **Specific transaction needs** : that are linked to specific life events whichrequire a commitment of resources. For instance making a provision for\nhigher education/ marriage of dependents; or purchase of a house or\nconsumer durables**ii.** **General transaction needs:** Amounts set aside from current consumptionwithout being earmarked for any specific purposes – these are popularly\ntermed as ‘future provisions’**b)** **Meeting contingencies**Contingencies are unforeseen life events that may call for large funds. These\ncannot met from current income and need to be pre-funded. Some of these\nevents, like death and disability or unemployment, lead to a loss of income.\nOthers, like a fire, may result in a loss of wealth.Such needs may be addressed through insurance, if the probability of their\noccurrence is low but cost impact is high. One may alternatively meet them\nby setting aside a large amount of liquid assets as a reserve.**c)** **Wealth accumulation**The accumulation motive refers to an individual’s desire to invest for\naccumulating wealth, taking advantage of favourable market opportunities.\nSome individuals may take a cautious approach while investing, while some\nmay be willing to take more risks, with a view to earn a higher return. Higher\nreturn is desired because it helps to increase one’s wealth or net worth more\nrapidly. Wealth is linked with independence, enterprise, power and influence.**5.** **Financial products**Corresponding to the above sets of needs there are three types of products in the\nfinancial market:|Transactional<br>products|Bank deposits and other savings instruments that enable<br>one to have adequate purchasing power (liquidity) at the<br>right time and quantum.|\n|---|---|\n|**Contingency**<br>**products like**<br>**insurance**|These provide protection against large losses that may be<br>suffered in the event of sudden unforeseen events.|\n|**Wealth**<br>**accumulation**<br>**products**|Shares and high yielding bonds or real estate are examples<br>of such products. Here the investment is made with a view<br>to committing money for making more money.|127An individual would typically have a mix of all of the above needs and thus may\nneed to have all three types of products. In a nutshell one may say there is:i. A need to save – For cash requirementsii. A need to insure – Against uncertaintiesiii. A need to invest – For wealth creation**6.** **Risk profile and investments**As an individual moves through various stages in the life cycle, from young earner\ntowards middle ages and then towards the final years of one’s work life, the risk\nprofile, or approach towards taking risks also changes.When one is young, one may be quite aggressive and willing to take risks in order\nto accumulate as much wealth as possible. As the years pass however, one may\nbecome more prudent and careful about investing. One is now concerned to\nsecure and consolidate one’s investments.Finally, as one nears retirement one may be more conservative. The focus is now\nto have a corpus from which one can spend in the post retirement years. One may", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_064", "metadata": {"file_size": 20885, "chunk_index": 64, "chunk_tokens": 1001, "has_examples": true, "has_tables": true, "key_concepts": ["Wealth accumulation", "Individual needs", "Financial products", "Contingency", "Risk profile and investments"]}}
{"chunk": "need to have all three types of products. In a nutshell one may say there is:i. A need to save – For cash requirementsii. A need to insure – Against uncertaintiesiii. A need to invest – For wealth creation**6.** **Risk profile and investments**As an individual moves through various stages in the life cycle, from young earner\ntowards middle ages and then towards the final years of one’s work life, the risk\nprofile, or approach towards taking risks also changes.When one is young, one may be quite aggressive and willing to take risks in order\nto accumulate as much wealth as possible. As the years pass however, one may\nbecome more prudent and careful about investing. One is now concerned to\nsecure and consolidate one’s investments.Finally, as one nears retirement one may be more conservative. The focus is now\nto have a corpus from which one can spend in the post retirement years. One may\nalso think about making donations for one’s children, for gifting to charity etc.**One’s investment style also changes to keep pace with the risk profile.** This is\nindicated below:**Diagram 3:** **Risk Profile and Investment Style****Risk Profile** **Investment Style****Test Yourself 1**Which among the following gives specific protection against unforeseen events?I. InsuranceII. Transactional products like bank Fixed DepositsIII. SharesIV. Debentures128**B.** **Role of financial planning****1.** **Financial planning**Financial planning is the process of carefully evaluating a ~~cl~~ ient’s current and\nfuture needs along with his or her risk profile and income, to chart out a road\nmap for meeting various anticipated/ unforeseen needs through recommending\nappropriate financial products.Elements of financial planning include: Investing - allocating assets based on one’s risk taking appetite, Risk management, Retirement planning, Tax and estate planning, and Financing one’s needsTo put it in a nutshell financial planning involves 360 degrees planning.**Diagram 4:** **Elements of Financial Planning****2.** **Role of Financial planning**Financial planning is not a new discipline. It was practiced in simple form by our\nfore fathers. There were limited investment options then. A few decades ago\nmany considered equity investment as akin to gambling. Savings were largely\nchannelled in bank deposits, postal savings schemes and other fixed income\ninstruments. The challenges facing our society and our customers are far different\ntoday. Some of them are:**i.** **Disintegration of the joint family**The joint family has given way to the nuclear family, consisting of father,\nmother and children. The typical head and earning member of this family has\nto bear the responsibility for taking care of oneself and one’s immediate\nfamily. This may call for a lot of proper planning and advice from a\nprofessional financial planner.129**ii.** **Multiple investment choices**A large number of investment instruments are available today for wealth\ncreation, each offering varying degrees of risk and return. To achieve financial\ngoals, one has to choose wisely and make the right investment decisions based\non one’s risk taking appetite. Financial planning can help with one’s asset\nallocation.**iii.** **Changing lifestyles**Instant pleasure seems to be the order of the day. Individuals want to have\nthe latest mobile phones, cars, large homes, memberships of prestigious\nclubs, etc. To satisfy these desires, people often borrow heavily and spend a\ngood part of their income to pay off loans, leaving little scope to save.\nFinancial planning helps to plan and one’s expenditure so that one can cut\ndown unnecessary expenses so as to maintain one’s present standard of living\nwhile upgrading it over time.**iv.** **Inflation**Inflation is a rise in the general level of prices of goods and services in an\neconomy over a period of time. This leads to a fall in the value of money. As\na result, the purchasing power of money gets reduced. Inflation can play\nhavoc post retirement. Financial planning can help to ensure that one is\nequipped to deal with inflation, especially in later years.**v.** **Other contingencies and needs**Financial planning also enables individuals to meet a number of other needs\nand challenges like medical emergencies and tax liabilities. Individuals also\nneed to ensure that their estate consisting of their wealth and properties,\nsmoothly pass on to their loved ones after their death. There are other needs\nlike the need to do charity or meet certain social and religious obligations\nduring one’s lifetime and even thereafter. Financial planning is the means to\nachieve all this.3. **When is the right time to start financial planning?****Financial planning** is not meant only for the wealthy. Indeed, Planning should\nideally start one earns one’s first salary. There is no trigger point to tell when", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s128", "section": "Risk profile and investments", "chunk_id": "Final IC 38 - WA_Composite  - English_065", "metadata": {"file_size": 20885, "chunk_index": 65, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Risk profile and investments", "Multiple investment choices", "Risk Profile", "Test Yourself 1", "Role of Financial planning"]}}
{"chunk": "while upgrading it over time.**iv.** **Inflation**Inflation is a rise in the general level of prices of goods and services in an\neconomy over a period of time. This leads to a fall in the value of money. As\na result, the purchasing power of money gets reduced. Inflation can play\nhavoc post retirement. Financial planning can help to ensure that one is\nequipped to deal with inflation, especially in later years.**v.** **Other contingencies and needs**Financial planning also enables individuals to meet a number of other needs\nand challenges like medical emergencies and tax liabilities. Individuals also\nneed to ensure that their estate consisting of their wealth and properties,\nsmoothly pass on to their loved ones after their death. There are other needs\nlike the need to do charity or meet certain social and religious obligations\nduring one’s lifetime and even thereafter. Financial planning is the means to\nachieve all this.3. **When is the right time to start financial planning?****Financial planning** is not meant only for the wealthy. Indeed, Planning should\nideally start one earns one’s first salary. There is no trigger point to tell when\none should begin to plan.**There is however an important principle that should guide us – the longer the**\n**time period of our investments, the more they will multiply.**Hence one should start early. One’s investments would then get the maximum\nbenefit of time. Again, planning is not only for wealthy individuals. It is for\neveryone. To achieve one’s financial goals, one must follow a disciplined\napproach. An unplanned, impulsive approach to financial planning is one of the\nprime causes of financial distress of individuals.130**Test Yourself 2**When is the best time to start financial planning?I. Post retirement\nII. As soon as one gets his first salary\nIII. After marriage\nIV. Only after one gets rich**C.** **Financial planning - Types**Let us now look at the various types of financial planning exercises that an\nindividual may need to do.**Diagram 5:** **Financial Planning Advisory Services**Consider the various advisory services that may be provided. There are six such\nareas that are taken up Cash planning Investment planning Insurance planning Retirement planning Estate planning Tax planning**1.** **Cash planning**Managing cash flows has two purposes.i. To manage income and expenditures flow including establishing andmaintaining a reserve of liquid assets to meet unanticipated needs.ii. To systematically create and maintain a surplus of cash for capitalinvestment.Cash Planning involves a number of steps. One must prepare a budget and analyse\none’s income and expenditure flows to check on what regular and lump sum costs131have been incurred. While fixed expenses cannot be controlled easily, one can\nreduce, postpone and manage expenses that are variable. The next step is to\n**predict future monthly income and expenses over the whole year and** design\na plan for managing these cash flows.Another part of the cash planning process is to design strategies for maximizing\ndiscretionary income.**Example**One can restructure one’s outstanding debts.One can meet outstanding credit card debts through consolidating them and\npaying them off through a bank loan with lower interest.One may reallocate one’s investments to make them earn more income.**2.** **Insurance planning**There are certain risks to which individuals are exposed that can keep them from\nattaining their personal financial goals. Insurance planning involves constructing\na plan of action to provide adequate insurance against such risks.The task here is to estimate how much insurance is needed and determining what\ntype of policy is best suited.**i.** **Life insurance** may be decided by estimating the income and expenserequirements of the dependents in the event of premature death of the\nbread winner.**ii.** **Health insurance** requirements may be assessed in terms of thehospitalisation expenses that are likely to be incurred in any family\nmedical emergency.a. Finally **insurance for one’s assets** may be considered in terms ofthe type and quantum of cover required to protect one’s home/\nvehicle/ factory etc. from the risk of loss.**3.** **Investment planning**There is no one right way to invest. What is appropriate would vary from\nindividual to individual. Investment planning is a process of determining the most\nsuitable investment and asset allocation strategies based on an individual’s risk\ntaking appetite, financial goals and the time horizon to meet those goals.132**a)** **Investment parameters****Diagram 6:** **Investment Parameters**The first step here is to define certain investment parameters. These include:**i.** **Returns** : Returns on Investment is often the most important parameterthat people look for when they invest their money. The rate of return", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s131", "section": "Inflation", "chunk_id": "Final IC 38 - WA_Composite  - English_066", "metadata": {"file_size": 20885, "chunk_index": 66, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Financial Planning Advisory Services", "Health insurance", "Investment planning", "Returns", "Example"]}}
{"chunk": "type of policy is best suited.**i.** **Life insurance** may be decided by estimating the income and expenserequirements of the dependents in the event of premature death of the\nbread winner.**ii.** **Health insurance** requirements may be assessed in terms of thehospitalisation expenses that are likely to be incurred in any family\nmedical emergency.a. Finally **insurance for one’s assets** may be considered in terms ofthe type and quantum of cover required to protect one’s home/\nvehicle/ factory etc. from the risk of loss.**3.** **Investment planning**There is no one right way to invest. What is appropriate would vary from\nindividual to individual. Investment planning is a process of determining the most\nsuitable investment and asset allocation strategies based on an individual’s risk\ntaking appetite, financial goals and the time horizon to meet those goals.132**a)** **Investment parameters****Diagram 6:** **Investment Parameters**The first step here is to define certain investment parameters. These include:**i.** **Returns** : Returns on Investment is often the most important parameterthat people look for when they invest their money. The rate of return\ndetermines how fast one’s wealth from investments would grow over time.\nThe role of returns can be appreciated when one considers the ‘Power of\ncompounding’. For instance, if an amount of Rs 1000 is invested today at\n8% rate of interest, at the end of five years, it would accumulate to Rs\n1469 and at the end of 10 years it would more than double to reach Rs\n2159. This expectation of returns which helps to accumulate wealth is one\nof the prime motives of investment. At the same time, one must note that\nhigher rates of return may be typically accompanied with higher levels of\nrisk. One has to make a trade-off between return and risk. This depends\non an individual’s risk tolerance.**ii.** **Risk tolerance** : A measure of how much risk someone is willing to take inpurchasing an investment.**iii.** **Time horizon** : This is the amount of time available to attain a financialobjective. The longer the time horizon, the less concern is there about\nshort term liability. One can invest in longer term, in less liquid assets\nthat earn a higher return.**iv.** **Liquidity** : Individuals with limited investment capacity, or uncertainincome and expenditure flows, or who are investing for meeting a\nparticular personal or business expenditure, would be concerned with\nliquidity [This refers to the ability to convert investment into cash without\nloss of value.]133**v.** **Marketability** : The ease with which an asset can be bought or sold.**vi.** **Diversification** : The extent to which one seeks to diversify or spread theinvestments to reduce the risks.**vii.** **Taxes** : Many investments confer certain income tax benefits and one maylike to consider the post-tax returns of various investments.**b)** **Selection of appropriate investment vehicles**The next step is selection of appropriate investment vehicles based on the above\nparameters. The actual selection would depend on the individual’s expectations\nabout return and risk.In India there are a variety of products that may be considered for the purpose\nof investments. These include: Fixed deposits of banks/ corporates, Small savings schemes of post office, Public issues of shares, Debentures or other securities, Mutual funds Unit linked policies that are issued by life insurance companies etc.**4.** **Retirement planning**It is the process of determining the amount of money that an individual needs to\nmeet his needs post retirement and deciding on various retirement options for\nmeeting these needs. Retirement planning involves three phases**a)** **Accumulation:** Accumulation of funds is done through various kinds ofstrategies to set aside money for investment with this purpose.**b)** **Conservation:** Conservation refers to the efforts made to ensure that one’sinvestments are put to hard work and that the principal gets maximised\nduring the individual’s working years.**c)** **Distribution:** Distribution refers to the optimal method of converting thecorpus or principal into withdrawals/ annuity payments for meeting income\nneeds after retirement.**5.** **Estate planning**It is a plan for the devolution and transfer of one’s estate after one’s demise.\nThere are various processes like nomination and assignment or preparation of a\nwill. The basic idea is to ensure that one’s property and assets are smoothly\ndistributed and or utilised according to one’s wishes after one is no more.**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Life insurance", "chunk_id": "Final IC 38 - WA_Composite  - English_067", "metadata": {"file_size": 20885, "chunk_index": 67, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Investment planning", "Time horizon", "Estate planning", "Risk tolerance", "Retirement planning"]}}
{"chunk": "meet his needs post retirement and deciding on various retirement options for\nmeeting these needs. Retirement planning involves three phases**a)** **Accumulation:** Accumulation of funds is done through various kinds ofstrategies to set aside money for investment with this purpose.**b)** **Conservation:** Conservation refers to the efforts made to ensure that one’sinvestments are put to hard work and that the principal gets maximised\nduring the individual’s working years.**c)** **Distribution:** Distribution refers to the optimal method of converting thecorpus or principal into withdrawals/ annuity payments for meeting income\nneeds after retirement.**5.** **Estate planning**It is a plan for the devolution and transfer of one’s estate after one’s demise.\nThere are various processes like nomination and assignment or preparation of a\nwill. The basic idea is to ensure that one’s property and assets are smoothly\ndistributed and or utilised according to one’s wishes after one is no more.**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full\nadvantage of the tax breaks. As per the tax laws in India, life insurance premium134paid by an individual on a life insurance policy on his/ her own life, on the life of\nhis/ her spouse and children is eligible for deduction under Section 80C of the\nIncome Tax Act for calculating the taxable income. Currently, this deduction is\nallowed up to Rs.1,50,000 subject to conditions. The maturity proceeds (sum\nassured plus bonus) of such policies are also exempted under Section 10 (10D).\nSimilarly, Death Claim amounts are exempt from Income Tax at the hands of the\nrecipient. One must note that the purpose here is to minimise and not evade\ntaxes.Life insurance agents may be often required by their clients and prospective\ncustomers to advise them not only about meeting their insurance needs but also\nfor support in meeting their other financial needs as well. A sound knowledge of\nfinancial planning would be of great value to any insurance agent.**Test Yourself 3**Which among the following is not an objective of tax planning?I. Maximum tax benefitII. Reduced tax burden as a result of prudent investmentsIII. Tax evasionIV. Full advantage of tax breaks**Summary**Financial planning is a process of: Identifying one’s life’s goals, Translating these identified goals into financial goals and Managing one’s finances in ways that will help one to achieve those goalsBased on the individual life cycle three types of financial products are\nneeded. These help in: Enabling future transactions, Meeting contingencies and Wealth accumulationThe need for financial planning is further increased by the changing societal\ndynamics like disintegration of the joint family, multiple investment choices\nthat are available today and changing lifestyles etc.The best time to start financial planning is right after one receives the first\nsalary.Financial planning advisory services include: Cash planning,\n Investment planning,\n Insurance planning,135 Retirement planning,\n Estate planning and\n Tax planning**Key Terms**1. Financial planning\n2. Life stages\n3. Risk profile\n4. Cash planning\n5. Investment planning\n6. Insurance planning\n7. Retirement planning\n8. Estate planning\n9. Suitability information\n10. Tax planning**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.136## CHAPTER L-03## LIFE INSURANCE PRODUCTS: TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of life insurance products. It begins by\ntalking about products in general and then proceeds to discussing the need for\nlife insurance products and the role they play in achieving various life goals.\nFinally we look at some traditional life insurance products.**Learning Outcomes**137**A.** **Overview of life insurance products****1.** **What is a product?**To begin with, let us understand what is meant by a ‘product’. In popular terms\na product is normally just considered as a commodity or good that is brought and\nsold in the market.It is necessary to understand that every Product is a bundle of features or\nattributes that confer certain benefits.All Companies try to differentiate their products by making them more attractive\nto customers and offering different kinds of features and benefits. A life\ninsurance agent’s role is to understand and pitch on these features and benefits\nto make the products of their companies unique and attractive compared to\nothers.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "m134", "section": "Accumulation:", "chunk_id": "Final IC 38 - WA_Composite  - English_068", "metadata": {"file_size": 20885, "chunk_index": 68, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Estate planning", "Answer 3", "Tax planning"]}}
{"chunk": "**Answer 3** - The correct option is III.136## CHAPTER L-03## LIFE INSURANCE PRODUCTS: TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of life insurance products. It begins by\ntalking about products in general and then proceeds to discussing the need for\nlife insurance products and the role they play in achieving various life goals.\nFinally we look at some traditional life insurance products.**Learning Outcomes**137**A.** **Overview of life insurance products****1.** **What is a product?**To begin with, let us understand what is meant by a ‘product’. In popular terms\na product is normally just considered as a commodity or good that is brought and\nsold in the market.It is necessary to understand that every Product is a bundle of features or\nattributes that confer certain benefits.All Companies try to differentiate their products by making them more attractive\nto customers and offering different kinds of features and benefits. A life\ninsurance agent’s role is to understand and pitch on these features and benefits\nto make the products of their companies unique and attractive compared to\nothers.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the\nfeatures of each brand is different from the other.Products may be:**i.** **Tangible** : refers to physical objects that can be directly seen or felt by touch\n(for instance a car or a television set)**ii.** **Intangible:** refers to products that can only be perceived indirectly.Life insurance is a product that is intangible.**2.** **Purpose of Life Insurance products.**Human beings possess **an immensely valuable asset** - **human capital – which is**\n**the source of our productive earning capacity.** However, there is an uncertainty\nabout life and human well-being. Events like death and disease can destroy our\nEarning capabilities and life savings. Insurance provides protection for such\nsituations.Life insurance products offer protection against the loss of economic value of an\nindividual’s productive abilities, as a result of death or disability. The moment\nan individual takes a life insurance policy and pays the first premium, **an**\n**immediate estate is created** in his/ her name and its proceeds are available to\nhis/ her dependents or loved ones.Life insurance provides peace of mind and protection to the near and dear ones\nof an individual, in case of one’ unfortunate death. Beyond providing such\nprotection, life insurance fulfils other needs of the market, such as savings,\nwealth accumulation, safety and security of investment and certain rates of\nreturn, which are not discussed in this course.Life insurance industry has seen enormous innovations in product offerings over\nthe last two centuries. The journey began with death benefit products but over138the period, multiple living benefits like endowment, disability benefits, dreaded\ndisease covers and so on were added.One of the major innovations of recent years was the creation of market linked\npolicies where the insured was invited to participate in choosing and managing\nhis investment assets. Another major innovation was the evolution of flexible\nunbundled products, in which different benefits as well as cost components could\nbe varied by the policy holder as per changing needs, affordability and life-stages.**3.** **Suitability Information**In order to make insurance intermediaries including agents and brokers more\naccountable and reduce instances of mis-selling, IRDAI has created a concept of\n‘product suitability’. ‘Suitability information’ is the information of a prospect on\nage, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, etc. That is, before selling an\ninsurance policy to a client, an Agents should be able to justify the suitability of\nthe product for the client’s needs.In other words, the Agent takes into account the particular prospect’s risk profile- age, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, insurance needs etc. and decides\nwhether the product is suitable for that prospect. The nature of product, the\namount of premium, the mode of premium payment and tenure of the policy as\nwell as the manner of premium payment are also part of the parameters of\n‘Suitability’.IRDAI mandates that the suitability information collected should be signed by the\nprospect and the agent; and preserved by the Insurer as part of the policy records\nand made available for inspection by the Authority.**4.** **Riders in Life Insurance Products**A rider is a provision typically added through an endorsement, which becomes\npart of the contract. Riders are commonly used to provide supplementary benefits\nlike increasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "L-03", "section": "Answer 3", "chunk_id": "Final IC 38 - WA_Composite  - English_069", "metadata": {"file_size": 20885, "chunk_index": 69, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Riders in Life Insurance Products", "Tangible", "Answer 3", "Suitability Information", "Example"]}}
{"chunk": "insurance policy to a client, an Agents should be able to justify the suitability of\nthe product for the client’s needs.In other words, the Agent takes into account the particular prospect’s risk profile- age, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, insurance needs etc. and decides\nwhether the product is suitable for that prospect. The nature of product, the\namount of premium, the mode of premium payment and tenure of the policy as\nwell as the manner of premium payment are also part of the parameters of\n‘Suitability’.IRDAI mandates that the suitability information collected should be signed by the\nprospect and the agent; and preserved by the Insurer as part of the policy records\nand made available for inspection by the Authority.**4.** **Riders in Life Insurance Products**A rider is a provision typically added through an endorsement, which becomes\npart of the contract. Riders are commonly used to provide supplementary benefits\nlike increasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different\nrequirements of a person into a single plan.Riders provide a means to provide benefits like Disability cover, accident cover\nand Critical Illness cover as additional benefits in a standard life insurance\ncontract. Policy holders can avail of them by paying an extra premium.**Test Yourself 1**Which among the following is an intangible product?\nI. CarII. HouseIII. Life insurance\nIV. Soap139**B.** **Traditional life insurance products**We shall now learn about some of the traditional types of life insurance products.**Diagram 1:** **Traditional Life Insurance Products****1.** **Term insurance plans**Term insurance is a contract that is valid only during a certain time period. This\nmay range from the short time required to complete an airplane trip to multiple\nyears. Protection may extend up to age 65 or 70. One-year term policies are quite\nsimilar to property and casualty insurance contracts. There is no savings or cash\nvalue element in this policy.In October 2020, IRDAI has introduced a Standard Individual Term Life Insurance\nProduct called, “Saral Jeevan Bima” (the Insurer’s name shall be prefixed to the\nproduct name), a non-linked non-participating individual pure risk premium life\ninsurance plan, which provides for payment of Sum Assured in lump sum to the\nnominee in case of the Life Assured’s unfortunate death during the policy term.Apart from certain benefits and riders specified by the Regulator, no other riders/\nbenefits/ options/ variants are allowed to be offered. Also, there shall be no\nexclusions under the product other than the suicide exclusion. Saral Jeevan Bima\nis to be offered to individuals without restrictions on gender, place of residence,\ntravel, occupation or educational qualifications.**a)** **Purpose**A Term Life insurance plan fulfils the main and basic idea behind life\ninsurance, which is to provide an assured sum of money to the dependents of\nthe insured on his/ her death.**The policy works as an income replacement plan also.** Here the payment of\na lump-sum amount is replaced by a series of monthly, quarterly or similar\nperiodical payments to the dependent beneficiaries.140**b)** **Disability**\nNormally a Term insurance policy covers only death. However, it is possible\nto buy a Disability Protection Rider on the main policy. In such a case, if the\ninsured suffers from a specified disability during the term of the contract, a\ndisability benefit would be paid to the beneficiaries/ insured person. The\nbenefits will continue till the death of the insured person.**Diagram 2:** **Disability****c)** **Term insurance as a rider**Protection under Term Life is usually provided as a stand-alone policy but it\ncould also be provided through a rider in a policy.**Example**A rider to a pension plan provides for a death benefit to be payable if one dies\nbefore the date when pension is to start.**d)** **Convertibility**Convertible term insurance policies allow a policyholder to change or convert\na term insurance policy into a permanent plan like “Whole Life” without\nproviding fresh evidence of insurability. This privilege helps those who wish\nto have permanent cash value insurance but are unable to afford its high\npremiums. When the term policy is converted into permanent insurance the\nnew premium rate would be higher.**e)** **Unique Selling Proposition** ( **USP)**The unique selling proposition (USP) of term assurance is its low price,\nenabling one to buy relatively large amounts of life insurance on a limited", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "p139", "section": "Riders in Life Insurance Products", "chunk_id": "Final IC 38 - WA_Composite  - English_070", "metadata": {"file_size": 20885, "chunk_index": 70, "chunk_tokens": 996, "has_examples": true, "has_tables": false, "key_concepts": ["Riders in Life Insurance Products", "Disability", "Convertibility", "Term insurance as a rider", "Purpose"]}}
{"chunk": "insured suffers from a specified disability during the term of the contract, a\ndisability benefit would be paid to the beneficiaries/ insured person. The\nbenefits will continue till the death of the insured person.**Diagram 2:** **Disability****c)** **Term insurance as a rider**Protection under Term Life is usually provided as a stand-alone policy but it\ncould also be provided through a rider in a policy.**Example**A rider to a pension plan provides for a death benefit to be payable if one dies\nbefore the date when pension is to start.**d)** **Convertibility**Convertible term insurance policies allow a policyholder to change or convert\na term insurance policy into a permanent plan like “Whole Life” without\nproviding fresh evidence of insurability. This privilege helps those who wish\nto have permanent cash value insurance but are unable to afford its high\npremiums. When the term policy is converted into permanent insurance the\nnew premium rate would be higher.**e)** **Unique Selling Proposition** ( **USP)**The unique selling proposition (USP) of term assurance is its low price,\nenabling one to buy relatively large amounts of life insurance on a limited\nbudget.**f)** **Variants**A number of variants of term assurance are possible.**Diagram 3:** **Variants of Term Assurance**141**i.** **Decreasing Term Assurance**\nThese plans typically consist of decreasing term insurance which provides an\namount of death benefit that is equal to the balance that is due on a loan, if\nthe borrower dies before the loan is paid. These are often marketed as\nMortgage Redemption (discussed in Chapter 15) or Credit Life Insurance. The\nplans are usually sold to lending institutions as group insurance to cover the\nlives of their borrowers. Purchase of mortgage redemption insurance is often\na condition of the mortgage loan. Such plans may also be available for\nautomobile or other personal loans.**ii.** **Increasing term assurance**\nAs the name suggests, the plan provides a death benefit, which increases\nalong with the term of the policy. Premium generally increases as the amount\nof coverage increases.**iii.** **Term insurance with return of premiums**\nAnother type of policy (quite popular in India) is term assurance with return\nof premiums. Though the premium paid would be much higher than for a\nsimilar term insurance plan without return of premiums, some customers may\nneed such policies.**g)** **Relevant scenarios**Term insurance may have relevance in the following situations:\ni. Where the need for insurance protection is purely temporary, as in caseof mortgage redemption\nii. As an additional supplement to a savings plan.\niii. As part of a “buy term and invest the rest” philosophy, where one seeksonly cheap term insurance protection from the insurance company and\nwants to invest the difference of premiums in other attractive\ninvestments.**Important****Limitations of term plans:** Term Insurance plans are available only for specific\nperiods and one may not be able to continue the coverage beyond a certain\nage, say 65 or 70.**2.** **Whole life insurance**Whole life insurance is an example of a permanent life insurance policy. Here,\nthe life insurer offers to pay the agreed death benefit when the insured dies, no\nmatter when the death might occur. The premiums can be paid throughout one’s\nlife or for a limited time as specified.Whole life premiums are much higher than term premiums as whole life policies\nare designed to remain in force until the death of the insured, and pay the death\nbenefit anytime. The Plan also provides for a cash value in the policy holder’s\naccount. He/ she can withdraw cash in the form of a policy loan from this cash\nvalue or even redeem it by surrendering the policy for its cash value.142In case of outstanding loans, the amount of loan and interest get deducted from\nthe pay-out to the beneficiaries upon death.**A whole life policy is a good plan for the main earner of the family who wishes**\n**to protect his/ her loved ones in the event of premature death and preserve**\n**his/ her capital against erosion from various events like terminal illness.** One\ncan also use the cash value of the whole life insurance policy for retirement\nneeds, if required. Whole life insurance thus plays an important role in household\nsaving and creating wealth to be passed on to the next generation.**3.** **Endowment Assurance**It is a contract in which the sum assured is payable to the nominees of the insured\nin case of the death of the insured during the term of the policy. If the insured\nsurvives the term the sum assured is paid to the insured.**The product has both death and survival benefit components.** Endowment\nAssurance links one’s insurance and savings programmes by offering a safe and", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "Final IC 38 - WA_Composite  - English_071", "metadata": {"file_size": 20885, "chunk_index": 71, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Disability", "Whole life insurance", "Convertibility", "Variants", "Term insurance as a rider"]}}
{"chunk": "account. He/ she can withdraw cash in the form of a policy loan from this cash\nvalue or even redeem it by surrendering the policy for its cash value.142In case of outstanding loans, the amount of loan and interest get deducted from\nthe pay-out to the beneficiaries upon death.**A whole life policy is a good plan for the main earner of the family who wishes**\n**to protect his/ her loved ones in the event of premature death and preserve**\n**his/ her capital against erosion from various events like terminal illness.** One\ncan also use the cash value of the whole life insurance policy for retirement\nneeds, if required. Whole life insurance thus plays an important role in household\nsaving and creating wealth to be passed on to the next generation.**3.** **Endowment Assurance**It is a contract in which the sum assured is payable to the nominees of the insured\nin case of the death of the insured during the term of the policy. If the insured\nsurvives the term the sum assured is paid to the insured.**The product has both death and survival benefit components.** Endowment\nAssurance links one’s insurance and savings programmes by offering a safe and\ncompulsory method of savings accumulation.People buy endowment plans as a sure method of providing against old age or for\nmeeting specific purposes like having a fund for (a) educational purposes, (b)\nmeeting children’s marriage expenses or(c) paying a mortgage (housing) loan.**Government usually offers tax benefits on the premiums paid, which make it**\n**attractive.** Many endowment policies mature at ages 55 to 65, when the insured\nis planning for his/ her retirement. In such cases such policies can supplement\nretirement savings.**Variants:** Endowment assurance has certain variants - discussed below.**4.** **Money Back Policy**\nThe Money Back policy is a popular endowment plan in India. It has a provision\nfor returning some part of the sum assured in instalments during the term and\nthe balance sum assured at the end of the term.**Example**A Money Back policy for 20 years may provide for paying survival benefits of 20%\nof the sum assured each at the end of the 5 [th], 10 [th] and 15 [th] years and the balance\n40% at the end of the full term of 20 years. If the life assured dies at the end of,\nsay 18 years, the full sum assured and bonuses (explained in the next section)\naccrued are paid as death benefit, even though the insured would have been paid\na benefit of 60% of the face value already, as money back.Money Back plans have been popular because of their liquidity (cash back)\nelement, which make them attractive for meeting short and medium term needs.\nSuch plans provide full death protection also, if the individual dies at any point\nduring the term of the policy.143**5.** **Participating (Par) and Non-Participating (Non-Par)Plans**The Life Insurance products can also be classified as Participating (Par) and Nonparticipating (Non-Par) products. The term “Par” implies policies which are\nparticipating in the profits of the life insurer. “Non–Par”, on the other hand,\nrepresents policies which do not participate in the profits. Both kinds are present\nin traditional life insurance. Under all traditional plans, the pooled life funds,\nwhich are derived from policyholders’ premiums, are invested as per regulatory\nnorms. Policy holders who opt for ‘par products’ are eligible to receive, in\naddition to a guaranteed sum assured, a share in the surpluses( bonuses) that are\ngenerated by the insurer. These are known as ‘With Profit’ plans.**6.** **Non-participating products**The Policy holders who buy non-linked without profit [non par] plans are paid a\nbenefit that is fixed and guaranteed at the beginning of the contract and nothing\nmore. Non-participating products may be offered either under a ‘linked platform’\nor a ‘non-linked platform’. These are known as ‘Without Profits’ plans.**Example**One may have an endowment policy of twenty years providing a guaranteed\naddition of 2% of sum assured for each year of term, so that the maturity benefit\nis sum assured plus a total addition of 40% of the sum assured.Under the IRDAI’s guidelines on traditional non-par policies, the benefits to be\npaid on the happening of a specified event, have to be explicitly stated at the\noutset and not linked to an index or benchmark. The same applies to additional\nbenefits that are accrued at regular intervals. This means that the return on these", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "A whole life policy is a good plan for the main earner of the family who wishes", "chunk_id": "Final IC 38 - WA_Composite  - English_072", "metadata": {"file_size": 20885, "chunk_index": 72, "chunk_tokens": 996, "has_examples": true, "has_tables": false, "key_concepts": ["Non-participating products", "Variants:", "Example", "Money Back Policy", "Endowment Assurance"]}}
{"chunk": "addition to a guaranteed sum assured, a share in the surpluses( bonuses) that are\ngenerated by the insurer. These are known as ‘With Profit’ plans.**6.** **Non-participating products**The Policy holders who buy non-linked without profit [non par] plans are paid a\nbenefit that is fixed and guaranteed at the beginning of the contract and nothing\nmore. Non-participating products may be offered either under a ‘linked platform’\nor a ‘non-linked platform’. These are known as ‘Without Profits’ plans.**Example**One may have an endowment policy of twenty years providing a guaranteed\naddition of 2% of sum assured for each year of term, so that the maturity benefit\nis sum assured plus a total addition of 40% of the sum assured.Under the IRDAI’s guidelines on traditional non-par policies, the benefits to be\npaid on the happening of a specified event, have to be explicitly stated at the\noutset and not linked to an index or benchmark. The same applies to additional\nbenefits that are accrued at regular intervals. This means that the return on these\npolicies must be disclosed at the time of taking the policy.**Important**Death benefits are subject to regulations of IRDAI issued from time to time. At\npresent, as per the new Regulation 9 of IRDAI (Non-linked) Products Regulation,\n2019 pertaining to traditional products, the minimum death cover is as follows:For all non-linked individual life insurance products, the minimum Sum Assured\non death during the entire term of the policy shall not be less than 7 times the\nannualized premium, for limited or regular premium products, and 1.25 times the\nsingle premium for single premium products.For participating products, in addition to the sum assured on death, the bonus\nand additional benefits as stated in the policy and accrued till the date of death\nshall become payable on death as part of the death benefit, if not paid earlier.\nIn essence, there are **two variants**, participating and non-participating plans.i. For **participating polices** the bonus is linked to the investmentperformance of the fund and is not declared or guaranteed before. The\n**bonus, once it is announced, becomes a guarantee** . It is usually paid in144case of death of the policyholder or maturity benefit. This bonus is also\ncalled **reversionary bonus** .\nii. In case of **non-participating policies**, the return on the policy is disclosedin the beginning of the policy itself.**7.** **Pension Plans and Annuities**A pension plan is typically a fund into which money is paid during a person’s\nemployment years and from which money is drawn to support the person after\n[his retirement from work in the form of periodic payments.](https://en.wikipedia.org/wiki/Retirement)Pension plans are designed on group (usually employer driven) or individual basis.\nA group pension may be a \"defined benefit plan\", where a fixed sum is paid\nregularly to a person, or a \"defined contribution plan\", under which a fixed sum\nis invested which becomes available at retirement age. Pensions are essentially\n[guaranteed life annuities, thus insuring against the risk of longevity. A pension](https://en.wikipedia.org/wiki/Life_annuity)\ncreated by an employer for the benefit of an employee is commonly referred to\nas an occupational or employer pension.On retirement, the money in the member's account is used to provide retirement\nbenefits, typically by purchasing an annuity which then provides a regular\nincome. An annuity is a long-term investment issued by an insurance company\ndesigned to help protect one from the risk of outliving one’s income. Through\nannuitization, one’s contributions are converted into periodic payments that can\nlast for life.Individuals can avail of pension benefits by purchasing pension plans from\ninsurance companies. Pension plans can be **on accumulation or deferred** **basis**\nwhich allows a person to contribute in two ways, (i) in lump sum, or (ii) over a\nperiod of time; so that he/ she can get a pension from the desired age/ date\n(called as the ‘vesting’ date). One can opt to receive pensions/ annuities on\nmonthly, quarterly, half-yearly or annual modes. Pension plans are available on\nan **immediate basis** also, from the very next month of purchase, on payment of\na lump sum amount, called as immediate annuity.The Indian insurance industry has several deferred and immediate annuity\nproducts marketed by Life Insurers. Each product has its own features, terms,\nconditions and annuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "n144", "section": "Non-participating products", "chunk_id": "Final IC 38 - WA_Composite  - English_073", "metadata": {"file_size": 20885, "chunk_index": 73, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Non-participating products", "Example", "Important", "Pension Plans and Annuities", "Saral Pension:"]}}
{"chunk": "designed to help protect one from the risk of outliving one’s income. Through\nannuitization, one’s contributions are converted into periodic payments that can\nlast for life.Individuals can avail of pension benefits by purchasing pension plans from\ninsurance companies. Pension plans can be **on accumulation or deferred** **basis**\nwhich allows a person to contribute in two ways, (i) in lump sum, or (ii) over a\nperiod of time; so that he/ she can get a pension from the desired age/ date\n(called as the ‘vesting’ date). One can opt to receive pensions/ annuities on\nmonthly, quarterly, half-yearly or annual modes. Pension plans are available on\nan **immediate basis** also, from the very next month of purchase, on payment of\na lump sum amount, called as immediate annuity.The Indian insurance industry has several deferred and immediate annuity\nproducts marketed by Life Insurers. Each product has its own features, terms,\nconditions and annuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly\nmeet the needs of an average customer, in January 2021, IRDAI mandated all Life\nInsurers to introduce a standard, immediate annuity product, with simple\nfeatures and standard terms and conditions on an individual (not group) basis.\nSuch a standard product will make it easier for the customers to make an\ninformed choice, enhance the trust between the Insurers and the insured, and\nreduce mis-selling as well as potential disputes.The standard individual immediate annuity product is called, “Saral Pension”,\nprefixed by the Insurer’s name. The product offer two (and only two) annuity\noptions as follows:145a) Life annuity with 100% Return of Purchase Price; andb) Joint Life annuity with a provision of 100% annuity to the secondary\nannuitant on death of the primary annuitant and return of 100% Purchase Price\non death of last survivor.Mode of Annuity payment would be Monthly, Quarterly, Half-Yearly and Yearly.\nDetails are available on IRDAI’s website at the following link\n=\n[https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1) PageNo\n[4353&flag=1](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1)**Test Yourself 2**The premium paid for whole life insurance is _____________ than the premium\npaid for term assurance.I. Higher\nII. Lower\nIII. Equal\nIV. Substantially higher**Summary**Life insurance products offer protection against the loss of economic value of\nan individual’s productive abilities, which is available to his/ her dependents\nor to the self.A life insurance policy, at its core, provides peace of mind and protection to\nthe near and dear ones of the individual in case something unfortunate\nhappens to him or her.Term insurance provides valid cover only during a certain time period that has\nbeen specified in the contract.The unique selling proposition (USP) of term assurance is its low price,\nenabling one to buy relatively large amounts of life insurance on a limited\nbudget.While term assurance policies are examples of temporary assurance, where\nprotection is available for a temporary period of time, whole life insurance is- an example of a permanent life insurance policy.**Key Terms**1. Term insurance2. Whole life insurance3. Endowment assurance\n4. Money back policy\n5. Par and non-par schemes\n6. Reversionary bonus146**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is I.147## CHAPTER L-04## LIFE INSURANCE PRODUCTS: NON-TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of non-traditional life insurance\nproducts. We start by examining the limitations of traditional life insurance\nproducts and then have a look at the appeal of non-traditional life insurance\nproducts. Finally we look at some of the different types of non-traditional life\ninsurance products available in the market.**Learning Outcomes**148**A.** **Overview of non-traditional life insurance products****1.** **Non-traditional life insurance products – Purpose and need**In the previous chapters we have considered some of the traditional life insurance\nproducts which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "o4353", "section": "Saral Pension:", "chunk_id": "Final IC 38 - WA_Composite  - English_074", "metadata": {"file_size": 20885, "chunk_index": 74, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Chapter Introduction", "Key Terms", "Answer 1"]}}
{"chunk": "4. Money back policy\n5. Par and non-par schemes\n6. Reversionary bonus146**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is I.147## CHAPTER L-04## LIFE INSURANCE PRODUCTS: NON-TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of non-traditional life insurance\nproducts. We start by examining the limitations of traditional life insurance\nproducts and then have a look at the appeal of non-traditional life insurance\nproducts. Finally we look at some of the different types of non-traditional life\ninsurance products available in the market.**Learning Outcomes**148**A.** **Overview of non-traditional life insurance products****1.** **Non-traditional life insurance products – Purpose and need**In the previous chapters we have considered some of the traditional life insurance\nproducts which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to\nprovide a rate of return comparable to other assets in the financial market. Issues\nhave also been raised about the way they are structured into a single package of\nbenefits and premiums.**2.** **Limitations of traditional products**a) A critical examination would reveal the following areas of concern:b) **Cash value component:** The savings or cash value component in traditional\npolicies is not well defined. This makes it less transparent about mortality,\ninterest rates, expenses and other parameters that are made.c) **Rate of return:** It is not easy to ascertain the rate of return on traditional policies\nbecause the value of the benefits under “With Profit policies” can be known only\nwhen the contract ends. This makes it difficult to compare these policies with\nother financial instruments.d)e)f) **Surrender value:** The method of arriving at the cash and surrender values (at any\npoint of time), are set by the life insurer and not transparent.**Yield:** The yield on these policies are much lower than those from other\ninvestments.**3.** **Features of Non-Traditional Policies:** Life insurance companies starteddesigning policies with certain innovative features, some of which are given\nbelow:a) **Direct linkage with investment gains:** Policies with direct linkage withthe capital market were designed in an attempt to make investment gains.\nb) **Policies that can beat inflation:** Policies were designed to give returnscloser to the inflation rates. The change was that insurers started thinking\nthat life policies need to match if not beat inflation.\nc) **Policies with Flexibility:** Policies which allowed customers to decide(within certain limits) the amount of premium they wanted to pay; and\nthe amount of death benefits and cash values they wanted, got designed.\nd) **Surrender value:** Policies that gave better surrender values availableunder traditional policies were also designed by insurers.These policies became very popular and even began to replace traditional\nproducts in many countries, including India.149**Test Yourself 1**Which among the following is a non-traditional life insurance product?I. Term assuranceII. Universal life insuranceIII. Endowment insuranceIV. Whole life insurance**B.** **Non-traditional life insurance products****Some non-traditional products**We shall discuss some of the non-traditional products which have emerged in the\nIndian market and elsewhere.**1.** **Universal Life and Variable Life**Universal Life policy was introduced in the United States in 1979 and quickly\nbecame very popular. Its features are **flexible premiums, flexible face amount**\n**and death benefit amounts.** Unlike traditional policies, where fixed premiums\nhave to be paid periodically to keep the contract in force, universal life policies\nallow the policyholder (within limits) to decide the amount of premiums he or\nshe wants to pay for the coverage.Variable Life was introduced in the United States in 1977.It is a typeof “Whole\nLife” policy where the death benefit and cash value of the policy fluctuates\naccording to the investment performance of a special investment account into\nwhich premiums are credited.The design and sale of the above two kinds of products, both of which were called\nVariable Insurance Products, have been discontinued and are not allowed in India\nsince2019,further to the issue of IRDAI (ULIP) Regulations, 2019.**2.** **Unit linked insurance**Unit Linked Plans, also known as ULIPs were first introduced in UK during the\n1960s.They have today emerged as one of the most popular and significant\nproducts, displacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s146", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 - WA_Composite  - English_075", "metadata": {"file_size": 20885, "chunk_index": 75, "chunk_tokens": 973, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Limitations of traditional products", "Some non-traditional products", "Yield:", "Policies that can beat inflation:"]}}
{"chunk": "became very popular. Its features are **flexible premiums, flexible face amount**\n**and death benefit amounts.** Unlike traditional policies, where fixed premiums\nhave to be paid periodically to keep the contract in force, universal life policies\nallow the policyholder (within limits) to decide the amount of premiums he or\nshe wants to pay for the coverage.Variable Life was introduced in the United States in 1977.It is a typeof “Whole\nLife” policy where the death benefit and cash value of the policy fluctuates\naccording to the investment performance of a special investment account into\nwhich premiums are credited.The design and sale of the above two kinds of products, both of which were called\nVariable Insurance Products, have been discontinued and are not allowed in India\nsince2019,further to the issue of IRDAI (ULIP) Regulations, 2019.**2.** **Unit linked insurance**Unit Linked Plans, also known as ULIPs were first introduced in UK during the\n1960s.They have today emerged as one of the most popular and significant\nproducts, displacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.\nThe premium paid by the policyholder gets divided into two major portionsthe first portion which is utilised for providing insurance cover, andthe second portion that gets invested into the fund opted by the insured.150The benefits under such contracts are wholly or partially determined by the value\nof units credited to the policyholder’s account at the date when payment is due.In many markets these policies were positioned and sold as investment vehicles\nwith an attached insurance component.Unlike traditional savings policies that are bundled, Unit linked contracts are\nunbundled. Their structure is transparent with the charges to pay for the\ninsurance and expenses component being clearly specified.**Diagram 1:** **Premium break-up**After deducting the charges from the premium, the balance of the account and\nincome are invested in **units** .**The Value of Units**The value of units is defined by a rule or formula, which is outlined in advance.\nTypically the value of the units is given by the Net Asset Value (NAV), which\nreflects the market value of the assets in which the fund is invested. Different\npersons could arrive at the same benefits payable by following the formula.The Formula is as follows:Net Asset Value [NAV] = Market Value of Assets of the fund/ Number of units of\nthe fundsThus, Policyholder benefits do not depend on the assumptions of the life\ninsurance company.Unit linked policies allow policy holders to choose between different kinds of\nfunds. Each fund would have a different portfolio mix. The investor gets to choose\nbetween a broad option of debt, balanced and equity funds, defined below. Even\nwithin these broad categories there may be other types of options.|Equity Fund|Debt Fund|Balanced Fund|Money Market Fund|\n|---|---|---|---|\n|~~This fund invests~~<br>the major portion of<br>the money in equity|~~This fund invests~~<br>major portion of the<br>money in Govt.|~~This fund~~<br>invests in a mix<br>of equity and|~~This fund invests~~<br>money mainly in<br>instruments such as|151There is also provision to switch from one kind of fund to another if performance\nof one or more funds is not found to be up to the mark.Some of the specific features of ULIP Policies are given below:**i.** **Unitising**Benefits under ULIP policies are determined by the value of units credited to the\npolicyholder’s account at the date when the claim payment is due to be made. A\nunit is created by dividing an investment fund into a number of equal parts.**ii.** **Transparent structure**The charges for insurance cover and expenses in ULIPs are clearly specified. Once\nthese charges are deducted from the premium, the balance of the account and\nincome from it are invested in units.**iii.** **Pricing**Under ULIPs, the insured decides the amount of premium that he/ she can\ncontribute at regular intervals.In all Life Insurance policies, the initial costs are very high. Under traditional\npolicies, the premium charges for meeting these costs are spread throughout the\npolicy term.In the case of ULIPs, they are deducted from the initial premiums itself. This\nsignificantly reduces the amount allocated for investment. This is why the value\nof the benefits, vis-à-vis the premiums paid, would be very low and even less than\nthe premiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e2019", "section": "Unit linked insurance", "chunk_id": "Final IC 38 - WA_Composite  - English_076", "metadata": {"file_size": 20885, "chunk_index": 76, "chunk_tokens": 1005, "has_examples": false, "has_tables": true, "key_concepts": ["Transparent structure", "Diagram 1:", "Unitising", "Death Benefit", "The Value of Units"]}}
{"chunk": "policyholder’s account at the date when the claim payment is due to be made. A\nunit is created by dividing an investment fund into a number of equal parts.**ii.** **Transparent structure**The charges for insurance cover and expenses in ULIPs are clearly specified. Once\nthese charges are deducted from the premium, the balance of the account and\nincome from it are invested in units.**iii.** **Pricing**Under ULIPs, the insured decides the amount of premium that he/ she can\ncontribute at regular intervals.In all Life Insurance policies, the initial costs are very high. Under traditional\npolicies, the premium charges for meeting these costs are spread throughout the\npolicy term.In the case of ULIPs, they are deducted from the initial premiums itself. This\nsignificantly reduces the amount allocated for investment. This is why the value\nof the benefits, vis-à-vis the premiums paid, would be very low and even less than\nthe premiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy,\nthe beneficiary would be paid the higher of the Sum Assured [which is a multiple\nof the premium] or the Fund Value (unit price multiplied by the number of units)\nstanding to his or her account.**v.** **The bearing of investment risk**The value of the units depends on the value of the life insurer’s investments,\nwhich are not guaranteed.152The life insurer, though expected to manage the portfolio efficiently, does not\ngive any guarantee about unit values. Hence, the investment risk is borne by the\npolicyholder/ unit holder.**Test Yourself 2**Which of the following statements is/ are incorrect?I. Variable life insurance is a temporary life insurance policy\nII. Variable life insurance is a permanent life insurance policy\nIII. The policy has a cash value account\nIV. The policy provides a minimum death benefit guarantee**Summary**A critical concern with respect to life insurance policies was giving a\ncompetitive rate of return comparable to other assets in the financial\nmarketplace.Some of the trends that led to the increase in non-traditional life products\ninclude unbundling, investment linkage and transparency.Universal life insurance is a form of permanent life insurance characterised\nby its flexible premiums, flexible face amount and death benefit amounts,\nand the unbundling of its pricing factors.ULIPs became one of the most popular and significant products, replacing\ntraditional plans in many markets.ULIPs provide the means for directly and immediately cashing on the benefits\nof a Life Insurer’s investment performance.**Key Terms**1. Universal life insurance2. Variable life insurance3. Unit linked insurance4. Net asset value**Answers to Test Yourself****Answer 1** -The correct option is II.**Answer 2** - The correct option is I.153## CHAPTER L-05## APPLICATIONS OF LIFE INSURANCE**Chapter Introduction**Life insurance does not merely seek to protect individuals from premature death.\nIt has other applications as well. It can be applied to the creation of trusts with\nresultant insurance benefits; it can be applied for creating a policy covering key\npersonnel of industries and also for redeeming mortgages. We shall briefly\ndescribe these various applications of life insurance.**Learning Outcomes**154N’s\n**A.** **Applications of Life insurance****1.** **Married Women’s Property Act**Section 6 of the Married Women’s Property Act, 1874 tries to ensure that the\nbenefits under a life insurance policy will pass on in a secure manner to the wife\nand children through creation of a trust for the purpose.**Diagram 1:** **Beneficiaries under MWP Act**The section provides that when a married man takes a policy on his own life and\nclearly expresses on the face of such policy that it is for the benefit of his wife\nor his wife and children, and to be held in a trust for their benefit only, the\nproceeds of such a policy shall not, so long as the objects of the trust remains,\nbe subject to the control of the husband or to his creditors or form part of his", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e2", "section": "Transparent structure", "chunk_id": "Final IC 38 - WA_Composite  - English_077", "metadata": {"file_size": 20885, "chunk_index": 77, "chunk_tokens": 894, "has_examples": false, "has_tables": false, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Transparent structure", "Diagram 1:"]}}
{"chunk": "It has other applications as well. It can be applied to the creation of trusts with\nresultant insurance benefits; it can be applied for creating a policy covering key\npersonnel of industries and also for redeeming mortgages. We shall briefly\ndescribe these various applications of life insurance.**Learning Outcomes**154N’s\n**A.** **Applications of Life insurance****1.** **Married Women’s Property Act**Section 6 of the Married Women’s Property Act, 1874 tries to ensure that the\nbenefits under a life insurance policy will pass on in a secure manner to the wife\nand children through creation of a trust for the purpose.**Diagram 1:** **Beneficiaries under MWP Act**The section provides that when a married man takes a policy on his own life and\nclearly expresses on the face of such policy that it is for the benefit of his wife\nor his wife and children, and to be held in a trust for their benefit only, the\nproceeds of such a policy shall not, so long as the objects of the trust remains,\nbe subject to the control of the husband or to his creditors or form part of his\nestate.**Features of a policy under the MWP Act**i. Each policy will remain a separate Trust. Either the wife or child (over 18years of age) can be a trustee.ii. The policy shall be beyond the control of court attachments, creditors andeven the life assured.iii. The claim money shall be paid to the trustees.iv. The policy cannot be surrendered and neither nomination nor assignmentis allowed.v. If the policyholder does not appoint a special trustee to receive andadminister the benefits under the policy, the sum secured under the policy155becomes payable to the Official Trustee of the State in which the office\nat which the insurance was effected is situated.**Benefits**The Trust is set up under a deed that cannot be revoked or amended. It can\ncontain one or more insurance policies. It is important to appoint a trustee who\nwould be responsible for administering the trust property, including investing the\ninsurance proceeds, on behalf of the beneficiaries. These benefits are secured\nfrom passing to future creditors**2.** **Key-man Insurance**Keyman insurance is an important form of business insurance.**Definition**Key-man Insurance can be described as an insurance policy taken out by a\nbusiness to compensate that business for financial losses that would arise from\nthe death or extended incapacity of an important member of the business.Many businesses have key persons responsible for a major part of its profits or has\nknowledge and skills that are vital to the organisation and difficult to replace.\nKey man insurance is taken by employers on the life of such key persons to\nfacilitate business continuity and offset the costs and losses which are likely to\nbe suffered in the event of the loss of a key person. Keyman insurance does not\nindemnify the actual losses incurred but compensates with a fixed monetary sum\nas specified on the insurance policy.Keyman insurance is allowed as a term insurance policy where the sum assured is\nlinked to the profitability of the company rather than the key person’s own\nincome. The premium is paid by the company. In case the key person dies, the\nbenefit is paid to the company. The proceeds of Keyman insurance is taxable at\nthe hands of the company.**a)** **Who can be a key-man?**A key person can be anyone directly associated with the business whose loss\ncan cause financial strain to the business. For example, the person could be\na director of the company, a partner, a key sales person, key project\nmanager, or someone with specific skills or knowledge which is especially\nvaluable to the company.**b)** **Insurable losses**The following are the losses for which key person insurance can provide\ncompensation:156i. Losses related to the extended period when a key person is unable towork, to provide temporary personnel and, if necessary to finance the\nrecruitment and training of a replacementii. Insurance to protect profits. For example, offsetting lost income from lostsales, losses resulting from the delay or cancellation of any business\nproject that the key person was involved in, loss of opportunity to expand,\nloss of specialised skills or knowledge**3.** **Mortgage Redemption Insurance (MRI)**A person taking a loan to buy a property, may be required to pay for mortgage\nredemption insurance by the bank, as part of the loan arrangement. “Mortgage\nRedemption Insurance” is popularly referred to “Credit Life Insurance policy”.**a)** **What is MRI?**It is an insurance policy that provides financial protection for home loan\nborrowers. It is basically a decreasing term life insurance policy taken by\nmortgagor to repay the balance on a mortgage loan if he/ she dies before its", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y155", "section": "Learning Outcomes", "chunk_id": "Final IC 38 - WA_Composite  - English_078", "metadata": {"file_size": 20885, "chunk_index": 78, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Mortgage Redemption Insurance (MRI)", "Diagram 1:", "What is MRI?", "Married Women’s Property Act", "Learning Outcomes"]}}
{"chunk": "manager, or someone with specific skills or knowledge which is especially\nvaluable to the company.**b)** **Insurable losses**The following are the losses for which key person insurance can provide\ncompensation:156i. Losses related to the extended period when a key person is unable towork, to provide temporary personnel and, if necessary to finance the\nrecruitment and training of a replacementii. Insurance to protect profits. For example, offsetting lost income from lostsales, losses resulting from the delay or cancellation of any business\nproject that the key person was involved in, loss of opportunity to expand,\nloss of specialised skills or knowledge**3.** **Mortgage Redemption Insurance (MRI)**A person taking a loan to buy a property, may be required to pay for mortgage\nredemption insurance by the bank, as part of the loan arrangement. “Mortgage\nRedemption Insurance” is popularly referred to “Credit Life Insurance policy”.**a)** **What is MRI?**It is an insurance policy that provides financial protection for home loan\nborrowers. It is basically a decreasing term life insurance policy taken by\nmortgagor to repay the balance on a mortgage loan if he/ she dies before its\nfull repayment. It can be called a loan protector policy. This plan is suitable\nfor people whose dependents may need assistance in clearing their debts in\ncase of the unexpected demise of the policyholder.**b)** **Features**The insurance cover under this policy decreases each year unlike a term\ninsurance policy where insurance cover is constant during the policy period.**Test Yourself 1**What is the objective behind Mortgage Redemption Insurance?I. Facilitate cheaper mortgage rates\nII. Provide financial protection for home loan borrowers\nIII. Protect value of the mortgaged property\nIV. Evade eviction in case of default**Summary**Section 6 of the Married Women’s Property Act, 1874 provides for security of\nbenefits under a life insurance policy to the wife and children.The policy effected under MWP Act shall be beyond the control of court\nattachments, creditors and even the life assured.157Keyman insurance is an important form of business insurance. It can be\ndescribed as an insurance policy taken out by a business to compensate at for\nfinancial losses that would arise from the death or extended capacity of an\nimportant member of the business.Mortgage redemption insurance is basically a decreasing term life insurance\npolicy taken by a mortgagor to repay the balance on a mortgage loan if he/\nshe dies before its full repayment.**Key Terms**1. Married Women’s Property Act\n2. Keyman insurance\n3. Mortgage Redemption Insurance**Answers to Test Yourself****Answer 1** - The correct option is II.158## CHAPTER L-06## PRICING AND VALUATION IN LIFE INSURANCE**Chapter Introduction**The objective of this chapter is to introduce to the learner the basic elements\nthat are involved in the pricing and benefits of life insurance contracts. We shall\nfirst discuss the elements that constitute the premium and then discuss the\nconcept of surplus and bonus.**Learning Outcomes**159**A.** **Insurance pricing – Basic elements****1.** **Premium**In ordinary language, the term premium denotes the price that is paid by an\ninsured for purchasing an insurance policy. It is normally expressed as a rate of\npremium per thousand rupees of sum assured. The premium rates depend on the\nage of the prospect and the plan.These premium rates are available in the form of tables of rates that are available\nwith insurance companies.**Diagram 1:** PremiumThe rates printed in these tables are known as “Office Premiums”. They are in\nmost cases the same throughout the term and are expressed as an annual rate.**Example**If the premium for a twenty year endowment policy for a given age is Rs. 4,800,\nit means that Rs. 4,800 has to be paid each year for twenty years.However it is possible to have some policies in which the premiums are payable\nonly in the first few years. Companies also have single premium contracts in which\nonly one premium is payable at the beginning of the contract. These policies are\nusually investment oriented.**2.** **Rebates**Life insurance companies may also offer certain types of rebates on the premium\nthat is payable. Two such rebates are: For sum assured160 For mode of premum**Rebate for sum assured**The rebate **for sum assured** is offered to those who buy policies with higher\namounts of sum assured. It is offered as a way of passing on to the customer,\nthe gains that the insurer may make when servicing higher value policies. The\nlogic is that the effort and cost required to process a policy of Rs 50,000 or\n5,00,000 remains the same. But higher sum assured policies yield more", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "L-06", "section": "Insurable losses", "chunk_id": "Final IC 38 - WA_Composite  - English_079", "metadata": {"file_size": 20885, "chunk_index": 79, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Mortgage Redemption Insurance (MRI)", "Rebates", "Test Yourself 1", "Insurance pricing – Basic elements"]}}
{"chunk": "most cases the same throughout the term and are expressed as an annual rate.**Example**If the premium for a twenty year endowment policy for a given age is Rs. 4,800,\nit means that Rs. 4,800 has to be paid each year for twenty years.However it is possible to have some policies in which the premiums are payable\nonly in the first few years. Companies also have single premium contracts in which\nonly one premium is payable at the beginning of the contract. These policies are\nusually investment oriented.**2.** **Rebates**Life insurance companies may also offer certain types of rebates on the premium\nthat is payable. Two such rebates are: For sum assured160 For mode of premum**Rebate for sum assured**The rebate **for sum assured** is offered to those who buy policies with higher\namounts of sum assured. It is offered as a way of passing on to the customer,\nthe gains that the insurer may make when servicing higher value policies. The\nlogic is that the effort and cost required to process a policy of Rs 50,000 or\n5,00,000 remains the same. But higher sum assured policies yield more\npremium and so more profits.**Rebate for mode of premium**Similarly a rebate may be offered **for the mode of premium** . Life insurance\ncompanies may allow premiums to be paid on annual, half yearly, quarterly\nor monthly basis. More frequent the mode, more the administrative costs for\ncollecting and accounting the premium. Again, in the yearly mode, the insurer\ncan utilise this amount during the entire year and earn interest on it. Insurers\nwould hence encourage payment via yearly and half yearly modes by allowing\na rebate on these. They may also charge a little extra for monthly mode of\npayments, to cover additional administrative expenses involved.**3.** **Extra charges**The tabular premium is charged for those individuals who are not subject to\nany significant factors that would pose an extra risk. They are known as\n**standard lives** and the rates charged are known as ordinary rates.If a person proposing for insurance suffers from certain health problems like\nheart ailments or diabetes that can pose a hazard to his life, he or she is\nconsidered to be sub-standard. The insurer may decide to impose an extra\npremium by way of a health extra. Similarly an occupational extra may be\nimposed on those engaged in a hazardous occupation, like a circus acrobat.\nThese extras would result in the premium being more than the tabular\npremium.Again, an insurer may offer certain extra benefits under a policy, which are\navailable on payment of an extra premium.**Example**A life insurer may offer a Double Accident Benefit or DAB (where double the\nsum assured is payable as a claim if death is a result of accident). For this it\nmay charge an extra premium of one rupee per thousand sum assured.161Similarly a benefit known as Permanent Disability Benefit (PDB) may be\navailed by paying an extra per thousand sum assured.**4.** **Determining the premium**Let us now examine how life insurers arrive at the rates that are presented in\nthe premium tables. This task is performed by an actuary. The process of\nsetting the premium in case of traditional life insurance policies like term\ninsurance, whole life and endowment considers following elements: Mortality\n Interest\n Expenses of management\n Reserves\n Bonus loading**Diagram 2:** **Components of Premium**The first two elements give us the Net premium. By adding [also called\n‘loading’] the other elements to the net premium we get the gross or office\npremium**a)** **Mortality and Interest**Mortality is the first element in premiums. It is the chance or likelihood that\na person of a certain age would die during a given year. To find out the\nexpected Mortality of a person, “Mortality Tables” are used.**Example**If the mortality rate for age 35 is 0.0035 it implies that out of every 1000\npeople who are alive as on age 35, 3.5 (or 35 out of 10,000) are expected to\ndie between age 35 and 36.162The table may be used to calculate mortality cost for different ages. For\nexample the rate of 0.0035 for age 35 implies a cost of insurance of 0.0035 x\n1000 (sum assured) = Rs. 3.50 per thousand sum assured.The above cost may be also called the “Risk Premium”. For higher ages the\nrisk premium would be higher.**Example**If we need to have Rs. 5 per thousand to meet the cost of insurance after five", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d160", "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_080", "metadata": {"file_size": 20885, "chunk_index": 80, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Extra charges", "Rebates", "Example", "Rebate for sum assured", "Components of Premium"]}}
{"chunk": "‘loading’] the other elements to the net premium we get the gross or office\npremium**a)** **Mortality and Interest**Mortality is the first element in premiums. It is the chance or likelihood that\na person of a certain age would die during a given year. To find out the\nexpected Mortality of a person, “Mortality Tables” are used.**Example**If the mortality rate for age 35 is 0.0035 it implies that out of every 1000\npeople who are alive as on age 35, 3.5 (or 35 out of 10,000) are expected to\ndie between age 35 and 36.162The table may be used to calculate mortality cost for different ages. For\nexample the rate of 0.0035 for age 35 implies a cost of insurance of 0.0035 x\n1000 (sum assured) = Rs. 3.50 per thousand sum assured.The above cost may be also called the “Risk Premium”. For higher ages the\nrisk premium would be higher.**Example**If we need to have Rs. 5 per thousand to meet the cost of insurance after five\nyears and if we assume a rate of interest of 6%, the present value of Rs. 5\npayable after five years would be 5 x 1/ (1.06) [5 ] = 3.74.If instead of 6% we were to assume 10%, the present value would be only 3.10.\nIn other words the higher the rate of interest assumed, the lower the present\nvalue.From our study of mortality and interest there are two major conclusions we\ncan derive Higher the mortality rate in the mortality table, higher the premiumswould be\n Higher the interest rate assumed, lower the premium**Net premium**\nThe estimates of mortality and interest give the “Net Premium”**Gross premium**\nGross premium is the net premium plus an amount called loading. There are\nthree considerations or guiding principles that needs to be borne in mind when\ndetermining the amount of loading:**b)** **Expenses and reserves**Life insurers have to incur various types of operating expenses including: Agents training and recruitment,\n Commissions of agents,\n Staff salaries,\n Office accommodation,\n Office stationery,\n Electricity charges,\n Other miscellaneous etc.All these have to be paid from premiums that are collected by insurers.\nThese expenses are suitably loaded to the net premium.163**c)** **Lapses and contingencies**In addition to expenses, there are other factors that can make the calculations\nof life insurers go wrong.One source of risk is that of lapses and withdrawals. A lapse means that the\npolicyholder discontinues payment of premiums. In case of withdrawals, the\npolicyholder surrenders the policy and receives an amount from the policy’s\nacquired cash value.Lapses usually happen within the first three years, especially in the first year\nof the contract.**d)** **With Profit (participating) policies and Bonus loading**The concept of ‘With Profit’ policies originated when Life insurers started the\npractice of charging a high loading in advance to create a buffer to keep them\nsolvent even in adverse situations. If subsequent experience proved to be\nmore favourable, the life insurer would share some of the profits it made as\na result with policy holders by way of bonus.In sum we can say that:**Gross premium = Net premium + Loading for expenses + Loading for**\n**contingencies + Bonus loading****Test Yourself 1**What does a policy lapse mean?I. Policyholder completes premium payment for a policy\nII. Policyholder discontinues premium payment for a policy\nIII. Policy attains maturity\nIV. Policy is withdrawn from the market**B.** **Surplus and bonus****1.** **Determination of surplus and bonus**Every life insurance company is expected to undertake a periodic valuation of its\nassets and liabilities. Such a valuation has two purposes:i. To assess the financial state of the life insurer and determine if it issolvent or insolvent\nii. To determine the surplus available for distribution among policyholders/share holders164**Definition**Surplus is the excess of value of assets over value of liabilities. If it is negative,\nit is known as a strain.Let us now see how the concept of surplus in life insurance is different from that\nof profit of a firm.Firms in general look at profits in two ways. Firstly, profit is the **excess of income**\n**over outgo** for a given accounting period, as it appears in the profit and loss\naccount. Profit also forms part of the balance sheet of a firm - it may be defined", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s164", "section": "Mortality and Interest", "chunk_id": "Final IC 38 - WA_Composite  - English_081", "metadata": {"file_size": 20885, "chunk_index": 81, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Surplus and bonus", "Net premium", "Test Yourself 1", "Example", "Lapses and contingencies"]}}
{"chunk": "**contingencies + Bonus loading****Test Yourself 1**What does a policy lapse mean?I. Policyholder completes premium payment for a policy\nII. Policyholder discontinues premium payment for a policy\nIII. Policy attains maturity\nIV. Policy is withdrawn from the market**B.** **Surplus and bonus****1.** **Determination of surplus and bonus**Every life insurance company is expected to undertake a periodic valuation of its\nassets and liabilities. Such a valuation has two purposes:i. To assess the financial state of the life insurer and determine if it issolvent or insolvent\nii. To determine the surplus available for distribution among policyholders/share holders164**Definition**Surplus is the excess of value of assets over value of liabilities. If it is negative,\nit is known as a strain.Let us now see how the concept of surplus in life insurance is different from that\nof profit of a firm.Firms in general look at profits in two ways. Firstly, profit is the **excess of income**\n**over outgo** for a given accounting period, as it appears in the profit and loss\naccount. Profit also forms part of the balance sheet of a firm - it may be defined\nas the **excess of assets over liabilities** . In both instances, profits are determined\nat the end of the accounting period.**Surplus = Assets - Liabilities**Let us understand what liabilities mean in life insurance. For a given block of life\ninsurance policies, the life insurer has to make provision for meeting future\nclaims, expenses and other expected pay-outs that may arise. The insurer also\nexpects to receive premiums in future for these policies.Liabilities are thus the present value of all payments that have to be made less\nthe present value of premiums expected to be received on these policies. The\npresent value is arrived at by applying a suitable rate of discount [the interest\nrate]\nSurplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed. Life insurers are obliged to share the benefits arising as a\nresult with holders of it’s with profit policies.**Example**The profits of XYZ firm as on 31 [st] March 2013, is given as its income less expenses\nor its assets less liabilities as on that date.In both instances, the profit is clearly defined and is known.**2.** **Bonus**Insurers have to declare and distribute its divisible surplus among the policy\nholders and shareholders of the company [if any] in the form of a bonus. In India,\nthe United Kingdom and many other countries, distribution of surplus is popular.Bonus is paid as an addition to the basic benefit payable under a contract.\nTypically it may appear as an addition to basic sum assured or basic pension per\nannum. It is expressed, for example, as Rs. 60 per thousand sum assured165The most common form of bonus is the **reversionary bonus** . Once declared these\nbonus additions, made each year, get attached to the policy and cannot be taken\naway. They are called ‘Reversionary’ bonuses because they are received only at\nthe time of a claim by death or maturity. Bonuses may also be payable on\nsurrender provided the contract is eligible through having run for a minimum term[say 5 years]**Types of reversionary bonuses****Diagram 3:** **Types of Reversionary Bonuses****i.** **Simple Reversionary Bonus**This is a bonus expressed as a percentage of the basic cash benefit under the\ncontract. In India for example, it is declared as amount per thousand sum\nassured.**ii.** **Compound Bonus**Here the company expresses a bonus as a percentage of basic benefit and\nalready attached bonuses. It is thus a bonus on a bonus. A way to express it\nmay be as @ 8% of basic sum assured plus attached bonus.**iii.** **Terminal Bonus**As the name suggests, this bonus attaches to the contract only at the time of\nits termination [by death or maturity]. It is applicable only for the claims\narising in the ensuing year. Thus terminal bonus declared for 2013 would only\napply to claims that have arisen during 2013-14 and not for subsequent years.\nTerminal bonuses depend on the time duration of the contract and increase\nwith it. A contract that has run for 25 years would have higher terminal bonus\nthan one which has run for 15 years.166**3.** **The Contribution Method**Another method of distribution of surplus adopted in North America is the\n“Contribution” method. Here, the surplus, i.e. the difference between what was\nexpected to happen and what actually happened over the year with respect to\nmortality, interest and expenses is declared and distributed as dividends.The dividends can be paid in cash, by way of adjustments/ reductions in future", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s164", "section": "Test Yourself 1", "chunk_id": "Final IC 38 - WA_Composite  - English_082", "metadata": {"file_size": 20885, "chunk_index": 82, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Compound Bonus", "Surplus and bonus", "Simple Reversionary Bonus", "Test Yourself 1", "Example"]}}
{"chunk": "already attached bonuses. It is thus a bonus on a bonus. A way to express it\nmay be as @ 8% of basic sum assured plus attached bonus.**iii.** **Terminal Bonus**As the name suggests, this bonus attaches to the contract only at the time of\nits termination [by death or maturity]. It is applicable only for the claims\narising in the ensuing year. Thus terminal bonus declared for 2013 would only\napply to claims that have arisen during 2013-14 and not for subsequent years.\nTerminal bonuses depend on the time duration of the contract and increase\nwith it. A contract that has run for 25 years would have higher terminal bonus\nthan one which has run for 15 years.166**3.** **The Contribution Method**Another method of distribution of surplus adopted in North America is the\n“Contribution” method. Here, the surplus, i.e. the difference between what was\nexpected to happen and what actually happened over the year with respect to\nmortality, interest and expenses is declared and distributed as dividends.The dividends can be paid in cash, by way of adjustments/ reductions in future\npremiums, by allowing purchase of non-forfeitable paid up additions to the policy\nor as accumulations to the credit of the policy.**4.** **Unit Linked Policies**The Principles of Pricing and other features of ULIP Policies have already been\ncovered in an earlier chapter.**Summary**In ordinary language, the term premium denotes the price that is paid by an\ninsured for purchasing an insurance policy.The process of setting the premium for life insurance policies involves\nconsideration of mortality, interests, expense management and reserves.Gross premium is the net premium plus an amount called loading.A lapse means that the policyholder discontinues payment of premiums. In\ncase of withdrawals, the policyholder surrenders the policy and receives an\namount from the policy’s acquired cash value.Surplus arises as a result of the life insurer’s actual experience being better\nthan what it had assumed.Surplus allocation could be towards maintaining solvency requirements,\nincreasing free assets etc.The most common form of bonus is the reversionary bonus.**Key Terms**1. Premium2. Rebate3. Bonus\n4. Surplus\n5. Reserve\n6. Loading\n7. Reversionary bonus**Answers to Test Yourself****Answer 1** - The correct option is II.167## CHAPTER L-07## LIFE INSURANCE DOCUMENTATION**Chapter Introduction**We have seen that the insurance industry deals with a large number of forms and\ndocuments in Chapter 7. There are some documents specific to life insurance,\nwhich are discussed in this chapter. Here, we are also discussing the main\nprovisions incorporated in a policy document. Provisions related to grace period,\npolicy lapse and non-forfeiture and certain other privileges are also discussed.**Learning Outcomes**168**A. Proposal stage documentation**Further to the common points discussed about the Prospectus and the Proposal\nForm in Chapter 7, there are some additional points that Life Insurers need to\nunderstand.**Prospectus:** In insurance, ‘Prospectus’ means a document in physical, electronic\nor any other format issued by the insurer to sell or promote the insurance product.\nThe prospectus of an insurance product shall clearly state(a) the Unique Identification Number (UIN) allotted by the Authority for theconcerned insurance product:\n(b) the scope of benefits;\n(c) the extent of insurance cover;\n(d) the warranties, exclusions/exceptions and conditions of the insurancecover along with explanations.\nThe prospectus should also provide:(a) a description of the contingency or contingencies to be covered by\ninsurance;\n(b) the class or classes of lives or property eligible for insurance under theterms of such prospectus.\nIn Life insurance, the prospectus should also mention about the Riders (also called\nAdd-on covers in Health and General Insurance) allowable on the product and\ntheir benefits.**Proposal Form:** In respect of Life insurance, the details of the proposers’ family\nmembers (including parents) indicating their longevity, status of health and\nailments suffered by any of them, are collected through the Proposal form.\nDepending on the product, the medical details of the life proposed for insurance,\nhis/ her personal history of disease and personal characteristics may also be asked\nfor. The Proposal Form is the document by which insurers get all the information\nthat they need from the prospect.Section 45 of the Insurance Act, provides that the Policy shall not be called in\nquestion on the ground of mis-statement after three years. Agents have an\nimportant role in guiding the prospect to give answers to all the questions in the\nProposal Form/ Medical Forms etc. truthfully and advising them of the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "m2", "section": "Terminal Bonus", "chunk_id": "Final IC 38 - WA_Composite  - English_083", "metadata": {"file_size": 20885, "chunk_index": 83, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus:", "Proposal Form:", "The Contribution Method", "Chapter Introduction"]}}
{"chunk": "The prospectus should also provide:(a) a description of the contingency or contingencies to be covered by\ninsurance;\n(b) the class or classes of lives or property eligible for insurance under theterms of such prospectus.\nIn Life insurance, the prospectus should also mention about the Riders (also called\nAdd-on covers in Health and General Insurance) allowable on the product and\ntheir benefits.**Proposal Form:** In respect of Life insurance, the details of the proposers’ family\nmembers (including parents) indicating their longevity, status of health and\nailments suffered by any of them, are collected through the Proposal form.\nDepending on the product, the medical details of the life proposed for insurance,\nhis/ her personal history of disease and personal characteristics may also be asked\nfor. The Proposal Form is the document by which insurers get all the information\nthat they need from the prospect.Section 45 of the Insurance Act, provides that the Policy shall not be called in\nquestion on the ground of mis-statement after three years. Agents have an\nimportant role in guiding the prospect to give answers to all the questions in the\nProposal Form/ Medical Forms etc. truthfully and advising them of the\nimplications of not doing so in terms of Section 45.Proposal Forms for Life Insurance should state the requirements of Section 45 of\nthe Act. While answering the questions in the Proposal Form for obtaining life\ninsurance cover, the prospect is to be guided by the provisions of Section 45 of\nthe Act.Similarly, Section 39 of the Act is about the provision of nomination. Wherever\nthe facility of Nomination is available to the proposer, the Agent shall inform\nhim/ her of the provisions of Section 39 of the Act and encourage the proposer to\navail the facility.169Aspects related to the personal financial planning of the life proposed including\nhis/ her work span, projected income and expenses, as well as needs for savings\nand investment, health, retirement and insurance may also be asked in the Life\nInsurance Proposal Form.**Age Proof:** Age being an important factor for assessing the risk profile of the life\nto be insured, Life insurers collect documentary evidence to verify correct age.\nValid age proofs may be standard or non-standard, as discussed in Chapter 7.Life insurers look into the following documents as well.**a)** **Agent’s Confidential Report**The agent is the primary underwriter. All material facts and particulars about the\npolicyholder, relevant to risk assessment, need to be revealed by the agent in\nhis/ her report. This means that matters of health, habits, occupation, income\nand family details need to be mentioned in the report.**b)** **Medical Examiner’s report**In many cases, the life to be insured has to be medically examined by a doctor\nwho is empanelled by the insurance company. Details of physical features like\nheight, weight, blood pressure, cardiac status etc. are recorded and mentioned\nby the doctor in his report called the medical examiner’s report. The underwriter\nof the insurance company thereby gets an account of the current health position\nof the life to be insured.Many proposals are underwritten and accepted for insurance without calling for\na medical examination. They are known as non–medical cases. The medical\nexaminer’s report is required typically when the proposal cannot be considered\nunder non-medical underwriting because the sum proposed or the age of the\nproposed life is high or there are certain characteristics which are revealed in the\nproposal, which call for examination and report by a medical examiner.**c)** **Moral Hazard report**Moral Hazard is the likelihood that a client's behaviour might change as a result\nof purchasing a life insurance policy and such a change would increase the chance\nof a loss. This is one factor that Life insurance underwriters take into account\nseriously when assessing the risk.Life insurance companies seek to guard against the possibility of individuals\nseeking to make a profit from the purchase of life insurance through actions like\nending one’s own life or the life of another. Life insurance underwriters would\nthus look for any factors which might suggest such hazard. For this purpose, the\ncompany may require that a Moral Hazard Report has to be submitted by an\nofficial of the insurance company.**Example**Vikas recently purchased a life insurance policy. He then decided to go on a skiing\nexpedition at a site which was touted to be one of the most dangerous skiing\nplaces on earth. In the past he had refused to undertake such expeditions.170**B. Policy Stage Documentation****1.** **First Premium Receipt**An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR).\n**The FPR is the evidence that the policy contract has begun.** The first premium\nreceipt contains the following information:i. Name and address of the life assured\nii. Policy number", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Proposal Form:", "chunk_id": "Final IC 38 - WA_Composite  - English_084", "metadata": {"file_size": 20885, "chunk_index": 84, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Proposal Form:", "B. Policy Stage Documentation", "Example", "First Premium Receipt"]}}
{"chunk": "of purchasing a life insurance policy and such a change would increase the chance\nof a loss. This is one factor that Life insurance underwriters take into account\nseriously when assessing the risk.Life insurance companies seek to guard against the possibility of individuals\nseeking to make a profit from the purchase of life insurance through actions like\nending one’s own life or the life of another. Life insurance underwriters would\nthus look for any factors which might suggest such hazard. For this purpose, the\ncompany may require that a Moral Hazard Report has to be submitted by an\nofficial of the insurance company.**Example**Vikas recently purchased a life insurance policy. He then decided to go on a skiing\nexpedition at a site which was touted to be one of the most dangerous skiing\nplaces on earth. In the past he had refused to undertake such expeditions.170**B. Policy Stage Documentation****1.** **First Premium Receipt**An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR).\n**The FPR is the evidence that the policy contract has begun.** The first premium\nreceipt contains the following information:i. Name and address of the life assured\nii. Policy number\niii. Premium amount paid\niv. Method and frequency of premium payment\nv. Next due date of premium payment\nvi. Date of commencement of the risk\nvii. Date of final maturity of the policy\nviii.Date of payment of the last premium\nix. Sum assuredAfter the issue of the FPR, the insurance company will issue subsequent premium\nreceipts when it receives further premiums from the proposer. These receipts are\nknown as renewal premium receipts (RPR). The RPRs act as proof of payment in\nthe event of any disputes related to premium payment.**2.** **Policy Document**The policy document is the most important document associated with insurance.\n**It is evidence of the contract between the assured and the insurance**\n**company.** It is not the contract itself. If the policy document is lost by the policy\nholder, it does not affect the insurance contract. The insurance company will\nissue a duplicate policy without making any changes to the contract. The policy\ndocument has to be signed by a competent authority and should be stamped\naccording to the Indian Stamp Act. Life insurers are very careful while designing\nthe policy document because they bear onus of responsibility for any ambiguity\nor confusion that may arise in the interpretation of its wordings.The standard policy document typically has three parts:**a)** **Policy Schedule**The policy schedule forms the first part. It is usually found on the face page\nof the policy. The schedules of life insurance contracts would be generally\nsimilar. They would normally contain the following information:171**Diagram 1:** **Policy document components**i. Name of the insurance companyii. Some common details of a policy are: Policy owner’s name and address\n Date of birth and age last birthday\n Plan and term of policy contract\n Sum assured\n Amount of premium\n Premium paying term\n Date of commencement, date of maturity and due date of lastpremium\n Whether policy is with or without profits\n Name of nominee\n Mode of premium payment – yearly; half yearly; quarterly; monthly;via deduction from salary\n The policy number – which is the unique identity number of the policycontractiii. The insurer’s promise to pay. The events on the happening of which andthe amounts that are promised to be paid. This forms the heart of the\ninsurance contractiv. The signature of the authorised signatory and policy stampv. The address of the local Insurance Ombudsman.**b)** **Standard Provisions**The second component of the policy document is made up of standard policy\nprovisions, such as relating to proof of age, premium payment grace period\netc. which are normally present in all life insurance contracts. Some of these\nprovisions may not be applicable in the case of certain kinds of contracts, like\nterm, single premium or non-participating (with profits) policies. These\nstandard provisions define the rights and privileges and other conditions,\nwhich are applicable under the contract.172**c)** **Specific Policy Provisions**The third part of the policy document consists of specific policy provisions\nthat are specific to the individual policy contract. These may be printed on\nthe face of the document or inserted separately in the form of an attachment.While standard policy provisions, like days of grace or non-forfeiture in case\nof lapse, are often statutorily provided under the contract, specific provisions\nare generally linked to the particular contract between the insurer and the\ninsured.**Example**A clause precluding death due to pregnancy for a lady who is expecting at the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_085", "metadata": {"file_size": 20885, "chunk_index": 85, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Standard Provisions", "Policy Schedule", "Diagram 1:", "Specific Policy Provisions", "Example"]}}
{"chunk": "insurance contractiv. The signature of the authorised signatory and policy stampv. The address of the local Insurance Ombudsman.**b)** **Standard Provisions**The second component of the policy document is made up of standard policy\nprovisions, such as relating to proof of age, premium payment grace period\netc. which are normally present in all life insurance contracts. Some of these\nprovisions may not be applicable in the case of certain kinds of contracts, like\nterm, single premium or non-participating (with profits) policies. These\nstandard provisions define the rights and privileges and other conditions,\nwhich are applicable under the contract.172**c)** **Specific Policy Provisions**The third part of the policy document consists of specific policy provisions\nthat are specific to the individual policy contract. These may be printed on\nthe face of the document or inserted separately in the form of an attachment.While standard policy provisions, like days of grace or non-forfeiture in case\nof lapse, are often statutorily provided under the contract, specific provisions\nare generally linked to the particular contract between the insurer and the\ninsured.**Example**A clause precluding death due to pregnancy for a lady who is expecting at the\ntime of writing the contract.**Test Yourself 1**What does a first premium receipt (FPR) signify? Choose the most appropriate\noption.I. Free-look period has ended\nII. It is evidence that the policy contract has begun\nIII. Policy cannot be cancelled now\nIV. Policy has acquired a certain cash value.**C. Policy conditions and privileges****Grace Period**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during\nthe grace period. Every life insurance contract undertakes to pay the death\nbenefit on the condition that the premiums have been paid up to date and the\npolicy is in force. The “Grace Period” clause grants the policyholder an additional\nperiod of time to pay the premium after it has become due.The premium however remains due and if the policyholder dies during this period,\nthe insurer deducts the premium from the death benefit. If premiums remain\nunpaid even after the grace period is over, the policy would then be considered\nlapsed and the company is not under obligation to pay the death benefit. The\nonly amount payable would be whatever is applicable under the non-forfeiture\nprovisions.**Important****Lapse and Reinstatement/ Revival**We have already seen that a policy may be said to be in lapse condition if premium\nhas not been paid even during the days of grace. The good news is that most\nlapsed life insurance policies can be reinstated [revived]. As per IRDAI Product\nRegulations, a Non-Linked Policy can be revived within 5 years from the date of\nunpaid premium, whereas a Linked Policy can be revived within 3 years.173**Definition**Reinstatement is the process by which a life insurance company puts back into\nforce a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A revival of the policy cannot however be an unconditional right of the insured.\nIt can be accomplished only under certain conditions:**i.** **Revival application within specific time period:** The policy owner must\ncomplete the revival application within the time frame stated in the\nprovision for such reinstatement, say five years from the date of lapsation.**ii.** **Satisfactory evidence of continued insurability:** The insured mustpresent to the insurance company satisfactory evidence of continued\ninsurability of the insured. Not only must her health be satisfactory but\nother factors such as financial income and morals must not have\ndeteriorated substantially.**iii.** **Payment of overdue premiums with interest:** The policy owner isrequired to make payment of all overdue premiums with interest from due\ndate of each premium.**iv.** After having evaluated the evidence of continued insurability the insurermay decide to revive the policy as per existing terms and premium or even\noffer revival with increase in premium or reduced risk cover or both.**Perhaps the most significant of the above conditions is that which requires**\n**evidence of insurability at revival.** The type of evidence called for would depend\non the circumstances of each individual policy. If the policy has been in a lapsed\nstate for a very short period of time, the insurer may reinstate the policy without\nany evidence of insurability or may only require a simple statement from the\ninsured certifying that he is in good health.The company may however require a medical examination or other evidence of", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Standard Provisions", "chunk_id": "Final IC 38 - WA_Composite  - English_086", "metadata": {"file_size": 20885, "chunk_index": 86, "chunk_tokens": 985, "has_examples": true, "has_tables": false, "key_concepts": ["Grace Period", "Specific Policy Provisions", "Test Yourself 1", "Example", "Payment of overdue premiums with interest:"]}}
{"chunk": "insurability of the insured. Not only must her health be satisfactory but\nother factors such as financial income and morals must not have\ndeteriorated substantially.**iii.** **Payment of overdue premiums with interest:** The policy owner isrequired to make payment of all overdue premiums with interest from due\ndate of each premium.**iv.** After having evaluated the evidence of continued insurability the insurermay decide to revive the policy as per existing terms and premium or even\noffer revival with increase in premium or reduced risk cover or both.**Perhaps the most significant of the above conditions is that which requires**\n**evidence of insurability at revival.** The type of evidence called for would depend\non the circumstances of each individual policy. If the policy has been in a lapsed\nstate for a very short period of time, the insurer may reinstate the policy without\nany evidence of insurability or may only require a simple statement from the\ninsured certifying that he is in good health.The company may however require a medical examination or other evidence of\ninsurability under certain circumstances:i. If the grace period has expired since long and the policy is in a lapsedcondition for say, nearly a year.ii. If the insurer has reason to suspect that a health or other problem may bepresent. Fresh medical examination may also be required if the sum\nassured or face amount of the policy is large.**Important**Revival of lapsed policies is an important service function that life insurers seek\nto actively encourage since policies in lapsed state may do little good to either\ninsurer or policyholder.174**Non-forfeiture provisions**The Insurance Act, 1938 (Section 113) protects policies (which have acquired\nsurrender value), from lapsation, by keeping them alive to the extent of paid-up\nsum assured even without payment of further premiums. This is because the\npolicyholder has a claim to the cash value accumulated under the policy.**a)** **Surrender values**Surrender value is the amount you stand to get when you decide to make a\npremature exit from the plan, i.e. when you have decided to completely\nwithdraw or terminate the policy before its maturity.Life insurers normally have a chart that lists the surrender values at various times\nand also the method that will be used for calculating the surrender values. The\nformula takes into account the type and plan of insurance, age of the policy and\nthe length of the policy premium-paying period.The actual amount of cash one gets in hand on surrender may be different from\nthe surrender value amount prescribed in the policy. The actual amount may\ndiffer on account of any accrued bonuses, recoveries etc.**Guaranteed Surrender Value [GSV]:** The law in India as per IRDAI Guidelines\n(revised in 2019) provides for a Guaranteed Surrender Value [GSV] to be payable\nif all premiums have been paid for at least two consecutive years. This Value\narrived as a percentage (say 30%) of premiums paid is called Guaranteed\nSurrender Value. The value depends on the duration of premium paid. The GSV is\nrequired to be mentioned in the policy document.**b)** **Policy loans**Life insurance policies that accumulate a cash value also have a provision to grant\nthe policyholder the right to borrow money from the insurer by using the cash\nvalue of the policy as a security for the loan. The policy loan is usually limited to\na percentage of the policy’s surrender value (say 90%). Note that the policyholder\nborrows from his own account. He or she would have been eligible to get the\namount if the policy had been surrendered. In that case the insurance would have\nbeen terminated.Insurers charge interest on policy loans, which are payable semi-annually or\nannually. Although loan and interest are repayable periodically, If the loan has\nnot been repaid, the insurer deducts the amount of outstanding (unpaid) loan and\ninterest from the policy benefit that is payable. A loan provides relief to\npolicyholder in case of financial emergencies while keeping the insurance alive.Since the loan is granted on the policy being kept as security, the policy has to\nbe assigned (explained in later para) in favour of the insurer. Where the\npolicyholder has nominated (explained in later para) someone to receive the\nmoney in the event of death of the insured, this nomination shall not be cancelled\nbut the nominee’s right will be affected to the extent of the insurer’s interest in\nthe policy.175**Example**Arjun bought a life insurance policy wherein the total death claim payable under\nthe policy was Rs. 2.5 lakhs. Arjun’s total outstanding loan and interest under the\npolicy amounts to Rs. 1.5 lakhs. Hence in the event of Arjun’s death, the nominee", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Payment of overdue premiums with interest:", "chunk_id": "Final IC 38 - WA_Composite  - English_087", "metadata": {"file_size": 20885, "chunk_index": 87, "chunk_tokens": 1020, "has_examples": true, "has_tables": false, "key_concepts": ["Policy loans", "Non-forfeiture provisions", "Example", "Payment of overdue premiums with interest:", "Important"]}}
{"chunk": "amount if the policy had been surrendered. In that case the insurance would have\nbeen terminated.Insurers charge interest on policy loans, which are payable semi-annually or\nannually. Although loan and interest are repayable periodically, If the loan has\nnot been repaid, the insurer deducts the amount of outstanding (unpaid) loan and\ninterest from the policy benefit that is payable. A loan provides relief to\npolicyholder in case of financial emergencies while keeping the insurance alive.Since the loan is granted on the policy being kept as security, the policy has to\nbe assigned (explained in later para) in favour of the insurer. Where the\npolicyholder has nominated (explained in later para) someone to receive the\nmoney in the event of death of the insured, this nomination shall not be cancelled\nbut the nominee’s right will be affected to the extent of the insurer’s interest in\nthe policy.175**Example**Arjun bought a life insurance policy wherein the total death claim payable under\nthe policy was Rs. 2.5 lakhs. Arjun’s total outstanding loan and interest under the\npolicy amounts to Rs. 1.5 lakhs. Hence in the event of Arjun’s death, the nominee\nwill be eligible to get the balance of Rs. 1 lakh.**Special policy provisions and endorsements****a)** **Nomination**i. Under Section 39 of the Insurance Act 1938, the holder of a policy on his/her own life may nominate the person or persons to whom the money\nsecured by the policy shall be paid in the event of his/her death.\nii. The life assured can **nominate one or more than one person** as nominees.\niii. Nominees are entitled for **valid discharge** and have to **hold the money as****a trustee** on behalf of those entitled to it.\niv. Nomination can be done either **at the time the policy is bought or later**at any time before the maturity of the Policy.\nv. Nomination may be incorporated in the text of the Policy itself or by anendorsement on the Policy. Nominations need be communicated to the\ninsurer and registered by the insurer in the records relating to the Policy.\nvi. Nomination can be cancelled or changed at any time before Policymatures, by an endorsement or a further endorsement or a will as the case\nmay be.**Important**Nomination only gives the nominee the right to receive the policy monies from\nthe insurer in the event of the death of the life assured. However, the money\nwould be belonging to the legal heir only. **A nominee does not have any right**\n**to the whole (or part) of the claim.** However vide Section 39(7) of Insurance\nAct,1938, in respect of all policies maturing for payment after 26 [th] December,\n2014, nomination in favour of parents, spouse, children or spouse and children\nby the owner of the policy on his/ own life makes the nominees beneficially\nentitled to the amount payable by the insurance company.Where the nominee is a minor, the policy holder needs to appoint an\nappointee. The appointee needs to sign the policy document to show his or\nher consent to acting as an appointee. The appointees lose their status when\nthe nominee reaches majority age. The policy holder can change the\nappointee at any time. If no appointee is given, and the nominee is a minor,\nthen on the death of the life assured, the death claim is paid to the legal heirs\nof the policyholder.Where more than one nominee is appointed, the death claim will be payable\nto them jointly, or to the survivor or survivors. Nominations made after the\ncommencement of the policy have to be intimated to the insurers to be\neffective.176Section 39(11) of the Insurance Act says that where a policyholder dies after\nthe maturity of the policy but the proceeds and benefit of his policy has not\nbeen made to him because of his death, his nominee shall be entitled to the\nproceeds and benefit of his policy.**Diagram 2:** **Provisions related to nomination****b)** **Assignment**Since life insurance policy carries a promise or a debt that the insurance\ncompany owes the insured, it is considered a security for money or property.\nWe have seen that loan is advanced against by the insurers against the\nsurrender value of the policy. Similarly, many financial institutions including\nbanks advance loan against the security of the insurance policy by having it\nassigned it in their favour.The term assignment ordinarily refers to transfer of property by writing in\nfavour of another person.The assignment of a life insurance policy implies the act of transferring the\nrights, title and interest in the policy (as property) from one person to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_088", "metadata": {"file_size": 20885, "chunk_index": 88, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Special policy provisions and endorsements", "Example", "Provisions related to nomination", "Important", "A nominee does not have any right"]}}
{"chunk": "to them jointly, or to the survivor or survivors. Nominations made after the\ncommencement of the policy have to be intimated to the insurers to be\neffective.176Section 39(11) of the Insurance Act says that where a policyholder dies after\nthe maturity of the policy but the proceeds and benefit of his policy has not\nbeen made to him because of his death, his nominee shall be entitled to the\nproceeds and benefit of his policy.**Diagram 2:** **Provisions related to nomination****b)** **Assignment**Since life insurance policy carries a promise or a debt that the insurance\ncompany owes the insured, it is considered a security for money or property.\nWe have seen that loan is advanced against by the insurers against the\nsurrender value of the policy. Similarly, many financial institutions including\nbanks advance loan against the security of the insurance policy by having it\nassigned it in their favour.The term assignment ordinarily refers to transfer of property by writing in\nfavour of another person.The assignment of a life insurance policy implies the act of transferring the\nrights, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called **assignor** and the person\nto whom property is transferred is called **assignee** . On assignment, the\nownership of the policy changes and hence nomination is cancelled, except\nwhen assignment is made to the insurance company for a policy loan.There are two types of assignments.**Diagram 3:** **Types of Assignment**177Absolute assignment is more commonly seen in many commercial situations\nwhere the policy is typically mortgaged against a debt assumed by the\npolicyholder, like a housing loan.**Conditions for valid assignment**Let us now look at the conditions that are necessary for a valid assignment.i. The assignor must have **absolute right and title or assignable interest** tothe policy being assigned.ii. The assignment should **not be opposed to any law in force** .iii. Assignee can do another assignment, but cannot do nomination becauseassignee is not the life assured.**Important** : A life insurance policy can be assigned wholly or partially The assignment must be signed by the transferor or assignor or dulyauthorized agent and attested by at least one witness. The transfer of title has to be specifically set forth in the form of anendorsement on the policy or a separate instrument.\n The policyholder must give notice of the assignment to the insurer,without which the assignment will not be valid. Section 38(2) specifies that an insurer may accept the assignment, ordecline the same, if it has sufficient reason to believe that such\nassignment is not bona fide or is not in the interest of the policyholder\nor in public interest or is for the purpose of trading of insurance policy. However, the insurer shall, before refusing to act upon theendorsement, record in writing the reasons for such refusal and\ncommunicate the same to the policyholder not later than thirty days\nfrom the date of the policyholder giving notice of such transfer or\nassignment.178**Diagram 4:** **Provisions related to assignment of insurance policies****Commonly extended privileges to policyholders**a) **Duplicate Policy:**A life insurance policy document is only an evidence of a promise. Loss or\ndestruction of the policy document does not in any way absolve the company\nof its liability under the contract. Life insurance companies generally have\nstandard procedures to be followed in case of loss of the policy document.Normally the office would examine the case to see if there is any reason to\ndoubt the alleged loss. Satisfactory proof may need to be produced that the\npolicy has been lost and not dealt with in any manner. Generally the claim\nmay be settled on the claimant furnishing an indemnity bond with or without\nsurety.If payment is shortly due and the amount to be paid is high, the office may\nalso insist that an advertisement be placed in a national paper with wide\ncirculation, reporting the loss. A duplicate policy may be issued on being sure\nthat there is no objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year\nof the policy, except for change in the mode of premium or alterations which\nare of a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "Final IC 38 - WA_Composite  - English_089", "metadata": {"file_size": 20885, "chunk_index": 89, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Commonly extended privileges to policyholders", "Types of Assignment", "Provisions related to nomination", "Conditions for valid assignment", "Important"]}}
{"chunk": "doubt the alleged loss. Satisfactory proof may need to be produced that the\npolicy has been lost and not dealt with in any manner. Generally the claim\nmay be settled on the claimant furnishing an indemnity bond with or without\nsurety.If payment is shortly due and the amount to be paid is high, the office may\nalso insist that an advertisement be placed in a national paper with wide\ncirculation, reporting the loss. A duplicate policy may be issued on being sure\nthat there is no objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year\nof the policy, except for change in the mode of premium or alterations which\nare of a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a\nseparate paper. Other alterations, which require a material change in policy179conditions, may require the cancellation of existing policies and issue of new\npolicies.Some of the main types of alterations that are permitted arei. Change in certain classes of insurance or term [where risk is not increased]\nii. Reduction in the sum assured\niii. Change in the mode of payment of premium\niv. Change in the date of commencement of the policy\nv. Splitting up of the policy into two or more policies\nvi. Removal of an extra premium or restrictive clause\nvii. Change from without profits to with profits plan\nviii. Correction in name\nix. Settlement option for payment of claim and grant of double accidentbenefitThese alterations generally do not involve an increase in the risk. There are\nother alterations in policies that are not allowed. These may be alterations\nthat have the effect of lowering the premium. Examples are extension of the\npremium paying term; change from with profit to without profit plans; change\nfrom one class of insurance to another, where it increases the risk: and\nincrease in the sum assured.**Test Yourself 2**Under what circumstances would the policyholder need to appoint an appointee?I. Insured is minorII. Nominee is a minor\nIII. Policyholder is not of sound mind\nIV. Policyholder is not married**Summary**Matters of health, habits and occupation, income and family details need to\nbe mentioned by the agent in the agent’s report.Details pertaining to physical features like height, weight, blood pressure,\ncardiac status etc. are recorded and mentioned by the doctor in his/ her\nreport called the medical examiner’s report.Moral hazard is the likelihood that a client's behaviour might change as a result\nof purchasing a life insurance policy and such a change would increase the\nchance of a loss.An insurance contract commences when the life insurance company issues a\nfirst premium receipt (FPR). The FPR is the evidence that the policy contract\nhas begun.The policy document is the most important document associated with\ninsurance. It is the evidence of the contract between the assured and the\ninsurance company.The standard policy document typically has three parts which are the policy\nschedule, standard provisions and the policy’s specific provisions.180The grace period clause grants the policyholder an additional period of time\nto pay the premium after it has become due.Reinstatement is the process by which a life insurance company puts back into\nforce a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A policy loan is different from an ordinary commercial loan in two respects,\nfirstly the policy owner is not legally obligated to repay the loan and the\ninsurer need not perform a credit check on the insured.Nomination is where the life assured proposes the name of the person(s) to\nwhich the sum assured should be paid by the insurance company after their\ndeath.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except\nfor some simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y179", "section": "Alteration", "chunk_id": "Final IC 38 - WA_Composite  - English_090", "metadata": {"file_size": 20885, "chunk_index": 90, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Key Terms", "Alteration", "Test Yourself 2"]}}
{"chunk": "force a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A policy loan is different from an ordinary commercial loan in two respects,\nfirstly the policy owner is not legally obligated to repay the loan and the\ninsurer need not perform a credit check on the insured.Nomination is where the life assured proposes the name of the person(s) to\nwhich the sum assured should be paid by the insurance company after their\ndeath.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except\nfor some simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period\n10. Policy lapse\n11. Policy revival\n12. Surrender value13. Nomination\n14. Assignment**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.181## CHAPTER L-08## LIFE INSURANCE UNDERWRITING**Chapter Introduction**A life insurance agent’s work does not stop once a proposal is secured from a\nprospective customer. The proposal must also be accepted by the insurance\ncompany and result in a policy.Every life insurance proposal has to pass through a gateway where the life insurer\ndecides whether to accept the proposal and if so, on what terms. In this chapter\nwe shall know more about the process of underwriting and the elements involved\nin the process.**Learning Outcomes**182**A.** **Underwriting – Basic concepts****1.** **Underwriting purpose**Underwriting has two purposesi. To assess the risk, classify the risk and decide the terms of acceptance orto decline the risk.\nii. To prevent anti-selection against the insurer**Definition**The term **underwriting** refers to the process of evaluating each proposal for life\ninsurance in terms of the degree of risk it represents and then deciding whether\nor not to grant insurance and on what terms.**Anti-selection** is the tendency of people, who suspect or know that their chance\nof experiencing a loss is high, to seek out insurance with a view to gain in theprocess.**Example**If life insurers were to be not selective about whom they offered insurance, there\nis a chance that people with serious ailments like heart problems or cancer, who\ndid not expect to live long, would seek to buy insurance.In other words, if an insurer did not exercise underwriting discretion, it would be\nselected against and may suffer losses in the process.**2.** **Equity among risks**The term “Equity” means that applicants who are exposed to similar degrees of\nrisk must be placed in the same premium class. The Mortality table, used to\ndetermine premiums, represents the mortality experience of standard lives or\naverage risks. They include the vast majority of individuals who propose to take\nlife insurance.**a)** **Risk classification**To usher equity, the underwriter engages in a process known as **risk classification**\ni.e. individual lives are categorised and assigned to different risk classes\ndepending on the degree of risks they pose. There are four such risk classes.183**Diagram 1:** **Risk classification****i.** **Standard lives**\nThese consist of those whose anticipated mortality corresponds to the\nstandard lives represented by the mortality table.**ii.** **Preferred risks**\nThese are the ones whose anticipated mortality is significantly lower than\nstandard lives and hence could be charged a lower premium.**iii.** **Substandard lives**\nThese are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable\ncost. Sometimes an individual’s proposal may also be temporarily declined if\nhe or she has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e13", "section": "Key Terms", "chunk_id": "Final IC 38 - WA_Composite  - English_091", "metadata": {"file_size": 20885, "chunk_index": 91, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Field or Primary level", "Equity among risks", "Substandard lives", "Chapter Introduction"]}}
{"chunk": "These consist of those whose anticipated mortality corresponds to the\nstandard lives represented by the mortality table.**ii.** **Preferred risks**\nThese are the ones whose anticipated mortality is significantly lower than\nstandard lives and hence could be charged a lower premium.**iii.** **Substandard lives**\nThese are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable\ncost. Sometimes an individual’s proposal may also be temporarily declined if\nhe or she has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes\ninformation gathering by an agent or company representative to decide\nwhether an applicant is suitable for granting insurance coverage. The agent\nplays a critical role as primary underwriter. He is in the best position to know\nthe life to be insured.Many insurance companies may require that agents complete a statement or\na confidential report, asking for specific information, opinion and184recommendations to be provided by the agent with respect to the proposed\nlife.**Fraud monitoring and role of agent as primary underwriter**Much of the decision with regard to acceptance of a risk depends on the facts\nthat have been disclosed by the proposer in the proposal form. It may be\ndifficult for an underwriter who is sitting in the underwriting department to\nknow whether these facts are untrue and have been fraudulently\nmisrepresented with deliberate intent to deceive.The agent plays a significant role here. He or she is in the best position to\nensure that the facts that have been represented are true, due to his/ her\ndirect and personal contact with the proposed life.**b)** **Underwriting at the Department level**The main level of Underwriting is at the Department or Office level. It involves\nspecialists and persons who consider all the relevant data on the case to\ndecide whether to accept a proposal for Life insurance and on what terms.**4.** **Methods of underwriting****Diagram 2:** **Methods of Underwriting**Underwriters may use two types of methods for the purpose:|Judgment Method|Numerical Method|\n|---|---|\n|~~Under~~<br>~~this~~<br>~~method~~<br>subjective<br>judgment<br>is<br>used,<br>especially<br>when<br>deciding on a case that is<br>complex.<br>|~~Under this method underwriters assign positive~~<br>rating points for all negative or adverse factors<br>(negative points for any positive or favourable<br>factors).<br>|\n|~~**Example:**Deciding whether~~<br>life insurance can be given<br>to a person staying in a<br>disturbed country/ area.<br>|~~**Example:** A person with history of cardiac~~<br>ailments and/ or early deaths in the family may<br>be assigned positive points. The total number<br>of points so assigned will help an underwriter<br>in deciding the extent of risk involved.<br>|\n|~~In such situations, the~~<br>department may get the<br>expert opinion of a medical<br>doctor who is also called a<br>medical referee.|~~The sum total of these positive/negative~~<br>points, and/or is referred to as Extra Mortality<br>Rating (EMR). Higher EMR indicates that the<br>life is substandard. If the EMR is very high,<br>underwriters may decline insurance.|185**Underwriting Decisions**Let us now consider the various kinds of decisions that underwriters may take\nwith regard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. Thisrating indicates that the risk is accepted at the same rate of premium as\nwould apply to an ordinary or standard life.**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing withthe large majority of sub-standard risks. It involves charging an extra over\nthe tabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount\nof benefit it has to pay in the event of a claim.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d184", "section": "Preferred risks", "chunk_id": "Final IC 38 - WA_Composite  - English_092", "metadata": {"file_size": 20885, "chunk_index": 92, "chunk_tokens": 1004, "has_examples": true, "has_tables": true, "key_concepts": ["Underwriting at the Department level", "Methods of Underwriting", "Methods of underwriting", "Acceptance with a lien on the sum assured:", "Substandard lives"]}}
{"chunk": "with regard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. Thisrating indicates that the risk is accepted at the same rate of premium as\nwould apply to an ordinary or standard life.**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing withthe large majority of sub-standard risks. It involves charging an extra over\nthe tabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount\nof benefit it has to pay in the event of a claim.\n**Example: Consider the case of an insured who** has suffered and\nrecovered from a certain disease like TB. Imposition of Lien would imply\nthat if this person were to die from a relapse of the TB, within a given\nperiod, only a decreased amount of death benefit may be payable.**d)** **Acceptance with a restrictive clause:** For certain kinds of hazards arestrictive clause may be applied which limits death benefit in the event\nof death under certain circumstances.**Example** is a pregnancy clause imposed on pregnant ladies that limits\ninsurance payable in the event of pregnancy related deaths occurring\nwithin say three months of delivery.186**e)** **Decline or postpone:** Finally, a life insurance underwriter may decide todecline or reject a proposal for insurance. This would happen when there\nare certain health/ other features which are so adverse that they\nconsiderably increase the risk.**Example:** An individual who suffers from cancer and has little chance of\nremission, would be a candidate for rejection,Similarly in some cases it may be prudent to postpone acceptance of the risk\nuntil such time as the situation has improved and become more favourable.**Example**A lady who has just had a hysterectomy operation may be asked to wait for a few\nmonths before insurance on her life is allowed, to allow any post operation\ncomplications that may have arisen to disappear.**Test Yourself 1**Which of the following cases is likely to be declined or postponed by a life insurer?I. A healthy 18 year old\nII. A sports person\nIII. A person suffering from AIDS\nIV. A housewife with no income of her own**B.** **Non-medical underwriting****1.** **Non-medical underwriting**A large number of life insurance proposals may typically get selected for\ninsurance without conducting a medical examination to check the insurability of\na life to be insured. Such cases are termed as **non-medical proposals** .In view of multiple reasons including the costs involved, in some types of policies,\nLife insurers grant insurance without insisting on a medical examination\n**2.** **Conditions for non-medical underwriting**However non-medical underwriting calls for conditions like applicability to\ncertain class of lives, certain plans of insurance, certain upper limits of sum\ninsured, entry age limits, maximum term of insurance etc.to be followed.\n**3.** **Rating factors in underwriting**Rating factors refer to various aspects related to financial situation, life style,\nhabits, family history, personal history of health and other personal\ncircumstances in the prospective insured’s life that may pose a hazard and\nincrease the risk. Underwriting involves identifying these hazards and their likely\nimpact and classifying the risk accordingly.Rating factors may be broadly divided into two – those which contribute to moral\nhazard and those which contribute to physical [medical] hazards. Life insurance\ncompanies often divide their underwriting into categories accordingly. Factors187like income, occupation, lifestyle and habits, which contribute to moral hazard,\nare assessed as part of **financial underwriting**, while medical aspects of health\nfall under **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face\nsome problems with respect to moral hazard. This is because many women in\nIndian society are victims of male domination and social exploitation. Evils\nlike dowry deaths exist even today. Longevity of women can also be affected\nfrom problems connected with pregnancy.Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only\nto those who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**Minors have no contracting power of their own. Hence a proposal on the life\nof a minor has to be submitted by another person who is related to the minor\nin the capacity of a parent or legal guardian. It would also be necessary to\nascertain the need for insurance, since minors usually have no earned income", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s187", "section": "Acceptance at ordinary rates (OR)", "chunk_id": "Final IC 38 - WA_Composite  - English_093", "metadata": {"file_size": 20885, "chunk_index": 93, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Example: Consider the case of an insured who", "Acceptance with a restrictive clause:", "Minors", "Acceptance with a lien on the sum assured:", "Test Yourself 1"]}}
{"chunk": "are assessed as part of **financial underwriting**, while medical aspects of health\nfall under **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face\nsome problems with respect to moral hazard. This is because many women in\nIndian society are victims of male domination and social exploitation. Evils\nlike dowry deaths exist even today. Longevity of women can also be affected\nfrom problems connected with pregnancy.Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only\nto those who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**Minors have no contracting power of their own. Hence a proposal on the life\nof a minor has to be submitted by another person who is related to the minor\nin the capacity of a parent or legal guardian. It would also be necessary to\nascertain the need for insurance, since minors usually have no earned income\nof their own. Three conditions would generally be sought when considering\ninsurance for minors:**i.** **Whether they have a properly developed physique**Poor physique can be a result of malnutrition or other health problems\nposing grave risks.\n**ii.** **Proper family history and personal history**If there are adverse indicators here, it may pose risks.\n**iii.** **Whether the family is adequately insured**It is necessary to check if the family has a culture of insurance. One must\nbe on guard if no other member of the minor’s family has been insured.\nAmount of insurance is generally linked to that of parents.\n**c)** **Large sums assured**An underwriter needs to be wary when the amount of insurance is very large\nrelative to annual income of the proposed insured. Generally sum assured may\nbe assumed to be around ten to twelve times one’s annual income. If the ratio\nis much higher than this, it raises the possibility of selection against the\ninsurer.**Example**\nIf an individual has an annual income of Rs. 5 lakhs and proposes for a life\ninsurance cover of Rs. 3 crores, it raises a cause for concern.Typically concerns can arise in such instances because of the possibility that\nsuch a large amount of insurance is being proposed in anticipation of suicide188or as a result of expected deterioration in health. A third reason for such large\nsums could be excessive misselling by the sales person.Large sums assured would also mean premiums increasing in proportion and\nraise the question of whether the payment of such premiums would be\ncontinued. In general, the premium payable should be within one third of an\nindividual’s annual income**d)** **Age**\nMortality risk is closely related to age. The underwriter needs to be careful\nwhen considering insurance for people of advanced ages.**Example**\nIf the insurance is being proposed for the first time after age 50, there is a\nneed to suspect moral hazard and enquire about why such insurance was not\ntaken earlier.We must also note that chances of occurrence of degenerative diseases like\ndiseases of the heart and kidney failure increase with age and become higher\nat older ages. Life insurers may also seek for some special reports when\nproposals are submitted for high sums assured/ advanced ages or a\ncombination of both.**Example**\nExamples of such reports are ECG; EEG; X-Ray of the chest and Blood Sugar\ntest. These tests may reveal deeper insights about the health of the proposed\nlife than the answers given in the proposal or an ordinary medical examination\ncan provide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of\nthe life proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard189**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus\nartistes, scaffolding workers, demolition experts and film stunt artistes.**ii.** **Health hazards** arise when the nature of the job is such as to give rise to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e188", "section": "Female insurance", "chunk_id": "Final IC 38 - WA_Composite  - English_094", "metadata": {"file_size": 20885, "chunk_index": 94, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Minors", "Occupation", "Accidental hazards", "Health hazards"]}}
{"chunk": "can provide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of\nthe life proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard189**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus\nartistes, scaffolding workers, demolition experts and film stunt artistes.**ii.** **Health hazards** arise when the nature of the job is such as to give rise to\npossibility of medical impairment. There are various kinds of health hazards. Some jobs like that of **rickshaw pullers** involve a lot of physical strainand impact the respiratory system. Situations where one may be exposed to **toxic substances** like miningdust or carcinogenic substances (that cause cancer) like chemicals and\nnuclear radiation. Working in **high pressure environments** like underground tunnels ordeep sea, can cause acute decompression sickness. Finally, **overexposure** to certain job situations (like sitting crampedbefore a computer or working in a high noise setting) can impair\nfunctioning of certain body parts in the longer run.**iii.** **Moral hazard** can arise when a job involves proximity or can cause\npredisposition towards criminal elements or to drugs and alcohol. An\nexample is that of a dancer in a nightclub or an enforcer in a liquor bar or\nthe ‘bodyguard’ of a businessman with suspected criminal links. Again the\njob profiles of certain individuals like superstar entertainers may lead them\nto intoxicating lifestyles, which sometimes come to tragic ends.When an occupation falls under any such hazardous category, the applicant\nfor insurance may need to complete an occupational questionnaire that asks\nfor specific details of the job, duties involved and risks exposed to. A rating\nmay also be imposed for occupation in the form of a flat extra (for example\nRupees two per thousand sums assured.) Such extra may be reduced or\nremoved when the insured’s occupation changes.**f)** **Lifestyle and habits**Lifestyle and habits are terms, covering a wide range of individual lifestyle\ncharacteristics, which may be brought out in the agent’s confidential reports190and moral hazard reports, suggesting an exposure to risk. In particular three\nfeatures are important:**Smoking and tobacco use** : Use of tobacco is not only a risk in itself but also\ncontributes to increasing other medical risks. Companies charge differential\nrates today for smokers and non-smokers and users of other forms of tobacco\nusage like _gutkha_ and _paan masala_ .**Alcohol:** Drinking alcohol occasionally or in modest quantities is not\nconsidered a hazard. However, long term heavy drinking can impair liver\nfunctioning, affect the digestive system and lead to mental disorders.\nAlcoholism is also linked with accidents, violence, family abuse, depression\nand suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants.\nSome of these are even illegal and their use indicates criminal disposition and\nmoral hazard.**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical\nunderwriting. They may often call for a medical examiner’s report. Let us look at\nsome of the factors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision**191**a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d189", "section": "Examples", "chunk_id": "Final IC 38 - WA_Composite  - English_095", "metadata": {"file_size": 20885, "chunk_index": 95, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Moral hazard", "Health hazards", "Occupation", "Accidental hazards"]}}
{"chunk": "and suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants.\nSome of these are even illegal and their use indicates criminal disposition and\nmoral hazard.**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical\nunderwriting. They may often call for a medical examiner’s report. Let us look at\nsome of the factors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision**191**a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to\nanother, say from parents to children.**ii.** **Average longevity of the family** : When the parents have died early onaccount of certain diseases like heart trouble or cancer, it may be a\npointer that the offspring may also not live long.**iii.** **Family environment** : Thirdly, the environment in which the family livescan cause exposure to infection and other risks.Life insurers have thus to be careful when entertaining cases of individuals\nwith adverse family history. They may call for other reports and may impose\nan extra mortality rating in such cases.**b)** **Personal history**Personal history refers to past impairments of various systems of the human\nbody which the life to be insured has suffered from. The proposal form for\nlife insurance typically contains a set of questions which enquire whether the\nlife to be insured has been under treatment for any of these.The major kinds of ailments that are considered by the underwriters include\nCardiovascular diseases, diseases of the respiratory system, malignant\ntumours/ cancer, ailments of the renal system, impairments of the endocrine\nsystem, diseases of the digestive system like gastric ulcers and cirrhosis of the\nliver and diseases of the nervous system.**c)** **Personal characteristics**These can also be significant indicators of the tendency to disease.**i.** **Build**A person’s build consists of his height, weight, chest and girth of the\nabdomen. For given age and height, there is a standard weight that has been\ndefined and if the weight is too high or low in relation to this standard weight,\nwe can say that the person is overweight or underweight.Similarly, it is expected that the chest should be expanded at least by four\ncentimetres in a normal person and that the abdominal girth should not be\nmore than one’s expanded chest.**ii.** **Blood pressure**Another indicator is a person’s blood pressure. There are two measures of this Systolic Diastolic192When the actual readings are much higher than the normal values, we say\nthat the person has high blood pressure or hypertension. When it is too low,\nit is termed as hypotension. The former can have serious consequences.**iii.** **Urine – Specific gravity**Finally, a reading of the specific gravity of one’s urine can indicate the\nbalance among various salts in the urinary system. It can indicate any\nmalfunctioning of the system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought\nit in April 2013. You and your insurance company agree to change the policy\nto officially start it from April, 2013. In this case, you have backdated the\npolicy. Usually, no interest is charged if the policy is backdated by less than\na month.Backdating is done for the following purposes:(i) **Getting a lower premium based on age:** While issuing the policy,insurers consider the nearest age of the policyholder. It means if you are\n32 years and 7 months old, the insurer will consider your age as 33 years.\nThis nearest age may put you in a higher premium slab. However, if you\nbackdate the policy by 2 months, the insurer will consider your age as 32\nyears and 5 months only. Now you will be paying lower premiums based", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "c192", "section": "Substance abuse", "chunk_id": "Final IC 38 - WA_Composite  - English_096", "metadata": {"file_size": 20885, "chunk_index": 96, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Substance abuse", "Backdating:", "Getting a lower premium based on age:", "Average longevity of the family", "Blood pressure"]}}
{"chunk": "balance among various salts in the urinary system. It can indicate any\nmalfunctioning of the system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought\nit in April 2013. You and your insurance company agree to change the policy\nto officially start it from April, 2013. In this case, you have backdated the\npolicy. Usually, no interest is charged if the policy is backdated by less than\na month.Backdating is done for the following purposes:(i) **Getting a lower premium based on age:** While issuing the policy,insurers consider the nearest age of the policyholder. It means if you are\n32 years and 7 months old, the insurer will consider your age as 33 years.\nThis nearest age may put you in a higher premium slab. However, if you\nbackdate the policy by 2 months, the insurer will consider your age as 32\nyears and 5 months only. Now you will be paying lower premiums based\non a plan for a 32-year old.(ii) **Set the timing of payment:** There are specific professions where theincome flow is not steady. In such a scenario if an individual accidently\nbuys a life insurance policy in its off-season then the policy can be\nbackdated to the period of maximum earnings. For instance, a farmer\nmay have a seasonal income. He would prefer to make insurance\npayments only after he has received his crop proceedings. In this case, a\nfarmer could backdate the policy to start it in the harvest season.(iii) **To coincide with special dates:** You can backdate the policy to coincidewith your important dates, such as birthday and anniversary. It keeps\neasy for you to remember your premium due date.(iv) **Early maturity claims** : Backdating reduces the tenure of a policy andfacilitates early maturity. For instance, if a 30-year life insurance cover\nbought on March 2000 is backdated to April 1999, the policy would mature\non April, 2029 instead of March 2030. In case of endowment policies, this\ncould be beneficial as maturity benefits accrue earlier.193**Test Yourself 3**Why is heredity history of importance in medical underwriting?I. Rich parents have healthy kids\nII. Certain diseases can be passed on from parents to children\nIII. Poor parents have malnourished kids\nIV. Family environment is a critical factor**Summary**To bring equity, the underwriter engages in risk classification where individual\nlives are categorised and assigned to different risk classes depending on the\ndegree of risks they pose.Underwriting process may be said to take place at two levels: At field level and At underwriting department levelUnderwriting decisions made by underwriters include acceptance of standard\nrisk at standard rates or charging extra for sub-standard risks. Sometimes\nthere is acceptance with lien on sum assured or acceptance is based on\nrestrictive clauses. Where the risk is large the proposal is declined or\npostponed.A large number of life insurance proposals may typically get selected for\ninsurance without conducting a medical examination. Such cases are termed\nas non-medical proposals.Some of the rating factors for non-medical underwriting include Age Large sum assured Moral hazard etc.Some of the factors considered in medical underwriting include Family history, Heredity and personal history etc.**Key Terms**1. Underwriting\n2. Standard life\n3. Non-medical underwriting\n4. Rating factor1945. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.195## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the\nforms to be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**196**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a\npolicy results into a claim. The true value of life insurance is judged by the way\na claim is settled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "r1945", "section": "Backdating:", "chunk_id": "Final IC 38 - WA_Composite  - English_097", "metadata": {"file_size": 20885, "chunk_index": 97, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Set the timing of payment:", "To coincide with special dates:", "Answers to Test Yourself", "Answer 2", "Backdating:"]}}
{"chunk": "2. Standard life\n3. Non-medical underwriting\n4. Rating factor1945. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.195## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the\nforms to be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**196**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a\npolicy results into a claim. The true value of life insurance is judged by the way\na claim is settled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that\nlife insurers, shall process death claims without delay and call for all\nrequirements together, within 15 days of the receipt of the death intimation.A death claim shall be paid, rejected or repudiated giving all the relevant\nreasons, within 30 days from the date of receipt of all relevant papers/\nclarifications.If, in the opinion of the insurer, the claim warrants investigation, it shall\ncomplete the same expeditiously, within 90 days from the date of intimation and\nsettle the claim within 30 days thereafter.IRDAI specifies that in respect of Maturity clams, Survival Benefit claims and\nAnnuities, the Life Insurer shall initiate the claim process by sending advance\nintimation, by sending post-dated cheque or by giving direct credit to the bank\naccount of the claimant through any electronic mode approved by RBI, so as to\npay the claim on or before the due date.**Definition**A claim is a demand that the insurer should make good the promise specified in\nthe contract.A claim under a life insurance contract is triggered by the happening of one or\nmore of the events covered under the insurance contract. While in some claims,\nthe contract continues, in others, the contract is terminated.Claims can be of two types:**i.** survival claims payable when the life assured is alive and**ii.** death claim**Diagram 1:** **Types of claims**While a **death claim** arises only upon the death of the life assured, **survival claims**\nare payable on happening of events specified in the policy.197**Important**In all claims situations, the insurer has to ensure that the identity of the claimant\nis proven and well documented as per KYC norms.**Example**Such specified events where the claims are paid to the insured.i. The insured reaching the maturity period of the policy;\nii. The insured reaching the pre-decided duration(s) under a money-backpolicy, when instalment(s) become payable; or under annuity plans.\niii. Occurrences of Critical illnesses covered under the policy (as a riderbenefit or otherwise);\niv. Surrender of the policy either by the policyholder or assignee;**B.** **Ascertaining whether a claim situation has occurred****i.** **Survival claim** is payable to the insured on reaching the period of maturityor fulfilling conditions stipulated in the policy.**ii.** **Maturity claims and money-back instalment claims** are easily establishedas they are based on dates which are determined at the beginning of the\ncontract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy\nare clearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments.Here, unlike other claims, the event is triggered by the decision of the\npolicy holder or assignee to cancel the contract and withdraw what is due\nto him or her under the contract. There is typically a penalty for\npremature withdrawal. The amount paid would be less than what would\nbe due under a full claim and hence would be less than what would have\nbeen due if the full claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "r1945", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 - WA_Composite  - English_098", "metadata": {"file_size": 20885, "chunk_index": 98, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Survival claim", "Answer 3", "Diagram 1:"]}}
{"chunk": "contract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy\nare clearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments.Here, unlike other claims, the event is triggered by the decision of the\npolicy holder or assignee to cancel the contract and withdraw what is due\nto him or her under the contract. There is typically a penalty for\npremature withdrawal. The amount paid would be less than what would\nbe due under a full claim and hence would be less than what would have\nbeen due if the full claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned,\nall the benefits would be payable to the assignee and it would not meet the\nintended purpose of the critical illness benefit. To avoid this situation, policy\nholders need to be educated about the extent of benefits they may assign by way\nof a conditional assignment.198A **maturity or death claim** or a surrender leads to termination of the insurance\ncover under the contract and no further insurance cover is available.**Types of claims:** The following payments may occur during the policy term:\n**a)** **Survival Benefit Payments**Periodical payments are made by the insurer to the insured at specified times\nduring the term of the policy.**I.** **Surrender of Policy**Surrender value reflects the value of investments and depends on various\nfactors such as sum assured, bonuses, policy term and premiums paid.\nPremature closing of a life insurance policy is a voluntary termination of the\npolicy contract. A policy can be surrendered only if it has acquired paid-up\nvalue. The amount payable to the insured is the **surrender value** which is\nusually a percentage of the premiums paid. The actual surrender value paid\nto the insured is more than the Guaranteed Surrender Value (GSV).**II.** **Rider Benefit**A payment under a rider is made by an insurance company on the occurrence\nof a specified event according to the terms and conditions.\nUnder a **critical illness rider**, in the event of diagnosis of a critical illness, a\nspecified amount is paid as per terms. The illness should have been covered\nin the list of critical illnesses specified by the insurance company.Under **hospital care rider**, the insurer pays the treatment costs in the event\nof hospitalisation of the insured, subject to terms and conditions.The policy contract continues even after the rider payments are made.The following claim payments are made at the end of the policy term\nspecified in the insurance contract.**III.** **Maturity Claim**In such claims, the insurer promises to pay the insured a specified amount at\nthe end of the term, if the insured survives the plan’s entire term. This is\nknown as a **maturity claim.****i.** **Participating Plan:** The maturity claim amount payable under aparticipating plan is the sum assured plus accumulated bonuses less dues\nsuch as outstanding premium and policy loans and interests thereon.\n**ii.** **Return of Premium (ROP) Plan:** In some cases premiums paid over theterm period are returned when the policy matures.\n**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.199**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which\nis paid to the nominee or assignee or legal heir whatever the situation may\nbe. A death claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Surrender value payments", "chunk_id": "Final IC 38 - WA_Composite  - English_099", "metadata": {"file_size": 20885, "chunk_index": 99, "chunk_tokens": 986, "has_examples": true, "has_tables": false, "key_concepts": ["Maturity Claim", "Participating Plan:", "Rider Benefit", "III.", "Annuities:"]}}
{"chunk": "**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.199**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which\nis paid to the nominee or assignee or legal heir whatever the situation may\nbe. A death claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,\ndate and place of death.**i.** **Forms to be submitted for death claim**Usually, the following forms are to be submitted by the beneficiary to the\ninsurer to facilitate processing of the claim: Claim form by nominee\n Certificate of burial or cremation\n Treating physician’s certificate\n Hospital’s certificate\n Employer’s certificate\n Death certificate issued by municipal authorities etc., as proof ofdeath\n Certified court copies of police reports like First Information Report(FIR), Inquest Report, Post-Mortem Report, and Final Report - these\nreports are required in case of death by accident.**Diagram 2:** **Forms to be submitted for Death Claim**200**ii.** **Repudiation of death claim**The death claim may be paid or repudiated. If, while processing the claim,\nthe insurer detects that the proposer had made any incorrect statements or\nhad suppressed material facts relevant to the policy, the contract would be\ndeclared as void. All benefits under the policy are forfeited.**iii.** **Section 45: Indisputability Clause**However this penalty is subject to **Section 45** of the Insurance Act, 1938.**Important****Section 45 states:**“No policy of life insurance shall be called in question on any ground\nwhatsoever after the expiry of three years from the date of the policy, i.e.\nfrom the date of issuance of the policy or the date of commencement of risk\nor the date of revival of the policy or the date of the rider to the policy,\nwhichever is later”.**C.** **Claim Procedure for Life Insurance Policy****Although there is no laid down standard claims procedure for all insurers,**\n**the IRDAI has laid down guidelines for insurers in the matter of claim**\n**settlement.****Regulation 8: Claims procedure in respect of a life insurance policy**i. A life insurance policy shall state the **primary documents** which arenormally required to be submitted by a claimant in support of a claim.ii. A life insurance company, upon receiving a claim, shall process the claimwithout delay. Any queries or requirement of additional documents, to\nthe extent possible, shall be raised all at once and not in a piece-meal\nmanner, within a period of 15 days of the receipt of the claim.iii. As per the IRDAI (Protection of Policyholders’ Interests) Regulations, 2017,a death claim under a life insurance policy shall be paid, rejected or\nrepudiated giving all the relevant reasons, within 30 days from the date\nof receipt of all relevant papers and required clarifications. However, if\nthe insurer needs the claim to be investigated, it shall initiate and\ncomplete the investigation at the earliest, in any case not later than 90\ndays from the date of receipt of claim intimation. The claim should be\nsettled within 30 days of completing the investigation.iv. Where a claim is ready for payment but the payment cannot be made dueto any reasons of proper identification of the payee, the life insurer shall\nhold the amount for the benefit of the payee and it shall earn interest at\nthe rate applicable to a savings bank account with a scheduled bank201(effective from 30 days following the submission of all papers and\ninformation).v. Where there is a delay on the part of the insurer in processing a claim fora reason other than the one covered by sub-regulation (iv), the life\ninsurance company shall pay **interest on the claim amount at a rate**\n**which is 2% above the bank rate** prevalent at the beginning of the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "k201", "section": "Unit Linked Insurance Plan (ULIP):", "chunk_id": "Final IC 38 - WA_Composite  - English_100", "metadata": {"file_size": 20885, "chunk_index": 100, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Repudiation of death claim", "Section 45", "Section 45: Indisputability Clause", "Unit Linked Insurance Plan (ULIP):", "Important"]}}
{"chunk": "repudiated giving all the relevant reasons, within 30 days from the date\nof receipt of all relevant papers and required clarifications. However, if\nthe insurer needs the claim to be investigated, it shall initiate and\ncomplete the investigation at the earliest, in any case not later than 90\ndays from the date of receipt of claim intimation. The claim should be\nsettled within 30 days of completing the investigation.iv. Where a claim is ready for payment but the payment cannot be made dueto any reasons of proper identification of the payee, the life insurer shall\nhold the amount for the benefit of the payee and it shall earn interest at\nthe rate applicable to a savings bank account with a scheduled bank201(effective from 30 days following the submission of all papers and\ninformation).v. Where there is a delay on the part of the insurer in processing a claim fora reason other than the one covered by sub-regulation (iv), the life\ninsurance company shall pay **interest on the claim amount at a rate**\n**which is 2% above the bank rate** prevalent at the beginning of the\nfinancial year in which the claim is reviewed by it.**Role of an agent**An agent shall render all possible service to the nominee/ legal heir or the\nbeneficiary in filling up of claim forms accurately and assisting in submission of\nthese at the insurer’s office.Apart from discharging obligations, goodwill is generated from such a situation\nwhereby there exists ample opportunity for the agent to procure business or\nreferrals in future from the family of the deceased.**Test Yourself 1**Which of the below statement best describes the concept of claim? Choose the\nmost appropriate option.I. A claim is a request that the insurer should make good the promise specifiedin the contract\nII. A claim is a demand that the insurer should make good the promise specifiedin the contract\nIII. A claim is a demand that the insured should make good the commitmentspecified in the agreement\nIV. A claim is a request that the insured should make good the promise specifiedin the agreement**Summary**A claim is a demand that the insurer should make good the promise specified\nin the contract.A claim can be survival claim or death claim. While a death claim arises only\nupon the death of the life assured, survival claims can be caused by one or\nmore eventsFor payment of a survival claim, the insurer has to ascertain that the event\nhas occurred as per the conditions stipulated in the policy.The following payments may occur during the policy term:\n Survival Benefit Payments\n Surrender of Policy\n Rider Benefit\n Maturity Claim\n Death Claim202Section 45 (Indisputability Clause) of the Insurance Act offers protection\nagainst rejection of claim by the insurer on flimsy grounds provided and sets\na time limit of 3 years for the Insurer for calling a policy into question.Under the IRDAI (Protection of Policyholders Interests) Regulations, 2017, the\nIRDAI has laid down regulations to safeguard/ protect the insured or\nbeneficiary in case of claims.**Answers to Test Yourself****Answer 1** The correct option is II.203## SECTION## HEALTH SECTION204## CHAPTER H-01## INTRODUCTION TO HEALTH INSURANCE**Chapter Introduction**This chapter will tell you about how insurance evolved over time. It will also\nexplain what healthcare is, levels of healthcare and types of healthcare. You will\nalso learn about the healthcare system in India and factors affecting it. Finally,\nit will explain how health insurance evolved in India and also the various players\nin the health insurance market in India.**Learning Outcomes**After studying this chapter, you should be able to:a) Understand how insurance evolved.\nb) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.205**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness\nof the body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was\nHippocrates (460 to 370 BC) who came up with the reasons behind illness.\nAccording to him, illness is caused due to various factors relating to environment,\nsanitation, personal hygiene and diets. Vedic texts of ancient India speak about\n_‘Arogyame Mahabhagyam’_ meaning ‘Health is great luck’ or in other words,\n‘Health is Wealth’. Many treatises of ancient India like _Atharva Veda, Charaka_", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "k201", "section": "Role of an agent", "chunk_id": "Final IC 38 - WA_Composite  - English_101", "metadata": {"file_size": 20885, "chunk_index": 101, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 1", "Chapter Introduction", "Understanding Healthcare", "Answer 1"]}}
{"chunk": "b) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.205**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness\nof the body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was\nHippocrates (460 to 370 BC) who came up with the reasons behind illness.\nAccording to him, illness is caused due to various factors relating to environment,\nsanitation, personal hygiene and diets. Vedic texts of ancient India speak about\n_‘Arogyame Mahabhagyam’_ meaning ‘Health is great luck’ or in other words,\n‘Health is Wealth’. Many treatises of ancient India like _Atharva Veda, Charaka_\n_Samhita, Sushruta Samhita, Ashtangahrdayam, Ashtangasamgraha, Bhela_\n_Samhita_, and _Kashyapa Samhita_ discuss healing traditions practiced in India in\nolden times.**Definition**A widely accepted definition of health was given by World Health Organization\n(WHO) _–‘Health is a state of complete physical, mental and social wellbeing and_\n_not merely the absence of disease or infirmity.’_**Determinants of health**It is generally believed that the following factors determine the health of any\nindividual:**a)** **Lifestyle factors**Lifestyle factors are those which are mostly in the control of the individual\nconcerned e.g. exercising and eating within limits, avoiding worry and the\nlike leading to good health; leading to diseases such as cancer, aids,\nhypertension and diabetes, to name a few.**b)** **Environmental factors**Communicable diseases like Influenza and Chickenpox etc. are spread due to\nbad hygiene, diseases like Malaria and Dengue are spread due to bad\nenvironmental sanitation, while certain diseases are also caused due to\nenvironmental factors.**c)** **Genetic factors**Diseases may be passed on from parents to children through genes. Such\ngenetic factors result in differing health trends amongst the population spread\nacross the globe based on race, geographical location and even communities.It is quite obvious that a country’s social and economic progress depends on the\nhealth of its people. This poses a question as to whether different types of\nhealthcare are required for different situations.206**Test Yourself 1**Which of the following diseases is not attributed to Lifestyle factors (i.e. not in\nthe control of the individual)?I. CancerII. AidsIII. Malaria\nIV. Hypertension**B.** **Levels of Healthcare**Healthcare is nothing but a set of services provided by various agencies and\nproviders including the government, to promote, maintain, monitor or restore\nhealth of people. Health care to be effective must be:Appropriate to the needs of the peopleComprehensiveAdequateEasily available- Affordable\nThe health care facilities should be based upon the probability of the incidence\nof disease for the population. For example, a person may get fever, cold, cough,\nskin allergies etc. many times a year, but the probability of him/ her suffering\nfrom Hepatitis B is less as compared to cold and cough.Hence, the need to set up the healthcare facilities in any area whether a village\nor a district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres\nfor primary, secondary and tertiary health care and takes other measures to make\nappropriate healthcare affordable and accessible to the population.207**C.** **Types of Healthcare**Healthcare is broadly categorized as follows:**1.** **Primary healthcare**Primary health care refers to the services offered by the doctors, nurses and other\nsmall clinics which are contacted first by the patient for any sickness, that is to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "A.", "chunk_id": "Final IC 38 - WA_Composite  - English_102", "metadata": {"file_size": 20885, "chunk_index": 102, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Environmental factors", "Determinants of health", "Genetic factors", "Test Yourself 1", "Understanding Healthcare"]}}
{"chunk": "or a district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres\nfor primary, secondary and tertiary health care and takes other measures to make\nappropriate healthcare affordable and accessible to the population.207**C.** **Types of Healthcare**Healthcare is broadly categorized as follows:**1.** **Primary healthcare**Primary health care refers to the services offered by the doctors, nurses and other\nsmall clinics which are contacted first by the patient for any sickness, that is to\nsay that primary healthcare provider is the first point of contact for all patients\nwithin a health system.For example, if a person visits a doctor for fever and the first diagnosis is\nindicative of Dengue fever, the primary health care provider will prescribe some\nmedicines but also direct the patient to get admitted in a hospital for specialized\ntreatment.At a country level, Primary Health care centres are set up both by Government\nand private players. Government primary health care centres are established\ndepending upon the population size and are present right up to the village level\nin some form or the other.**2.** **Secondary healthcare**Secondary health care refers to the healthcare services provided by medical\nspecialists and other health professionals who generally do not have first contact\nwith patient. It includes acute care requiring treatment for a short period for a\nserious illness, often (but not necessarily) as an in-patient, including Intensive\nCare services, ambulance facilities, pathology, diagnostic and other relevant\nmedical services.**3.** **Tertiary healthcare**Tertiary Health care is specialized consultative healthcare, usually for inpatients\nand on referral from primary/ secondary care providers.Examples of Tertiary Health care providers are those who have advanced medical\nfacilities and medical professionals, beyond the scope of secondary health care\nproviders e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk\npregnancy specialists etc.It is to be noted that as the level of care increases, the expenses associated with\nthe care also increase. The infrastructure for different levels of care also varies\nfrom country to country, rural-urban areas, while socio-economic factors also\ninfluence the same.**Test Yourself 2**Which of the following are part of primary healthcare?I. FeverII. Cancer\nIII. Organ Transplant\nIV. High risk pregnancy208**D.** **Evolution of Health Insurance in India**While the government had been busy with its policy decisions on healthcare, it\nalso put in place health insurance schemes. Insurance companies came with their\nhealth insurance policies only later. Here is how health insurance developed in\nIndia:**1.** **Employees’ State Insurance Scheme**Health Insurance in India formally began with the beginning of the Employees’\nState Insurance Scheme, introduced vide the ESI Act, 1948, shortly after the\ncountry’s independence in 1947. This scheme was introduced for blue-collar\nworkers employed in the formal private sector and provides comprehensive\nhealth services through a network of its own dispensaries and hospitals.ESIC (Employees State Insurance Corporation) is the implementing agency\nwhich runs its own hospitals and dispensaries and also contracts public/\nprivate providers wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme\n(CGHS), which was introduced in 1954 for the central government employees\nincluding pensioners and their family members working in civilian jobs. It aims\nto provide comprehensive medical care to employees and their families and\nis partly funded by the employees and largely by the employer (central\ngovernment).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers\nbefore as well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and\ntheir families was launched in the Indian market by all the four nationalized\nnon-life insurance companies (these were then the subsidiaries of the General\nInsurance Corporation of India). This product, **Mediclaim** was introduced to\nprovide coverage for the hospitalisation expenses up to a certain annual limit\nof indemnity with certain exclusions such as maternity, pre-existing diseases\netc.\nThe hospitalization indemnity-based annual contract continues to be the most", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y208", "section": "C.", "chunk_id": "Final IC 38 - WA_Composite  - English_103", "metadata": {"file_size": 20885, "chunk_index": 103, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Secondary healthcare", "Employees’ State Insurance Scheme", "Central Government Health Scheme", "Evolution of Health Insurance in India", "Tertiary healthcare"]}}
{"chunk": "which runs its own hospitals and dispensaries and also contracts public/\nprivate providers wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme\n(CGHS), which was introduced in 1954 for the central government employees\nincluding pensioners and their family members working in civilian jobs. It aims\nto provide comprehensive medical care to employees and their families and\nis partly funded by the employees and largely by the employer (central\ngovernment).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers\nbefore as well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and\ntheir families was launched in the Indian market by all the four nationalized\nnon-life insurance companies (these were then the subsidiaries of the General\nInsurance Corporation of India). This product, **Mediclaim** was introduced to\nprovide coverage for the hospitalisation expenses up to a certain annual limit\nof indemnity with certain exclusions such as maternity, pre-existing diseases\netc.\nThe hospitalization indemnity-based annual contract continues to be the most\npopular form of private health insurance in India today. With private players\ncoming into the insurance sector in 2001, health insurance has grown\ntremendously. However, there is a large untapped market even today.The Government has encouraged individuals to purchase Health Insurance\npolicies. Premiums paid by the individuals towards Health Insurance of self,\nspouse and family members are allowed to be deducted from taxable income\nunder Section 80 D of the Income Tax Act. The Section allows higher limits for\npaying premiums of parents/ parents in law above 60 years of age.209Considerable variations in covers, exclusions and newer add-on covers have\nbeen introduced which will be discussed in later chapters.**Test Yourself 3**The first standardised health insurance product for individuals and their families\nwas launched in the Indian market by all the four nationalized non-life insurance\ncompanies in the year _____.I. 1948II. 1954III. 1986IV. 2001**E.** **Health Insurance Market**The health insurance market today consists of a number of players some providing\nthe health care facilities called providers, others the insurance services and also\nvarious intermediaries. Some form the basic infrastructure while others provide\nsupport facilities. Some are in the government sector while others are in the\nprivate sector.**1.** **Private sector Health Care providers**India has a very large private health sector providing all three types of healthcare\nservices - primary, secondary as well as tertiary. These range from voluntary,\nnot-for-profit organisations and individuals to for-profit corporate, trusts, solo\npractitioners, stand-alone specialist services, diagnostic laboratories, pharmacy\nshops, and also the unqualified providers (quacks).India also has the largest number of qualified practitioners in other systems of\nMedicine (Ayurveda/ Siddha/ Unani/ Homeopathy) which is over 7 lakh\npractitioners. These are located in the public as well as the private sector. Apart\nfrom the for-profit private providers of health care, the NGOs and the voluntary\nsector have also been engaged in providing health care services to the\ncommunity.**Insurance Companies** in the general insurance sector provide the bulk of the\nhealth insurance services. Stand Alone Health Insurance (SAHI) Companies are\nallowed to transact all types of Health Insurances, while Life Insurance Companies\nare also permitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance210brokers, reinsurance brokers, insurance consultants, surveyors and loss assessors\nas well as Third Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:\na. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or\nboth, as per the underlying terms and conditions of the respective policy and\nwithin the framework of the guidelines issued by the insurers for settlement\nof claims.\nb. Servicing of claims for Hospitalization cover, if any, under Personal AccidentPolicy and domestic travel policy.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e210", "section": "Central Government Health Scheme", "chunk_id": "Final IC 38 - WA_Composite  - English_104", "metadata": {"file_size": 20885, "chunk_index": 104, "chunk_tokens": 968, "has_examples": true, "has_tables": false, "key_concepts": ["Health Insurance Market", "Central Government Health Scheme", "Private sector Health Care providers", "Test Yourself 3", "Commercial Health insurance"]}}
{"chunk": "allowed to transact all types of Health Insurances, while Life Insurance Companies\nare also permitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance210brokers, reinsurance brokers, insurance consultants, surveyors and loss assessors\nas well as Third Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:\na. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or\nboth, as per the underlying terms and conditions of the respective policy and\nwithin the framework of the guidelines issued by the insurers for settlement\nof claims.\nb. Servicing of claims for Hospitalization cover, if any, under Personal AccidentPolicy and domestic travel policy.\nc. Facilitating carrying out of pre-insurance medical examinations in connectionwith underwriting of the health insurance policies.**Summary**a) Insurance in some form or other existed many centuries ago but its modernform is only a few centuries old. Insurance in India has passed through many\nstages with government regulation.b) Health of its citizens being very important, governments play a major role increating a suitable healthcare system.c) Level of healthcare provided depends on many factors relating to a country’spopulation.d) The three type of healthcare are primary, secondary and tertiary dependingon the level of medical attention required. Cost of healthcare rises with each\nlevel with tertiary care being the costliest.\ne) India has its own peculiar challenges such as population growth andurbanization which require proper healthcare.f) The public sector insurance companies were the first to come up with schemesfor health insurance followed later by commercial insurance by private\ninsurance companies.g) The health insurance market is made up of many players some providing theinfrastructure, with others providing insurance services, intermediaries such\nas brokers, agents and third party administrators servicing health insurance\nbusiness and also other regulatory, educational as well as legal entities\nplaying their role.211**Answers to Test Yourself****Answer 1** The correct option is III.\n**Answer 2** The correct option is I.\n**Answer 3** The correct option is III.**Key terms**\na) Healthcare\nb) Commercial insurance\nc) Nationalization\nd) Primary, Secondary and Tertiary Healthcare\ne) Third Party Administrator212## CHAPTER H-02## HEALTH INSURANCE DOCUMENTATION**Chapter Introduction**In the insurance industry, we deal with a large number of forms, documents etc.\nThis chapter takes us through the documents and their importance in a health\ninsurance contract.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of proposal form.\nb) Describe the importance of Prospectus\nc) Explain terms and wordings in insurance policy document.\nd) Discuss policy conditions and warranties.\ne) Appreciate why endorsements are issued.\nf) Understand the premium receipt.\ng) Appreciate why renewal notices are issued.213**A.** **Proposal forms****1.** **Health Insurance Proposal forms**As discussed in the common chapters, the Proposal Form contains information\nwhich is useful for the insurance company to accept the risk offered for insurance.\nGiven below are some of the details of the proposal form for a health insurance\npolicy:1. The proposal form incorporates a prospectus which gives details of the cover,such as coverage, exclusions, provisions etc. The prospectus forms part of the\nproposal form and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address,occupation, date of birth, sex, and relationship of each insured person with the\nproposer, average monthly income and income tax PAN No., name and address\nof the Medical Practitioner, his qualifications and registration number. Bank\ndetails of the insured are also now a days collected to make payment of claim\nmoney directly through bank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment\nb. Date of first treatment\nc. Name and address of attending Doctor", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e210", "section": "Intermediaries:", "chunk_id": "Final IC 38 - WA_Composite  - English_105", "metadata": {"file_size": 20885, "chunk_index": 105, "chunk_tokens": 1004, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Proposal forms", "Answer 3", "Chapter Introduction"]}}
{"chunk": "policy:1. The proposal form incorporates a prospectus which gives details of the cover,such as coverage, exclusions, provisions etc. The prospectus forms part of the\nproposal form and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address,occupation, date of birth, sex, and relationship of each insured person with the\nproposer, average monthly income and income tax PAN No., name and address\nof the Medical Practitioner, his qualifications and registration number. Bank\ndetails of the insured are also now a days collected to make payment of claim\nmoney directly through bank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment\nb. Date of first treatment\nc. Name and address of attending Doctor\nd. Whether fully recovered\n6. The proposer as to state any additional facts which should be disclosed to insurersand if he has any knowledge of any positive existence or presence of any illness\nor injury which may require medical attention.\n7. The form also includes questions relating to past insurance and claims history andadditional present insurance with any other insurer.\n8. The special features of the declaration to be signed by the proposer must benoted.\n9. The insured person agrees and authorises the insurer to seek medical informationfrom any hospital/ medical practitioner who has at any time attended or may\nattend concerning any illness which affects his physical or mental health.\n10. The insured person confirms that he has read the prospectus forming part of theform and is willing to accept the terms and conditions.\n11. The declaration includes the usual warranty regarding the truth of thestatements and the proposal form as the basis of the contract.**2.** **Medical Questionnaire**In case of adverse medical history in the proposal form, the insured person has to\ncomplete a detailed questionnaire relating to diseases such as Diabetes,\nHypertension, Chest pain or Coronary Insufficiency or Myocardial Infarction.214These have to be supported by a form completed by a consulting physician. This form\nis scrutinised by company’s panel doctor, based on whose opinion, acceptance,\nexclusion, etc. are decided.**Standard form of Declaration**The IRDAI has specified the format of the standard declaration in the health\ninsurance proposal as under:1. I/ We hereby declare, on my behalf and on behalf of all persons proposed tobe insured, that the above statements, answers and/ or particulars given by\nme are true and complete in all respects to the best of my knowledge and that\nI/ We am/ are authorized to propose on behalf of these other persons.2. I understand that the information provided by me will form the basis of theinsurance policy, is subject to the Board approved underwriting policy of the\ninsurance company and that the policy will come into force only after full\nreceipt of the premium chargeable.3. I/ We further declare that I/ we will notify in writing any change occurring inthe occupation or general health of the life to be insured/ proposer after the\nproposal has been submitted but before communication of the risk acceptance\nby the company.4. I/ We declare and consent to the company seeking medical information fromany doctor or from a hospital who at any time has attended on the life to be\ninsured/ proposer or from any past or present employer concerning anything\nwhich affects the physical or mental health of the life to be assured/ proposer\nand seeking information from any insurance company to which an application\nfor insurance on the life to be assured/ proposer has been made for the\npurpose of underwriting the proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting\nand/ or claims settlement and with any Governmental and/ or Regulatory\nAuthority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal\nforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits, past\nhealth-insurance experience etc. along with the proposer’s profession,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Medical Questionnaire", "chunk_id": "Final IC 38 - WA_Composite  - English_106", "metadata": {"file_size": 20885, "chunk_index": 106, "chunk_tokens": 1004, "has_examples": false, "has_tables": false, "key_concepts": ["Standard form of Declaration", "Nature of questions in a proposal form", "Medical Questionnaire"]}}
{"chunk": "insured/ proposer or from any past or present employer concerning anything\nwhich affects the physical or mental health of the life to be assured/ proposer\nand seeking information from any insurance company to which an application\nfor insurance on the life to be assured/ proposer has been made for the\npurpose of underwriting the proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting\nand/ or claims settlement and with any Governmental and/ or Regulatory\nAuthority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal\nforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits, past\nhealth-insurance experience etc. along with the proposer’s profession,\noccupation or business which important as they could have a material bearing on\nthe risk.215**Example 1** A delivery man of a fast-food restaurant, who has to frequently travel on motorbikes at a high speed to deliver food to his customers, may be more exposed\nto accidents than the accountant of the same restaurant. A person working in a coal mine or a cement plant may be exposed to dustparticles leading to lung ailments.**Example 2** For the purpose of overseas travel insurance, the proposer is required to state(who is travelling, when, to which country, for what purpose) or For the purpose of health insurance, the proposer is asked about his/ her\nhealth (with person’s name, address and identification) etc. depending on thecase.**Example 3** In case of health insurance, it could be the cost of hospital treatment, whilefor personal accident insurance this could be a fixed amount for loss of life,\nloss of a limb, or loss of sight due to an accident.**a)** **Previous and Present insurance**The proposer is required to inform the details about his previous insurances to\nthe insurer. This is to understand his insurance history. In some markets there are\nsystems by which insurers confidentially share data about the insured.The proposer is also required to state whether any insurer had declined his\nproposal, imposed special conditions, required an increased premium at renewal\nor refused to renew or cancelled the policy. Details of current insurance with any\nother insurer including the names of the insurers are also required to be disclosed.\nFurther, in personal accident insurance an insurer would like to restrict the\namount of coverage (sum insured) depending on the sum insured under other PA\npolicies taken by the same insured.**b)** **Claim Experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about\nthe subject matter of insurance and how the insured has managed the risk in the\npast. It means the insurance company has a duty to record all the information\nreceived even orally, which the agent has to keep in mind by way of follow up.**B.** **Acceptance of the proposal (underwriting)**A completed proposal form broadly gives the following information: Details of the insured\n Details of the subject matter\n Type of cover required216 Details of the physical features both positive and negative\n Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the\nprospective customer e.g. above 45 years of age to a doctor and/ or for medical\ncheck-up. Based on the information available in the proposal and, where medical\ncheck-up has been advised, based on the medical report and the recommendation\nof the doctor, the insurer takes the decision. Sometimes, where the medical\nhistory is not satisfactory, an additional questionnaire to get more information is\nalso required to be obtained from the prospective client. The insurer then decides\nabout the rate to be applied to the risk factor and calculates the premium based\non various factors, which is then conveyed to the insured.**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the\nprospective buyers of insurance. It is usually in the form of a brochure or leaflet\nor it can be in electronic form also and serves the purpose of introducing a\nproduct to such prospective buyers. Issue of prospectus is governed by the\nInsurance Act, 1938 as well as by Protection of Policyholders’ Interest Regulations", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d216", "section": "Nature of questions in a proposal form", "chunk_id": "Final IC 38 - WA_Composite  - English_107", "metadata": {"file_size": 20885, "chunk_index": 107, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Example 3", "Prospectus", "Previous and Present insurance", "Acceptance of the proposal (underwriting)", "Nature of questions in a proposal form"]}}
{"chunk": " Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the\nprospective customer e.g. above 45 years of age to a doctor and/ or for medical\ncheck-up. Based on the information available in the proposal and, where medical\ncheck-up has been advised, based on the medical report and the recommendation\nof the doctor, the insurer takes the decision. Sometimes, where the medical\nhistory is not satisfactory, an additional questionnaire to get more information is\nalso required to be obtained from the prospective client. The insurer then decides\nabout the rate to be applied to the risk factor and calculates the premium based\non various factors, which is then conveyed to the insured.**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the\nprospective buyers of insurance. It is usually in the form of a brochure or leaflet\nor it can be in electronic form also and serves the purpose of introducing a\nproduct to such prospective buyers. Issue of prospectus is governed by the\nInsurance Act, 1938 as well as by Protection of Policyholders’ Interest Regulations\n2017 and the Health Insurance Regulations 2016 of the IRDAI. Insurers of Health\npolicies usually publish Prospectuses about their Health insurance products. The\nproposal form in such cases would contain a declaration that the customer has\nread the Prospectus and agrees to it.As discussed in Chapter 4, Section 64 VB of the Insurance Act 1938 stipulates that\nPremiums have to be collected in advance. However, considering the need for\neasing the payment of health insurance premiums in view of conditions owing to\nCOVID-19 outbreak, IRDAI allowed insurers to collect premiums of individual\nhealth insurance products in instalments. It was also mandated that Insurance\ncompanies would announce the availability of the facility of payment of premiums\nin instalments, and the conditions thereof, on their websites. This facility would\nbe offered to all policyholders without any discrimination.**D.** **Policy Document**IRDAI Regulations for protecting policy holder’s interest act 2017 specified that a Health\nInsurance Policy document should contain:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter\nb) Full description of the persons or interest insured\nc) The sum insured under the policy person and/ or peril wise\nd) UIN of the product, name, code number, contact details of the personinvolved in sales process;\ne) Date of birth of the insured and corresponding age in completed years;\nf) The period of insurance and the date from which the policyholder hasbeen continuously obtaining health insurance cover in India from any of\nthe insurers without break217g) The sub-limits, Proportionate Deductions and the existence of Packagerates if any, with cross reference to the concerned policy section;\nh) Co-pay limits if any;\ni) The pre-existing disease (PED) waiting period, if applicable;\nj) Specific waiting periods as applicable;\nk) Deductible as applicable – general and specific, if any Perils covered andexclusions\nl) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium along with periodicity of\ninstalments if any\nm) Policy terms, conditions and warranties\nn) Action to be taken by the insured upon occurrence of a contingency likelyto give rise to a claim under the policy\no) The obligations of the insured in relation to the subject-matter ofinsurance upon occurrence of an event giving rise to a claim and the rights\nof the insurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings.\nThese are called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made\nor used in support thereof or if any fraudulent means or devices are used by\nthe Insured or any one acting on his behalf to obtain any benefit under the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "D-19", "section": "C.", "chunk_id": "Final IC 38 - WA_Composite  - English_108", "metadata": {"file_size": 20885, "chunk_index": 108, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Prospectus", "EXAMPLES:", "Policy Document", "Conditions:"]}}
{"chunk": "of the insurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings.\nThese are called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made\nor used in support thereof or if any fraudulent means or devices are used by\nthe Insured or any one acting on his behalf to obtain any benefit under the\npolicy or if the loss or damage be occasioned by the wilful act, or with the\nconnivance of the Insured, all benefits under this policy shall be forfeited.**b.** **The Claim Intimation condition in a Health policy may state:**Claim must be filed within certain days from date of discharge from the\nHospital. However, waiver of this Condition may be considered in extreme\ncases of hardship.A breach of condition makes the policy voidable at the option of the insurer.2182. **Warranties:** A warranty is an agreement between insurer and insured that must\nbe carried out fully. It forms a part of the policy document. For example, the\nInsurer may be covering the risk of a particular disease on the condition that the\ninsured shall do a quarterly consultations with a specialist. In the above example,\nfailure of the insured to fulfil his part of the agreement shall either negate or\nreduce the liability in respect of that particular section/ warranty.Warranties must be observed and complied with strictly and literally, whether it\nis material to the risk or not.**Test Yourself 1**Which of the below statement is correct with regards to a warranty?I. A warranty is a condition which is implied without being stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot bepart of the policy document\nIV. Claims will be payable even if a warranty is breached.**Endorsements in Health Insurance**It is the practice of insurers to issue policies in a standard form; covering certain\nperils and excluding certain others.**Definition**If certain terms and conditions of the policy need to be changed at the time of\nissuance, it is done by setting out the amendments/ changes through a document called\nendorsement.It is attached to the policy and forms part of it. The policy and the endorsement\ntogether make up the contract. Endorsements may also be issued during the currency\nof the policy to record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy relate to:a) Variations/ changes in sum insured\nb) Addition and deletion of insured family members\nc) Change of insurable interest by way of taking of a loan and mortgaging thepolicy to a bank.\nd) Extension of insurance to cover additional perils/ extension of policy period\ne) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.219**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of\nissuance, it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.220## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product –\nMediclaim to hundreds of products of different kinds, the customer has a wide\nrange to choose appropriate cover. The chapter explains the features of various\nhealth products that can cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "H-03", "section": "E.", "chunk_id": "Final IC 38 - WA_Composite  - English_109", "metadata": {"file_size": 20885, "chunk_index": 109, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Warranties:", "Answers to Test Yourself", "Answer 2", "EXAMPLES:"]}}
{"chunk": "d) Extension of insurance to cover additional perils/ extension of policy period\ne) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.219**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of\nissuance, it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.220## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product –\nMediclaim to hundreds of products of different kinds, the customer has a wide\nrange to choose appropriate cover. The chapter explains the features of various\nhealth products that can cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance\nb) Describe the IRDAI guidelines on standardization in health insurance\nc) Discuss the various types of health products available in the Indian markettoday\nd) Explain Personal Accident insurance\ne) Discuss overseas travel insurance\nf) Understand key terms and clauses in health policies221**A.** **Classification of health insurance products****1.** **Introduction to health insurance products**“Health insurance business” is defined under Section 2(6C) of the Insurance Act,\n1938 as _“the effecting of contracts which provide for sickness benefits or_\n_medical, surgical or hospital expense benefits, whether in-patient or out-patient_\n_travel cover and personal accident cover.”_ IRDAI follows this definition of Health\ninsurance business.Health insurance products available in the Indian market are mostly in the nature\nof **hospitalization products.** These products cover the expenses incurred by an\nindividual during hospitalization.Therefore, health insurance is important mainly for two reasons: **Providing financial assistance to pay for medical facilities** in case of anyillness. **Preserving the savings of an individual** which may otherwise be wiped outdue to illness.Today, the health insurance segment has developed to a large extent, with\nhundreds of products offered by almost all general Insurance companies,\nstandalone health insurers and life insurers. However, the basic benefit structure\nof the Mediclaim policy i.e. cover against hospitalization expenses still remains\nthe most popular form of insurance.**2.** **Broad classification of health insurance products**Whatever be the product design, health insurance products can be broadly\nclassified into two categories:**a)** **Indemnity covers**These products constitute the bulk of the health insurance market and pay\nfor actual medical expenses incurred due to hospitalization.**b)** **Fixed benefit covers**Also called as ‘hospital cash’, these products pay for a fixed sum per day for\nthe period of hospitalization. Some products also provide for a pre-decided\namount for different surgeries.**3.** **Classification based on customer segment**Products can also be classified on the basis of the target customer segment.\nProducts classified based on customer segments are:a) **Individual cover** offered to retail customers and their family members222b) **Group cover** offered to corporate clients, covering employees and groups,covering their membersc) **Mass policies** for government schemes like/ Pradhan Mantri Jan ArogyaYojana/ various State health insurance schemes covering very poor sections\nof the population.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought\nin Health Regulations, 2016 regarding Health Products, some of which have been\ngiven below:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General\nInsurers and Health-Insurers, can offer these products for policy tenure of\n1 Year, but not exceeding 5 Years. Group Health Policies can be offered by\nany insurer for a term of one year except credit linked products where the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "H-03", "section": "Test Yourself 2", "chunk_id": "Final IC 38 - WA_Composite  - English_110", "metadata": {"file_size": 20885, "chunk_index": 110, "chunk_tokens": 979, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Preserving the savings of an individual", "Answer 2", "Introduction to health insurance products", "Mass policies"]}}
{"chunk": "of the population.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought\nin Health Regulations, 2016 regarding Health Products, some of which have been\ngiven below:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General\nInsurers and Health-Insurers, can offer these products for policy tenure of\n1 Year, but not exceeding 5 Years. Group Health Policies can be offered by\nany insurer for a term of one year except credit linked products where the\nterm can be extended up to the loan period not exceeding five years.4. No Group Health Insurance Policy shall be issued where a Group is formedwith the main purpose of availing itself of insurance. The Group shall have\na size as determined by the Insurer which shall be applicable for all its\ngroup policies, subject to a minimum of 7.5. General Insurers and Health Insurers may also offer Credit Linked GroupPersonal Accident policies for a term extended up to the loan period not\nexceeding five years.6. Multiple policies –In case insured has taken health policies from more thanone insurance company which provide fixed benefits, each insurer shall\nmake the claim payment, on occurrence of an insured event, independent\nof payments received from other similar policies in accordance with the\nterms and conditions of the policies.If two or more policies are taken by an insured during a period from one or\nmore insurers to indemnify treatment costs, the policyholder shall have the\nright to ask for a settlement of his/ her claim in terms of any of his/ her\npolicies. The insurer on whom the claim is made shall make the claim\npayment and balance claim or claims disallowed under the earlier chosen\npolicy/ policies may be made from the other policy/ policies even if the\nsum insured is not exhausted in the earlier chosen policy/ policies.223**B.** **IRDA Guidelines on Standardization in health insurance**With so many insurers providing numerous varied products and with different\ndefinitions of various terms and exclusions, confusion arose in the market. It\nbecame difficult for the customer to compare products and take a considered\ndecision. Moreover, in critical illness policies, there is no clear understanding as\nto what is meant by critical illness and what is not.To remove the confusion among insurers, service providers, TPAs and hospitals\nand the grievances of the insuring public, the regulator tried to provide some kind\nof standardization in health insurance. Based on a common understanding, IRDA\nissued Guidelines on standardization in health insurance in 2016 which was\nfurther amended in 2020. These are applicable to all General and Health Insurers\noffering indemnity based Health insurance (excluding PA and Domestic/ Overseas\nTravel) products (both Individual and Group)The guidelines now provide for standardization of:1. definitions of commonly used insurance terms\n2. definitions of critical illnesses\n3. list of optional items of expenses in hospitalization indemnity policies\n4. claim forms and pre-authorization forms\n5. billing formats\n6. discharge summary of hospitals\n7. standard contracts between TPAs, insurers and hospitals\n8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get\nrecovery of medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s10", "section": "Regulations for Health Insurance", "chunk_id": "Final IC 38 - WA_Composite  - English_111", "metadata": {"file_size": 20885, "chunk_index": 111, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Hospitalization indemnity", "Regulations for Health Insurance", "Example"]}}
{"chunk": "8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get\nrecovery of medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical\nbill raised was Rs. 1.25 lakhs. The insurance company paid Rs 1 lakh according to224the plan coverage and Raghu had to pay the remaining amount of Rs. 25,000 from\nhis own pocketThe main features of the indemnity based Mediclaim policy are detailed below,\n**though variations in limits of cover, additional exclusions or benefits or some**\n**add-ons may apply to products marketed by each insurer** .**1.** **Inpatient hospitalization expenses**The policy pays the insured the cost of hospitalization expenses incurred on\naccount of illness/ accident. The policy has a minimum prescribed period of\nhospitalization (generally 24 hours) after which the policy provisions come\ninto force. However once this period is reached then the expenses for the\nentire period become payable.Most of the expenses related with the treatment are paid, yet certain expenses\nthat includes items of personal comfort, cosmetic surgeries are not. It is therefore\nimportant for the customer to be made aware of the excluded items of expenses\nthat are not covered under the policy.i. Room, boarding and nursing expenses as provided by the hospital/ nursinghome. This includes nursing care, RMO charges, IV fluids/ blood\ntransfusion/ injection administration charges and similar expensesii. Intensive Care Unit (ICU) expensesiii. Surgeon, anaesthetist, medical practitioner, consultants, specialists feesiv. Anaesthetic, blood, oxygen, operation theatre charges, surgicalappliances,v. Medicines and drugs,vi. Dialysis, chemotherapy, radiotherapyvii. Cost of prosthetic devices implanted during surgical procedure likepacemaker, orthopaedic implants, infra cardiac valve replacements,\nvascular stentsviii.Relevant laboratory/ diagnostic tests and other medical expenses relatedto the treatmentix. Hospitalization expenses (excluding cost of organ) incurred on donor inrespect of organ transplant to the insured.**2.** **Day Care Procedures**There are many surgeries that do not require can be conducted at specialized\nhospitals. Treatments such as eye surgeries, chemotherapy; dialysis etc. can be\nclassified under day-care surgeries and the list is ever growing. These are also\ncovered under the policy.**3.** **OPD cover**Coverage of outpatient expenses is still very limited in India, with few such\nproducts offering OPD covers. However there are some plans that provide cover225treatment as outpatient and also related health care expenses associated with\ndoctor visits, regular medical tests, dental and pharmacy costs.**4.** **Pre and post hospitalization expenses****i.** **Pre hospitalization expenses**Hospitalization could be either emergency hospitalization or planned. If a\npatient goes in for a planned surgery, there would be expenses incurred by\nhim prior to the hospitalization. Such expenses are known as Pre\nhospitalisation expenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized\nanda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissibleby the Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s10", "section": "C.", "chunk_id": "Final IC 38 - WA_Composite  - English_112", "metadata": {"file_size": 20885, "chunk_index": 112, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Day Care Procedures", "Hospitalization indemnity", "Example", "Inpatient hospitalization expenses", "Post hospitalization expenses"]}}
{"chunk": "patient goes in for a planned surgery, there would be expenses incurred by\nhim prior to the hospitalization. Such expenses are known as Pre\nhospitalisation expenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized\nanda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissibleby the Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if\na) They are incurred for the same condition for which the Insured Person’sHospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissibleby the Insurance Company.\nPost hospitalization expenses would be relevant medical expenses incurred\nduring period up to the defined number of days after hospitalization and will\nbe considered as part of claim.\nPost hospitalization expenses could be in the form of medicines, drugs, review\nby doctors etc. after discharge from hospital. Such expenses have to be\nrelated to the treatment taken in hospital and are covered under the health\npolicies.Though the duration of cover for pre and post hospitalization expenses would\nvary from insurer to insurer and is defined in the policy, the most common\ncover is for **thirty days pre and sixty days post hospitalization** .226Pre and post-hospitalization expenses form part of the overall sum insured for\nwhich cover is granted under the policy.**iii.** **Domiciliary Hospitalization**\n**iv.** There is also a benefit available for patients whose illness otherwise needshospitalisation but avail treatment at home either for accommodation in\nhospitals or in a position that they cannot be moved to a hospital.To prevent misuse of the provision, this cover usually carries an **excess clause**\n**of three to five days** meaning that treatment costs for the first three to five\ndays have to be borne by the insured. The cover excludes domiciliary\ntreatments for certain chronic or common ailments such as Asthma,\nBronchitis, Diabetes Mellitus, Hypertension, Influenza Cough, Cold, and fevers\netc.**Example**Mira had taken a health insurance policy for coverage of expenses in the event of\nhospitalisation. The policy had a clause for initial waiting period of 30 days.\nUnfortunately, 20 days after she took the policy, Mira contracted malaria and was\nhospitalised for 5 days. She had to pay heavy hospital bills.When she asked for reimbursement from the insurance company, they denied\npayment of the claim because the event of hospitalization occurred within the\nwaiting period of 30 days from taking the policy.**a)** **COVERAGE OPTIONS AVAILABLE****i.** **Individual coverage:** An individual insured can cover himself along with familymembers such as spouse, dependent children, dependent parents, dependent\nparents in law, dependent siblings etc. Some insurers do not have a restriction\non the dependents who can be covered. It is possible to cover each of such\ndependent insured’s under a single policy with a separate sum insured chosen\nfor each insured person. In such covers, each person insured under the policy\ncan claim up to the maximum amount of his sum insured during the currency\nof the policy. Premium will be charged for each individual insured according\nto his age and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered\na single sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during\nthe policy period, it will pay for claims related to more than one family member\nor multiple claims of a single member of the family. All these together cannot\nexceed the total coverage of Rs. 5 lacs. Premium will normally be charged based\non the age of the oldest member of the family proposed for insurance227The covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets\ncoverage for an overall sum insured which can be chosen at a higher level at a\nreasonable premium.**Pre-Existing diseases**\nInsurance is designed to cover accidents/ diseases etc. that happen", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e227", "section": "Definition", "chunk_id": "Final IC 38 - WA_Composite  - English_113", "metadata": {"file_size": 20885, "chunk_index": 113, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["COVERAGE OPTIONS AVAILABLE", "Example", "Individual coverage:", "Pre-Existing diseases", "Post hospitalization expenses"]}}
{"chunk": "can claim up to the maximum amount of his sum insured during the currency\nof the policy. Premium will be charged for each individual insured according\nto his age and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered\na single sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during\nthe policy period, it will pay for claims related to more than one family member\nor multiple claims of a single member of the family. All these together cannot\nexceed the total coverage of Rs. 5 lacs. Premium will normally be charged based\non the age of the oldest member of the family proposed for insurance227The covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets\ncoverage for an overall sum insured which can be chosen at a higher level at a\nreasonable premium.**Pre-Existing diseases**\nInsurance is designed to cover accidents/ diseases etc. that happen\nunexpectedly. Covering the costs of treating existing medical conditions is not\npart of insurance, as it is unfair to healthy people who would have to pay for the\nexisting illnesses of some others. It goes against the principle of creating risk\npools covering similarly placed risks. So, it is very important to collect details of\nthe existing ailments/ injuries of each insured person before issuing a health\npolicy. This will enable the insurer to decide on accepting the proposal for\ninsurance, charging proper premiums and/ or providing additional conditions for\nthose who are more likely to make claims.**What is a pre-existing disease?**\nDiseases suffered by an insured person within 48 months prior to commencement\nof the policy are regarded as pre-existing diseases. Based on the same logic,\ninsurers are not allowed to exclude pre-existing diseases after a person is covered\nfor insurance continuously for 48 months.**Renewability:** Although Healthcare policies have a contract life of one year, and\na fresh policy is to be issued every year, Lifelong renewability has been made\ncompulsory by IRDAI for all policies.**SPECIAL FEATURES**In order to provide new features in the product as also to maintain the pricing,\ninsurance companies have come out innovative modifications in the products. For\nexample, the Mediclaim Policy, which was the most popular policy before 2000,\nhas undergone many changes and new special features have been added to the\ncoverage. Some features have been added to the basic indemnity cover. These\nfeatures may vary from insurer to insurer and product to product and may not be\navailable uniformly for all products.**i.** **Sub limits and Disease specific capping**Some of the products have disease specific capping e.g. cataract. A few also have\nsub limits on room rent linked to sum insured e.g. per day room rent restricted\nto 1% of sum insured and ICU charges to 2% of sum insured. As expenses under\nother heads such as ICU charges, OT charges and even surgeon’s fees are linked\nto the type of room opted for, room rent capping helps in restricting expenses\nunder other heads also and hence the overall hospitalization expenses.228**ii.** **Co-payment (popularly called Co-pay)**Co-payment is defined by IRDAI as a cost sharing requirement under a health\ninsurance policy that provides that the policyholder/ insured will bear a specified\npercentage of the admissible claims amount. A co-payment does not reduce the\nSum Insured.\nCo-payment is the concept of the insured bearing a portion of each and every\nclaim under a health policy. These could be compulsory or voluntary depending\non the product. Co-payment brings in a certain discipline among the insured to\navoid unnecessary hospitalizations. This ensures that the insured exercises\ncaution in selecting his healthcare options and avoids luxurious ones.\nWhen an insured event occurs, many health policies require the insured to share\na part of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay\namount is 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a\nspecified number of days/ hours in case of hospital cash policies which will apply\nbefore any benefits are payable by the insurer. In Health policies, it is the fixed", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e227", "section": "Family floater:", "chunk_id": "Final IC 38 - WA_Composite  - English_114", "metadata": {"file_size": 20885, "chunk_index": 114, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["What is a pre-existing disease?", "Co-payment (popularly called Co-pay)", "Example", "Sub limits and Disease specific capping", "Deductible/ Excess"]}}
{"chunk": "percentage of the admissible claims amount. A co-payment does not reduce the\nSum Insured.\nCo-payment is the concept of the insured bearing a portion of each and every\nclaim under a health policy. These could be compulsory or voluntary depending\non the product. Co-payment brings in a certain discipline among the insured to\navoid unnecessary hospitalizations. This ensures that the insured exercises\ncaution in selecting his healthcare options and avoids luxurious ones.\nWhen an insured event occurs, many health policies require the insured to share\na part of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay\namount is 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a\nspecified number of days/ hours in case of hospital cash policies which will apply\nbefore any benefits are payable by the insurer. In Health policies, it is the fixed\namount of money the insured is required to pay initially before the claim is paid\nby insurer, for e.g. if the deductible in a policy is Rs. 10,000, the insured pays\nfirst Rs. 10,000 in each insured loss claimed for. To illustrate, if the claim is for\nRs. 80,000, the insured bears the first Rs. 10,000 and the insurer pays Rs. 70,000.\nA deductible does not reduce the Sum Insured.Deductible may also be a specified number of days/ hours in case of hospital cash\npolicies which will apply before any benefits are payable by the insurer.An agent must examine and inform the insured whether the deductible is\napplicable per year, per life or per event and the specific deductible to be\napplied.**iv.** **Waiting Period**A waiting period of 30 days from inception of policy is normally applicable in most\npolicies for making any claim. This however will not be applied for hospitalization\ndue to an accident.**v.** **Waiting periods for specific diseases**This is applicable for diseases for which treatment can be delayed and planned.\nDepending on the product waiting periods of one/ two/ four years are imposed\nby the insurance companies and claims are paid for these ailments only after\nexpiry of this period. Some of the diseases are Cataract, Benign Prostatic\nHypertrophy, Hysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele,\nCongenital internal disease, Fistula in anus, piles, Sinusitis and related disorders\netc.229**vi.** **Coverage for Day care procedure**Advancement of medical science has seen inclusion of large number of procedures\nunder day care category as already discussed earlier**vii.** **Cost of pre policy check up**Cost of medical examination was earlier borne by prospective clients. Now insurer\nreimburses the cost, provided the proposal is accepted for underwriting, the\nreimbursement varying from 50% to 100%.Now this has also been mandated by\nIRDAI that insurer would bear at least 50% of health check-up expenses.**viii.** **Add on covers**Various new additional covers called Add-on covers have been introduced by some\nof the insurers. Some of them are: **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end versionproducts for certain ailments which are life threatening and entail expensive\ntreatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured(which gets reduced on payment of a claim) can be restored to the original\nlimit by paying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage\nof the hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in\npatient hospitalization expenses. Few companies now offer limited cover for", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Deductible/ Excess", "chunk_id": "Final IC 38 - WA_Composite  - English_115", "metadata": {"file_size": 20885, "chunk_index": 115, "chunk_tokens": 971, "has_examples": false, "has_tables": false, "key_concepts": ["Maternity cover:", "Coverage for Day care procedure", "Deductible/ Excess", "Cost of pre policy check up", "Add on covers"]}}
{"chunk": "of the insurers. Some of them are: **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end versionproducts for certain ailments which are life threatening and entail expensive\ntreatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured(which gets reduced on payment of a claim) can be restored to the original\nlimit by paying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage\nof the hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in\npatient hospitalization expenses. Few companies now offer limited cover for\nout-patient expenses under some of the high-end plans. **Hospital cash:** This provides for fixed lump sum payment for each day ofhospitalization for a specified period. Normally the period is granted for 7 days\nexcluding the policies deductible of 2/ 3 days. Thus, the benefit would trigger\nonly if hospitalization period is beyond the deductible period. This is in\naddition to the hospitalization claim but within the overall sum insured of the\npolicy or may be with a separate sub-limit. **Recovery benefit:** Lump sum benefit is paid if the total period of stay inhospital due to sickness and/ or accident is not less than 10 days.230 **Donor’s expenses:** The policy provides for reimbursement of expenses towardsdonor in case of major organ transplant as per the terms and condition defined\nin the policy. **Reimbursement of ambulance:** Expenses incurred towards ambulance byInsured/ insured person are reimbursed up to a certain limit specified in the\nschedule of the policy. **Expenses for accompanying person:** This is intended to cover the expensesincurred by accompanying person towards food, transportation whilst\nattending to insured patient during the period of hospitalization. Lump sum\npayment or reimbursement payment as per the policy terms is paid, up to the\nlimit specified in the schedule of the policy. **Family definition:** Definition of family has undergone changes in few healthproducts. Earlier, primary insured, spouse, dependent children were granted\ncover. Now there are policies where parents and in-laws can also be granted\ncover under the same policy.**x.** **Failure to seek or follow medical advice or failure to follow treatment**Initially the health insurance cover was denied to persons suffering from preexisting diseases. Such cases are now being offered cover by excluding such\ndiseases.**Standard Health Product** **– Arogya Sanjeevani** : In the background of the Covid19 pandemic, IRDAI asked all Insurance Companies to come out with a standard\nhealth product called Arogya Sanjeevani with no variations in terms and\nconditions to make it easy to understand. The premium may however vary\naccording to the pricing policy of each company. This is to ensure better\npenetration of Health Insurance in market. All Insurers are required to offer this\nproduct called Arogya Sanjeevani. [The context for this move was that there were\ndifferent Health Insurances available in the market and customers were not able\nto compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder canbecome the beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.231**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by\ninsurers, provide cover for high sums insured over and above a specified amount\n(called threshold).This policy works along with a basic health cover having a low\nsum insured and comes at a comparatively reasonable premium. For example,\nIndividuals covered by their employers can also opt for a top-up cover for\nadditional protection (keeping the sum insured of the first policy as the\nthreshold).To be eligible to receive a claim under the top-up policy, the medical costs must", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d19", "section": "Maternity cover:", "chunk_id": "Final IC 38 - WA_Composite  - English_116", "metadata": {"file_size": 20885, "chunk_index": 116, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Hospital cash:", "Standard Health Product", "Recovery benefit:", "Reinstatement of sum insured:"]}}
{"chunk": "to compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder canbecome the beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.231**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by\ninsurers, provide cover for high sums insured over and above a specified amount\n(called threshold).This policy works along with a basic health cover having a low\nsum insured and comes at a comparatively reasonable premium. For example,\nIndividuals covered by their employers can also opt for a top-up cover for\nadditional protection (keeping the sum insured of the first policy as the\nthreshold).To be eligible to receive a claim under the top-up policy, the medical costs must\nbe greater than the deductible (or threshold) level chosen under the plan and the\nreimbursement under the high deductible plan would be the amount of expense\nincurred i.e. greater than the deductible.**Example**An individual is covered for a sum insured of Rs. 3 lacs by his employer. He could\nopt for a top-up policy of Rs. 10 lacs in excess of Rs. Three lacs. If the cost of a\nsingle hospitalization is Rs. 5 lacs, the basic policy would cover up to Rs. Three\nlacs only. With the top-up cover, the balance sum of Rs. Two lacs would be paid\nout by the top-up policy.Top-up policies come cheap and the cost of a single Rs. 10 lacs policy would be\nfar higher than the top-up policy of Rs. 10 lacs in excess of Rs. Three lacs.These covers are available on individual basis and family basis the top-up plan\nrequires the deductible amount to be crossed at every single event of\nhospitalization. However some top-up plans that allow the deductible to be\ncrossed post a series of hospitalizations during the policy period are known as\nAggregate based high deductible plans or Super top-up cover as known in the\nIndian market. A super top-up plan covers the total of all hospitalisation bills (up\nto the super top-up plan limit) above the deductible amount, that is, the\ndeductible is applied to the total claims in one year. Hence, once the deductible\nis paid, the plan becomes active for subsequent claims.**E.** **Senior Citizen Policy**These plans are designed to offer cover to elderly people who often were denied\ncoverage after certain age (e.g. people over 60 years of age). The structure of\nthe coverage and exclusions are much like a hospitalization policy.Special attention is paid to diseases of the elderly in setting coverage and waiting\nperiod. Entry age is mostly after 60 years and renewable lifelong. Sum insured\nrange from Rs. 50,000 to Rs. 5,00,000. There is variation of waiting period\napplicable to certain ailments.232Example: Cataract may have 1 year waiting for one insurer and 2 year waiting\nperiod for some other insurer.Example: Sinusitis does not fall in waiting period clause of some insurers but few\nothers include it in their waiting period clause.Some policies have waiting periods or capping in respect of Pre-existing diseases.\nPre-post hospital expenses are either paid as a percentage of hospital claims or\na sub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90\ndays.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of\nthe amount spent by him for the named treatment. In this product, commonly\noccurring treatments are listed under segments such as ENT, Ophthalmology,\nObstetrics and Gynaecology, etc. and the maximum pay out for each of these is\nspelt out in the policy.These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a\ndaily cash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find\na place in the list named in the policy. Multiple claims for different treatments", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Individual Plan", "chunk_id": "Final IC 38 - WA_Composite  - English_117", "metadata": {"file_size": 20885, "chunk_index": 117, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Senior Citizen Policy", "Example", "Family Floater Plan", "Individual Plan"]}}
{"chunk": "Pre-post hospital expenses are either paid as a percentage of hospital claims or\na sub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90\ndays.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of\nthe amount spent by him for the named treatment. In this product, commonly\noccurring treatments are listed under segments such as ENT, Ophthalmology,\nObstetrics and Gynaecology, etc. and the maximum pay out for each of these is\nspelt out in the policy.These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a\ndaily cash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find\na place in the list named in the policy. Multiple claims for different treatments\nare possible during the policy period. However the claims are finally limited by\nthe sum insured chosen under the policy.Some of the fixed benefit insurance plans are: Hospital daily cash insurance plans\n Critical illness insurance plans**1.** **HOSPITAL DAILY CASH POLICY****a)** **Per day amount limit**\nHospital cash coverage provides a fixed sum to the insured person for each\nday of hospitalization. Per day cash coverage could vary from (for example)\nRs. 1,500 per day to Rs. 5,000 or even more per day. An upper limit is provided\non the daily cash pay-out per illness as well as for the duration of the policy,\nwhich is usually an annual policy.233**b)** **Number of payment days**\nIn some of the variants of this policy, the number of days of daily cash allowed\nis linked to the disease for which treatment is being taken. A detailed list of\ntreatments and duration of stay for each is stipulated which limits the daily\ncash benefit allowed for each type of procedure/ illness.**c)** **Standalone cover or add-on cover**\nThe hospital daily cash policy is available as a standalone policy as offered by\nsome insurers while, in other cases, it is an add-on cover to a regular\nindemnity policy. These policies help the insured to cover incidental expenses\nas the pay-out is a fixed sum and not related to the actual cost of treatment.\nThis also allows the pay out under the policy to be provided in addition to any\ncover received under an indemnity based health insurance plan.**d)** **Supplementary cover**\nThese policies could supplement a regular hospital expenses policy as it is cost\neffective and provides compensation for incidental expenses and also\nexpenses not payable under the indemnity policy such as exclusions, co-pay\netc.**e)** **Other advantages of the cover**From the insurer’s point of view, this plan has several advantages as it is easy\nto explain to a customer and hence can be sold more easily. It beats medical\ninflation as a fixed sum per day is paid for the duration of hospitalization\nwhatever may be the actual expense. Also, acceptance of such insurance\ncovers and claims settlements are really simplified.**2.** **CRITICAL ILLNESS POLICY**With advancement in medical science, people are surviving some of the major\ndiseases like cancer, strokes and heart attack etc., which in earlier times would\nhave resulted in death. However surviving a major illness entails huge expense\nfor treatment as well as for living expenses post treatment. Onset of critical\nillness threatens the financial security of a person. A basic health insurance policy\nmay not be sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of largeexpenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated\nCI benefit plan and standalone CI benefit plan. To avoid confusion, the definitions\nof 22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.234The critical illnesses covered vary across insurers and products. Generally 100%\nof the sum insured is paid on diagnosis of a critical illness. In some cases\ncompensation could vary from 25% to 100% of sum insured depending on the policy\nterms and conditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "F.", "chunk_id": "Final IC 38 - WA_Composite  - English_118", "metadata": {"file_size": 20885, "chunk_index": 118, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Per day amount limit", "CRITICAL ILLNESS POLICY", "HOSPITAL DAILY CASH POLICY", "Standalone cover or add-on cover", "Supplementary cover"]}}
{"chunk": "have resulted in death. However surviving a major illness entails huge expense\nfor treatment as well as for living expenses post treatment. Onset of critical\nillness threatens the financial security of a person. A basic health insurance policy\nmay not be sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of largeexpenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated\nCI benefit plan and standalone CI benefit plan. To avoid confusion, the definitions\nof 22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.234The critical illnesses covered vary across insurers and products. Generally 100%\nof the sum insured is paid on diagnosis of a critical illness. In some cases\ncompensation could vary from 25% to 100% of sum insured depending on the policy\nterms and conditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to\nbecome payable under the policy and the survival clause of 30 days after diagnosis\nof the illness. Rigorous medical examinations are to be undergone for persons\nespecially over 45 years of age.The policy terminates, once compensation is paid under the policy in respect of\nany of the insured person. This policy is also offered to groups especially\ncorporates who take policies for their employees.**Disease Specific Products** - **Corona Kavach**In June 2020, when the country was facing many cases of Corona Virus infection\n(Covid-19), the market saw the introduction of many benefit based products\nproviding lump sum payment on the diagnosis of Covid-19 positive. Later some\ncompanies introduced indemnity based products too. However, there were many\nconsumables like PPE kits, Oximeter etc. and quarantine expenses that were not\ntaken care of in these products.IRDAI came up with two standard Health Insurance Policies called _Corona Kavach_\nand _Corona Rakshak (discussed separately under Life insurance section)_ . While it\nis mandatory for general and health insurers to provide _Corona Kavach_ as an\nindemnity-based standard COVID-19 product, _Corona Rakshak,_ offering the\nbenefit-based product, is optional for all insurers. Both products have a waiting\nperiod of 15 days._Corona Rakshak_ is a standard benefit based health insurance designed for\nproviding lump sum benefit to insured individuals affected by COVID-19 and\nrequire hospitalisation for a minimum continuous period of 72 hours. The plan\noffers coverage on individual basis for people between the age of 18 years and 65\nyears, with different policy terms of 3.5months, 6.5 months and 9.5 months as a\none-time benefit policy and terminates upon the payment of benefit. _Corona_\n_Rakshak_ offers sum insured options ranging from Rs. 50,000 to Rs. 2.5 lakh, in\nmultiples of 50,000.The policy provides (i) complete sum insured benefit, (ii)\neconomical premium, (iii) lump-sum amount of claim, (iv) a short waiting period\nof 15 days and (v) tax benefits.**Corona Kavach** offers the following coverage vide Guidelines issued by IRDAI in\nJune 2020:1. Hospitalization Expenses incurred for the treatment of Covid-19 on Positivediagnosis of Covid-19 in a government authorized diagnostic centre covering235the following: (Expenses on Hospitalization for a minimum period of 24 hours\nare admissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgicalappliances, ventilator charges, medicines and drugs, costs towards\ndiagnostics, diagnostic imaging modalities, PPE Kit, gloves, mask and such\nother similar expenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up tomaximum 14 days per incident subject to the conditions (not exhaustive)\nmentioned below:\na. The Medical practitioner advices the Insured person to undergo treatmentat home.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d-19", "section": "Disease Specific Products", "chunk_id": "Final IC 38 - WA_Composite  - English_119", "metadata": {"file_size": 20885, "chunk_index": 119, "chunk_tokens": 976, "has_examples": false, "has_tables": false, "key_concepts": ["Corona Kavach", "Disease Specific Products"]}}
{"chunk": "June 2020:1. Hospitalization Expenses incurred for the treatment of Covid-19 on Positivediagnosis of Covid-19 in a government authorized diagnostic centre covering235the following: (Expenses on Hospitalization for a minimum period of 24 hours\nare admissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgicalappliances, ventilator charges, medicines and drugs, costs towards\ndiagnostics, diagnostic imaging modalities, PPE Kit, gloves, mask and such\nother similar expenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up tomaximum 14 days per incident subject to the conditions (not exhaustive)\nmentioned below:\na. The Medical practitioner advices the Insured person to undergo treatmentat home.\nb. There is a continuous monitoring of the health status by a medicalpractitioner for each day, including records of treatment administered.3. Other Expenses covered if prescribed by the treating medical practitioner andrelated to treatment of COVID,\na. Diagnostic tests undergone at home or at diagnostics centre\nb. Medicines prescribed in writing\nc. Consultation charges of the medical practitioner\nd. Nursing charges related to medical staff\ne. Medical procedures limited to parenteral administration of medicines\nf. Cost of Pulse oximeter, Oxygen cylinder and NebulizerAdditional Cover - Hospital Daily Cash: The Insurer will pay 0.5% of sum insured\nper day for each 24 hours of continuous hospitalization for treatment of Covid\nfollowing an admissible hospitalization claim under this policy.**Standard Vector Borne Disease Health Policy:**IRDAI vide its Guidelines dated 3 February 2021 decided that Standard Products\nfor vector borne diseases shall offer the following coverage:\n1. **Hospitalization Benefit:** Lump sum benefit equal to 100% of the Sum Insuredshall be payable on positive diagnosis of any of the following vector borne\ndisease (s) requiring hospitalization for a minimum continuous period of 72\nhours.\na) Dengue fever\nb) Malaria\nc) Filaria (Lymphatic Filariasis)\nd) Kala-azar236e) Chikungunya\nf) Japanese Encephalitis\ng) Zika Virus2. **Diagnosis Cover:** 2% of the sum insured shall be payable on positive diagnosis(through laboratory examination and confirmed by the medical practitioner)\nof every covered vector borne disease on the first diagnosis during the Cover\nPeriod, subject to policy terms and conditions. The Policyholder is entitled\nfor payments under “diagnosis cover” payment for each disease only once in\nthe policy year.**G.** **Combo-products****Health plus Life Combo Products** offer the combination of a life insurance cover\nof a Life Insurance Company and a health insurance cover offered by Non-Life\nand/ or Standalone Health Insurance Company.The product may be offered both as individual insurance policy and on group\ninsurance basis. However in respect of health insurance floater policies, the pure\nterm life insurance coverage is allowed on the life of one of the earning members\nof the family who is also the proposer on health insurance policy subject to\ninsurable interest and other applicable underwriting norms of respective insurers.**Package policies**Package or umbrella covers give, under a single document, a combination ofcovers.Examples of package policy in health insurance include combining Critical illness\ncover benefits with indemnity policies and even life insurance policies and\nhospital daily cash benefits with indemnity policies.**Travel Insurance:**Travel insurance policy is also offered as a package policy covering not only health\ninsurance but also accidental death/ disability benefits along with Medical\nexpenses due to illness/ accident and the coverages like Loss of or delay in arrival\nof checked in baggage, Loss of passport and documents, Third party liability for\nproperty/ personal damages, Cancellation of trips and even Hijack cover\ntraditionally provided under travel policies. (Details of Travel Insurance are\nprovided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of\nlow income people from rural and informal sectors. It is a low value product, with\nan affordable premium and benefit package. Micro insurance is governed by the\nIRDA Micro Insurance Regulations, 2005.237Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d-19", "section": "Standard Vector Borne Disease Health Policy:", "chunk_id": "Final IC 38 - WA_Composite  - English_120", "metadata": {"file_size": 20885, "chunk_index": 120, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Hospitalization Benefit:", "Diagnosis Cover:", "Travel Insurance:", "Health plus Life Combo Products", "Combo-products"]}}
{"chunk": "cover benefits with indemnity policies and even life insurance policies and\nhospital daily cash benefits with indemnity policies.**Travel Insurance:**Travel insurance policy is also offered as a package policy covering not only health\ninsurance but also accidental death/ disability benefits along with Medical\nexpenses due to illness/ accident and the coverages like Loss of or delay in arrival\nof checked in baggage, Loss of passport and documents, Third party liability for\nproperty/ personal damages, Cancellation of trips and even Hijack cover\ntraditionally provided under travel policies. (Details of Travel Insurance are\nprovided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of\nlow income people from rural and informal sectors. It is a low value product, with\nan affordable premium and benefit package. Micro insurance is governed by the\nIRDA Micro Insurance Regulations, 2005.237Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of\nsociety are Jan Arogya Bima Policy and Universal Health Scheme. The private\nsector insurance companies have also come out with many innovative micro\ninsurance health products to cater to this target segment like Bima Kavach\nYojana, Grameena Jeevan Raksha Plan, Bhaghya Laxmi - the entire list can be\nfound on IRDAI website.**I.** **Rashtriya Swasthya Bima Yojana**The government has also launched various health schemes, some of them\napplicable to particular states. It had implemented the Rashtriya Swasthya Bima\nYojana (RSBY) in association with insurance companies to provide health\ninsurance coverage for the below poverty line (BPL) families. However RSBY\nprovided a Sum Insured of only Rs 30,000 which was not considered enough to\ncover major surgeries/ hospitalisation expenses.**J.** **Pradhan Mantri Jan Arogya Yojana**To address the shortcomings of RSBY, as recommended by the National Health\nPolicy 2017, the Government of India launched ‘Ayushman Bharat Scheme’ in\n2017, a flagship scheme of to achieve the vision of Universal Health Coverage\n(UHC). Also known as Pradhan Mantri Jan Arogya Yojana (PMJAY) Ayushman\nBharat came with a Sum Insured of Rs. 5,00,000.It subsumed the then existing Rashtriya Swasthya Bima Yojana (RSBY). PM-JAY is\nfully funded by the Government and cost of implementation is shared between\nthe Central and State Governments.**K.** **Pradhan Mantri Suraksha Bima Yojana**Features of the recently announced PMSBY covering personal accident death and\ndisability cover are as follows:\n**Scope of coverage:** All savings bank account holders in the age 18 to 70 years in\nparticipating banks are entitled to join through one savings bank account only\nand if he enrols in more than one bank, he gets no extra benefit and the extra\npremium paid will stand forfeited. Aadhaar would be the primary KYC for the\nbank account.**Enrolment Modality/ Period** : The cover shall be for the one year period from 1 [st]\nJune to 31 [st] May for which option to join/ pay by auto-debit from the designated\nsavings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:238|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Travel Insurance:", "chunk_id": "Final IC 38 - WA_Composite  - English_121", "metadata": {"file_size": 20885, "chunk_index": 121, "chunk_tokens": 985, "has_examples": true, "has_tables": true, "key_concepts": ["Scope of coverage:", "Rashtriya Swasthya Bima Yojana", "Pradhan Mantri Jan Arogya Yojana", "Travel Insurance:", "Enrolment Modality/ Period"]}}
{"chunk": "savings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:238|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from\nthe account holder’s savings bank account through ‘auto debit’ facility**Termination of cover** : The accident cover for the member shall terminate:1. On member attaining the age of 70 years (age nearest birth day) or2. Closure of account with the Bank or insufficiency of balance to keep theinsurance in force orIf the insurance cover is ceased due to any technical reasons such as insufficient\nbalance on due date or due to any administrative issues, the same can be\nreinstated on receipt of full annual premium, subject to conditions that may be\nlaid down.**L.** **Personal Accident and Disability cover**A **Personal Accident (PA) Cover** provides compensation due to death and\ndisability in the event of unforeseen accident.In a PA policy,a) The death benefit is payment of 100% of the sum insured,b) In the event of disability, compensation varies from a fixed percentage of\nthe sum insured in the case of permanent disabilityc) Weekly compensation for temporary disablement.Weekly compensation means payment of a fixed sum per week of disablement\nsubject to a maximum limit in terms of number of weeks for which the\ncompensation would be payable.**1.** **Types of disability covered**Types of disability which are normally covered under the policy are:**i.** **Permanent total disability (PTD):** means becoming totally disabled forlifetime viz. paralysis of all four limbs, comatose condition, loss of both\neyes/ both hands/ both limbs or one hand and one eye or one eye and one\nleg or one hand and one leg,**ii.** **Permanent partial disability (PPD):** means becoming partially disabledfor lifetime viz. loss of fingers, toes, phalanges etc.**iii.** **Temporary total disability (TTD):** means becoming totally disabled for atemporary period of time. This section of cover is intended to cover the\nloss of income during the disability period.239The client has choice to select only death cover or death plus permanent\ndisablement of Or Death plus permanent disablement and also temporary total\ndisablement.**2.** **Sum insured**Sums insured for PA policies are usually decided on the basis of gross monthly\nincome. Typically, it is 60 times of the gross monthly income. However, some\ninsurers also offer on fixed plan basis without considering the income level. In\nsuch policies sum insured for each section of cover varies as per the plan opted.**3.** **Personal Accident Insurance – a Benefit plan**Being a benefit plan, PA policies are not subject to the principle of ‘contribution’\nat the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on\nthe basis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out\nof disability existing prior to the inception of policy, death or disability due to\nmental disorders or any sickness, injury due to war, invasion, culpable homicide\nor murder, intentional self-injury, suicide, intake of drugs/ alcohol, injury while\nengaging in defined extra hazardous activity like aviation or ballooning . This is", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "r2", "section": "Premium", "chunk_id": "Final IC 38 - WA_Composite  - English_122", "metadata": {"file_size": 20885, "chunk_index": 122, "chunk_tokens": 995, "has_examples": true, "has_tables": true, "key_concepts": ["Personal Accident and Disability cover", "Scope of cover", "Exclusions:", "Sum insured", "Permanent partial disability (PPD):"]}}
{"chunk": "at the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on\nthe basis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out\nof disability existing prior to the inception of policy, death or disability due to\nmental disorders or any sickness, injury due to war, invasion, culpable homicide\nor murder, intentional self-injury, suicide, intake of drugs/ alcohol, injury while\nengaging in defined extra hazardous activity like aviation or ballooning . This is\nan indicative list and can vary from company to company.PA policies are offered to individuals, family and also to groups.**Group Personal Accident Policies**Group Personal Accident Policies are usually annual policies with renewals being\nallowed on the anniversary. However, non-life and standalone health insurers\nmay offer group personal accident products with term less than one year also to\nprovide coverage to specific events.**Broken bone policy and compensation for loss of daily activities**This is a specialised PA policy. This policy is designed to provide cover against\nlisted fractures. Fixed benefit or percentage of sum insured mentioned against\neach fracture is paid at the time of claim. Quantum of benefit depends on the\ntype of bone covered and nature of fracture sustained.**M.** **Overseas Travel insurance****Need for the policy:** To cover expenses of accidental injury or hospitalisation\nwhilst travelling outside India for business, holidays or studies., The cost of240medical care, especially in countries such as USA and Canada, is very high and\ncould cause major financial problems.**Scope of coverage**Such policies are primarily meant for accident and sickness benefits, but most\nproducts available in the market package a range of covers within one product.The usual covers offered are:**a) Medical and sickness section:**i. Accidental death/ disability\nii. Medical expenses due to illness/ accident\n**b) Repatriation and evacuation**\n**c) Personal accident cover**\n**d) Personal liability**\n**e) Other non-medical covers:**i. Trip Cancellation\nii. Trip Delay\niii. Trip interruption\niv. Missed Connection\nv. Delay of Checked Baggage\nvi. Loss of Checked Baggage\nvii. Loss of Passport\nviii. Emergency Cash Advance\nix. Hijack Allowance\nx. Bail Bond insurance\nxi. Hijack cover\nxii. Sponsor Protection\nxiii. Compassionate Visit\nxiv. Study Interruption\nxv. Home burglary**1.** **Types of plans**The popular policies are the Business and Holiday Plans, the Study Plans and the\nEmployment Plans.**2.** **Who can take the policy**An Indian citizen travelling abroad on business, holiday or for studies can avail\nthis policy. Employees of Indian employers sent on contracts abroad can also be\ncovered.**3.** **Sum insured and premiums**The cover is granted in US Dollars and generally varies from USD 100,000 to USD\n500,000 for the section covering medical expenses, evacuation and repatriation.\nFor other sections the Sum Insured is lower, except for the liability cover.\nPremiums can be paid in Indian rupees except in the case of the employment plan\nwhere premium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada World-wide including USA/ Canada241Some products provide cover for a group of countries. Examples are travel to\nAsian countries only, European countries only or travel to a particular country\nonly.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies\nfor its executives who frequently make trips outside India. This cover can also be\ntaken by individuals who fly overseas many times during a year. An advance\npremium is paid based on the estimated man days of travel in a year by a\ncompany’s employees. The above policies are granted only for business and\nholiday travels. Pre-existing diseases are usually excluded for Overseas Medical/\nTravel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f240", "section": "Scope of cover", "chunk_id": "Final IC 38 - WA_Composite  - English_123", "metadata": {"file_size": 20885, "chunk_index": 123, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Scope of cover", "Exclusions:", "Overseas Travel insurance", "Need for the policy:", "Group Health cover"]}}
{"chunk": "where premium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada World-wide including USA/ Canada241Some products provide cover for a group of countries. Examples are travel to\nAsian countries only, European countries only or travel to a particular country\nonly.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies\nfor its executives who frequently make trips outside India. This cover can also be\ntaken by individuals who fly overseas many times during a year. An advance\npremium is paid based on the estimated man days of travel in a year by a\ncompany’s employees. The above policies are granted only for business and\nholiday travels. Pre-existing diseases are usually excluded for Overseas Medical/\nTravel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year\nrenewable contracts.**Features of group policies - Hospitalisation benefit covers.****1.** **Scope of coverage**The most common form of group health insurance is the policy taken by\nemployers covering employees and their families including dependent\nspouse, children and parents/ parents in law.**2.** **Tailor-made cover**Group policies are often tailor-made covers to suit the requirements of the\ngroup. Thus, in group policies, one will find several standard exclusions of\nthe individual policy being covered under the group policy.**3.** **Maternity cover**One of the most common extensions in a group policy is the maternity\ncover. Maternity cover would provide for the expenses incurred in\nhospitalization for delivery of child and includes C- section delivery. This\ncover is generally restricted to a certain amount within the overall sum\ninsured of the family.**4.** **Child cover**Coverage is given to babies from day one, sometimes restricted to the\nmaternity cover limit and sometimes extended to include the full sum\ninsured of the family.**5.** **Pre-existing diseases covered, waiting period waived off**Several of the usual exclusions, such as the pre-existing disease exclusion,\nthirty days waiting period, two years waiting period, congenital diseases\nmay be waived off, in tailor-made group policies.242**6.** **Premium calculation**The premium charged for a group policy is based on the age profile of the\ngroup members, the size of the group and most importantly the claims\nexperience of the group.**7.** **Non-employer employee groups**In India, regulatory provisions strictly prohibit formation of groups\nprimarily for the purpose of taking out a group insurance cover. When group\npolicies are given to other than employers, it is important to determine the\nrelation of the group owner to its members.**Example**A bank taking a policy for its saving bank account holders or credit card\nholders constitutes a homogenous group, whereby a large group is able to\nbenefit by a tailor-made policy designed to suit their requirements.**8.** **Pricing**In group policies, there is provision for discount on premium based on size\nof the group as also the claims experience of the group**2.** **CORPORATE BUFFER OR FLOATER COVER**In most group policies, each family is covered for a defined sum insured, varying\nfrom Rs. One lac to five lacs and sometimes more. There arise situations where\nthe sum insured of the family is exhausted, especially in the case of major illness\nof a family member. In such situations, if the buffer cover is opted for it brings\nrelief, whereby the excess expenses over and above the family sum insured are\nmet from this buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health checkup paid for by the insurer. There is incentive for better control of factors like\nblood glucose, blood pressure etc. in the form of reduced premiums from second\nyear of policy onwards. On the other hand, a higher premium would be chargeable\nfor poor control.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "a241", "section": "Corporate Frequent Flyer plans", "chunk_id": "Final IC 38 - WA_Composite  - English_124", "metadata": {"file_size": 20885, "chunk_index": 124, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Non-employer employee groups", "CORPORATE BUFFER OR FLOATER COVER", "Disease covers", "Child cover", "Tailor-made cover"]}}
{"chunk": "of a family member. In such situations, if the buffer cover is opted for it brings\nrelief, whereby the excess expenses over and above the family sum insured are\nmet from this buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health checkup paid for by the insurer. There is incentive for better control of factors like\nblood glucose, blood pressure etc. in the form of reduced premiums from second\nyear of policy onwards. On the other hand, a higher premium would be chargeable\nfor poor control.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up\nto 70 years. Sum Insured ranges from Rs. 50,000 to Rs. 5,00,000. Capping on Room\nrent is applicable. Product is aimed to cover hospitalization complications of\ndiabetes like diabetic retinopathy (eye), kidney, diabetic foot, kidney transplant\nincluding donor expenses.243**Test Yourself 1**Though the duration of cover for pre-hospitalization expenses would vary from\ninsurer to insurer and is defined in the policy, the most common cover is for\n________ pre-hospitalization.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty daysKey terms in health policies **(All the terms are as defined in IRDAI Master**\n**Circular on Standardization of Health Insurance Products dated 22.07.2020)****1.** **Network Provider**Network provider refers to a hospital/ nursing home/ day care centre which is\nunder tie-up with an insurer/ TPA for providing cashless treatment to insured\npatients. Patients are free to go to out-of-network providers but there they are\ngenerally charged much higher fees.**2.** **Preferred provider network (PPN)**An insurer has the option to create a preferred network of hospitals to ensure\nquality treatment and at best rates. When this group is limited to only a select\nfew by the insurer based on experience, utilization and cost of providing care,\npreferred provider networks get formed.**3.** **Cashless service**A cashless service enables the insured to avail of the treatment up to the limit of\ncover without any payment to the hospitals. All that the insured has to do is\napproach a network hospital and present his medical card as proof of insurance.\nThe insurer facilitates a cashless access to the health service and directly makes\npayment to the network provider for the admissible amount. However, the\ninsured has to make payment for amounts beyond the policy limits and for\nexpenses not payable as per policy conditions.**4.** **Third Party Administrator (TPA)**A major development in the field of health insurance is the introduction of the\nthird party administrator or TPA. Several insurers across the world utilize the\nservices of independent organizations for managing health insurance claims.\nThese agencies are known as the TPAs. In India, a TPA is engaged by an insurer\nfor provision of health services which includes among other things:i. Providing an identity card to the policyholder which is proof of hisinsurance policy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards\nfor hospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals244or health service providers and ensure that any person who undergoes treatment\nin the network hospitals is given a cashless service. They are the intermediaries\nbetween the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d-19", "section": "O.", "chunk_id": "Final IC 38 - WA_Composite  - English_125", "metadata": {"file_size": 20885, "chunk_index": 125, "chunk_tokens": 938, "has_examples": false, "has_tables": false, "key_concepts": ["Hospital", "Network Provider", "Disease covers", "Test Yourself 1", "Special Products"]}}
{"chunk": "services of independent organizations for managing health insurance claims.\nThese agencies are known as the TPAs. In India, a TPA is engaged by an insurer\nfor provision of health services which includes among other things:i. Providing an identity card to the policyholder which is proof of hisinsurance policy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards\nfor hospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals244or health service providers and ensure that any person who undergoes treatment\nin the network hospitals is given a cashless service. They are the intermediaries\nbetween the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum\ncriteria as under:a) Has at least 10 inpatient beds in those towns having a population of lessthan 10,00,000 and 15 inpatient beds in all other places;b) Has qualified nursing staff under its employment round the clock;c) Has qualified medical practitioner(s) in charge round the clock;d) Has a fully equipped operation theatre of its own where surgicalprocedures are carried out;e) Maintains daily records of patients and will make these accessible to theInsurance Company’s authorized personnel.**6.** **Medical practitioner**A Medical practitioner is a person who holds a valid registration from the medical\ncouncil of any state of India or for homeopathy and is thereby entitled to practice\nmedicine within its jurisdiction; and is acting within the scope and jurisdiction of\nhis license. However, insurance companies are free to make a restriction that the\nregistered practitioner should not be the insured or any close family member.\nThis is to ensure fraudulent claims are not lodged by taking treatment from\nrelatives or by self or by hospitals owned by either.**Qualified nurse:** Qualified nurse means a person who holds a valid registration\nfrom the Nursing Council of India or the Nursing Council of any state in India.**7.** **Reasonable and necessary expenses**A health insurance policy always contains this clause as the policy provides for\ncompensation of expenses that would be deemed to be reasonable for treatment\nof a particular ailment and in a particular geographical area.**8.** **Notice of claim**Every insurance policy provides for immediate intimation of claim and specified\ntime limits for document submission. In health insurance policies, wherever\ncashless facility is desired by the customer, intimations are given well before the\nhospitalization. However in cases of reimbursement claims the time limit for\nsubmission of claim documents is normally fixed at 15 days from the date of\ndischarge.245**9.** **Free health check**In individual health policies, a provision is generally available to give some form\nof incentive to a claim free policyholder. Many policies provide for reimbursement\nof the cost of health check-up at the end of four continuous, claim free policy\nperiods.**10.** **Cumulative bonus**A cumulative bonus is given on the sum insured for every claim free year. This\nmeans that the sum insured gets increased on renewal by a fixed percentage say\n5% annually and is allowed up to a maximum of 50% for ten claim-free renewals.\nMoreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second\nyear, in case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs\n(5% more than the previous year) at the same premium of Rs. 5,000. This could\ngo up to Rs. 4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or\nloading of premium is collected at renewal. However, in case of group policies,\nthe malus is charged by way of loading the overall premium suitably to keep the\nclaim ratio within reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s244", "section": "Hospital", "chunk_id": "Final IC 38 - WA_Composite  - English_126", "metadata": {"file_size": 20885, "chunk_index": 126, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Medical practitioner", "Reasonable and necessary expenses", "Hospital", "Notice of claim", "Cumulative bonus"]}}
{"chunk": "Moreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second\nyear, in case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs\n(5% more than the previous year) at the same premium of Rs. 5,000. This could\ngo up to Rs. 4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or\nloading of premium is collected at renewal. However, in case of group policies,\nthe malus is charged by way of loading the overall premium suitably to keep the\nclaim ratio within reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year\ninstead of a bonus on sum insured.**13.** **Room rent restrictions**Some health plans place a restriction on the category of room that an insured\nchooses by linking it to the sum insured. Hence a person with a sum insured of\none lac would be entitled to a room of Rs 1,000 per day if the policy has a room\nrent restriction of 1% of sum insured per day.**14.** **Renewability clause**The IRDAI guidelines on renewability of health insurance policies makes lifetime\nguaranteed renewal of the health policies compulsory, except on grounds of fraud\nand misrepresentation. In accordance to the provisions of IRDAI Health Insurance\nRegulation 2016, once a proposal is accepted in respect of a health insurance\npolicy (except Personal Accident and Travel Policies) and a policy is issued which\nis thereafter renewed periodically without any break, further renewal shall not\nbe denied on the grounds of age of the Insured. Thus, health insurance policies\nare renewable lifelong.246**15.** **Cancellation clause**An insurance company may at any time cancel the policy only on grounds of\nmisrepresentation, fraud, and non-disclosure of material fact or non-cooperation\nby the insured.When policies are cancelled by the insurer, a proportion of the premium\ncorresponding to the unexpired period of insurance, is returned to the insured\nprovided no claim has been paid under the policy. This is usually on pro-rata basis.When annual policies are cancelled by the insured, insurers usually charge\npremiums at Short period scales, instead of pro-rata premiums. This would\nprevent anti-selection against the insurers and take care of the initial expenses\nof the insurer.**16.** **Grace period for renewal**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during\nthe grace period.Most of above key clauses, definitions, exclusions relating to grace period have\nbeen standardized under Health Regulations and Health Insurance\nStandardization Guidelines issued by IRDAI and updated from time to time.**Test Yourself 2**As per IRDA guidelines, a ________ grace period is allowed for renewal of\nindividual health policies.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty days**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.247## CHAPTER H-04## HEALTH INSURANCE UNDERWRITING**Chapter Introduction**This chapter aims to provide you detailed knowledge about underwriting in health\ninsurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get\nan understanding about basic principles, tools, methods and process of\nunderwriting. It will also provide you the knowledge about group health insurance\nunderwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten248**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "H-04", "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_127", "metadata": {"file_size": 20885, "chunk_index": 127, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Room rent restrictions", "Example", "Chapter Introduction"]}}
{"chunk": "insurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get\nan understanding about basic principles, tools, methods and process of\nunderwriting. It will also provide you the knowledge about group health insurance\nunderwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten248**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his\nfamily health history, habits and so on.On receipt of his proposal form, he was also required to submit many documents\nsuch as identity and age proof, proof of address and previous medical records.\nThen they told him to undergo a health check-up and some medical tests which\nfrustrated him.Manish, who considered himself a healthy person and with a good income level,\nstarted wondering why such a lengthy process was being followed by the\ninsurance company in his case. Even after going through all this, the insurance\ncompany told him that high cholesterol and high BP had been diagnosed in his\nmedical tests, which increased the chances of heart diseases later. Though they\noffered him a policy, the premium was much higher than what his friend had paid\nand so he refused to take the policy.Here, the insurance company was following all these steps as part of their\nunderwriting process. While providing risk coverage, an insurer needs to evaluate\nrisks properly and also to make reasonable profit. If the risk is not assessed\nproperly and there is a claim, it will result in a loss. Moreover, insurers collect\npremiums on behalf of all insuring persons and have to handle these moneys like\na trust.**A.** **What is underwriting?****1.** **Underwriting**\nInsurance companies try to insure people who are expected to pay adequate\npremium in proportion to the risk they bring to the insurance pool. This process\nof collecting and analysing information from a proposer is known as underwriting.\nOn the basis of information collected through this process, they decide whether\nthey want to insure a proposer. If they decide to do so, then at what premium,\nterms and conditions so as to make a reasonable profit from taking such risk.**Definition****Underwriting** is the process of assessing the risk appropriately and deciding the\nterms on which the insurance cover is to be granted. Thus, it is a process of risk\nassessment and risk pricing.249**2.** **Need for Underwriting**Underwriting is the backbone of an insurance company as acceptance of the risk\ncarelessly or for insufficient premiums will lead to insurer’s insolvency. On the\nother hand, being too selective or careful will prevent the insurance company\nfrom creating a big pool so as to spread the risk uniformly. It is therefore critical\nto strike the correct balance between risk and business, thereby being\ncompetitive and yet profitable for the organization.This process of balancing is done by the underwriter, in accordance with the\nphilosophy, policies and risk hunger of the insurance company concerned.\nAlthough age affects the chance of sickness as well as death, it must be\nremembered that sickness usually comes much before death and could be\nfrequent. Hence, it is quite logical that the underwriting norms and guidelines\nare much tighter for health coverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored\nas there has to be an insurable interest and financial underwriting is important\nto rule out any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A\nlife insurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered\ncarefully while assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "n248", "section": "Learning Outcomes", "chunk_id": "Final IC 38 - WA_Composite  - English_128", "metadata": {"file_size": 20885, "chunk_index": 128, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["What is underwriting?", "Example", "Factors which affect chance of illness", "Learning Outcomes", "Look at this Scenario"]}}
{"chunk": "frequent. Hence, it is quite logical that the underwriting norms and guidelines\nare much tighter for health coverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored\nas there has to be an insurable interest and financial underwriting is important\nto rule out any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A\nlife insurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered\ncarefully while assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young\nadults due to increased risk of infections and accidents. Similarly, for\nadults beyond the age of 45 years, the premiums are higher, as the\nprobability of an individual suffering from a chronic ailment like diabetes,\na sudden heart ailment or other such morbidity is much higher.\n**b)** **Gender:** Women are exposed to additional risk of illness during childbearing period. However, men are more likely to get affected by heart\nattacks than women or suffer job related accidents than women as they\nmay be more involved in hazardous employment.250**c)** **Habits:** Consumption of tobacco, alcohol or narcotics in any form has adirect bearing on the morbidity risk.\n**d)** **Occupation:** Extra risk to accidents is possible in certain occupations, e.g.driver, blaster, aviator etc. Likewise, certain occupations may have higher\nhealth risks, like an X-Ray machine operator, asbestos industry workers,\nminers etc.\n**e)** **Family history:** This has greater relevance, as genetic factors influencediseases like asthma, diabetes and certain cancers. This does impact the\nmorbidity and should be taken into consideration while accepting risk.\n**f)** **Build:** Stout, thin or average build may also be linked to morbidity incertain groups.\n**g)** **Past illness or surgery:** It has to be ascertained whether the past illnesshas any possibility of causing increased physical weakness or even recur\nand accordingly the policy terms should be decided. For e.g. kidney stones\nare known to recur and similarly, cataract in one eye increases possibility\nof cataract in the other eye.\n**h)** **Current health status and other factors or complaints:** This is importantto ascertain the degree of risk and insurability and can be established by\nproper disclosure and medical examination.\n**i)** **Environment and residence:** These also have a bearing on morbidityrates.**Understanding Moral Hazard in Health Insurance**While factors like age, gender, habits etc. refer to the physical hazard of a health\nrisk, there is something else that needs to be closely watched. This is the moral\nhazard of the client which can prove very costly to the insurance company.An extreme example of bad moral hazard is that of an insured taking health\ninsurance knowing that he will undergo a surgical operation within a short time\nbut not disclosing this to the insurer. There is thus a deliberate intention of taking\ninsurance just to collect a claim.**Test Yourself 1**Underwriting is the process of ___________.\nI. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks251**Definition**The term **assessment of risks** refers to the process of evaluating each proposal\nfor health insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance\neagerly and to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there\nis a chance that people with serious ailments like diabetes, high BP, heart\nproblems or cancer, who knew that they would soon require hospitalization,\nwould seek to buy health insurance, create losses for the insurer. In other words,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s251", "section": "Underwriting – Risk Assessment", "chunk_id": "Final IC 38 - WA_Composite  - English_129", "metadata": {"file_size": 20885, "chunk_index": 129, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Purposes of Underwriting", "Understanding Moral Hazard in Health Insurance", "Gender:", "Test Yourself 1", "Example"]}}
{"chunk": "I. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks251**Definition**The term **assessment of risks** refers to the process of evaluating each proposal\nfor health insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance\neagerly and to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there\nis a chance that people with serious ailments like diabetes, high BP, heart\nproblems or cancer, who knew that they would soon require hospitalization,\nwould seek to buy health insurance, create losses for the insurer. In other words,\nif an insurer does not assess risk properly, it would be selected against and suffer\nlosses in the process.**2.** **Equity among risks**\nLet us now consider equity among risks. “Equity” means that applicants who are\nexposed to similar types and degrees of risk be placed in the same premium class.\nInsurers would like to have some type of standardization to determine the\npremiums to be charged. The proposals that come to the underwriter are\nclassified into following risk types:**i.** **Standard risks**\nThese are the people whose expected morbidity (chance of falling ill) isaverage.**ii.** **Preferred risks**\nIn some cases, the expected morbidity is significantly lower than average and\nhence are preferred risks. These could be charged a lower premium.**iii.** **Substandard risks**\nIn some other cases, the expected morbidity may be higher than the average.\nThough these risks also may be insurable, insurers may charge higher\npremiums and/or accept them subject to certain conditions and restrictions.**iv.** **Declined risks**There are some persons who have certain medical or other conditions, which\nmake them highly prone to sicknesses and making claims. It is highly probable\nthat such persons fall sick and cause a disproportionate degree of liability on\nthe common pool. In other words, while others in the pool have a more or less\naverage chance of falling sick, these persons have a very high chance of falling\nsick making it difficult to insure them even at higher rates of premium.252[Sometimes, such persons may be posing a Moral Hazard when they do not\nreveal their high probability of falling sick and try to get insured like other\nnormal people.] Most insurers decline such risks and create a database of such\npeople for future use.Being a ‘Declined Risk’ means only that a particular insurer does not wish to\ninsure a person for that type of insurance product, at that particular point in\ntime. However, it is possible that another insurer might insure him/ her at a\ndifferent premium and/or with different conditions. The same insurer might\nalso consider him/ her for another type of policy or even for the same policy\nat a later date, when the conditions change.**3.** **Underwriting process**The underwriting process takes place at two levels: At the primary or field level or\n At the underwriting department level**a)** **Primary Underwriting**Primary underwriting (or Field level underwriting) includes information\ngathering by an agent or company representative to decide whether an\napplicant is suitable for granting insurance coverage. The agent plays this\ncritical role of **primary underwriting** . He is in the best position to know\nwhether prospective client is insurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may\nalso be sought from an official of the insurance company. These reports\ntypically cover the occupation, income and financial standing and reputation\nof the person proposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts\ndisclosed by the proposer in the Proposal Form. It would be difficult for an\nunderwriter sitting in the office to know whether these facts are true or have\nbeen fraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the\nagent has direct personal contact with the proposer, he or she is in the best", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s251", "section": "B.", "chunk_id": "Final IC 38 - WA_Composite  - English_130", "metadata": {"file_size": 20885, "chunk_index": 130, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Equity among risks", "Purposes of Underwriting", "Substandard risks", "Moral Hazard report", "Example"]}}
{"chunk": "gathering by an agent or company representative to decide whether an\napplicant is suitable for granting insurance coverage. The agent plays this\ncritical role of **primary underwriting** . He is in the best position to know\nwhether prospective client is insurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may\nalso be sought from an official of the insurance company. These reports\ntypically cover the occupation, income and financial standing and reputation\nof the person proposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts\ndisclosed by the proposer in the Proposal Form. It would be difficult for an\nunderwriter sitting in the office to know whether these facts are true or have\nbeen fraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the\nagent has direct personal contact with the proposer, he or she is in the best\nposition to find out whether the information submitted is true and whether\nany wilful non-disclosure or misrepresentation has been made.253**a)** **Role of the Underwriting department**The Underwriting department in the insurer’s office does the major part of\nthe underwriting. Here, specialists who are proficient in such work, consider\nand analyse all the relevant data on the particular risk and even some\ndemographical data. They finally decide whether to accept the proposal for\ninsurance, decide the terms, and charge the appropriate premiums.**C.** **Other Health Insurance regulations of IRDAI**\nThe regulator has also brought in some changes for benefit of the Insured as given\nbelow.a. The insured is to be informed of any underwriting loading charged over andabove the premium and the specific consent of the policyholder for such\nloadings shall be obtained before issuance of a policy.\nb. If an insurance company requires any further information, such as change ofoccupation, at any subsequent stage of a policy or at the time of its renewal,\nit has prescribed standard forms to be filled up by the insured which forms\npart of the policy document.\nc. Insurers have come out with various mechanisms to reward policyholders forearly entry, continued renewals, favourable claims experience etc. with the\nsame insurer and disclose upfront such mechanism or incentives in the\nprospectus and the policy document.**D.** **Portability of Health Insurance**Portability is defined by IRDAI as **the right** accorded to individual health insurance\npolicyholders (including all members under family cover), **to transfer** the credit\ngained for pre-existing conditions and time bound exclusions, **from one insurer**\n**to another insurer or from one plan to another plan of the same insurer**,\nprovided the previous policy has been maintained without any break.Portability is the provision by which an Insured can move from one insurer to\nanother carrying with him/ her all the benefits earned over a period of time.\nStudents may please read IRDAI’s Consolidated Guidelines on Product filing in\nHealth Insurance Business dated 22 July 2020 lays down norms for standardising\nmany of the practices including Portability.IRDAI mandates that Portability shall be allowed under all individual indemnity\nhealth insurance policies issued by General Insurers and Health Insurers including\nfamily floater policies.However, porting can be done only at the time of renewal. Apart from the waiting\nperiod credit, other terms of the new policy including the premium would be\ndecided by the new insurance company. Procedurally, the request for porting\nshould be made by the insured to the old insurer at least 45 days before the\nrenewal, specifying the company to which the policy has to be ported. The policy\nhas to be renewed without a break (there is a 30 day grace period if porting is254under process). IRDA has created a web-based facility that maintains data about\nall health insurance policies issued by insurance companies to individuals, to\nenable the new insurer to access and obtain data on the porting policyholder’s\nhealth insurance history in a smooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance\npolicyholders (including all members under family cover and members of group\nhealth insurance policy), **to transfer** the credit gained for pre-existing conditions\nand time bound exclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business\ndated 22 July 2020 revised the guidelines on Migration of health insurance\npolicies. It provides that every individual policyholder (including members under", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s254", "section": "Moral Hazard report", "chunk_id": "Final IC 38 - WA_Composite  - English_131", "metadata": {"file_size": 20885, "chunk_index": 131, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Other Health Insurance regulations of IRDAI", "Role of the Underwriting department", "Fraud monitoring role of Agent", "Migration of Health Insurance"]}}
{"chunk": "decided by the new insurance company. Procedurally, the request for porting\nshould be made by the insured to the old insurer at least 45 days before the\nrenewal, specifying the company to which the policy has to be ported. The policy\nhas to be renewed without a break (there is a 30 day grace period if porting is254under process). IRDA has created a web-based facility that maintains data about\nall health insurance policies issued by insurance companies to individuals, to\nenable the new insurer to access and obtain data on the porting policyholder’s\nhealth insurance history in a smooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance\npolicyholders (including all members under family cover and members of group\nhealth insurance policy), **to transfer** the credit gained for pre-existing conditions\nand time bound exclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business\ndated 22 July 2020 revised the guidelines on Migration of health insurance\npolicies. It provides that every individual policyholder (including members under\nfamily floater policy) covered under an indemnity based individual health\ninsurance policy shall be provided an option of migration at the explicit option\nexercised by the policyholder. Migration from group policies to individual policy\nwill be subject to underwriting.A policyholder desirous of migrating his/ her policy shall be allowed to apply to\nthe insurance company to migrate the policy along with all members of the\nfamily, if any, at least 30 days before the premium renewal date of his/her\nexisting policy. However, if the insurer is willing to consider even less than 30\ndays period, then the insurer may do so. Insurers shall not levy any charges\nexclusively for migration.**F.** **Basic principles of insurance and tools for underwriting****1.** **Basic principles relevant to underwriting**In any form of insurance, whether it is life insurance or general insurance, there\nare certain legal principles which operate along with acceptance of risks. Health\ninsurance is equally governed by these principles and any violation of the\nprinciples may result in the insurer deciding to avoid the liability. (These\nprinciples have been discussed in the common chapters.)**2.** **Tools for underwriting**These are the sources of information for the underwriter and the basis on which\nthe risk classification is done and premiums finally decided. The following are the\nkey tools for underwriting:**a)** **Proposal form**This document is the base of the contract where all the critical information\npertaining to the health and personal details of the proposer (i.e. age,255occupation, build, habits, health status, income, premium payment details\netc.) are collected. Any breach or concealment of information by the insured\nshall render the policy void. (This has been discussed in the common\nchapters.)**b)** **Age proof**Premiums are determined on the basis of the age of the insured. Hence it is\nimperative that the age disclosed at the time of enrolment is verified through\nsubmission of an age proof.**Example**\nIn India, there are many documents which can be considered as age proof but all\nof them are not legally acceptable. Mostly valid documents are divided into two\nbroad categories. They are as follows:a) Standard age proof: Some of these include school certificate, passport,domicile certificate, PAN card etc.\nb) Non-standard age proof: Some of these include ration card, voter ID,elder’s declaration, gram panchayat certificate etc.**Financial documents**\nKnowing the financial status of the proposer is particularly relevant for\nbenefit products and to reduce the moral hazard. However, normally the\nfinancial documents are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and\nusually depends upon the age of the insured and sometimes on the amount of\ncover opted. Some replies in the proposal form may also contain some\ninformation that leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive\nto generate more business, there is a conflict of interest which has to be\nwatched out for.256**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s254", "section": "E.", "chunk_id": "Final IC 38 - WA_Composite  - English_132", "metadata": {"file_size": 20885, "chunk_index": 132, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Basic principles relevant to underwriting", "Financial documents", "Reports of sales personnel", "Example", "Migration of Health Insurance"]}}
{"chunk": "Knowing the financial status of the proposer is particularly relevant for\nbenefit products and to reduce the moral hazard. However, normally the\nfinancial documents are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and\nusually depends upon the age of the insured and sometimes on the amount of\ncover opted. Some replies in the proposal form may also contain some\ninformation that leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive\nto generate more business, there is a conflict of interest which has to be\nwatched out for.256**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.\nI. The insurerII. The insuredIII. Both the insurer and the insuredIV. The medical examiners**Test Yourself 3**Insurable interest refers to ____________.\nI. Financial interest of the person in the asset to be insured\nII. The asset which is already insured\nIII. Each insurer’s share of loss when more than one company covers the samelossIV. The amount of the loss that can be recovered from the insurer**G.** **Underwriting** **process**Once the required information is received, the underwriter decides the terms of\nthe policy. The common forms used for underwriting health insurance business\nare as below:**1.** **Medical underwriting**Medical underwriting is a process in which medical reports are called for from the\nproposer to determine the health status of an individual applying for health\ninsurance policy. The health information collected is then evaluated by the\ninsurers to determine whether to offer coverage, up to what limit and on what\nconditions and exclusions. Thus medical underwriting can determine the\nacceptance or declining of a risk and also the terms of cover.**Example**Medical conditions like hypertension, overweight/ obesity and raised sugar levels\nhave a high probability of future hospitalization for diseases of the heart, kidney\nand the nervous system. So, these conditions should be carefully considered while\nassessing the risk for medical underwriting.Medical underwriting guidelines may also require a signed declaration of the\nproposer’s health status by his/ her family physician.Persons above the age of 45-50 years, enrolling for the first time are normally\nrequired to undergo specified pathological investigations to assess health risk257profile and to obtain information on their current health status. Such\ninvestigations also provide an indication of prevalence of any pre-existing medical\nconditions or diseases.**2.** **Non-medical underwriting**Most of the proposers which apply for health insurance do not need medical\nexamination.Even, if the proposer were to disclose all material facts completely and truthfully\nand the same were checked by agent carefully, then also the need for medical\nexamination could be much less.**Example**\nIf an individual has to take health insurance coverage quickly without going\nthrough a long process of medical examinations, waiting periods and processing\ndelays, then he can opt for a non-medical underwriting policy. In a non-medical\nunderwriting policy, premium rates and sum assured are usually decided on the\nbasis of answers to a few health questions mostly based on age, gender, smoking\nclass, build etc. The process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practicedin all companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate.\nThis becomes an additional exclusion apart from the standard policy exclusion", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "k257", "section": "Medical reports", "chunk_id": "Final IC 38 - WA_Composite  - English_133", "metadata": {"file_size": 20885, "chunk_index": 133, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Reports of sales personnel", "Non-medical underwriting", "Example", "Test Yourself 3", "Numerical rating method"]}}
{"chunk": "class, build etc. The process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practicedin all companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate.\nThis becomes an additional exclusion apart from the standard policy exclusion\nand shall form the part of the contract.258**5.** **Use of general or standard exclusions**The majority of policies impose exclusions that apply to all their members. These\nare known as standard exclusions or sometimes referred to as general exclusions.\nInsurers limit their exposure by the implementation of standard exclusions. These\nhave been discussed in an earlier chapter.**6.** **Zone wise premium**Normally, the premium would depend on the age of the insured person and the\nsum insured selected. Premium differential has been introduced in certain zones\nwith higher claims cost e.g. Delhi and Mumbai form part of highest premium zone\nfor certain products by some insurers. For e.g. Individual Policy for age group of\n55-65 years would be rated higher in Metros and ‘A Class’ cities than a similar\npolicy for the same age bracket in a city like Indore or Jammu.**Test Yourself 4**Which of the following statements about medical underwriting is incorrect?I. It involves high cost in collecting and assessing medical reports.\nII. Current health status and age are the key factors in medical underwriting forhealth insurance.\nIII. Proposers have to undergo medical and pathological investigations to assesstheir health risk profile.\nIV. Percentage assessment is made on each component of the risk.**H.** **Health Insurance at Group Level**While accepting a group for health insurance, the insurers take into consideration\nthe possibility of existence of a few members in the group who may have severe\nand frequent health problems.**1.** **Group Health Insurance**Underwriting of group health insurance requires analysing the characteristics of\nthe group to evaluate whether it falls within the insurance company’s\nunderwriting guidelines as well as the guidelines laid down for group insurance\nby the insurance regulators.Standard underwriting process for group health insurance requires evaluating the\nproposed group on the following factors:a) Type of group\nb) Group size\nc) Type of industry\nd) Eligible persons for coverage\ne) Whether entire group is being covered or there is an option for membersto opt out259f) Level of coverage – whether uniform for all or differently\ng) Composition of the group in terms of sex, age, single or multiple locations,income levels of group members, employee turnover rate, whether\npremium paid entirely by the group holder or members are required to\nparticipate in premium payment\nh) Difference in healthcare costs across regions in case of multiple locationsspread in different geographical locations\ni) Preference of the group holder for administration of the group insuranceby a third party administrator (of his choice or one selected by the insurer)\nor by the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore,\nthe insurer will price the group health insurance policy accordingly in both thecases.Similarly to avoid adverse selection in case of groups with high turnover such as\nIT companies, insurers can introduce precautionary criteria requiring employees\nto serve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered\ngroup health insurance, the character of the group composition is one of the\nimportant consideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t259", "section": "Numerical rating method", "chunk_id": "Final IC 38 - WA_Composite  - English_134", "metadata": {"file_size": 20885, "chunk_index": 134, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Underwriting other than employer- employee groups", "Use of general or standard exclusions", "Test Yourself 4", "Health Insurance at Group Level", "Example"]}}
{"chunk": "h) Difference in healthcare costs across regions in case of multiple locationsspread in different geographical locations\ni) Preference of the group holder for administration of the group insuranceby a third party administrator (of his choice or one selected by the insurer)\nor by the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore,\nthe insurer will price the group health insurance policy accordingly in both thecases.Similarly to avoid adverse selection in case of groups with high turnover such as\nIT companies, insurers can introduce precautionary criteria requiring employees\nto serve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered\ngroup health insurance, the character of the group composition is one of the\nimportant consideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be\nadopted by insurers in dealing with various groups. Such non-employer groups\ninclude:a) Employer welfare associations\nb) Holders of credit cards issued by a specific company\nc) Customers of a particular business where insurance is offered as an add-onbenefit\nd) Borrowers of a bank and professional associations or societies**I.** **Underwriting of Overseas Travel Insurance**Since the main cover under Overseas Travel Insurance policies is the health cover,\nthe underwriting would follow the pattern for health insurance in general.The premium rating and acceptance would as per individual company guidelines\nbut a few important considerations are given below:2601. Premium rate would depend on the age of the proposer and the durationof foreign travel.\n2. As medical treatment is costly overseas, the premium rates are normallymuch higher compared to domestic health insurance policies.\n3. Even among the foreign countries, USA and Canada premium is thehighest.\n4. Care should be taken to rule out the possibility of a Proposer using thepolicy to take medical treatment abroad and hence the existence of any\npre-existing disease must be carefully considered at the proposal stage.**J.** **Underwriting of Personal Accident Insurance**The underwriting considerations for Personal Accident Policies are discussed\nbelow:**Rating**In personal accident insurance, the main factor considered is the occupation of\nthe insured. The risks associated with profession or occupation varies in\naccordance with the nature of work performed. For example, an office manager\nis less exposed to risk at work than a civil engineer working at a site where a\nbuilding is being constructed. To fix a rate, occupations are classified into groups,\neach group reflecting, more or less, similar risk exposure.**Classification of Risk**On the basis of occupation, the risks associated with the insured person may be\nclassified into three groups:**Risk group I**\nAccountants, Doctors, Lawyers, Architects and persons engaged in\nadministration functions, persons primarily engaged in occupations of similar\nhazards.**Risk group II**\nBuilders, Contractors and Engineers engaged in superintending functions and\npersons engaged in occupation of similar hazards. All persons engaged in\nmanual labour (except those falling under Group III),**Risk group III**\nPersons working in underground mines or engaged in activities like racing on\nwheels and persons engaged in occupations/ activities of similar hazard.\nRisk groups are also known in the form of ‘Normal’, ‘Medium’ and ‘High’\nrespectively.**Age Limits**General age limits for the working population (employer employee) is 1870.However for students Minimum age could be 5 years too.\nThe minimum and maximum age for being covered and renewed varies from\ncompany to company.261**Family Package Cover**The Personal accident policy also has a family package cover wherein Children\nand Non-earning spouse are covered for to death and permanent disablement\n(total or partial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the\npurpose of availing of group discount and other benefits, the proposed “Group”\nshould fall clearly under one of the following categories, given below:Employer – employee relationship including dependents of the\nemployeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_135", "metadata": {"file_size": 20885, "chunk_index": 135, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Underwriting other than employer- employee groups", "Risk group II", "Group discount criteria", "Example"]}}
{"chunk": "respectively.**Age Limits**General age limits for the working population (employer employee) is 1870.However for students Minimum age could be 5 years too.\nThe minimum and maximum age for being covered and renewed varies from\ncompany to company.261**Family Package Cover**The Personal accident policy also has a family package cover wherein Children\nand Non-earning spouse are covered for to death and permanent disablement\n(total or partial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the\npurpose of availing of group discount and other benefits, the proposed “Group”\nshould fall clearly under one of the following categories, given below:Employer – employee relationship including dependents of the\nemployeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above\ncategories, they may be deliberated and decided upon by the technical\ndepartment of the respective insurers.**Premium**Varying rates of premium are applicable to named employees as per the\nclassification of risks and the benefits selected.**On-duty cover**PA policies may have a cover for both on-duty and off-duty period or for either\nseparately. The premium is dependent on the Sum Assured, the number of hours\nof duty etc. Some employers may like to restrict themselves to cover the duty\nperiod only.**Exclusion of death cover**It is possible to issue group P.A. policies excluding the death benefit, subject to\nindividual company guidelines.**Group discount and Bonus/ Malus**Rating under renewal of group policies is determined with reference to the claims\nexperience.Favourable experience is rewarded with a discount in the renewal premium\n(bonus)262Adverse experience is penalised by loading of renewal premium (malus),\naccording to a scaleNormal rates will apply for renewal if the claims experience is, say, 70 percent**Test Yourself 5**1) In a group health insurance, any of the individual constituting the group couldanti-select against the insurer.\n2) Group health insurance provides coverage only to employer-employee groups.\nI. Statement 1 is true and statement 2 is falseII. Statement 2 is true and statement 1 is falseIII. Statement 1 and statement 2 are trueIV. Statement 1 and statement 2 are false**Answers to Test Yourself****Answer 1** **-** The correct option is III.\n**Answer 2** **-** The correct option is III.\n**Answer 3** **-** The correct option is I.\n**Answer 4** **-** The correct option is IV.\n**Answer 5** **-** The correct option is IV.263## CHAPTER H-05## HEALTH INSURANCE CLAIMS**Chapter Introduction**In this chapter we will discuss about claim management process in Health\nInsurance, claims related procedures and documentation. Apart from this, we will\nalso look into claims management under Personal Accident Insurance and\nunderstand the role of TPAs.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various stakeholders in insurance claims\nb) Describe how health insurance claims are managed\nc) Discuss the various documents required for settlement of health insuranceclaims\nd) Explain how reserves for claims are provided for by insurers.\ne) Discuss personal accident claims\nf) Understand the concept and role of TPAs264**A.** **Claims Management in Insurance**It is very well understood that insurance is a ‘ **promise’** and the policy is a\n‘ **witness’** to that promise. The occurrence of an insured event leading to a claim\nunder the policy is the true test of that promise. How well an insurer performs is\nevaluated by how well it keeps its claims promises. One of the key rating factors\nin insurance is the claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before\nlooking at how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the<br>‘payers of the claims’. Even if the claims are met from the<br>policy holders’ funds, in most cases, it is they who are liable<br>to keep the promise.|", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "H-05", "section": "Age Limits", "chunk_id": "Final IC 38 - WA_Composite  - English_136", "metadata": {"file_size": 20885, "chunk_index": 136, "chunk_tokens": 1001, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Exclusion of death cover", "Group discount criteria", "Age Limits", "Answer 5"]}}
{"chunk": "e) Discuss personal accident claims\nf) Understand the concept and role of TPAs264**A.** **Claims Management in Insurance**It is very well understood that insurance is a ‘ **promise’** and the policy is a\n‘ **witness’** to that promise. The occurrence of an insured event leading to a claim\nunder the policy is the true test of that promise. How well an insurer performs is\nevaluated by how well it keeps its claims promises. One of the key rating factors\nin insurance is the claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before\nlooking at how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the<br>‘payers of the claims’. Even if the claims are met from the<br>policy holders’ funds, in most cases, it is they who are liable<br>to keep the promise.|\n|**Underwriters**|Underwriters within an insurance company and across all<br>insurers have the responsibility to understand the claims and<br>design the products, decide policy terms, conditions and<br>pricing etc.|265|Regulator|The regulator (Insurance Regulatory and Development<br>Authority of India) is a key stakeholder in its objective to:<br> Maintain order in the insurance environment<br> Protect policy holders’ interest<br> Ensure long term financial health of insurers.|\n|---|---|\n|**Third Party**<br>**Administrators**|Service intermediaries known as Third Party Administrators,<br>who process health insurance claims.|\n|**Insurance**<br>**agents/**<br>**brokers**|Insurance agents/ brokers not only sell policies but are also<br>expected to service the customers in the event of a claim.<br>|\n|**Providers/**<br>**Hospitals**|~~They ensure that the customer gets a smooth claim~~<br>experience, especially when the hospital is on the panel of<br>the TPA the Insurer to provide cashless hospitalization.|Thus managing claims well means managing the objectives of the each of these\nstakeholders related to the claims. Of course, it may happen that some of these\nobjectives can conflict with each other.**Reserving:** In many cases, insurance companies may not be able to settle claims\ninstantly and may have to wait for information or the results of disputes, litigation\netc. So, they have to hold the claim amounts in reserve till the payments are due.\nReserves are usually are actuarial estimates of the amounts that will be paid on\noutstanding claims.Reserving refers to the amount of provision made for all claims in the books of\nthe insurer based on the status of the claims.**Test Yourself 1**Who among the following is not a stakeholder in Health insurance claim process?I. Customers\nII. Police Department\nIII. Regulator\nIV. TPA**B.** **Management of Health Insurance Claims****1.** **Claim process in health insurance**A claim may be serviced either by the insurance company itself or through the\nservices of a Third Party Administrator (TPA) authorized by the insurancecompany.From the time a claim is made known to the insurer/ TPA to the time the payment\nis made as per the policy terms, the health claim passes through a set of welldefined steps, each having its own relevance.266The processes detailed below are in specific reference to health insurance\n(hospitalization) indemnity products which form the major part of health\ninsurance business.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)267**a)** **Intimation**Claim intimation is the first instance of contact between the customer andthe claims team. The customer could inform the company that he is planning\nto avail a hospitalization or the intimation would be made after the\nhospitalization has taken place, especially in case of emergency admission to\na hospital.Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s264", "section": "A.", "chunk_id": "Final IC 38 - WA_Composite  - English_137", "metadata": {"file_size": 20885, "chunk_index": 137, "chunk_tokens": 1005, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Reserving:", "Claims Management in Insurance", "Owners", "Diagram 1:"]}}
{"chunk": "(hospitalization) indemnity products which form the major part of health\ninsurance business.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)267**a)** **Intimation**Claim intimation is the first instance of contact between the customer andthe claims team. The customer could inform the company that he is planning\nto avail a hospitalization or the intimation would be made after the\nhospitalization has taken place, especially in case of emergency admission to\na hospital.Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned\nadmission, and within 24 hours of hospitalization in case of an emergency.\nIntimation is now possible through Mobile Apps/ call centres run by insurers/\nTPAs open 24 hours as well as through the internet and e-mail.**b)** **Registration**Once the intimation is received by the company directly or through the TPA,\nthe details thereof are matched for accuracy and a reference number or claim\ncontrol number generated and intimated to the claimant. The documents are\nthen scrutinized for prima facie coverage and pre-authorisation of likely\nexpenditure is given to the Hospital in case the intimation is of a planned\nsurgery under the Cash-less scheme (detailed in subsequent section).The claims that come for the final settlement on the reimbursement basis arescrutinized in detail about admissibility, sum assured, deductibles, sub-limits\netc. In case of deficiency in documents the same has to be communicated\ntogether, not in piecemeal. It is worth knowing that the claim processing\ninvolves not only ensuring that the terms of the contract have to be fulfilled,\nbut also in ensuring that the Hospitals do not indulge in overcharging, doublecharging etc.**Example**Hospitalization is typically associated with Allopathic method of treatment.\nHowever, the patient could undergo other modes of treatment such as: Unani\n Siddha\n Homeopathy\n Ayurveda\n Naturopathy etc.Most policies now include these treatments, however there could be sub-limits.**Telemedicine:** IRDAI has asked insurers to allow telemedicine wherever regular\nmedical consultation is allowed, in the terms and conditions of medical insurance\npolicies.268This will help policy holders who may prefer to consult medical practitioners\nonline or telephonically to avoid going out of their homes or if they are in\nquarantine themselves due to the coronavirus infection.**Arriving at the final claim payable:** The factors that decide the claim amount\npayable are:a) Sum insured available for the member under the policyb) Balance sum insured available under the policy for the member aftertaking into account any claim made already:c) Sub-Limitsd) Check for any limits specific to illnesse) Check whether entitled or not to cumulative bonusf) Other expenses covered with limitation:What are finally paid are the Reasonable and Customary Charges meaning the\ncharges for services or supplies, which are the standard charges for the\nspecific provider and consistent with the prevailing charges in the\ngeographical area for identical or similar services, taking into account the\nnature of the illness/ injury involved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance StandardizationGuidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by\ncheque or by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety\nof reasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "Final IC 38 - WA_Composite  - English_138", "metadata": {"file_size": 20885, "chunk_index": 138, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Denial of claims", "Arriving at the final claim payable:", "Claim process broadly comprises following steps", "Diagram 2:", "Example"]}}
{"chunk": "nature of the illness/ injury involved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance StandardizationGuidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by\ncheque or by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety\nof reasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs\nviii. Hospitalization is less than 24 hours.Denial or repudiation of a claim (due to whatever reason) has to be informed\nto the customer in writing by the insurance company. Usually, such denial269letter clearly states the reason for denial, narrating the policy term/ condition\non which the claim was denied.Apart from the representation to the insurer, the customer has the option to\napproach the following in case of denial of claim: Insurance Ombudsman or The Consumer Commissions or IRDAI or Law courts.**e)** **Suspect claims require more detailed investigation by the companies/****TPAs**\nWherever the insurance company suspects foul-play it can get claims\ninvestigated. A few examples of frauds committed in health insurance are:i. Impersonation, the person insured is different from person treated.\nii. Fabrication of documents to make a claim where there is nohospitalization.\niii. Inflation of expenses, either with the help of the hospital or by additionof external bills fraudulently created.\niv. Outpatient treatment converted to in-patient/ hospitalization to covercost of diagnosis, which could be high in some conditions.It is to be noted that in respect of claims that need to be investigated,\ninvestigations shall be initiated and completed at the earliest, in any case not\nlater than 90 days from the date of receipt of claim intimation. The claim\nshould be settled within 30 days of completing the investigation. (Pl refer to\nIRDAI (Protection of policyholder’s), 2017 Regulations and updated\naccordingly)**f)** **Cashless settlement process by TPA**How does the cashless facility work? At the heart of this is an agreement that\nthe TPA insurer enters into, with the hospital. There are agreements possible\nwith other medical service providers as well. The process used for providing\ncashless facility are discussed in this section:**Table 3.1**270|Step 2| The hospital compiles the necessary information such as:<br>i. Diagnosis of illness<br>ii. Treatment,<br>iii. Name of treating doctor,<br>iv. Number of days of proposed hospitalization and<br>v. The estimated cost<br> This is presented in a format, called the cashless authorization form.|\n|---|---|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could<br>be provided and if so, for how much amount it should be authorized<br>and it is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized<br>by the TPA as credit in the patient’s account. The member may be<br>called on to make a deposit payment to cover the non-treatment<br>expenses and any co-pay required under the policy.<br>|\n|**Step 5**|~~~~ When the patient is ready for discharge, the hospital checks the<br>amount of credit in the account of the patient approved by the TPA<br>against the actual treatment charges covered by insurance.<br> If the credit is less, the hospital requests for additional approval of<br>credit for the cashless treatment.<br> TPA analyses the same and approves the additional amount.<br>|", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "l269", "section": "Payment of claim", "chunk_id": "Final IC 38 - WA_Composite  - English_139", "metadata": {"file_size": 20885, "chunk_index": 139, "chunk_tokens": 970, "has_examples": true, "has_tables": true, "key_concepts": ["Denial of claims", "Step 5", "Step 3", "Table 3.1", "Payment of claim"]}}
{"chunk": "|---|---|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could<br>be provided and if so, for how much amount it should be authorized<br>and it is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized<br>by the TPA as credit in the patient’s account. The member may be<br>called on to make a deposit payment to cover the non-treatment<br>expenses and any co-pay required under the policy.<br>|\n|**Step 5**|~~~~ When the patient is ready for discharge, the hospital checks the<br>amount of credit in the account of the patient approved by the TPA<br>against the actual treatment charges covered by insurance.<br> If the credit is less, the hospital requests for additional approval of<br>credit for the cashless treatment.<br> TPA analyses the same and approves the additional amount.<br>|\n|**Step 6**|~~~~ Patient pays the non-admissible charges and gets discharged. He will<br>be asked to sign the claim form and the bill, to complete the<br>documentation.<br>|\n|**Step 7**|~~~~ Hospital consolidates all the documents and presents to the TPA the<br>documents for processing of the bill<br>|\n|**Step 8**|~~~~ TPA will process the claim and recommend for payment to the hospital<br>after verifying details.|**g)** **Customer must make sure that he/ she has his/ her insurance details****with him/ her.**This includes his TPA card, Policy copy, Terms and conditions of cover etc.When these are not available, he can contact the TPA (through a 24 hour\nhelpline) and seek the details.i. Customer must check if the hospital suggested by his/ her consultingdoctor is in the network of the TPA. If not, he needs to check with the\nTPA the options available where cashless facility for such treatment is\navailable.ii. He/ she needs to make sure that the correct details are entered into thepre-authorization form. This form has been standardized by IRDAI as per\nGuidelines on Standardization in Health Insurance issued in 2013. If the\ncase is not clear, the TPA could deny the cashless facility or raise query.iii. He/ she needs to ensure that the hospital charges are consistent with thelimits such as room rent or caps on specified treatments such as cataract.iv. The customer must inform the TPA in advance of the discharge andrequest the hospital to send to the TPA any additional approval that may271be required before discharge. This will ensure the patient does not wait\nunnecessarily at the hospital.It is also possible that the customer requests and takes an approval for\ncashless treatment at a hospital but decides to admit the patient elsewhere.\nIn such cases, the customer must inform and ask the hospital to communicate\nto the TPA that the cashless approval is not being used.If this is not done, the amount approved could get blocked in the customer’s\npolicy and could prejudice the approval of the subsequent request.**C.** **Documentation in Health Insurance Claims**This section explains the need for and content of each of the documents required\nto be submitted by the customers:**1.** **Discharge summary**Discharge summary can be termed as the most important document that is\nrequired to process a health insurance claim. It details the complete information\nabout the condition of the patient and the line of treatment and helps the claim\nprocessing person immensely to understand the illness/ injury and the line of\ntreatment. Where the patient unfortunately does not survive, the discharge\nsummary is termed **Death Summary** in many hospitals. The discharge summary is\nalways sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that\nprompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the\nX-ray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance\npolicy. While the consolidated bill presents the overall picture, the detailed bill\nwill provide the break up, with reference codes. The bills have to be received in\noriginal.**4.** **Receipt for payment**The reimbursement of a health insurance claim will also require the formal\nreceipt from the hospital of the amount paid which must correspond to the total", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y271", "section": "Step 3", "chunk_id": "Final IC 38 - WA_Composite  - English_140", "metadata": {"file_size": 20885, "chunk_index": 140, "chunk_tokens": 1012, "has_examples": false, "has_tables": true, "key_concepts": ["Discharge summary", "Step 6", "Documentation in Health Insurance Claims", "Step 5", "Step 3"]}}
{"chunk": "about the condition of the patient and the line of treatment and helps the claim\nprocessing person immensely to understand the illness/ injury and the line of\ntreatment. Where the patient unfortunately does not survive, the discharge\nsummary is termed **Death Summary** in many hospitals. The discharge summary is\nalways sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that\nprompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the\nX-ray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance\npolicy. While the consolidated bill presents the overall picture, the detailed bill\nwill provide the break up, with reference codes. The bills have to be received in\noriginal.**4.** **Receipt for payment**The reimbursement of a health insurance claim will also require the formal\nreceipt from the hospital of the amount paid which must correspond to the total\nof the bill.The receipt should be numbered and or stamped and be presented in original.**5.** **Claim form**Claim form is the formal and legal request for processing the claim and is\nsubmitted in original signed by the customer. The claim form has now been\nstandardized by IRDAI.272Besides information on disease, treatment etc., the declaration the insured\nperson makes in the claim form is the most important document in the legalsense.**6.** **Identity proof**With the increasing use of identity proof across various activities in our life, the\ngeneral Proof of identity helps in verifying whether the person covered and the\nperson treated are one and the same. Usually identification document which is\nsought could be voters’ identity card, driving license, PAN card, Aadhaar card\netc.**7.** **Documents contingent to specific claims**There are certain types of claims that require additional documents apart from\nwhat has been stated above. These are:a) Accident claims, where FIR or Medico-legal certificate issued by thehospital to the registered police station, may be required.b) Case indoor papers in case of complicated or high value claims.c) Dialysis/ Chemotherapy/ Physiotherapy charts where applicable.d) Hospital registration certificate, where the compliance with the definitionof hospital needs to be checked**Test Yourself 2**Which of the following document is maintained at the hospital detailing all\ntreatment done to an in-patient?I. Investigation reportII. Discharge summaryIII. Case paperIV. Hospital registration certificate**Test Yourself 3**The amount of provision made for all claims in the books of the insurer based on\nthe status of the claims is known as ________.I. Pooling\nII. Accounting\nIII. Reserving\nIV. Investing273**D.** **Role of Third Party Administrators (TPA)**The Role of TPA has been discussed in earlier chapters too. It is important to\nknow the services offered by TPA so that the customer can be provided suitable\nservices by the salesperson.The scope of TPA services starts after the sale and issue of the insurance policy.\nIn case of insurers not using TPAs, the services are performed by in-house team.**1.** **Post sale service of health insurance**a) Once the proposal (and the premium) is accepted, the coveragecommences.\nb) If a TPA is to be used for servicing the policy, the insurer passes on theinformation about the customer and the policy to the TPA.\nc) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as wellas processing of claims when the member requires the support of the\npolicy for a hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the serviceswithin the time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospitalbased on the information provided for requesting the cashless facility.\nh) Where the information is not clear or not available, the TPA may rejectthe cashless request. In such cases the claim could be examined on\nreimbursement basis.**2.** **Customer relationship and contact management**Since TPAs are involved in claims servicing, they usually have a grievance", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "g273", "section": "Death Summary", "chunk_id": "Final IC 38 - WA_Composite  - English_141", "metadata": {"file_size": 20885, "chunk_index": 141, "chunk_tokens": 991, "has_examples": false, "has_tables": false, "key_concepts": ["Investigation reports", "Customer relationship and contact management", "Claim form", "Role of Third Party Administrators (TPA)", "Death Summary"]}}
{"chunk": "c) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as wellas processing of claims when the member requires the support of the\npolicy for a hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the serviceswithin the time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospitalbased on the information provided for requesting the cashless facility.\nh) Where the information is not clear or not available, the TPA may rejectthe cashless request. In such cases the claim could be examined on\nreimbursement basis.**2.** **Customer relationship and contact management**Since TPAs are involved in claims servicing, they usually have a grievance\nredressal mechanism themselves.**E.** **Claims Management – Personal Accident**On receipt of the notification of the claim the following aspects should be looked\ninto:a) Person in respect of whom the claim is made is covered under the policy\nb) Policy is valid as on date of accident and premium has been received\nc) Loss is within the policy period\nd) Loss has arisen out of “Accident” and not sickness\ne) Check for any fraud triggers and assign investigation if need be\nf) Register the claim and create reserve for the same\ng) Maintain the turnaround time (claim servicing time) and keep thecustomer informed of the development of the claim.274**1.** **Claims Investigation**Claims Investigation is about determining the validity of the claim and finding out\nthe real cause and extent of the loss. On receipt of the claim documents, if a\nclaim appears suspicious, the claim may be assigned to an internal/ professional\ninvestigator for verification.**Example**Example of case guideline:\n**Road traffic accident**i. When did the incident take place – exact time and date place? Date andtime\nii. Was the insured a pedestrian, traveling as passenger/ pillion rider ordriving the vehicle involved in accident?**Some examples of possible fraud and leakage in personal accident claims:**i. Exaggeration in TTD period.\nii. Illness presented as accident e.g. backache due to pathological reasonsconverted into a PA claim after reported ‘fall/ slip’ at home\nDischarge voucher is an important document for settlement of personal accident\nclaim, especially those involving death claims. It is also important to obtain\nnominee details at the time of proposal and the same should form part of policy\ndocument.\n**2.** **Claim documentation- Each company gives a list**a) Duly completed Personal Accident claim form signed by the claimant’s\nnominee/ family member\nb) Original or Attested copy of First Information Report.\nc) Original or Attested copy of Death certificate.\nd) Attested copy of Post Mortem Report if conducted.\ne) Attested copy of AML documents (Anti-money laundering) - for name\nverification (passport/ PAN card/ Voter's ID/ Driving license) for address\nverification (Telephone bill/ Bank account statement, Electricity bill/\nRation card).\nf) Legal heir certificate containing affidavit and indemnity bond both dulysigned by all legal heirs and notarized\ng) Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nh) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of\nexact leave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of\nthe case, especially the cases with suspected fraud angle to be investigated.**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?275I. Duly completed Personal Accident claim form signed by the claimant.\nII. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nIV. Fitness certificate from the treating doctor certifying that the insured is fitto perform his normal duties.**F.** **Claims Management- Overseas Travel Insurance**The coverage under this policy has already been discussed under the product\nchapter. This section tries to explain how the claims arising during overseas travel\nare handled.\n**Claims services essentially include:**a) Taking down the claim notification 24*7 basis;\nb) Sending the claim form and procedure;", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Customer relationship and contact management", "chunk_id": "Final IC 38 - WA_Composite  - English_142", "metadata": {"file_size": 20885, "chunk_index": 142, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Customer relationship and contact management", "Claims services essentially include:", "Test Yourself 4", "Example", "Claims Investigation"]}}
{"chunk": "h) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of\nexact leave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of\nthe case, especially the cases with suspected fraud angle to be investigated.**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?275I. Duly completed Personal Accident claim form signed by the claimant.\nII. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nIV. Fitness certificate from the treating doctor certifying that the insured is fitto perform his normal duties.**F.** **Claims Management- Overseas Travel Insurance**The coverage under this policy has already been discussed under the product\nchapter. This section tries to explain how the claims arising during overseas travel\nare handled.\n**Claims services essentially include:**a) Taking down the claim notification 24*7 basis;\nb) Sending the claim form and procedure;\nc) Guiding customer on what to do immediately after loss;\nd) Extending cashless services for medical and sickness claims;\ne) Arranging for repatriation and evacuation, emergency cash advance.\n**Assistance companies – Role in overseas claims**\nAssistance companies have their own offices and tie up arrangements with other\nsimilar service providers world over. These companies offer assistance to the\ncustomers of insurance companies in case of contingencies covered under the\npolicy.\nThese companies operate a 24*7 call centre including international toll free\nnumbers for claim registration and information. They also offer the following\nservices and charges for the services vary depending on agreement with the\nparticular insurance company, benefits covered etc.a) Medical assistance services:\ni. Medical service provider referrals\nii. Arrangement of hospital admission\niii. Arrangement of Emergency Medical Evacuation\niv. Arrangement of Emergency Medical Repatriation\nv. Mortal remains repatriation\nvi. Compassionate visit arrangements\nvii. Minor children assistance/ escort\nb) Monitoring of Medical Condition during and after hospitalisation\nc) Delivery of Essential Medicines\nd) Guarantee of Medical Expenses Incurred during hospitalization subject to\nterms and condition of the policy and approval of insurance company.\ne) Pre-trip information services and other services:\ni. Visas and inoculation requirements\nii. Embassy referral services\niii. Lost passport and lost luggage assistance services\niv. Emergency message transmission services\nv. Bail bond arrangement\nvi. Financial Emergency Assistance\nf) Interpreter Referral\ng) Legal Referral276h) Appointment with lawyer\n**a)** **Hospitalization Procedures**i. Most hospitals accept Guarantee of Payments from all internationalinsurance companies once the insured provides them with a valid health or\noverseas travel insurance policy.ii. Hospitals start the treatment immediately. If there is insurance cover theinsurance policy pays or the patient person has to pay. The hospitals tend\nto inflate charges since payments are delayed.iii. Information regarding network hospitals and the procedures is available tothe insured on the toll free numbers provided by the assistance companies.iv. In event of the necessity of a hospitalization the insured needs to intimatethe same at the call centre and proceed to a specified hospital with the\nvalid travel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officerin India: Past history, current treatment and further planned course inhospital and request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee\n(INR), unlike in cashless claims where payment is made in foreigncurrency.While processing the reimbursement claims, currency conversion rate is\napplied as on date of loss to arrive at quantum of liability in INR. Then the", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "l276", "section": "Test Yourself 4", "chunk_id": "Final IC 38 - WA_Composite  - English_143", "metadata": {"file_size": 20885, "chunk_index": 143, "chunk_tokens": 958, "has_examples": false, "has_tables": false, "key_concepts": ["Assistance companies – Role in overseas claims", "Claims services essentially include:", "Test Yourself 4", "Hospitalization Procedures", "Claims Management- Overseas Travel Insurance"]}}
{"chunk": "valid travel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officerin India: Past history, current treatment and further planned course inhospital and request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee\n(INR), unlike in cashless claims where payment is made in foreigncurrency.While processing the reimbursement claims, currency conversion rate is\napplied as on date of loss to arrive at quantum of liability in INR. Then the\npayment is made though cheque or electronic transfer.**c)** **Claim documentation for Medical Accident and Sickness Expenses**i. Claim formii. Doctor’s reportiii. Original Admission/ discharge card277iv. Original Bills/ Receipts/ Prescriptionv. Original X-ray reports/ Pathological/ Investigative reportsvi. Copy of passport/ Visa with Entry and exit stampThe above list is only indicative. Additional information/ documents may be\nrequired depending on specific case details or depending upon claim\nsettlement policy/ procedure followed by particular insurer.**Test Yourself 5**Most hospitals accept Guarantee of Payments from all international insurance\ncompanies once the insured provides them with a valid __________ Insurance\npolicy.I. Legal Liability\nII. Corona RakshakIII. Overseas TravelIV. Endowment**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.\n**Answer 4** - The correct option is IV.\n**Answer 5** - The correct option is III.**Summary**a) Insurance is a ‘promise’ and the policy is a ‘witness’ to that promise. Theoccurrence of insured event leading to a claim under the policy is the true\ntest of that promise.b) One of the key rating parameter in insurance is the claims paying ability ofthe insurance company.c) Customers, who buys insurance is the primary stakeholder as well as thereceiver of the claim.d) In Cashless claim a network hospital provides the medical services based on apre-approval from the insurer/ TPA and later submits the documents for\nsettlement of the claim.e) In reimbursement claim, the customer pays the hospital from his ownresources and then files claim with Insurer/ TPA for payment.f) Claim intimation is the first instance of contact between the customer andthe claims team.g) If a fraud is suspected by insurance company in case of insurance claim, it issent for investigation. Investigation of a claim could be done in-house by an\ninsurer/ TPA or be entrusted to a professional investigation agency.278h) Reserving refers to the amount of provision made for all claims in the booksof the insurer based on the status of the claims.i) In case of a denial, the customer has the option, apart from therepresentation to the insurer, to approach the Insurance Ombudsman or the\nconsumer Commissions or even the legal authorities.j) Frauds occur mostly in hospitalization indemnity policies but Personalaccident policies also are used to make fraud claims.k) The TPA provides many important services to the insurer and getsremunerated in the form of fees.279## SECTION **GENERAL INSURANCE**280## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful\nfor the insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.281**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t2", "section": "Reimbursement of medical expenses and other non-medical claims:", "chunk_id": "Final IC 38 - WA_Composite  - English_144", "metadata": {"file_size": 20885, "chunk_index": 144, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Proposal forms", "Answer 3", "Test Yourself 5"]}}
{"chunk": "consumer Commissions or even the legal authorities.j) Frauds occur mostly in hospitalization indemnity policies but Personalaccident policies also are used to make fraud claims.k) The TPA provides many important services to the insurer and getsremunerated in the form of fees.279## SECTION **GENERAL INSURANCE**280## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful\nfor the insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.281**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance\ncompany to accept the risk offered for insurance. The principle of utmost good\nfaith and the duty of disclosure of material information begin with the proposalform for insurance.**Example**If the insured was required to maintain an alarm or had stated that he has an\nautomatic alarm system in his gold jewellery showroom, then not only is he\nrequired to disclose it, he has to ensure the same remains in a working condition\nthroughout the policy period. The existence of the alarm is a material fact for\nthe insurer who will be accepting the proposal based on these facts and pricing\nthe risk accordingly.**1.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the classof insurance concerned.**i.** **Fire insurance** proposal forms are usually used for relatively simple/ standardrisks like houses, shops etc. For large industrial risks, inspection of the risk is\narranged by insurer before acceptance of the risk. Special questionnaire are\nsometimes used in addition to the proposal form to gather specificinformation.Fire insurance proposal form seeks, among other things, the description of\nthe property which would include the following information: Construction of external walls and roof, number of story\n Occupation of each portion of the building\n Presence of hazardous goods\n Process of manufacture including raw material and finished goods\n The sums proposed for insurance\n The period of insurance, etc.**ii.** **For motor insurance,** questions are asked about the vehicle, its operations,make and carrying capacity, how it is managed by the owner and related\ninsurance history.**iii.** **In personal lines** like health, personal accident and travel insurance, proposalforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits,\npast insurance experience etc.282**iv.** **In other miscellaneous insurances,** proposal forms are compulsory and theyincorporate a declaration which extends the common law duty of good faith.**2.** **Elements of a proposal****i.** **Proposer’s name in full**The proposer should be able to identify himself/ herself unambiguously. It is\nimportant for the insurer to know with whom the contract has been entered,\nso that the benefits under the policy would be received only by the insured.**ii.** **Proposer’s address and contact details**The reasons stated above are applicable for collecting the proposer’s addressand contact details as well.**iii.** **Proposer’s profession, occupation or business**In some cases like health and personal accident insurance, the proposer’s\nprofession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposedfor insurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose]or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "G-01", "section": "GENERAL INSURANCE", "chunk_id": "Final IC 38 - WA_Composite  - English_145", "metadata": {"file_size": 20885, "chunk_index": 145, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Proposal forms", "Sum insured", "Elements of a proposal", "Example", "Nature of questions in a proposal form"]}}
{"chunk": "profession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposedfor insurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose]or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to\nthe insurer.In property insurance, there is a chance that insured may take policies from\ndifferent insurers and when a loss happens, claim from more than one\ninsurer. This information is required to ensure that the principle of283contribution is applied so that the insured is indemnified and does not gain/\nprofit due to multiple insurance policies for the same risk.Further, in personal accident insurance an insurer would like to restrict the\namount of coverage (sum insured) depending on the sum insured under\nother PA policies taken by the same insured.**vii.** **Loss experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about\nthe subject matter of insurance and how the insured has managed the risk in\nthe past. Underwriters can understand the risk better from such answers and\ndecide on conducting risk inspections or collecting further details.**viii.** **Declaration by insured**As the purpose of the proposal form is to provide all material information to\nthe insurers, the form **includes a declaration by the insured that the answers**\n**are true and accurate and he agrees that the form shall be the basis of the**\n**insurance contract.** Any wrong answer will give the right to insurers to avoid\nthe contract. Other sections common to all proposal forms relate to **signature,**\n**date and in some cases agent’s recommendation.****B.** **Acceptance of the Proposal (underwriting)**As seen earlier, a completed proposal form broadly gives the followinginformation: Details of the insured Details of the subject matter Type of cover required Details of the physical features both positive and negative - including typeand quality of construction, age, presence of fire-fighting equipment, the\ntype of security etc., Previous history of insurance and lossIn the case of property, motor or cargo insurance, the insurer may also arrange\nfor pre-inspection survey of the risk before acceptance, depending on the natureand value of the risk. Insurers take their decision based on the informationavailable in the proposal, the risk inspection report, answers to the additional\nquestionnaire and other documents (as may be called for by the insurer). The\ninsurer then decides about the rate to be applied to the risk factor and calculates\nthe premium based on various parameters, which is then conveyed to the insured.\nProposals are processed by the insurer with speed and efficiency and all decisions\nthereof are communicated by it in writing within a reasonable period.284**Definition****Underwriting:** As per Protection of Policyholders’ Interests) Regulations, 2017,\nthe company has to process the proposal within 15 days’ time. The agent is\nexpected to keep track of these timelines, follow up internally and communicate\nwith the prospect/ insured as and when required by way of customer service. This\nentire process of scrutinizing the proposal and deciding about acceptance is\nknown as underwriting.**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As\ndiscussed in Chapter 4, the Agent should be always mindful that the **premium is**\n**to be paid in advance, before the inception date of the insurance contract** as\nper Section 64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f283", "section": "Details and identity of the subject matter of insurance", "chunk_id": "Final IC 38 - WA_Composite  - English_146", "metadata": {"file_size": 20885, "chunk_index": 146, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Premium Receipt", "Declaration by insured", "Test Yourself 1", "Sum insured", "Example"]}}
{"chunk": "the company has to process the proposal within 15 days’ time. The agent is\nexpected to keep track of these timelines, follow up internally and communicate\nwith the prospect/ insured as and when required by way of customer service. This\nentire process of scrutinizing the proposal and deciding about acceptance is\nknown as underwriting.**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As\ndiscussed in Chapter 4, the Agent should be always mindful that the **premium is**\n**to be paid in advance, before the inception date of the insurance contract** as\nper Section 64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed\nto be paid or a deposit is made in advance in the prescribed manner. Insurance\nRules 58 and 59 provide certain exceptions to this condition of advance\npayment of premium in some situations.b) Where an insurance agent collects a premium on a policy of insurance onbehalf of an insurer, he shall deposit with or dispatch by post to the insurer\nthe premium so collected in full without deduction of his commission within\ntwenty-four hours of the collection excluding bank and postal holidays.c) It is also provided that the risk may be assumed only from the date on whichthe premium has been paid in cash or by cheque.d) Where the premium is tendered by postal or money order or cheque sent bypost, the risk may be assumed on the date on which the money order is booked\nor the cheque is posted as the case may be.e) Any refund of premium which may become due to an insured on account ofthe cancellation of policy or alteration in its terms and conditions or\notherwise, shall be paid by the insurer directly to the insured by a crossed or\norder cheque or by postal/ money order or by Electronic Mode and a proper285receipt shall be obtained by the insurer from the insured, and such refund\nshall in no case be credited to the account of the agent.**D.** **Cover Notes/ Certificate of Insurance/ Policy Document**After underwriting is completed it may take some time before the policy is issued.\n**Pending the preparation of the policy or when the negotiations for insurance are**\n**in progress and it is necessary to provide cover on a provisional basis or when**\n**the premises are being inspected for determining the actual rate applicable,** a\ncover note is issued to confirm protection under the policy. It gives description\nof cover. Sometimes, insurers issue a letter confirming the provisional insurance cover\ninstead of a cover note.Although the cover note is not stamped, the wording of the cover note makes it clear\nthat it is subject to the usual terms and conditions of the insurers' policy for the class\nof insurance concerned. If the risk is governed by any warranties, then the cover note\nwould state that the insurance is subject to such warranties. The cover note is also\nmade subject to special clauses, if applicable e.g. Agreed Bank Clause, Declaration\nClause etc.**A cover note would incorporate the following:**a) Name and address of insuredb) Sum insuredc) Period of insuranced) Risk coverede) Rate and premium: if rate is not known, the provisional premiumf) **Description of the risk covered** : for example a fire cover note wouldindicate identification particulars of the building, its construction andoccupancy.g) Serial number of the cover noteh) Date of issuei) **Validity of cover note** is usually for a period of a fortnight and rarely upto 60 days**Cover notes are used predominantly in marine and motor classes of business.****1.** **Marine Cover Notes**These are normally issued when details required for the issue of policy such as\nname of the steamer, number of packages, or exact value etc. are not known.\nEven in respect of exports, a cover note may be issued e.g. a certain quantity of\ncargo meant for shipment is sent by the exporter to the docks. It may happen\nthat, owing to difficulty of securing adequate shipping space, shipment of the\ncargo by the intended vessel does not take place. The quantity therefore, that\nmay be sent by a particular vessel cannot be known. In the circumstances, a cover\nnote may be required which is to be followed subsequently by the issue of regular", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t-1938", "section": "Test Yourself 1", "chunk_id": "Final IC 38 - WA_Composite  - English_147", "metadata": {"file_size": 20885, "chunk_index": 147, "chunk_tokens": 984, "has_examples": true, "has_tables": false, "key_concepts": ["A cover note would incorporate the following:", "Premium Receipt", "Description of the risk covered", "Test Yourself 1", "Important"]}}
{"chunk": "name of the steamer, number of packages, or exact value etc. are not known.\nEven in respect of exports, a cover note may be issued e.g. a certain quantity of\ncargo meant for shipment is sent by the exporter to the docks. It may happen\nthat, owing to difficulty of securing adequate shipping space, shipment of the\ncargo by the intended vessel does not take place. The quantity therefore, that\nmay be sent by a particular vessel cannot be known. In the circumstances, a cover\nnote may be required which is to be followed subsequently by the issue of regular\npolicy when full details are available and made known to the insurance company.Marine cover note may be worded along the following lines:286i. Marine Cover Note Numberii. Date of issueiii. Name of the insurediv. Valid up to“As requested, you are hereby held covered subject to usual conditions of the\ncompany's policy to the extent of Rs. _____________.”**a)** **Clauses:** Institute Cargo Clauses A, B or C including War SRCC risks as perInstitute Clauses, but subject to 7 days’ notice of cancellation.**b)** **Conditions:** Details of shipment to be supplied on receipt of shipping documentsfor issue of policy. In the event of loss or damage prior to declaration and/ or\nshipment on board the steamer, it is hereby agreed that the basis of valuation\nshall be prime cost of the goods plus charges actually incurred and for which the\nassured is liable.With regard to inland transit normally all relevant data required for issue of policy\nare available and therefore a cover note is rarely required. There may however,\nbe some occasions when cover notes are issued and substituted later on by policies\ncontaining full description of the cargo, transit etc.**2.** **Motor Cover Notes**These are to be issued in the form prescribed by the respective companies the\noperative clause of a motor cover note may read as follows:“The insured described in the form, referred to below, having proposed for\ninsurance in respect of the Motor Vehicle(s) described therein and having paid\nthe sum of Rs….as premium the risk is hereby held covered under the terms of\nthe company’s usual form of……Policy applicable thereto (subject to any Special\nConditions mentioned below) unless the cover be terminated by the Company by\nnotice in writing in which case the insurance will thereupon cease and a\nproportionate part of the premium otherwise payable for such insurance will be\ncharged for the time the company had been on risk.”**The Motor Cover Note generally contains the following particulars:**a) Registration mark and number, or description of the vehicles insured/ cubiccapacity/ carrying capacity/ make/ year of manufacture, engine number,\nchassis number\nb) Name and address of the insured\nc) Effective date and time of commencement of insurance for the purpose ofthe Act. Time……, Date……\nd) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if any287The Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act,\n1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days\nat a time, but in, but in no case the total period of validity of a Cover Note shall\nexceed sixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day\ntechnology facilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof\nmay be required. For instance in motor insurance, in addition to the policy, a\ncertificate of insurance is issued as required by the Motor Vehicles Act. **This**\n**certificate provides evidence of insurance to the Police and Registration**\n**Authorities.** A specimen certificate for private cars is reproduced below, showing", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y287", "section": "Clauses:", "chunk_id": "Final IC 38 - WA_Composite  - English_148", "metadata": {"file_size": 20885, "chunk_index": 148, "chunk_tokens": 842, "has_examples": true, "has_tables": false, "key_concepts": ["Authorities.", "Certificate of Insurance – Motor Insurance", "Note:", "Important", "Clauses:"]}}
{"chunk": "d) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if any287The Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act,\n1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days\nat a time, but in, but in no case the total period of validity of a Cover Note shall\nexceed sixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day\ntechnology facilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof\nmay be required. For instance in motor insurance, in addition to the policy, a\ncertificate of insurance is issued as required by the Motor Vehicles Act. **This**\n**certificate provides evidence of insurance to the Police and Registration**\n**Authorities.** A specimen certificate for private cars is reproduced below, showing\nsalient features.**MOTOR VEHICLES ACT, 1988****CERTIFICATE OF INSURANCE**Certificate No. Policy No.1. Registration mark and Number, Place of registration, Engine No./Chassis No./ Make/Year of manufacture.2. Type of Body/ C.C/ Seating capacity/ Net Premium/ Name of Registration Authority,3. Geographical area – India. `4. Insured declared value (IDV)5. Name and address of the Insured, Business or profession.6. Effective date of commencement of Insurance for the purpose of the Act. From……….'O' clock on ………7. Date of expiry of insurance: midnight on ……………8. Persons or classes of persons entitled to drive.Any of the following:(a) The insured:(b) Any other person who is driving on the insured's order or with his permissionProvided that the person driving holds an effective driving license at the time of the\naccident and is not disqualified from holding or obtaining such a license. Provided also\nthat the person holding an effective learner's license may also drive the vehicle and such\na person satisfies the requirement of Rule 3 of Central Motor Vehicles Rules 1989.**LIMITATIONS AS TO USE**The policy covers use for any purpose other than:288(a) Hire or reward;(b) Carriage of goods (other than personal luggage)(c) Organised racing,(d) Race making,(e) Speed testing(f) Reliability Trials(g) Any purpose in connection with Motor Trade.I/ we hereby certify that the Policy to which this Certificate relates as well as this Certificate of\nInsurance are issued in accordance with the provisions of Chapter X and Chapter XI of the Motor\nVehicles Act, 1988.Examined .........(Authorized Insurer)**Motor certificate of Insurance is required to be carried in the vehicle at all times for**\n**the scrutiny of the relevant authorities.****4.** **Policy Document****The policy is a formal document which provides an evidence of the contract of**\n**insurance.** This document has to be stamped in accordance with the provisions of the\nIndian Stamp Act, 1899.A general insurance policy usually contains:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter;\nb) Full description of the property or interest insured;\nc) The location/ s of the property or interest insured under the policy andwhere appropriate, with respective insured values;\nd) Period of insurance;\ne) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likelyto give rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter ofinsurance upon occurrence of an event giving rise to a claim and the rights\nof the insurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman289**Test Yourself 2**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y287", "section": "Important", "chunk_id": "Final IC 38 - WA_Composite  - English_149", "metadata": {"file_size": 20885, "chunk_index": 149, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Authorities.", "Certificate of Insurance – Motor Insurance", "Note:", "CERTIFICATE OF INSURANCE", "This"]}}
{"chunk": "e) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likelyto give rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter ofinsurance upon occurrence of an event giving rise to a claim and the rights\nof the insurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman289**Test Yourself 2**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance\nII. Cover notes are predominantly used in all classes of general insurance\nIII. Cover notes are predominantly used in health insurance\nIV. Cover notes are predominantly used in marine and motor classes of generalinsurance**E.** **Warranties****A warranty is a condition expressly stated in the policy which has to be**\n**literally complied with for validity of the contract. Warranty is not a separate**\n**document. It is part of both cover notes and policy document.** It is a condition\nprecedent to the contract. It must be observed and complied with strictly and\nliterally, irrespective of the fact whether it is material to the risk or not. If a\nwarranty is breached, the policy becomes voidable at the option of the insurers\neven when it is clearly established that the breach has not caused or contributed\nto a particular loss. However, in practice, if the breach of warranty is of a purely\ntechnical nature and does not, in any way, contribute to or aggravate the loss,\ninsurers at their discretion may process the claims according to norms and\nguidelines as per company policy.**1.** **Fire Insurances warranties (some examples) are as given below**Warranted, that no hazards goods shall be stored in the insured premises during\nthe currency of policy.**Silent Risk:** Warranted that no manufacturing activity is carried out in the insured\npremises for consecutive period of 30 days or more.**Cigarette Filter Manufacturing:** Warranted that no solvents having flash point\nbelow 30 [0] C are used/ stored in the premises**2.** In **Marine Insurance, a warranty** is defined as follows: “a promissorywarranty, that is to say, a warranty by which the assured undertake that some\nparticular thing shall or shall not be done, or that some condition will be\nfulfilled, or whereby he affirms or negates the existence of a particular state\nof facts”In **Marine Cargo Insurance, a warranty** is inserted to the effect that goods (e.g.\ntea) are packed in tin-lined cases. In **Marine Hull insurance by inserting a**\n**warranty** that the insured vessel will not navigate in a certain area, gives an idea\nto the insurer about the extent of risk he has agreed to provide cover for. If the\nwarranty is breached, the risk agreed to initially is altered and the insurer is\nallowed to discharge himself from further liability from the date of breach**3.** In **Burglary Insurance**, it is warranted that the property is guarded by awatchman for twenty four hours. The rates, terms and conditions of the policy290continue to be the same only if the warranties attached to the policy are\ncomplied with.**Test Yourself 3**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot bepart of the policy document\nIV. Claims will be payable even if a warranty is breached.**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain\nperils and excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through\na document called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement\ntogether constitute the evidence of the contract. Endorsements may also be issued", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "n289", "section": "Test Yourself 2", "chunk_id": "Final IC 38 - WA_Composite  - English_150", "metadata": {"file_size": 20885, "chunk_index": 150, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Marine Cargo Insurance, a warranty", "Warranties", "Burglary Insurance", "Marine Hull insurance by inserting a", "Endorsements"]}}
{"chunk": "complied with.**Test Yourself 3**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot bepart of the policy document\nIV. Claims will be payable even if a warranty is breached.**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain\nperils and excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through\na document called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement\ntogether constitute the evidence of the contract. Endorsements may also be issued\nduring the currency of the policy to record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy related to:a) Variations/ changes in sum insured\nb) Change of insurable interest by way of sale, mortgage, etc.\nc) Extension of insurance to cover additional perils/ extension of policy period\nd) Change in risk, e.g. change of construction, or occupancy of the building infire insurance\ne) Transfer of property to another location\nf) Cancellation of insurance\ng) Change in name or address etc.**Specimen**For the purpose of illustration, specimen wordings of some endorsements are\nreproduced below:291**Cancellation**At the request of the insured the insurance by this Policy is hereby declared to\nbe cancelled as from ………. The insurance having been in force for a period over\n…………. Months, no refund is due to the Insured.**Test Yourself 4**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**G.** **Interpretation of policies**Contracts of insurance are expressed in writing and the insurance policy wordings\nare drafted by insurers. These policies have to be interpreted according to certain\nwell-defined rules of construction or interpretation which have been established\nby various courts. **The most important rule of construction is that the intention**292**of the parties must prevail and this intention is to be looked for in the policy**\n**itself.** If the policy is issued in an ambiguous manner, it will be interpreted by\nthe courts in favour of the insured and against the insurer on the general principle\nthat the policy was drafted by the latter.**Policy wordings** are understood and interpreted as per the following rules:a) An express condition overrides an implied condition except where there isinconsistency in doing so.\nb) In the event of a contradiction in terms between the standard printedpolicy form and the typed or handwritten parts, the typed or handwritten\npart is deemed to express the intention of the parties in the particular\ncontract, and their meaning will overrule those of the original printedwords.c) If an endorsement contradicts other parts of the contract the meaning ofthe endorsement will prevail as it is the later document.\nd) Clauses in italics over-ride the ordinary printed wording where they areinconsistent.e) Clauses printed or typed in the margin of the policy are to be given moreimportance than the wording within the body of the policy.\nf) Clauses attached or pasted to the policy override both marginal clausesand the clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wordingimpressed by an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts\nas in the case of other contracts.The principal rule of construction is that the intention of the parties of the\ncontract must prevail, that intention must be gathered from the policy document\nitself and the proposal form, clauses, endorsements, warranties etc. attached to\nit and forming a part of the contract.293**2.** **Meaning of wordings**\nThe words used are to be construed in their ordinary and popular sense. **The**\n**meaning to be used for words is the meaning that the ordinary man in the**", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Test Yourself 3", "chunk_id": "Final IC 38 - WA_Composite  - English_151", "metadata": {"file_size": 20885, "chunk_index": 151, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Meaning of wordings", "The", "Construction of policies", "Specimen", "Endorsements"]}}
{"chunk": "f) Clauses attached or pasted to the policy override both marginal clausesand the clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wordingimpressed by an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts\nas in the case of other contracts.The principal rule of construction is that the intention of the parties of the\ncontract must prevail, that intention must be gathered from the policy document\nitself and the proposal form, clauses, endorsements, warranties etc. attached to\nit and forming a part of the contract.293**2.** **Meaning of wordings**\nThe words used are to be construed in their ordinary and popular sense. **The**\n**meaning to be used for words is the meaning that the ordinary man in the**\n**street would construe. Thus, “fire” means flame or actual burning.**On the other hand, **words which have a common business or trade meaning will**\n**be construed with that meaning unless the context of the sentence indicates**\n**otherwise** . Where words are defined by statute, the meaning of that definition\nwill be used, such as “theft” as in the Indian Penal Code.Many words used in insurance policies have been the subject of previous legal\ndecisions and those decisions of a higher court will be binding on a lower court\ndecision. Technical terms must always be given their technical meaning, unless\nthere is an indication to the contrary.**H.** **Renewal Notice****Most of the non-life insurance policies are insured on annual basis.**Although there is no legal obligation on the part of insurers to advise the insured\nthat his policy is due to expire on a particular date, yet as a matter of courtesy\nand healthy business practice, insurers issue a renewal notice in advance of the\ndate of expiry, inviting renewal of the policy. The notice incorporates all the\nrelevant particulars of the policy such as sum insured, the annual premium, etc.\nIt is also the practice to include a note advising the insured that he should\nintimate any material alterations in the risk.**In motor renewal notice, for example, the insured’s attention is to be drawn**\n**to revise the sum insured (i.e. the Insured’s Declared Value of the vehicle) in**\n**the light of current requirements.**The insured’s attention is also to be invited to the statutory provision that no risk\ncan be assumed unless the premium is paid in advance.**Test Yourself 5**Which of the following statements is correct with regards to renewal notice?I. As per regulations there is a legal obligation on insurers to send a renewalnotice to insured, 30 days before the expiry of the policy\nII. As per regulations there is a legal obligation on insurers to send a renewalnotice to insured, 15 days before the expiry of the policy\nIII. As per regulations there is a legal obligation on insurers to send a renewalnotice to insured, 7 days before the expiry of the policy\nIV. As per regulations there is no legal obligation on insurers to send a renewalnotice to insured before the expiry of the policy294**Summary**a) The first stage of documentation is essentially the proposal forms throughwhich the insured informs about himself/ herself\nb) The duty of disclosure of material information arises prior to the inception ofthe policy, and continues even after the conclusion of the contract\nc) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance isknown as underwriting.\ng) Premium is the consideration or amount paid by the insured to the insurer forinsuring the subject matter of insurance, under a contract of insurance.\nh) Payment of premium can be made by cash, any recognised banking negotiableinstrument, postal money order, credit or debit card, internet, e-transfer,\ndirect credit or any other method approved by IRDAI from time to time.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y294", "section": "Important", "chunk_id": "Final IC 38 - WA_Composite  - English_152", "metadata": {"file_size": 20885, "chunk_index": 152, "chunk_tokens": 985, "has_examples": true, "has_tables": false, "key_concepts": ["On the other hand,", "The", "Meaning of wordings", "Construction of policies", "Renewal Notice"]}}
{"chunk": "c) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance isknown as underwriting.\ng) Premium is the consideration or amount paid by the insured to the insurer forinsuring the subject matter of insurance, under a contract of insurance.\nh) Payment of premium can be made by cash, any recognised banking negotiableinstrument, postal money order, credit or debit card, internet, e-transfer,\ndirect credit or any other method approved by IRDAI from time to time.\ni) A cover note is issued when preparation of policy is pending or whennegotiations for insurance are in progress and it is necessary to provide\ninsurance cover on provisional basis.\nj) Cover notes are used predominantly in marine and motor classes of business.\nk) A certificate of insurance provides existence of insurance in cases where proofmay be required\nl) The policy is a formal document which provides an evidence of the contractof insurance.\nm) A warranty is a condition expressly stated in the policy which has to beliterally complied with for validity of the contract.\nn) If certain terms and conditions of the policy need to be modified at the timeof issuance or during the policy tenure, it is done by setting out the\namendments/ changes through a document called endorsement.\no) The most important rule of construction is that the intention of the partiesmust prevail and this intention is to be looked for in the policy itself.295**Key Terms**a) Policy form\nb) Advance payment of premium\nc) Cover note\nd) Certificate of Insurance\ne) Renewal notice\nf) Warranty**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is IV.296## CHAPTER G-02## UNDERWRITING AND RATE MAKING**Chapter Introduction**We have learnt various concepts and principles related to general insurance.\nUnderwriting is the process by which the Insurer decides whether to accept a risk\nor not. For this, the underwriters analyse the risk. They understand how risky the\nrisk is. Also, how much of money should be collected as premium. Again,\nsometimes the risks can be accepted only subject to conditions to improve the\nrisk. All these angles are discussed in this chapter.**Learning Outcomes**After studying this chapter, you should be able to:1. Understand Physical hazards\n2. Appreciate Underwriting as a function\n3. Methods used by underwriters to reduce the risk\n4. Understand how the Sum Insured is fixed.297**A.** **Physical Hazards**A thorough knowledge of various hazards to which property and persons are\nexposed is most essential for underwriting.Physical hazard can be ascertained from the information given in a proposal form.\nIt can be better ascertained by a survey or inspection of the risk. The following\nare some examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in wallsand roof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors\ninvolve risk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower\nfloors through falling machinery or goods from upper floors.**iv.** **Occupancy:** The occupancy of a building, and the purpose for which it isused. Various types of hazards arise from occupancy.**v.** **Ignition hazard:** Buildings in which chemicals are produced or used in largequantity involve a considerable **ignition hazard** . A timber yard presents a\n**high combustibility hazard** because once a fire starts, timber burns quickly.\nThe contents may be highly susceptible to damage in the event of fire.For example, paper, clothing etc. are susceptible not only to fire damage", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "G-02", "section": "Key Terms", "chunk_id": "Final IC 38 - WA_Composite  - English_153", "metadata": {"file_size": 20885, "chunk_index": 153, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Ignition hazard:", "Answer 3", "Physical Hazards"]}}
{"chunk": "are some examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in wallsand roof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors\ninvolve risk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower\nfloors through falling machinery or goods from upper floors.**iv.** **Occupancy:** The occupancy of a building, and the purpose for which it isused. Various types of hazards arise from occupancy.**v.** **Ignition hazard:** Buildings in which chemicals are produced or used in largequantity involve a considerable **ignition hazard** . A timber yard presents a\n**high combustibility hazard** because once a fire starts, timber burns quickly.\nThe contents may be highly susceptible to damage in the event of fire.For example, paper, clothing etc. are susceptible not only to fire damage\nbut also to damage by water, heat etc.**vi.** **The process of manufacture:** If work is carried during the night, the hazardis increased due to the use of artificial lights, continuous use of machinery\nleading to friction and the likely carelessness of workers due to fatigue.**vii.** **Situation/ location of risk:** Location in a congested area, exposure tohazardous adjacent premises and distance from the fire brigade is an\nexample of physical hazard.**b)** **Marine****i.** **The age and condition of vessel: Older vessels are inferior risks.****ii.** **The voyage to be undertaken: The route of the voyage, loading and****unloading conditions and warehousing facilities at the ports are factors.****iii.** **The nature of the stocks: Articles of high value are exposed to theft;****machinery is liable to breakage in transit.****iv.** **The method of packing: Cargo packed in bales is considered to be better****than cargo in bags. Again, double bags are safer than single bags. Liquid**\n**cargo in second-hand drums constitute bad physical hazard.**298**c)** **Motor****i.** **The age and condition of the vehicle:** Older vehicles are more prone toaccidents.**ii.** **The type of vehicle:** Sports cars involve greater physical hazard etc.**d)** **Burglary****i.** **The nature of the stocks:** Articles of high value in small bulk (e.g.Jewellery) and easily disposable are considered to be bad risks.**ii.** **Situation:** Ground floor risks are inferior to upper floor risks: privatedwellings situated in isolated areas are hazardous.**iii.** **Constructional hazard** : Too many doors and windows constitute badphysical hazard.**e)** **Personal accident****i.** **The age of the person:** Very old persons are accident prone; besides theywill take longer to recover in the event of an accident.**ii.** **Nature of occupation:** Jockeys, mining engineers, manual workers areexamples of bad physical hazard.**iii.** **Health and physical condition:** A person suffering from Diabetes may notrespond to surgical treatment in the event of accidental bodily injury.**B.** **Physical Hazards – Importance of Risk Management, Clauses and Rating**Underwriters use the following methods to deal with physical hazards: Loading of premium Applying warranties on the policy Applying certain clauses Imposition of excess/ deductibles Restricting the cover granted Declinature of cover**a)** **Loading of premium**There may be some adverse features in a risk exposure for which the underwriters\nmay decide to charge an extra premium before acceptance of the same. By\nloading the premium the higher probability of claims or occurrence of large claims\nis taken into consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.299In personal accident insurance if the insured is engaged in hazardous pursuits like\nmountaineering, racing on wheels, big game hunting etc. extra premium is\ncharged.Sometimes loading of premium is also done for adverse claims ratio, as in case of\nmotor insurance or health insurance policies.**b)** **Imposition of warranties**Insurers incorporate appropriate warranties to reduce the physical hazard. Some", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Fire", "chunk_id": "Final IC 38 - WA_Composite  - English_154", "metadata": {"file_size": 20885, "chunk_index": 154, "chunk_tokens": 982, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "The type of vehicle:", "Situation:", "Nature of flooring:", "The age of the person:"]}}
{"chunk": "may decide to charge an extra premium before acceptance of the same. By\nloading the premium the higher probability of claims or occurrence of large claims\nis taken into consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.299In personal accident insurance if the insured is engaged in hazardous pursuits like\nmountaineering, racing on wheels, big game hunting etc. extra premium is\ncharged.Sometimes loading of premium is also done for adverse claims ratio, as in case of\nmotor insurance or health insurance policies.**b)** **Imposition of warranties**Insurers incorporate appropriate warranties to reduce the physical hazard. Some\nexamples are provided below.**Example****i.** **Marine cargo:** A warranty is inserted to the effect that goods (e.g. Tea) arepacked in tin lined cases.**ii.** **Burglary:** It is warranted that the property is guarded by a watchman fortwenty four hours.**iii.** **Fire:** In fire insurance, it is warranted the premises would not be used beyondnormal working hours.**iv.** **Motor:** It is warranted that the vehicle will not be used for speed testing orracing.**Example****Marine cargo:** Small damage to parts may cause costly machinery to be a\nconstructive total loss. Such machinery are subject to the Replacement Clause,\nwhich limits underwriter’s liability only to the cost of replacing, forwarding and\nrefitting any broken part.Cast pipes, hard board sometimes get damaged only at the edges. Marine policies\non cast pipes, hardboard etc., are subject to the cutting clause warranting that\nthe damaged portion should be cut off and the balance utilised.**c)** **Deciding on Excess/ Deductibles and Restricting the Cover**When the loss amount exceeds the deductible/ excess mentioned the balance is\npaid under 'excess' clause. Loss below the limit is not payable.The object of these clauses is to eliminate small claims. As the insured is made\nto pay part of a loss, he is encouraged to exercise more care and to practice loss\nprevention.**Example****i.** **Motor** : A proposal for an old motor vehicle will not be accepted oncomprehensive terms but insurers will offer a restricted cover i.e. against\nthird party risks only.300**ii.** **Personal accident** : A personal accident proposer who has crossed themaximum acceptance age limit may be covered for death risk only instead\nof on comprehensive terms i.e. including disablement benefits.**d)** **Discounts**Lower rates are charged or a discount is given in the normal premium if the risk\nis favourable. The following features are considered to contribute to\nimprovement of risk in fire insurance.i. Installation of sprinkler system within the premisesii. Installation of hydrant system in the compoundiii. Installation of hand appliances consisting of buckets, portableextinguishers and manual fire pumpsiv. Installation of automatic fire alarm**Example**Under **motor insurance** a discount in the premium is provided if the motor cycle\nis always used with a side-car attached, as this feature contributes to improved\nrisk because of the greater stability of the vehicle.In **marine insurance**, the insurer may consider giving discounts on premium for\n“Full Load” container as this reduces the incidence of theft and shortage.Under a **group personal accident** cover, discounts would be given for coverage\nof a large group, which reduces the administrative work and expenses of the\ninsurer.**e)** **No claim bonus (NCB)**A certain percentage is given as bonus for every claim free renewal year with a\nlimit to the maximum bonus that can be availed. It is allowed by way of deduction\non the total premium at renewal only, depending upon the incurred claim ratio\nfor the entire group or to Motor vehicle Own damage policy holders for claim freeyears.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of\nmoral hazard in the insured. It rewards the insured for not lodging claims either\nby adopting better driving skills as in motor insurance or taking better care of his\nhealth in Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.301**C.** **Moral hazard**Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 - WA_Composite  - English_155", "metadata": {"file_size": 20885, "chunk_index": 155, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "Discounts", "Moral hazard", "Imposition of warranties", "Fire:"]}}
{"chunk": "limit to the maximum bonus that can be availed. It is allowed by way of deduction\non the total premium at renewal only, depending upon the incurred claim ratio\nfor the entire group or to Motor vehicle Own damage policy holders for claim freeyears.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of\nmoral hazard in the insured. It rewards the insured for not lodging claims either\nby adopting better driving skills as in motor insurance or taking better care of his\nhealth in Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.301**C.** **Moral hazard**Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,\nan honest insured may be tempted to stage a loss, if he happens to be in\nfinancial difficulties.**b)** **Carelessness**Indifference towards loss is an example of carelessness. Because of the\nexistence of insurance, the insured may tend to adopt a careless attitude\ntowards the insured property.If the insured does not take the same care of the property as a prudent and\nreasonable man would if he were uninsured the moral hazard is\nunsatisfactory.**c)** **Industrial relations**Employer-employee relationship may involve an element of bad moral hazard.**d)** **Wrong claims**This kind of moral hazard arises when claims occur. An insured may not\ndeliberately bring about a loss but once a loss occurs, he would attempt to\ndemand unreasonably high amount of compensation, in total disregard of the\nprinciple of indemnity.**Information****Sub-limits:** The insurer may impose a limit on the total pay-out separately each\nfor room expenses, surgical procedures or doctor fees to check the inflated bills.**Where the moral hazard of the insured is suspected, the agent should not**\n**entertain or bring such proposals to the insurance company. S/ he should also**\n**bring such issues before the insurance company officials.****1.** **Short period scales**Normally, premium rates are quoted for a period of twelve months. If a policy is\ntaken for a shorter period, the premium is charged according to a special scale,\nknown as short period scale. The premium chargeable for short period insurance\nis not on proportionate basis.**Need for short period scales**a) These rates are applied because the expenses involved in the issue of thepolicy whether for a 12 months period or a shorter period, are almost thesame.302b) Further, an annual policy requires renewal procedure only once during a yearwhereas short period insurances involve more frequent renewals. If a\nproportionate premium is allowed, there would be a tendency on the part of\nthe insured to go on taking short period policies and thereby, in effect, pay\npremiums in instalments.c) Besides, some insurance are seasonal in character and the risk is greaterduring that season. Insurances are sometimes taken during such period when\nthe risk is greatest and thereby selection takes place against the insurers.\nShort period scales are evolved to prevent such selection against the insurers.\nThey are also applicable when annual insurance is cancelled by the insured.\nIn that case refund is made keeping the premium on short period scale for the\nperiod Insurer was in risk.**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "No claim bonus is a powerful strategy to improve underwriting experience and", "chunk_id": "Final IC 38 - WA_Composite  - English_156", "metadata": {"file_size": 20885, "chunk_index": 156, "chunk_tokens": 994, "has_examples": true, "has_tables": false, "key_concepts": ["Carelessness", "Sub-limits:", "Information", "Moral hazard", "Need for short period scales"]}}
{"chunk": "In that case refund is made keeping the premium on short period scale for the\nperiod Insurer was in risk.**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points\nwhich have to be borne in mind while deciding the sum insured:**a)** **Personal accident insurance** : The sum insured offered by a company can be afixed amount or it can also be based on the insured’s income. Some insurance\ncompanies may give a benefit equal to 60 times or 100 times of the insured’s\nmonthly income for a particular disability. There could be an upper limit or\n‘cap’ on the maximum amount. Compensations can vary from company to303company. In group personal accident policies the sum insured may be fixed\nseparately for each insured person or may be linked to emoluments payable to\nthe insured person.**b)** **Motor insurance** : In case of motor insurance the sum insured is the insured'sdeclared value [IDV]. It is the value of the vehicle, which is arrived at by\nadjusting the current manufacture's listed selling price of the vehicle with\ndepreciation percentage as prescribed in the erstwhile India Motor Tariff.\nManufacturer's listed selling price will include local duties/ taxes excluding\nregistration and insurance.IDV = (Manufacturer’s listed selling price – depreciation) + (Accessories that\nare not included in listed selling price-depreciation) and excludes registration\nand insurance costs.The IDV of vehicles that are obsolete or aged over 5 years is calculated by\nmutual agreement between insurer and the insured. Instead of depreciation,\nIDV of old cars is arrived at by assessment of vehicle’s condition done by\nsurveyors, car dealers etc.IDV is the amount of compensation given in case a vehicle is stolen or suffers\ntotal loss. It is highly recommended to get IDV which is near the market value\nof the car. Insurers provide a range of 5% to 10% to decrease IDV to the insured.\nLess IDV would mean lesser premium.**c)** **Fire insurance:** In fire insurance the sum insured may be fixed on the basis ofindemnity or reinstatement value for buildings/ plant and machinery and\nfixtures. Contents are covered on the basis of their market value which is cost\nof the item less depreciation. (Reinstatement value is explained in detail in\nChapter 28 - Commercial Insurance)**d)** **Stocks insurance:** In case of stocks, sum insured is their market value. Theinsured will be reimbursed at the cost at which these stocks can be purchased\nin the market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured isas per the agreement between insurer and insured at the time of contract.\nNormally it would consist of the sum of cost of the commodity plus Insurance\n+ freight i.e. CIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.304**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "o303", "section": "Minimum premium", "chunk_id": "Final IC 38 - WA_Composite  - English_157", "metadata": {"file_size": 20885, "chunk_index": 157, "chunk_tokens": 964, "has_examples": false, "has_tables": false, "key_concepts": ["Fire insurance:", "Marine cargo insurance:", "Test Yourself 1", "Motor insurance", "Minimum premium"]}}
{"chunk": "in the market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured isas per the agreement between insurer and insured at the time of contract.\nNormally it would consist of the sum of cost of the commodity plus Insurance\n+ freight i.e. CIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.304**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of\nnegligence against him.I. Personal accident insuranceII. Professional Liability insuranceIII. Marine hull insuranceIV. Health insurance**Summary**a) Process of classifying risks and deciding into which category they fall isimportant for rate making.b) Underwriting is the process of determining whether a risk offered forinsurance is acceptable, and if so, at what rate, terms and conditions the\ninsurance cover will be accepted.c) A rate is the price of a given unit of insurance.d) The basic objective of rate making is to ensure that price of insurance shouldbe adequate and reasonable.e) ‘Pure premium’ is suitably loaded or increased by adding percentages toprovide for expenses, reserves and profits.f) The term hazard in insurance language refers to those conditions or featuresor characteristics which create or increase the chance of loss arising from a\ngiven peril.g) The objective of imposing deductible/ excess clauses is to eliminate smallclaims.h) No claim bonus is a powerful strategy to improve underwriting experience andforms an integral part of rating systems.i) Sum insured is the maximum amount that an insurance company willindemnify as per policy condition.**Key terms**a) Underwritingb) Rate makingc) Physical hazardsd) Moral hazardse) Indemnity305f) Loading of premiumg) Warrantiesh) Deductiblesi) Excess**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.306## CHAPTER G-03## PERSONAL AND RETAIL INSURANCE**Chapter Introduction**In the previous chapters we have learnt various concepts and principles related\nto general insurance. General insurance products are classified differently in\ndifferent markets. Some classify them as property, casualty and liability.\nElsewhere, they are grouped as fire, marine, motor and miscellaneous. In this\nchapter, common products such as personal accident, travel, home and shop\nkeepers and motor insurance that are bought by such retail customers are\ndiscussed.**Learning Outcomes**After studying this chapter, you should be able to:1. Explain householder’s insurance\n2. Prepare shop insurance cover\n3. Discuss motor insurance307**A.** **Retail Insurance Products**There are some insurance products that are purchased for individuals for covering\ncertain interests. Though small commercial or business interests could be there\nfor such insurances, these are generally sold to individuals. In some markets these\nare called ‘small ticket’ policies or ‘retail policies’ or ‘retail products’. Insurances\nof the home, motor cars, two-wheelers, small businesses like shops etc. fall under\nthis category. These products are usually sold by the same agents/ distribution\nchannels that deal with personal lines of insurance as the buyers also are\nessentially from the same consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’sPolicy, Office Package Policy etc. that, under one policy, seek to cover various\nphysical assets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y305", "section": "Marine cargo insurance:", "chunk_id": "Final IC 38 - WA_Composite  - English_158", "metadata": {"file_size": 20885, "chunk_index": 158, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Retail Insurance Products", "Marine cargo insurance:"]}}
{"chunk": "channels that deal with personal lines of insurance as the buyers also are\nessentially from the same consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’sPolicy, Office Package Policy etc. that, under one policy, seek to cover various\nphysical assets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.\niv. Package covers could have common terms and conditions for all sections asalso specific terms for specific sections of the policy.I.**D.** **Shopkeeper’s Insurance**A shop owner is not a corporate house that has large reserves of money to restart\nbusiness. A single mishap may lead to closure of her/ his shop and could probably\nruin her/ his family. There may be bank loans also to repay. There is always the\npossibility that a member of the public suffers a personal injury or damage to\nher/ his property, caused by the shop owner’s operations and a court holds the\nshop owner liable to pay the damages. Such situations can also ruin a shopkeeper.\nTherefore, it's very essential to secure this means of livelihood.308**Shopkeeper’s Insurance policies are devised to cover many of such aspects of**\n**commercial shop/ retail business.** There are policies that are customised to\ncover specific interests of many types of shops such as antique shop, barbershop,\nbeauty parlour, bookstore, department store, dry cleaners, gift shop, pharmacy,\nstationery shop, toy shop, apparel store etc.**1.** **What does shopkeeper’s insurance cover?**The policy can be tailored to provide cover to protect the specific areas of retail\nbusiness. It usually covers damage to the shop structure and contents due to fire,\nearthquake, flooding or malicious damage; and burglary. Shop insurance can also\ninclude business interruption protection. This will cover any loss of income or\nadditional expenditure in the event of operation of unexpected peril causing\ninterruption of business operation. The coverage can be selected by the insured\ndepending on her/ his range of activities.The additional covers the insured can opt may vary from insurer to insurer and\ncan be verified from the respective websites of the non-life insurance companies.\nThese could be:**i.** **Burglary and Housebreaking:** Cover for housebreaking, theft, and larceny\nof office content\n**ii.** **Machinery Breakdown:** Cover for breakdown of electrical/ mechanicalappliances\n**iii.** **Electronic Equipment and Appliances:** Provides all-risk cover for electronic appliances\n Cover for loss of electronic installations\n**iv.** **Money Insurance** : Provides coverage against loss of money due to anaccident while it is in: Transit from the business premises to bank and vice versa\n A safe at the business premises\n A till (box/ drawer/ counter) at the business premises\n**v.** **Baggage** : Compensates for loss of baggage while on travel for officialpurposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage****to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course ofemployment\n Provides cover for legal liability to third parties309Fire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be\ntaken separately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s309", "section": "B.", "chunk_id": "Final IC 38 - WA_Composite  - English_159", "metadata": {"file_size": 20885, "chunk_index": 159, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Machinery Breakdown:", "Personal Accident", "Shopkeeper’s Insurance", "Baggage", "What does shopkeeper’s insurance cover?"]}}
{"chunk": " A till (box/ drawer/ counter) at the business premises\n**v.** **Baggage** : Compensates for loss of baggage while on travel for officialpurposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage****to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course ofemployment\n Provides cover for legal liability to third parties309Fire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be\ntaken separately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is\nusually a package of all the needs of a Householder.Losses normally covered include fire, lightning, explosion and aircraft fall/\nimpact damage (commonly known as FLEXA); storm, tempest, flood and\ninundation (commonly known as STFI); and burglary. Coverage differs from\ncompany to company and from policy to policy.Apart from the structure, it covers the contents of the house against burglary,\nhousebreaking, larceny and theft. Jewellery whilst being worn or kept in locked\nsafe can also be insured under Householder’s Insurance. Cover is also given for\nelectrical and mechanical failure of domestic and electronic appliances.Similarly, Householder’s insurance Package also provides coverage for loss of\npersonal baggage, lost during travel, or liabilities to neighbours/ visitors may also\nbe part of Householders’ insurance package. Some insurers also provide coverage\nfor pedal cycle, personal accident and workmen’s compensation.IRDAI has introduced a standard product with effect from 1st April, 2021 – Bharat\nGriha Raksha policy with a tenure of upto 10 years, which shall be mandatorily\noffered by all general insurers carrying on Fire and allied perils insurance\nbusiness.**Bharat Griha Raksha (meant for Home Building and Home Contents) policy**\noffers cover against a wide range of perils, namely Fire, Natural Catastrophe,\nForest, Jungle and Bush fires, Impact Damage of any kind, Riot, Strike, Malicious\nDamages, Acts of terrorism, Bursting and overflowing of water tanks, apparatus\nand pipes, Leakage from automatic sprinkler installations and Theft within 7 days\nfrom the occurrence of any of the aforesaid events. This policy can be for a period\nof 1 to 10 years.In addition to the Home Building, the policy covers General Home Contents\nautomatically (without any need for declaration of details) for 20% of the Sum\nInsured of the Building subject to a maximum of Rs.10 lakhs. One can also opt for\na higher Sum Insured for general contents by declaring the details.The policy offers two optional covers, namely (i) Insurance for Valuable Contents\nlike jewellery and curios; and (ii) Personal Accident of the insured and spouse\ndue to an insured peril under the policy.310The policy gives complete waiver of underinsurance. That is, if the Sum Insured\ndeclared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value\nof assets, therefore, it may not be difficult to arrive at the sum insured. In the\ncase of shop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two\nmethods of fixing the sum insured, viz. market value and reinstatement/\nreplacement value.For additional coverage like money, baggage, personal accident the premium\nwould depend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the\ncase of M.V., in the event of a loss, depreciation is levied on the asset\ndepending on its age. Under this method, the insured is not paid amount", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s309", "section": "Baggage", "chunk_id": "Final IC 38 - WA_Composite  - English_160", "metadata": {"file_size": 20885, "chunk_index": 160, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Personal Accident", "Baggage", "Householder’s Insurance", "Legal Liability:", "Sum Insured and Premium"]}}
{"chunk": "declared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value\nof assets, therefore, it may not be difficult to arrive at the sum insured. In the\ncase of shop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two\nmethods of fixing the sum insured, viz. market value and reinstatement/\nreplacement value.For additional coverage like money, baggage, personal accident the premium\nwould depend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the\ncase of M.V., in the event of a loss, depreciation is levied on the asset\ndepending on its age. Under this method, the insured is not paid amount\nsufficient to replace the property.ii. In the RIV method, the insurance company will pay the cost of replacementsubject to ceiling of sum insured. Under this method, no depreciation is\nlevied. One condition is that the damaged asset should be repaired/ replaced\nin order to get the claim. It may be noted that RIV method is allowed only for\nfixed assets and not for other assets like stocks and stocks in process.Most policies insure the structure of the home for its reconstruction, which is\ncalled ‘reinstatement value’ (and not on ‘market value’). Reinstatement value is\nthe cost incurred to reconstruct the home if it is damaged. On the other hand,\nmarket value depends on factors like age of the property, depreciation, etc.Sum insured is generally calculated by multiplying the built up area of insured's\nhome with the construction rate per square foot. The contents of the home furniture, durables, clothes, utensils, etc. - are valued on market value basis i.e.\nthe current market value of similar items after depreciation.Premium would depend on the value insured and the coverage taken.311**Test Yourself 1**Which of the below statements is correct with regards to a package policy?I. Package Policy provide a combination of covers under a single document\nII. Package Policy can cover only physical assets like buildings\nIII. A named peril policy or package policy comes at the same price.\nIV. Only named peril policies can be bought and package policies are notavailable.V.\n**Definition****Some important definitions****a)** **Burglary** means the unforeseen and unauthorised entry to or exit from theinsured premises by aggressive and detectable means with the intent to steal\ncontents there from.**b)** **Housebreaking** is said to have taken place when a house trespass has beencommitted by entering it for the purpose of committing an offence.**c)** **Robbery** means the theft of contents at the insured’s premises usingaggressive and violent means against the Insured and/ or insured’s employees.**d)** **Safe** means a strong cabinet within the insured’s premises designed for thesafe and secure storage of valuable items, and access to which is restricted.**e)** **Theft** is a generic term for all crimes in which a person intentionally andfraudulently takes the property of another without permission or consent and\nwith the intent to convert it to the taker’s use or potential sale. Theft is\nsynonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed\nplate glass and sanitary fittings’ cover. This will cover accidental loss of damage to\nwhich of the following?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and\ntaken it for a drive. Out of nowhere, a dog comes in the way and to avoid hitting312it, Revathi swerves sharply, breaks and goes over the divider, hits another car\nand injures a person walking on the road. The outcome of a single incident has\nresulted in damage to Revathi’s own car, public property, another car and also\ncaused injury to another person.In this scenario, if Revathi does not have a car insurance, she may end up paying\nfar more than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "g312", "section": "F.", "chunk_id": "Final IC 38 - WA_Composite  - English_161", "metadata": {"file_size": 20885, "chunk_index": 161, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Housebreaking", "Burglary", "Motor Insurance", "Theft"]}}
{"chunk": "synonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed\nplate glass and sanitary fittings’ cover. This will cover accidental loss of damage to\nwhich of the following?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and\ntaken it for a drive. Out of nowhere, a dog comes in the way and to avoid hitting312it, Revathi swerves sharply, breaks and goes over the divider, hits another car\nand injures a person walking on the road. The outcome of a single incident has\nresulted in damage to Revathi’s own car, public property, another car and also\ncaused injury to another person.In this scenario, if Revathi does not have a car insurance, she may end up paying\nfar more than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?\n What if they don't have insurance?That is why the laws of the land make it mandatory to have third-party liability\ninsurance. While motor insurance does not prevent these things from happening,\nit provides a financial security blanket for the owner.Apart from an accident, the car can also be stolen, damaged by an accident or\ndestroyed by fire and the owner would suffer financially.Motor insurance must be taken by a vehicle owner (i.e. the person in whose name\nthe vehicle is registered with the Regional Transport Authority in India.)**Important****Mandatory Third Party Insurance**As per the Motor Vehicles Act, 1988, it is mandatory for every owner of a vehicle\nplying on public roads, to take an insurance policy, to cover the amount, which\nthe owner becomes legally liable to pay as damages to third parties as a result of\naccidental death, bodily injury or damage to property. A Certificate of Insurance\nmust be carried in the vehicle as a proof of such insurance.**1.** **Motor insurance coverage**The country has a large vehicle population. A number of new vehicles keep\ncoming on to the road every day. Many of them are very costly as well. People\nsay that in India, vehicles do not get junked, but only keep changing hands. This\nmeans that old vehicles continue to be on the road and new vehicles get added.\nThe area of the roads (the space for driving) is not growing correspondingly with\nthe number of vehicles. The number of people walking on the road is also\nincreasing. Police and hospital statistics say that the number of road accidents in\nthe country is increasing. The amount of compensations awarded to accident\nvictims by Courts of Law are increasing. Even vehicle repair costs are going up.\n**All these show the importance of motor insurance in the country.**Motor insurance covers the loss of vehicles and the damages to them due to\naccidents and some other reasons. Motor insurance also covers the legal liability313of vehicle owners to compensate the victims of the accidents caused by their\nvehicles.Despite, the government mandate, all the vehicles in the country are not insured.**Motor Insurance covers all types of vehicles plying on public roads such as:** Two wheelers\n Private cars\n All types of commercial vehicles: Goods carrying and passenger carrying\n Miscellaneous type of vehicles e.g. cranes,\n Motor Trade (Vehicles in Showrooms and Garages)**‘Third-Party Insurance’**An insurance policy purchased for protection against the legal actions of another\nparty. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any\nvehicle plying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury\ncaused by a motor accident are to be filed by the complainant in Motor Accident\nClaim Tribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "g312", "section": "Test Yourself 2", "chunk_id": "Final IC 38 - WA_Composite  - English_162", "metadata": {"file_size": 20885, "chunk_index": 162, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Motor insurance coverage", "Motor Insurance", "Important", "Mandatory Third Party Insurance", "Test Yourself 2"]}}
{"chunk": "party. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any\nvehicle plying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury\ncaused by a motor accident are to be filed by the complainant in Motor Accident\nClaim Tribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident\ncover for Owner-Driver effective 1st January, 2019. The Cover is provided to the\nOwner-Driver whilst driving the vehicle including mounting into/ dismounting\nfrom or traveling in the insured vehicle as a co-driver. However, the policyholder\ncan choose to opt for the CPA cover as part of the Liability Only policy or the\nPackage policy. In the event the policyholder chooses to take a stand-alone CPA\npolicy, the CPA cover offered as part of Liability only or Package policy shall be\ndeleted.314**Package/ Comprehensive Policy: (Own Damage + Third Party Liability)**In addition to the above, the loss or damage to the vehicle insured by specified\nperils (known as own damage to motor vehicles) is also covered subject to the\nvalue declared (called IDV – discussed above) other terms and conditions in the\npolicy. Some of these perils are fire, theft, riot and strike, earthquake, flood,\naccident etc.Some insurers may also pay for towing charges from the place of accident to the\nworkshop. A restricted cover is also available covering the risk of fire and/ or\ntheft only, in addition to the compulsory cover granted under Act (Liability) Only\nPolicy.The policy can also cover loss or damage to accessories fitted in the vehicle,\npersonal accident cover under private car policies for passengers, paid driver;\nlegal liability to employees and non-fare paying passengers in commercial\nvehicles. Insurers also provide free emergency services or use of alternative car\nin case of breakdown.**2.** **Exclusions**Some of the important exclusions under the policies are wear and tear,\nbreakdowns, consequential loss, and loss due to driving with invalid driving\nlicense or under the influence of alcohol. Use of vehicle not in accordance with\n`limitations as to use ' (e.g. private car being used as a taxi) is not covered.**3.** **Sum Insured and Premium**The sum insured of a vehicle in a Motor Policy is referred to as Insured's Declared\nValue (IDV).In case of theft of vehicle or total damage beyond repairs in an accident, the\nclaim amount will be determined on the basis of the IDV.Rating/ premium calculation depends on factors like the Insured's Declared Value,\ncubic capacity, geographical zone, age of the vehicle etc.**Test Yourself 3**Motor insurance should be taken in whose name?I. In the name of the vehicle owner whose name is registered with RegionalTransport Authority\nII. If the person who will be driving the vehicle is different from the owner, thenin the name of the person who will be driving the vehicle, subject to approval\nfrom Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primarypolicy should be in the name of the vehicle owner and additional policies315should be purchased in the names of all the people who will be driving the\nvehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred toan insured property from hazards or events named in the policy. The perils\ncovered will be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire,riots, bursting of pipes, earthquakes etc. Apart from the structure, it covers\nthe contents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s315", "section": "Two important types of covers that are popular in the market are discussed", "chunk_id": "Final IC 38 - WA_Composite  - English_163", "metadata": {"file_size": 20885, "chunk_index": 163, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Exclusions", "Test Yourself 3", "Sum Insured and Premium", "Summary", "Act [Liability] Only Policy:"]}}
{"chunk": "from Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primarypolicy should be in the name of the vehicle owner and additional policies315should be purchased in the names of all the people who will be driving the\nvehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred toan insured property from hazards or events named in the policy. The perils\ncovered will be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire,riots, bursting of pipes, earthquakes etc. Apart from the structure, it covers\nthe contents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).\ne) Shopkeeper’s insurance usually covers damage to the shop structure andcontents due to fire, earthquake, flooding or malicious damage; and burglary.\nShop insurance can also include business interruption protection.\nf) Motor insurance covers the loss of vehicles and the damages to them due toaccidents and some other reasons. Motor insurance also covers the legal\nliability of vehicle owners to compensate the victims of the accidents caused\nby their vehicles. Compulsory Personal Accident cover for Owner-Driver is\nprovided to whilst driving the vehicle including mounting into/ dismounting\nfrom or traveling in the insured vehicle as a co-driver.**Key terms**a) Householder’s insurance\nb) Shopkeeper’s insurance\nc) Motor insurance**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is I.316## CHAPTER G-04## COMMERCIAL INSURANCE**Chapter Introduction**In the previous chapter we considered various kinds of insurance products that\ncover the risks faced by individuals and households. There is another set of\ncustomers who have other needs for protection. These are the commercial or\nbusiness enterprises or firms, who are engaged in or deal with of various kinds of\ngoods and services. In this chapter we shall consider the insurance products\navailable to cover the risks faced by this segment.**Learning Outcomes**After studying this chapter, you should be able to understand the importance and\nbasic purposes of the 11 types of insurances discussed.317**A.** **Property/ Fire Insurance**Commercial enterprises are broadly divided into two types: Small and Medium Enterprises [SMEs]Bharat Sookshma PolicyBharat Laghu Policy Large Business Enterprises-Standard fire and Special Perils Policy (SFSP), IAR etc.Historically, general insurance sector has largely developed by catering to the\nneeds of these customers.Selling general insurance products to commercial enterprises calls for a careful\nmatching of insurance products with their needs. Agents must have a proper\nunderstanding of the products available. Let us briefly consider some of these\ngeneral insurance products.**1. Standard Fire and Special Perils Policy (SFSP)**Fire insurance policy is suitable for commercial establishments as well as for the\nowner of property, one who holds property in trust or in commission and for,\nindividuals/ financial institutions who have financial interest in the property.All immovable and movable property located at a particular premises such as\nbuildings, plant and machinery, furniture, fixtures, fittings and other contents,\nstocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild\nand renew the property damaged to bring back the business to its normal course.\nIt is here that fire insurance plays its role.**2.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile\nAll India Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood andinundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation318 Bush fireThere are two important features which differentiate commercial insurance from", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s315", "section": "Summary", "chunk_id": "Final IC 38 - WA_Composite  - English_164", "metadata": {"file_size": 20885, "chunk_index": 164, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Answer 1"]}}
{"chunk": "stocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild\nand renew the property damaged to bring back the business to its normal course.\nIt is here that fire insurance plays its role.**2.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile\nAll India Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood andinundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation318 Bush fireThere are two important features which differentiate commercial insurance from\nindividual and retail lines.a) The insurance needs of firms or business enterprises are much larger than thatof individuals. The reason is that the value of the assets of a commercial\nenterprise is much larger than that of an individual’s assets. Their loss or\ndamage could adversely impact the very survival and future of the company.b) The demand for insurance of commercial enterprise is often mandated ormade necessary by legal or other requirements. For instance, when plants and\nassets are set up through a bank loan, their insurance may be a condition of\nthe loan. Many corporate enterprises in India are professionally run companies\nand a number of them are multinationals.They are required to maintain global quality standards, including the adoption\nof appropriate risk management strategies and insurance for protecting their\nassets.Any loss arising out of the above perils is covered by the policy subject to some\nexclusion.**2.2.** **Revised Standard Fire and Special Perils (SFSP) Policies:**IRDAI has issued guidelines with effect from 1st April, 2021 whereby the Standard\nFire and Special Perils (SFSP) Policy will be replaced by the following two standard\nproducts **for the risks** given **below** that shall be mandatorily offered by all general\ninsurers carrying on Fire and allied perils insurance business.**i.** **Bharat Sookshma Udyam Suraksha (meant for enterprises where the total****value at risk is upto Rs. 5 Crore)** - designed for financial protection of MSMEsThis policy provides cover for the Building/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value at risk across all insurable\nasset classes at one location is up to Rs. 5 Crore. This policy also offers cover\nagainst a wide range of perils, quite similar to the policy meant for Dwellings.The policy has many in-built covers in addition to the basic coverage — Cover for\nalterations, additions or extensions, Cover for stocks on a floater basis, Cover for\ntemporary removal of stocks, Cover for Specific Contents, Cover for start-up\nexpenses (following a loss), Cover for payment of professional fees for Architects,\nSurveyors and Consulting Engineers, Cost for removal of debris and Costs\ncompelled by Municipal Regulations.The policy can be taken by micro level enterprises such as offices, hotels,\nindustries, storage risks and so on. The policy underinsurance to the extent of31915% is waived. Bharat Sookshma Udyam Policies allow increase in Sum Insurer\nduring the policy tenure by endorsement.**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total****value at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for\nfinancial protection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery,\nStock and other assets of enterprises where the total value of risk across all\ninsurable asset classes at one location exceeds Rs.5 Crore but does not exceed\nRs. 50 Crore at the policy commencement date. This policy also has all the inbuilt covers offered by the policy for micro level enterprises mentioned above.\nThe perils against which insurance is offered are also similar to the policy meant\nfor micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "n318", "section": "What does the Standard Fire policy cover?", "chunk_id": "Final IC 38 - WA_Composite  - English_165", "metadata": {"file_size": 20885, "chunk_index": 165, "chunk_tokens": 978, "has_examples": true, "has_tables": false, "key_concepts": ["What does the Standard Fire policy cover?"]}}
{"chunk": "industries, storage risks and so on. The policy underinsurance to the extent of31915% is waived. Bharat Sookshma Udyam Policies allow increase in Sum Insurer\nduring the policy tenure by endorsement.**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total****value at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for\nfinancial protection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery,\nStock and other assets of enterprises where the total value of risk across all\ninsurable asset classes at one location exceeds Rs.5 Crore but does not exceed\nRs. 50 Crore at the policy commencement date. This policy also has all the inbuilt covers offered by the policy for micro level enterprises mentioned above.\nThe perils against which insurance is offered are also similar to the policy meant\nfor micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in\nSum Insurer during the policy tenure by endorsement.**iii.** **Exclusions under Fire Policies**Insurers traditionally exclude the following from the scope of Fire policies.**Losses due to excepted perils like**i. War and war like activities.\nii. Nuclear perils\niii. Ionisation and radiationiv. Pollution and contamination losses**Perils that are covered by other policies in General Insurance**i. Machinery Breakdown,\nii. Business Interruptioniv. **Add-on Covers**However some perils can be covered by payment of additional premium like earth\nquake, fire and shock; deterioration of stock in the cold storages following power\nfailure as a result of insured peril, additional expenditure involved in removal of\ndebris, architect, consulting engineers’ fee over and above the amount covered\nby the policy, forest fire, spontaneous combustion and impact damage due to\nown vehicles; terrorism.v. **Variants of Fire policy**Fire policies are generally issued for a period of 12 months. Only for dwellings,\ninsurance companies offer long term policies, i.e. for a period over 12 months. In\nsome cases short period policies are also issued, to which the short period scales\nare applicable.320a. **Market Value and Reinstatement Value Policies:** In the event of a loss, theinsurer would normally pay the market value [which is the depreciated\nvalue]. Under Reinstatement Value Policy, however, the insurers would pay\ncost of replacement of the damaged property, by new property of the same\nkind.Reinstatement value policies are issued for covering buildings, plant,\nmachinery and furniture, fixture, fittings. Reinstatement value policies are\nnot issued to cover stocks, which are usually covered on market value basis.b. **Declaration Policy:** To take care of frequent fluctuations in stocks values inwarehouse, Declaration Policy is granted subject to certain conditions. The\nsum insured should be the highest value that is expected to be stored in the\ngodown during the period of policy. On this value a provisional premium is\ncharged. The insured has to declare the value of his stocks at agreed\nintervals, during the currency of policy. This is adjustable along with the\npremium at the end of the policy period.c. **Floater Policies:** Floater policies may be issued for stocks of goods which arestored at various specified locations under one sum insured. Unspecified\nlocations are not covered. The premium rate is the highest rate applicable\nto insured’s stocks at any one location with a loading of 10%. These are also\ncalled fire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on thenature of occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and floodgroup perils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire321**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f31915", "section": "Bharat Laghu Udyam Suraksha(meant for enterprises where the total", "chunk_id": "Final IC 38 - WA_Composite  - English_166", "metadata": {"file_size": 20885, "chunk_index": 166, "chunk_tokens": 1005, "has_examples": false, "has_tables": false, "key_concepts": ["Market Value and Reinstatement Value Policies:", "Premium rating depends on:", "Test Yourself 1", "Losses due to excepted perils like", "Declaration Policy:"]}}
{"chunk": "called fire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on thenature of occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and floodgroup perils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire321**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or\nLoss of Profit Insurance.Fire insurance provides indemnity against material or property damage or loss\nsuffered to building, plant, machinery fixtures, fittings, merchandise goods, etc.\nby insured perils. **This may result in total or partial interruption of the**\n**insured’s business**, resulting in various economic losses, during the period of\ninterruption.**Coverage under Business Interruption Policy**Consequential Loss (CL) Policy [Business Interruption (BI)] provides indemnity for\nloss of what is termed as gross profit – which includes Net Profit plus Standing\nCharges along with the increased cost of working incurred by the insured to get\nthe business back to normalcy, as soon as possible to reduce the final loss. The\nperils covered and conditions are the same as those covered under the fire policy.**Example**If a Fire results in damage to the car manufacturer's plant, the production loss\nwill result in loss of income to the manufacturer. This loss of income along with\nextra expenses incurred can be insured provided it has resulted from a peril\ninsured.This policy can be taken only in conjunction with standard fire and special perils\npolicy as claims under this policy are admissible only if there is a claim under\nstandard fire and special perils policy.**Test Yourself 2**A business interruption insurance policy can be taken only in conjunction with____________.I. Standard fire and special perils insurance policy\nII. Standard marine insurance policy\nIII. Standard motor insurance policy\nIV. Standard health insurance policy**C.** **Burglary Insurance**The policy is meant for business premises like factories, shops, offices,\nwarehouses and godowns which may contain stocks, goods, furniture fixtures and\ncash in a locked safe which can be stolen. The scope of cover is clearly expressed\nin the policy.**Risks covered under burglary insurance**a) Loss of property following actual forcible and violent entry into the premisesor loss followed by actual, forcible and violent exit from the premises or holdup.322b) Damage to insured property or premises by burglars. Property insured iscovered only when it is lost from the insured premises and not from any other\npremises.**Cash cover:** An important part of burglary cover is cash cover. It operates only\nwhen the cash is secured in a safe, which is burglar proof and is of an approved\nmake and design. The common conditions applicable for granting cash cover are\ngiven below:a) Cash lost from the safe following the use of the original key to open, it iscovered only where such key has been obtained by violence or threats of\nviolence or through means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some placeother than the safe. The liability of the insurer is limited to the amount\nactually shown by such records.**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales,\ngrain, sugar etc.) the risk of losing the entire stock on a single occasion is\nconsidered remote. The value that can be burgled is ascertained as probable\nmaximum loss (PML) and the full premium is charged for this maximum\nprobable loss and certain percentage of full premium is charged on rest\namount of stock as PML floats over the entire stock. It is assumed that a\nsecond burglary may not follow immediately or the insured may take", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e321", "section": "Premium rating depends on:", "chunk_id": "Final IC 38 - WA_Composite  - English_167", "metadata": {"file_size": 20885, "chunk_index": 167, "chunk_tokens": 963, "has_examples": true, "has_tables": false, "key_concepts": ["Premium rating depends on:", "Burglary Insurance", "Test Yourself 1", "Example", "First Loss Insurance"]}}
{"chunk": "when the cash is secured in a safe, which is burglar proof and is of an approved\nmake and design. The common conditions applicable for granting cash cover are\ngiven below:a) Cash lost from the safe following the use of the original key to open, it iscovered only where such key has been obtained by violence or threats of\nviolence or through means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some placeother than the safe. The liability of the insurer is limited to the amount\nactually shown by such records.**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales,\ngrain, sugar etc.) the risk of losing the entire stock on a single occasion is\nconsidered remote. The value that can be burgled is ascertained as probable\nmaximum loss (PML) and the full premium is charged for this maximum\nprobable loss and certain percentage of full premium is charged on rest\namount of stock as PML floats over the entire stock. It is assumed that a\nsecond burglary may not follow immediately or the insured may take\nadditional security measures from its recurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other\npersons who are lawfully on the premises, nor does it cover larceny or ordinary\ntheft. It also excludes losses that are covered by a fire or plate glass policy.**4.** **Extensions**The policy can be extended to cover riot, strikes and terrorism risks at extra\npremium.**5.** **Premium**Rates of premium for burglary policy depend upon the nature of insured\nproperty, the moral hazard of the insured himself, construction and location\nof premises, safety measures ( _e.g. watchmen, burglar alarm)_, previous claims\nexperience etc.In addition to details given in the proposal form, a pre-acceptance inspection\nis done by insurers where high values are involved.**Test Yourself 3**The premium for burglary policy depends on ______________.I. Nature of insured property323II. Moral hazard of the insured himself\nIII. Construction and location of the premises\nIV. All of the above**D.** **Money Insurance**Handling of cash is an integral part of any business. The Money Insurance policy\nis intended to protect banks and industrial business establishments against loss\nof money. Money is at risk in the premises as well as outside. It can be unlawfully\ntaken away while withdrawing, depositing, making payments or collections.**1.** **Coverage of Money Insurance**Money insurance policy is designed to cover the losses that may occur while cash,\ncheques/ postal orders/ postal stamps are being handled. The policy normally\nprovides cover under two sections**a)** **Transit section:** It covers loss of money as a result of robbery or theft or otherfortuitous cause whilst it is carried outside by the insured or her authorised\nemployees.The transit section specifies two amounts:**i.** **Limit per carrying** : This is the maximum amount that insurers may berequired to pay in respect of each loss.**ii.** **Estimated amount in transit during the policy period:** It represents theamount to which the rate of premium is to be applied to arrive at the\namount of premium.Policies can be issued on “ **declaration basis”**, similar to the practice in fire\ninsurance. Insurers thus charge a provisional premium on the estimated\namount in transit and adjust this premium at the time of expiry of the policy,\nbased on actual amount in transit during the policy period, as declared by the\ninsured.**b)** **Premises section:** This section covers loss of cash from one’s premises/locked safe due to burglary, housebreaking, hold up etc. Other features of\nthe policy are normally the same as of burglary insurance (of business\npremises) that this was discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized personandc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risks324c) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y323", "section": "First Loss Insurance", "chunk_id": "Final IC 38 - WA_Composite  - English_168", "metadata": {"file_size": 20885, "chunk_index": 168, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Exclusions", "Extensions", "First Loss Insurance", "Test Yourself 3", "Premium"]}}
{"chunk": "amount in transit and adjust this premium at the time of expiry of the policy,\nbased on actual amount in transit during the policy period, as declared by the\ninsured.**b)** **Premises section:** This section covers loss of cash from one’s premises/locked safe due to burglary, housebreaking, hold up etc. Other features of\nthe policy are normally the same as of burglary insurance (of business\npremises) that this was discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized personandc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risks324c) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried\nthroughout the year based on declaration made within 30 days of expiry of the\npolicy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission\nII. Loss of cash from one’s premises due to burglary\nIII. Loss of money that has been entrusted to other than authorized person\nIV. Riot, strike and terrorism**E.** **Fidelity Guarantee Insurance**Companies suffer financial loss due to what are termed as white collar crimes like\nfraud or dishonesty of their employees. Fidelity guarantee insurance indemnifies\nemployers against the financial loss suffered by them due to fraud or dishonesty\nof their employees by forgery, embezzlement, larceny, misappropriation and\ndefault.**1.** **Coverage under Fidelity Guarantee Insurance**Cover is granted against a direct pecuniary loss and does not include\nconsequential losses.a) The loss should be in respect of moneys, securities or goodsb) The act should be committed in the course of the duties specified;c) The loss has be discovered within 12 months of expiry of the policy or deathretirement resignation or dismissal of the employee, whichever is earlierd) No cover is provided in respect of a dishonest employee who has been re\nemployed**2.** **Types of Fidelity Guarantee Policy**There are various types of fidelity guarantee policies, as discussed below:**a)** **Individual policy:** This type of policy is used where only one individual is tobe guaranteed. Name, designation of the employee and amount of\nguarantee has to be specified.**b)** **Collective policy:** This policy comprises a schedule listing out the names ofthose employees to whom the guarantee applies, along with a note on the\nduties of each employee and separate individual sums insured.**c)** **Floating policy or floater:** In this policy, the names and duties of theindividuals to be covered are inserted in a schedule, but instead of\nindividual amounts of guarantee, a specified amount of guarantee is325“floated” over the whole group. A claim in respect of any one employee\nwill, therefore, reduce the floated guarantee, unless the original sum is\nreinstated by payment of an extra premium.**d)** **Positions policy:** This is similar to a collective policy with the differencethat only the schedule lists out \"positions’ (say, Cashier, Account Officer\nEtc.) that are to be guaranteed for a specified amount and the name are\nnot mentioned.**e)** **Blanket policy:** This policy covers the entire staff without showing namesor positions. No enquiries about the employees are made by the insurers.\nSuch policies are only suitable for an employer with a large staff and the\norganization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers\nin the event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud ordishonesty of their employees\nII. Employees against the financial loss suffered by them due to fraud ordishonesty of their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s324", "section": "Premises section:", "chunk_id": "Final IC 38 - WA_Composite  - English_169", "metadata": {"file_size": 20885, "chunk_index": 169, "chunk_tokens": 975, "has_examples": false, "has_tables": false, "key_concepts": ["Extensions", "Types of Fidelity Guarantee Policy", "Test Yourself 4", "Coverage under Fidelity Guarantee Insurance", "Test Yourself 5"]}}
{"chunk": "Etc.) that are to be guaranteed for a specified amount and the name are\nnot mentioned.**e)** **Blanket policy:** This policy covers the entire staff without showing namesor positions. No enquiries about the employees are made by the insurers.\nSuch policies are only suitable for an employer with a large staff and the\norganization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers\nin the event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud ordishonesty of their employees\nII. Employees against the financial loss suffered by them due to fraud ordishonesty of their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate\nIV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions\nwho deal with operations involving money, considering the special risks faced by\nthem regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**\nThere are different variations to this policy based on the requirement of banker.a) Money securities lost or damaged whilst within the premises due to fire,burglary, riot and strike.b) Loss suffered due to any cause whatsoever including negligence of theemployees, when the property is carried outside the premises in the hands\nof authorized employees.326c) Forgery or alteration of cheques, drafts, fixed deposit receipts etc.d) Dishonesty of employees with reference to money/ securities or in respectof goods pledged.e) Dispatches by registered post parcels.f) Dishonesty of appraisers.g) Money lost while in the hands of agents of the bank like ‘Janata Agents’,‘Chhoti Bachat Yojana Agents’.The cover is issued on discovery basis, this means the policy will respond to a\nperiod during which a loss is discovered and not necessarily the period when it\noccurred. But a cover should have been in existence when the loss actually\noccurred.Conventionally losses within a period of 2 years prior to date of discovery only\nare payable, subject to the cover having been continuous, from a date earlier\nthan that when the loss has occurred.**2.** **Important exclusions**\nMajor exclusions are Trading losses, Negligence, Software crimes and dishonesty\nof the partners/ directors**3.** **Scope**\nThe policy comprises of 7 sections viz.:1. On Premises2. In Transit\n3. Forgery or Alteration\n4. Dishonesty\n5. Hypothecated Goods\n6. Registered Postal Service\n7. Appraisers\n8. Janata Agents**4.** **Sum insured**The bank has to fix the **sum insured** which would usually float over the first 5\nsections. This is termed as ‘basic sum insured’. Additional sum insured can be\npurchased for section (1) and (2) if the basic sum insured is not sufficient. The\npolicy also allows one compulsory and automatic reinstatement of sum insured by\npayment of an extra premium**5.** **Rating**The premium calculation is based on:a) Basic sum insured\nb) Additional sum insured327c) Number of staff\nd) Number of branches.**Test Yourself 6**Which of the below can be covered under a bankers indemnity insurance policy?I. Money securities lost or damaged whilst within the premises due to fire\nII. Forgery or alteration of cheques\nIII. Dishonesty of employees with reference to money\nIV. All of the above**G.** **Jewelers’ Block Policy**In recent years India has emerged as a leading centre in world trade for jewellery,\nespecially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in\nlarge quantity and moving them between different premises.**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are\nallowed to avail of other sections at their option. It is also the market practice\nto include some more sections to cover other assets like Electronic equipment,", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s2", "section": "Blanket policy:", "chunk_id": "Final IC 38 - WA_Composite  - English_170", "metadata": {"file_size": 20885, "chunk_index": 170, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Jewelers’ Block Policy", "Bankers Indemnity Insurance", "Sum insured", "Test Yourself 5"]}}
{"chunk": "d) Number of branches.**Test Yourself 6**Which of the below can be covered under a bankers indemnity insurance policy?I. Money securities lost or damaged whilst within the premises due to fire\nII. Forgery or alteration of cheques\nIII. Dishonesty of employees with reference to money\nIV. All of the above**G.** **Jewelers’ Block Policy**In recent years India has emerged as a leading centre in world trade for jewellery,\nespecially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in\nlarge quantity and moving them between different premises.**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are\nallowed to avail of other sections at their option. It is also the market practice\nto include some more sections to cover other assets like Electronic equipment,\nPlate glass, Signage etc. and liabilities like Employees Compensation, Infidelity\nof employees.Fidelity guarantee cover should also be taken by the insured for full protection if\nthere is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for\neach section with discounts for exclusive round the clock watchman, close circuit\nTV/ alarm system, exclusive strong room and for any other safety expedient etc.**Test Yourself 7**In case of a Jeweller’s Block Policy, there are traditionally multiple sections, of\nwhich one is usually compulsory while the remaining sections are ____________.I. Mandatory\nII. Retrospective\nIII. Optional\nIV. Compensatory328**H.** **Engineering Insurance**Engineering insurance is a branch of general insurance that developed parallel\nwith the growth of fire insurance. Its origins can be traced to the development of\nindustrialization, which highlighted the need for a separate cover for plant and\nmachinery. Concept of **All Risks** cover was also developed with regard to\nengineering projects - covering damage due to any cause except those specifically\nexcluded. The products covered various stages – from construction to testing till\nthe plant became operational. The customers for this insurance are both large\nand small industrial units. This also includes units having electronic equipment\nand contractors doing big projects. There are two types of engineering insurance\npolicies:1) Annual Policies-Generally of one year duration\na. Machinery Breakdown Policy\nb. Boiler Pressure Plant policy\nc. Electronic Equipment Policy\nd. Contractor’s Plant & Machinery Policy\ne. Deterioration of Stock Policy\nf. Civil Engineering Completed Risk\n2) Project Policies with variable duration based on project period\na) Contractors All Risk Policy\nb) Erection All Risk PolicyThere are two “Consequential Loss” policies associated with Engineering Policies:a) Machinery Breakdown Loss of Profit Policy (MBLOP) taken with\nMachinery Breakdown Policy or with Boiler and Pressure Plant policy andb) Advance loss of Profit (ALOP) or Delay in Startup (DSU) Policy taken\nwith project policy.Let us briefly consider the policies:\n**A.** **Annual Policies****1.** **Machinery Breakdown Policy (MB):** This policy is suitable for every industrywhich operates on machines and for whom breakdown of plant and machinery\nis of serious consequence. This policy covers machines like generators,\ntransformer and other electrical, mechanical and lifting equipment.The policy covers unforeseen and sudden physical damage by mechanical or\nelectrical breakdown by any cause (subject to excepted risks) to the insured\nproperty:a) While it is at work or at rest.\nb) While being dismantled for cleaning or overhauling\nc) During cleaning or overhauling operations and during reassemblythereafter.\nd) When being shifted within the premise.329Premium is charged on the reinstatement/ replacement value of individual\nmachinery. The machine as a whole should be insured. Rates depend on the type\nof machine; the industry in which it is used and its value. Discounts are offered\nbased on factors such as stand-by facilities, spares available and claims\nexperience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plantand to surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for**\n**adequate**", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "y328", "section": "Test Yourself 6", "chunk_id": "Final IC 38 - WA_Composite  - English_171", "metadata": {"file_size": 20885, "chunk_index": 171, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 7", "Jewelers’ Block Policy", "Boiler and Pressure Plant Policy:", "All Risks", "Engineering Insurance"]}}
{"chunk": "electrical breakdown by any cause (subject to excepted risks) to the insured\nproperty:a) While it is at work or at rest.\nb) While being dismantled for cleaning or overhauling\nc) During cleaning or overhauling operations and during reassemblythereafter.\nd) When being shifted within the premise.329Premium is charged on the reinstatement/ replacement value of individual\nmachinery. The machine as a whole should be insured. Rates depend on the type\nof machine; the industry in which it is used and its value. Discounts are offered\nbased on factors such as stand-by facilities, spares available and claims\nexperience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plantand to surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for**\n**adequate**\n**cover, both the policies need to be taken. Sum insured under all Engineering**\n**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronicequipment, which includes the entire computer system consisting of CPU,\nkeyboards, monitors, printers, UPS, system software etc. Auxiliary equipment\nsuch as air-conditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and\nburglary policy. The policy covers the contingencies such as defective design (not\ncovered under a warranty), effects of natural phenomena; defective functioning\ndue to voltage fluctuations, impact shock etc., burglary, housebreaking & theft\nare also covered.The policy is available to the owner, lessor or hirer, depending upon the\nresponsibility or liability in each case. It has usually three sections that cover\nvarious types of losses:**a)** **Section 1:** Loss and damage to equipment\n**b)** **Section 2:** Loss and damage to external data media like computer externalhard disks\n**c)** **Section 3:** Increased cost of working - to ensure continued data processingon substitute equipment up to 12, 26, 40 or 52 weeks.**4.** **Contractors Plant & Machinery (CPM) Policy:** Suitable for contractorsinvolved in construction business for covering all kinds of machinery like\ncranes, excavators from unforeseen and sudden physical loss or damage from\nany cause including:a) Burglary, Theft, Riot, Storm, Malicious Damage, Tempest330b) Fire and lightning, external explosion, earthquake and other Acts of Godperils\nc) Accidental damage while at work due to faulty manhandling, dropping orfalling, collapse, collision and impact; can be extended for third party\ndamage.The Premium to be charged depends on the type of equipment and the\nlocation at which it operates.**The cover is operative whilst the equipment is at work or at rest or being**\n**dismantled for cleaning or overhauling or re-assembling thereafter. The**\n**cover also applies while the same are lying at contractors own premises.**\n**However floater policy covering the equipment “Anywhere in India basis”**\n**is also available by charging 10% extra premium and with certain**\n**conditions.****5.** **Deterioration of Stock Policy:** This policy is suitable for the owner of the coldstorage (individual or a cooperative society) or those who take the cold\nstorage on lease or hire for storage of perishable commodities. The cover is\nagainst the risk of deterioration and contamination following breakdown of\nthe refrigeration plant and machinery and also due to rise in temperature and\nsudden and unforeseen escape of refrigerants into the cold storage rooms.**6.** **Civil Engineering Completed Risk:** It is generally taken by contractors whohas to maintain the civil projects after completion. The civil projects like –\nBridges, Dry docks, Harbours, Jetties Railway lines, Rock Filled dams,\nConcrete dams, Earthen dams, Canals, Irrigation system are considered under\nthis policy. Risks covered are –\n1. Fire\n2. Lightning\n3. Explosion/ Implosion\n4. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t330", "section": "Boiler and Pressure Plant Policy:", "chunk_id": "Final IC 38 - WA_Composite  - English_172", "metadata": {"file_size": 20885, "chunk_index": 172, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Boiler and Pressure Plant Policy:", "Section 1:", "Civil Engineering Completed Risk:", "Contractors Plant & Machinery (CPM) Policy:", "Section 3:"]}}
{"chunk": "storage on lease or hire for storage of perishable commodities. The cover is\nagainst the risk of deterioration and contamination following breakdown of\nthe refrigeration plant and machinery and also due to rise in temperature and\nsudden and unforeseen escape of refrigerants into the cold storage rooms.**6.** **Civil Engineering Completed Risk:** It is generally taken by contractors whohas to maintain the civil projects after completion. The civil projects like –\nBridges, Dry docks, Harbours, Jetties Railway lines, Rock Filled dams,\nConcrete dams, Earthen dams, Canals, Irrigation system are considered under\nthis policy. Risks covered are –\n1. Fire\n2. Lightning\n3. Explosion/ Implosion\n4. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami\n9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be\non an annual basis.\n**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small\nbuildings to massive dams, buildings, bridges, tunnels, etc. The policy\nprovides an “All Risk” cover – thus providing indemnity against any sudden and331unforeseen loss or damage that occurs to property insured at the construction\nsite. This can be extended to cover third party liability and other exposures.\nPremium chargeable depends on the nature of the project, the project cost,\nthe project period, geographic location and the period of testing.**2.** **Erection All Risks (EAR) Policy:** This policy is also known as Storage-cum\nErection (SCE) policy. It is suitable for the principal or contractors of a project\nwhereas plant and machinery is being erected as it is exposed to various\nexternal risks. This is a comprehensive insurance policy that covers any sort\nof contingency right from the moment the materials are unloaded at the\nproject site and continues during the entire project period until the project\nis tested, commissioned and handed over.Premium chargeable depends on the nature of the project, the cost, the\nproject period, geographic location, and the period of testing.**If required a marine cover can be issued along with the erection policy for**\n**providing coverage to the equipment and materials during the transit**\n**phase till delivered at the project site.****C.** **Consequential Loss Policies**These type of policies are issued to cover losses consequential to other losses.\nThese are also called ‘Business Interruption’ policies or ‘Loss of Profits’ policies.\n**3.** **Machinery Loss of Profits (MLOP) Policy**This policy is suitable for industries where interruptions or delays as a result of\nmachinery breakdown or boiler explosion result in huge consequential losses.Where the time lag between the breakdown or loss and the restoration is large,\nthis policy compensates for the loss of profits during the intervening period due\nto reduction in turnover and increase in cost of working. The terms and conditions\nand coverage of business interruption policy is the same as the business\ninterruption policy following a fire policy loss, which has been discussed earlier\nin this chapter.**4.** **Advance Loss of Profit Cover (ALOP) or Delay in Start-up Policy (D.S.U.)**This covers financial consequences of a project being delayed because of\naccidental damages during the project. It is suitable for the insured who is\ndeprived of the anticipated earning and for the financial institutions to the extent\nof their interest in the project. It is issued as an extension to the MCE/ EAR/ CAR\nPolicy before the actual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated332net profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are\nalso critical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d331", "section": "Civil Engineering Completed Risk:", "chunk_id": "Final IC 38 - WA_Composite  - English_173", "metadata": {"file_size": 20885, "chunk_index": 173, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Project Policies", "Test Yourself 8", "Erection All Risks (EAR) Policy:", "Civil Engineering Completed Risk:", "Contractors All Risks (C.A.R.) Policy:"]}}
{"chunk": "accidental damages during the project. It is suitable for the insured who is\ndeprived of the anticipated earning and for the financial institutions to the extent\nof their interest in the project. It is issued as an extension to the MCE/ EAR/ CAR\nPolicy before the actual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated332net profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are\nalso critical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both\nmanufacturing and storage facilities, anywhere in India under one policy. It\nprovides indemnification against material damage and business interruption.\nUsually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,\nii. Burglary (except larceny)\niii. Machinery breakdown/ boiler explosion/ electronic equipment\niv. Business interruption following operation of perils mentioned above(Note: Business interruption following perils under (iii) above is usually not\nincluded in the package cover but available as optional cover) The policy offers widest range of cover compared to that provided byindividual operational policies.\n Premium rates for the policy depend on the cover opted, claimsexperience, and deductibles opted, risk assessment report for MLOP etc.**Test Yourself 9**Which of the following is not covered under Industrial All Risks insurance?I. Fire and special perils as per fire insurance practice\nII. Larceny\nIII. Machinery breakdown\nIV. Electronic equipment333**J.** **Marine Insurance**Marine insurance is classified into two types: marine cargo and marine hull**1.** **Marine Cargo Insurance**Though the term ‘marine’ may indicate only losses due to sea (marine)\nmisadventures, **marine cargo insurance** covers much more. It provides indemnity\nin respect of loss of or damage to goods during transit by rail, road, sea, air or\nregistered post, within the country as well as abroad. Type of goods may range\nfrom diamonds to household goods, bulk items like cement, grains, over\ndimensional cargoes for projects etc.Cargo insurance plays an important role in domestic trade as well as in\ninternational trade. Most contracts of sale require that the goods must be\ncovered, either by the seller or the buyer, against loss or damage.**Who effects the insurance:** The seller or the buyer of the goods [consignment]\nmay insure the cargo depending upon the contract of sale.Marine insurance contract needs to have provisions that apply internationally.\nThis is because it covers goods that are in transit beyond any country’s borders.\nThe covers are accordingly governed by international conventions and certain\nclauses attached to the policy.While the basic policy document contains general conditions, the scope of cover\nand exceptions and special exclusions are attached by separate clauses known as\nInstitute cargo Clauses (ICC). These are drafted by the Institute of London\nUnderwriters.**a)** **Coverage under Marine Cargo Insurance**\nCargo policies are essentially voyage policies, i.e. they cover the subject matter\nwhilst in transit from one place to another. However, the insured is required to\nalways act with reasonable care in all circumstances within his control. The main\nfeature of this policy is that it's an Agreed Value Policy. The valuation is agreed\nbetween the insurer and insured and is not subject to revaluation later unless\nfraud is suspected. The convention for the Sum Insured is CIF + 10% (Cost\nInsurance & Freight + 10%). Another unique feature is that the policy is freely\nassignable.The cover normally commences from the time the goods leave the warehouse at\nthe place named in the policy and terminates at the destination named in the\npolicy, depending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit334ii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due\nto accident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "d332", "section": "Test Yourself 8", "chunk_id": "Final IC 38 - WA_Composite  - English_174", "metadata": {"file_size": 20885, "chunk_index": 174, "chunk_tokens": 1009, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 8", "Coverage under Marine Cargo Insurance", "Marine Insurance", "Test Yourself 9", "Industrial All Risks Insurance"]}}
{"chunk": "whilst in transit from one place to another. However, the insured is required to\nalways act with reasonable care in all circumstances within his control. The main\nfeature of this policy is that it's an Agreed Value Policy. The valuation is agreed\nbetween the insurer and insured and is not subject to revaluation later unless\nfraud is suspected. The convention for the Sum Insured is CIF + 10% (Cost\nInsurance & Freight + 10%). Another unique feature is that the policy is freely\nassignable.The cover normally commences from the time the goods leave the warehouse at\nthe place named in the policy and terminates at the destination named in the\npolicy, depending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit334ii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due\nto accident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle\niii. Stranding, grounding or sinking of the vessel (in case of ship)\niv. Collision with an external object\nv. Discharge of cargo at a port of distress\nvi. General average sacrifice\nvii. Jettison.Institute Cargo Clause B is wider than C. Apart from the perils covered in C it also\ncovers loss or damage due to:i. Act of God (AOG) perils like earthquake, volcanic eruption and lightning\nii. Collapse of bridges in Inland transit\niii. Washing overboard and sling loss in case of ocean transit\niv. Entry of water into the vessel.Institute Cargo Clause A is the widest cover as it covers all perils of B and C and\nloss or damage due to any other risk except some exclusion specified such as:i. Loss or damage due to wilful conduct of the insured\nii. Ordinary leakage, breakage, wear and tear or ordinary loss in weight/volume\niii. Insufficiency in packing\niv. Inherent vice\nv. Delays\nvi. Loss due to insolvency of owners\nvii. Nuclear perilsThese exclusions are common to all clauses of inland, air and sea. There are\nseparate clauses also for trading of specific commodities like coal, bulk oil and\ntea etc. Marine cover can be extended by paying additional premium to cover\nWar, Strikes, Riots, Civil Commotion and Terrorism. Marine and Aviation policies\nare the only branches of insurance that offer cover against War perils.**Important**Risks covered under a marine policy, under the standard policy form and under\nthe various clauses attached to the policy broadly fall into three categories:i. Marine perils,\nii. Extraneous perils and\niii. War, strike riot, civil commotion and terrorism risks.335**b)** **Different types of marine policies****i.** **Specific Policy**This policy covers a single shipment. It is valid for the particular voyage\nor transit. Merchants who are engaged in regular import and export trade\nor who are sending consignments regularly by inland transit would find it\nconvenient to arrange insurances under special arrangements like the\nopen policy.**ii.** **Open Policy**The carriage of goods within the country can be covered under an open\npolicy. The policy is valid for one year and all consignments during this\nperiod have to be declared by the insured to the insurer as agreed\nbetween them on a fortnightly, monthly or quarterly basis.**iii.** **Open Cover**The open cover is a contract for a year giving the Insured continuous\nprotection to cover a large number of shipments/ despatches. The\npremium on the consignments would be adjusted from the respective cash\ndeposit account maintained by the Insured. Open covers are issued to\nlarge exporters and importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for\ntransactions of marine dispatches for one-year. The open cover is not a\npolicy and it is not stamped. A certificate of insurance is issued for each\ndeclaration duly stamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is\nincreased due to payment of customs duty or increase in the market value\nof the goods at the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "t334", "section": "Important", "chunk_id": "Final IC 38 - WA_Composite  - English_175", "metadata": {"file_size": 20885, "chunk_index": 175, "chunk_tokens": 990, "has_examples": false, "has_tables": false, "key_concepts": ["Duty and increased value insurance", "Specific Policy", "Open Policy", "Different types of marine policies", "Important"]}}
{"chunk": "period have to be declared by the insured to the insurer as agreed\nbetween them on a fortnightly, monthly or quarterly basis.**iii.** **Open Cover**The open cover is a contract for a year giving the Insured continuous\nprotection to cover a large number of shipments/ despatches. The\npremium on the consignments would be adjusted from the respective cash\ndeposit account maintained by the Insured. Open covers are issued to\nlarge exporters and importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for\ntransactions of marine dispatches for one-year. The open cover is not a\npolicy and it is not stamped. A certificate of insurance is issued for each\ndeclaration duly stamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is\nincreased due to payment of customs duty or increase in the market value\nof the goods at the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across\ndifferent countries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**\n**b)** **Covering a period of time: Usually one year. The set of clauses used****here are called Institute (Time) Clauses**\n**c)** War risks are governed by special regulations and the premiums collectedwill be credited to the Central Government.**Information**Hull insurance also includes the following insurances:i. Inland vessels such as barges, launches, passenger vessels etc.\nii. Dredgers (Mechanized or non-mechanized)\niii. Fishing Vessels (Mechanized or non-mechanized)\niv. Sailing Vessels (Mechanized or non-mechanized)336v. Jetties and Wharvesvi. Vessels in the course of construction**The ship owner has insurable interest not only in the ship, but also in the**\n**freight to** be earned during the period of insurance. In addition to freight the\nship owner has insurable interest in the amount spent by him in fitting out the\nvessel, including provisions and stores. **These expenses are termed**\n**disbursements and are insured concurrently with the hull policy for a period**\n**of time.****Important****Aviation insurance:** A comprehensive policy is also available for aircraft which\ncovers loss or damage to the aircraft as also the legal liability to third parties and\nto passengers arising out of the operation of the aircraft.**Test Yourself 10**Which branch of insurance offers cover against war perils?I. Marine policies\nII. Aviation policies\nIII. Both of the aboveIV. None of the above**K.** **Liability Policies**Accidents cannot be avoided altogether, however careful a person is. This could\nresult in injury to oneself and damage to one’s property and also may\nsimultaneously cause injury to third parties and damage to their property. The\npersons thus affected would claim compensation for such loss.A liability could also arise from a defect in a product manufactured and sold, say\nchocolates or medicines, causing harm to the consumer. Similarly, liability could\narise from wrong diagnosis/ treatment of a patient or from a case improperly\nhandled by a lawyer for his client.In all such cases, where a third party, consumer or the patient would demand\ncompensation for the alleged wrong doing, it would raise a need for payment of\ncompensation or meeting expenses involved in defending the suits filed by the\nclaimants. In other words there is a financial loss arising from a liability to pay.\nThe existence of such a liability and the amount of compensation to be paid would\nbe decided by a civil court which would go into the aspect of alleged negligence/\nfraud. Liability insurance policies provide coverage of such liabilities. Let us look\nat some of the liability policies.**Statutory liability**There are certain laws or statutes which provide for the payment of\ncompensation. The laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010337Insurance policies are available for protection in respect of such liabilities. Let\nus look at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Open Cover", "chunk_id": "Final IC 38 - WA_Composite  - English_176", "metadata": {"file_size": 20885, "chunk_index": 176, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Duty and increased value insurance", "Test Yourself 10", "Information", "Institute Voyage Clauses", "Important"]}}
{"chunk": "compensation for the alleged wrong doing, it would raise a need for payment of\ncompensation or meeting expenses involved in defending the suits filed by the\nclaimants. In other words there is a financial loss arising from a liability to pay.\nThe existence of such a liability and the amount of compensation to be paid would\nbe decided by a civil court which would go into the aspect of alleged negligence/\nfraud. Liability insurance policies provide coverage of such liabilities. Let us look\nat some of the liability policies.**Statutory liability**There are certain laws or statutes which provide for the payment of\ncompensation. The laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010337Insurance policies are available for protection in respect of such liabilities. Let\nus look at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation\npayable per person is fixed as shown below.|Compensation payable|Col2|\n|---|---|\n|Fatal Accident|Rs. 25,000|\n|Permanent Total Disability|Rs. 25,000|\n|Permanent Partial Disability|% of Rs. 25,000 based on % of disability|\n|Temporary Partial Disablement|Rs. 1000 per month, maximum 3 months|\n|Actual Medical Expenses|Up to a maximum of Rs. 12,500|\n|Actual damage to property up to|Rs. 6,000|The premium is based on the AOA (Any One Accident) limit and the turnover of\nthe client. A special feature of this policy is that the insured has to pay\ncompulsorily an amount equal to the premium as contribution to Environment\nRelief Fund. If large numbers of third parties are affected and the total amount\nof relief payable exceeds A.O.A. limit, the balance amount will be paid by the\nfund.**2.** **Public Liability Policy (Industrial/ Non-industrial Risks)**This type of policy covers liability arising out of fault/ negligence of the insured\ncausing third party personal injury or property destruction [TPPI OR TPPD].There are separate policies covering industrial risks as well as non-industrial risks\nlike those affecting hotels, cinema halls, auditoriums, residential premises,\noffices, stadiums, godowns and shops. It covers the legal liability to pay\ncompensation including claimant’s costs, fees and expense according to Indian\nLaw, in respect of TPPI/ TPPD **.**The policy does not cover:a) Products liabilityb) Pollution liabilityc) Transportation andd) Injuries to workmen/ employees**3.** **Products Liability Policy**The demand for products liability insurance has arisen because of the wide variety\nof products (e.g. canned food stuff, aerated waters, medicines and injections,\nelectrical appliances, mechanical equipment, chemicals etc.) that are today\nmanufactured and sold to the public. If a defect in the product causes death,338bodily injury or illness or even damage to the property of third parties, it could\ncause a claim to arise. Product liability policies cover this liability of the insured.Cover is available for exports as well as domestic sales.4. **Lift (Third Party) Liability Insurance**The policy provides indemnity to owners of buildings in respect of liabilities\narising out of the use and operation of lifts. It covers legal liabilities for:a) Death/ bodily injury of any person (excluding employees of the insured)b) Damage to property (excluding insured’s own or employee’s property)The premium rates depend upon the limit of indemnity, any one person, any one\naccident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are\navailable for doctors hospitals; engineers, architects; chartered accountants,\nfinancial consultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility.\nThey may become liable to pay damages to shareholders, employees, creditors\nand other stakeholders of the company, for wrongful acts committed by them in\nthe supervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "l2", "section": "Statutory liability", "chunk_id": "Final IC 38 - WA_Composite  - English_177", "metadata": {"file_size": 20885, "chunk_index": 177, "chunk_tokens": 1004, "has_examples": false, "has_tables": true, "key_concepts": ["Directors' and Officers' Liability Policy", "Lift (Third Party) Liability Insurance", "Statutory liability", "Employee’s Compensation Insurance", "Products Liability Policy"]}}
{"chunk": "arising out of the use and operation of lifts. It covers legal liabilities for:a) Death/ bodily injury of any person (excluding employees of the insured)b) Damage to property (excluding insured’s own or employee’s property)The premium rates depend upon the limit of indemnity, any one person, any one\naccident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are\navailable for doctors hospitals; engineers, architects; chartered accountants,\nfinancial consultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility.\nThey may become liable to pay damages to shareholders, employees, creditors\nand other stakeholders of the company, for wrongful acts committed by them in\nthe supervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to\npay compensation to his employees who sustain personal injury by accident or\ndisease arising out of and in the course of his employment. This is also called\n**Workman’s Compensation Insurance.**Two forms of insurance are prevalent in the market:**a)** **Table A:** Indemnity against legal liability for accidents to employees underthe Employees Compensation Act, 1923, (Workman’s Compensation Act,\n1923), Fatal Accident Act, 1855 & Common Law.**b)** **Table B** : Indemnity against legal liability under Fatal Accidents Act, 1855and Common law.The premium rate is applied on the estimated wages of employees as declared in\nthe proposal form.The policy may be extended to cover:i. Medical and hospital expenses incurred by the insured for treatment ofemployee injuries, up to specific amounts339ii. Liability for occupational diseases listed in the Actiii. Liability towards employees of contractors**Test Yourself 11**Under the Public Liability Insurance Act, 1991, how much is the compensation\npayable for actual medical expenses for non-fatal accidents?I. Rs. 6,250\nII. Rs, 12,500\nIII. Rs. 25,000\nIV. Rs. 50,000**Answers to Test Yourself****Answer 1** - The correct option is III.\n**Answer 2** - The correct option is I.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is I.\n**Answer 6** - The correct option is IV.\n**Answer 7** - The correct option is III.\n**Answer 8** - The correct option is II.\n**Answer 9** - The correct option is II.\n**Answer 10** - The correct option is III.\n**Answer 11** - The correct option is II.340## CHAPTER G-05## GENERAL INSURANCE CLAIMS**Chapter Introduction**At the core of any insurance contract is the promise made at the beginning i.e.\nto indemnify the insured in the event of a loss. This chapter talks about the\nprocedures and documents involved, from the time loss takes place, making it\neasier to comprehend the entire process of claims settlement. It also explains the\nmethod of dealing with disputed claims either by insured or insurer.After studying this chapter, you should be able to:1. Argue the importance of claim settlement functions2. Describe the procedures for intimation of loss3. Appraise claim investigation and assessment4. Explain the importance of surveyors and loss assessors5. Illustrate the contents of claim forms6. Define claims adjustment and settlement341**A.** **Claims settlement process****1.** **Importance of settling claims**The most important function of an insurance company is to settle claims of\npolicyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble businessof insurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "s339", "section": "Professional Liability", "chunk_id": "Final IC 38 - WA_Composite  - English_178", "metadata": {"file_size": 20885, "chunk_index": 178, "chunk_tokens": 997, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 11", "Answer 10", "Answer 6", "Answer 5", "Answer 7"]}}
{"chunk": "policyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble businessof insurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon\nas the possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early\nas possible after the loss.b) **Professionalism**The insurance officials consider each and every claim on its merits and do not\napply prejudicial or pre-conceived notions to reject the claim without\nexamining all the documents that would answer the following questions.i. Did the loss really happen?ii. If so, did the loss making event really cause the damage?iii. The extent of damage out of this event.iv. What was the reason for the loss?v. Was the loss covered under the policy?vi. Is the claim payable as per the contract/ policy conditions?vii. If so, how much is payable?The answers to all these questions need to be found out by the insurancecompany.Processing claims is an important activity. All claims forms, procedures and\nprocesses have been carefully designed by the company to ensure that all claims\n‘payable’ under the policy are promptly paid and those that are not payable are\nnot paid.342The agent, being the representative of the company known to the insured, has to\nensure that all the relevant forms are properly filled up with correct information,\nall documents evidencing the loss are attached and all prescribed procedures are\nfollowed in a timely manner and duly submitted to the company. The role of the\nagent at the time of loss has already been discussed earlier.2. **Intimation or Notice of Loss**Policy conditions provide that the loss be intimated to the insurer immediately.\nThe purpose of an immediate notice is to allow the insurer to investigate a loss\nat its early stages. Delays may result in loss of valuable information relating to\nthe loss. It would also enable the insurer to suggest measures to minimise the loss\nand to take steps to protect salvage. The notice of loss is to be given as soon as\nreasonably possible.After this initial check/ scrutiny, the claim is allotted a number and entered in\nthe claims register, with details like policy number, name of insured, estimate of\namount of loss, date of loss, the claim is now ready to be processed.**Under certain types of policies (e.g. Burglary) notice is also to be given to**\n**police authorities. Under cargo rail transit policies, notice has to be served on**\n**the Railways.**3. **Investigation and assessment****a)** **Overview**On receipt of the claim form, from the insured, the insurers decide about\ninvestigation and assessment of the loss. If the claim amount is small, the\ninvestigation to determine the cause and extent of loss is done, by an officer ofthe insurers.**The investigation** of other claims is entrusted to independent licensed\nprofessional surveyors who are specialists in loss assessment. The assessment of\nloss by independent surveyors is based on the principle that since both the\ninsurers and insured are interested parties, the unbiased opinion of an\nindependent professional person should be acceptable to both the parties as well\nas to a court of law in the event of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with\nsupporting documents. Where necessary Police report/ fire Brigade report,\nInvestigator’s report are also obtained. For personal accident claims, the insured\nis required to submit a report from the attending doctor specifying the cause of\naccident or the nature of illness as the case may be, and the duration ofdisablement.343Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": null, "section": "Settling claims professionally is regarded the biggest advertisement for an", "chunk_id": "Final IC 38 - WA_Composite  - English_179", "metadata": {"file_size": 20885, "chunk_index": 179, "chunk_tokens": 946, "has_examples": true, "has_tables": false, "key_concepts": ["Professionalism", "Overview", "Investigation and assessment", "Promptness", "Intimation or Notice of Loss"]}}
{"chunk": "investigation to determine the cause and extent of loss is done, by an officer ofthe insurers.**The investigation** of other claims is entrusted to independent licensed\nprofessional surveyors who are specialists in loss assessment. The assessment of\nloss by independent surveyors is based on the principle that since both the\ninsurers and insured are interested parties, the unbiased opinion of an\nindependent professional person should be acceptable to both the parties as well\nas to a court of law in the event of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with\nsupporting documents. Where necessary Police report/ fire Brigade report,\nInvestigator’s report are also obtained. For personal accident claims, the insured\nis required to submit a report from the attending doctor specifying the cause of\naccident or the nature of illness as the case may be, and the duration ofdisablement.343Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of\nthe report of a veterinary doctor.**Information**On receipt of intimation of loss or damage insurers check whether:1. The insurance policy is in force on the date of occurrence of the loss ordamage2. The loss or damage is caused by an insured peril3. The property (subject matter of insurance) affected by the loss is the sameas insured under the policy4. Notice of loss has been received without delay.Motor third party claims involving death and personal injuries are assessed on the\nbasis of doctor’s report. These claims are dealt by Motor Accident Claims Tribunal\nand the amount to be paid is decided by factors like the age and income of theclaimant.Claims involving third party property damage are assessed on the basis of a surveyreport. Motor own damage claim is assessed on the basis of surveyors report. It may require police report if third party damage is involved.**Information**Investigation is different from the assessment of loss. Investigation is done to\nensure that a valid claim has been made and verify the important details and\ndoubts like absence of insurable interest, suppression or misrepresentation of\nmaterial facts, deliberately creating the loss, etc. are ruled out.Insurance surveyors undertake the work of investigation also. It helps if a surveyor\ngets on to the job as early as possible. Therefore, the practice is to appoint the\nsurveyor, as soon as possible after the intimation of the claim is received.**B.** **Role of Surveyors and Loss Assessors****a)** **Surveyors**Surveyors are professionals licensed by IRDAI. They are experts in inspecting and\nevaluating losses in specific areas. Surveyors are generally paid fees by the\ninsurance company, engaging them. Surveyors and loss assessors are hired by\ngeneral insurance companies normally, at the time of a claim. They inspect the\nproperty in question, examine and verify the causes and circumstances of the\nloss. They also estimate the quantum of the loss and submit reports to the\ninsurance company.344They also advise insurers, regarding appropriate measures to prevent further\nlosses. Surveyors are governed by provisions of the Insurance Act, 1938,\nInsurance Rules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open\nCover’ for exports, are assessed by the claims settling agents abroad named in\nthe policy. These agents may assess the loss and make payment, which is\nreimbursed by the insurers along with their settling fees. Alternatively, all the\nclaims papers are collected by the insurance claim settling agents and submitted\nto the insurers, along with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons\n(not being a person disqualified for the time being for being employed as a\nsurveyor or loss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e2", "section": "The investigation", "chunk_id": "Final IC 38 - WA_Composite  - English_180", "metadata": {"file_size": 20885, "chunk_index": 180, "chunk_tokens": 937, "has_examples": false, "has_tables": false, "key_concepts": ["Surveyors", "Information", "Section 64 UM of Insurance Act", "Important", "Role of Surveyors and Loss Assessors"]}}
{"chunk": "Insurance Rules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open\nCover’ for exports, are assessed by the claims settling agents abroad named in\nthe policy. These agents may assess the loss and make payment, which is\nreimbursed by the insurers along with their settling fees. Alternatively, all the\nclaims papers are collected by the insurance claim settling agents and submitted\nto the insurers, along with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons\n(not being a person disqualified for the time being for being employed as a\nsurveyor or loss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other\nquestions vary from one class of insurance to another.**Example**An example of information sought in a fire claim form is given here under:i. Name of the insured, policy number and addressii. Date, time, cause and circumstances of the fireiii. Details of damaged propertyiv. Sound value of the property at the time of fire. Where the insurance consistsof several items under which the claim is made. [The claim must be based on\nactual value of property at the place and time of occurrence after allowance\nfor depreciation, wear and tear (unless the policy in respect of building, plant\nand machinery is on “reinstatement value” basis). It shall not include profit]v. Amount claimed after deduction of salvage valuevi. Situation and occupancy of the premises in which the fire occurredvii. Capacity in which the insured claims, whether as owner, mortgage or the likeviii. If any other person is interested in the property damagedix. If any other insurance is in force upon such property if so, details thereof345This is followed by the declaration as to the truth and accuracy of the statement\nof in the form and signature of the insured and the date.The issuance of claim form by the insurance company does not imply or mean\nthat liability for the claim is admitted by insurers. Claim forms are issued with\nthe remark ‘without prejudice’.**Supporting documents**In addition to the claim form, certain documents are required to be submitted by\nthe claimant or secured by the insurers to substantiate the claim.i. For fire claims, a report from the Fire Brigade would be necessary.ii. For cyclone damage, a report from the Meteorological office may be calledforiii. In burglary claims, a report from the Police may be necessary.iv. For fatal accident claims, reports may be necessary from the Coroner and thePolice.v. For motor claims, the insurer may like to examine driving license, registrationbook, police report etc.vi. In marine cargo claims, the nature of documents varies according to the typeof loss i.e. total loss, particular average, inland or overseas transit claims etc.**Test Yourself 1**Which of the following activities is not considered as professional in settlementof claims?I. Seeking information relating to the cause of the lossII. Approaching the claim with a prejudiceIII. Ascertaining whether the loss was a result of an insured perilIV. Quantifying the amount payable under the claim**Test Yourself 2**Raj is involved in a car accident. His car is insured under a motor insurance\ncomprehensive policy. Which among the following is most appropriate for Raj todo?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage346**Test Yourself 3**Which of the following statements about claims investigation and claimsassessment is correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether\nthere was any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the lossIV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "f345", "section": "Important", "chunk_id": "Final IC 38 - WA_Composite  - English_181", "metadata": {"file_size": 20885, "chunk_index": 181, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Test Yourself 4", "Example", "Section 64 UM of Insurance Act", "Test Yourself 5"]}}
{"chunk": "comprehensive policy. Which among the following is most appropriate for Raj todo?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage346**Test Yourself 3**Which of the following statements about claims investigation and claimsassessment is correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether\nthere was any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the lossIV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while\nexamining a cyclone damage claim?I. Coroner’s reportII. Report from Fire BrigadeIII. Police reportIV. Report from Meteorological Department**Test Yourself 6**Under which principle can the insurer assume the rights of the insured in order\nto recover from a third party the loss paid under a policy?I. ContributionII. DischargeIII. SubrogationIV. Indemnity347**Test Yourself 7**If the insurer decides that a certain loss is not payable because it is not covered\nunder the policy then who decides on such matters?I. Insurer’s decision is finalII. UmpireIII. ArbitratorIV. Court of Law**Summary**a) Settling claims professionally is regarded as the biggest advertisement for aninsurance company.b) Policy conditions provide that the loss be intimated to the insurerimmediately.c) If the claim amount is small, the investigation to determine the cause andextent of loss is done by an officer of the insurer. But for other claims it is\nentrusted to independent licensed professional surveyors who are specialistsin loss assessment.d) In general the claim form is designed to get full information regarding thecircumstances of the loss, such as date of loss, time, cause of loss, extent of\nloss, etc.e) Claims assessment is the process of determining whether the cause of the losssuffered by the insured was caused by an insured peril and whether there was\nany breach of warranty. The quantum of loss suffered by the insured and the\ninsurer’s liability under the policy are assessed. This is done before paymentof the claim.f) Settlement of the claim is made only after obtaining a discharge under thepolicy.**Key terms**a) Intimation of lossb) Investigation and Assessmentc) Surveyors and Loss Assessorsd) Claim formse) Adjustment and Settlement348**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is I.**Answer 3** - The correct option is II.**Answer 4** - The correct option is III.**Answer 5** - The correct option is IV.**Answer 6** - The correct option is III.**Answer 7** - The correct option is IV.349## SECTION## ANNEXURES350## CHAPTER A-01## ANNEXURESThese annexures are provided so that the students get a better idea of proposal\nforms used in general insurance.351352**Proposal Forms of Bharat Griha Raksha, Bharat Sookshma & Bharat Laghu**\n**Udyam**For a better understanding of standard products and their respective proposal\nforms, i.e. Bharat Griha Raksha, Bharat Sookshma and Bharat Laghu Udyam,\nplease check the following link to the IRDAI website.https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/StandardProducts/Ann\nexure-I-BharatGrihaRaksha.pdf353", "source_file": "Final IC 38 - WA_Composite  - English.md", "chapter": "e346", "section": "ANNEXURESThese annexures are provided so that the students get a better idea of proposal", "chunk_id": "Final IC 38 - WA_Composite  - English_182", "metadata": {"file_size": 20885, "chunk_index": 182, "chunk_tokens": 858, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 7", "Answer 2", "Answer 7", "Udyam"]}}
{"chunk": "## IC - 38 **INSURANCE MARKETING FIRM** **COMPOSITE****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory**\n**and Development Authority of India (IRDAI) and prepared by Insurance**\n**Institute of India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## INSURANCE MARKETING FIRM **COMPOSITE** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This\ncourse is designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express\nwritten permission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to\nctd@iii.org.in mentioning the subject title and unique publication number\nmentioned on the cover pageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nCorporate Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in\npreparing the course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate\ntheir professional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that\nInsurance agents need to know. Separate sections are provided for those aspiring\nto become (2) Life Insurance Agents, (3) General Insurance Agents and (4) Health\nInsurance Agents.A set of model questions are included in the course to give students an idea of\nthe examination format and the types of objective questions that may be asked.\nThe model questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**COMMON CHAPTERS **|**COMMON CHAPTERS **|\n|C-01|Introduction to Insurance|2|\n|C-02|Core Elements of Insurance|19|\n|C-03|Principles of Insurance|29|\n|C-04|Features of Insurance Contracts|43|\n|C-05|Underwriting and Rating|52|\n|C-06|Claims Processing|60|\n|C-07|Documentation|67|\n|C-08|Customer Service|76|\n|C-09|Grievance Redressal Mechanism|93|\n|C-10|Regulatory Aspects for Insurance Marketing Firm|101|\n|**SECTION **|**LIFE INSURANCE **|**LIFE INSURANCE **|\n|L-01|What Life Insurance Involves|118|\n|L-02|Financial Planning|125|\n|L-03|Life Insurance Products: Traditional|139|\n|L-04|Life insurance products: Non-Traditional|150|\n|L-05|Applications of Life Insurance|156|\n|L-06|Pricing and Valuation in Life Insurance|161|\n|L-07|Life Insurance Documentation|170|\n|L-08|Life Insurance Underwriting|184|\n|L-09|Life Insurance Claims|198|\n|**SECTION **|**HEALTH INSURANCE **|**HEALTH INSURANCE **|\n|H-01|Introduction to Health Insurance|207|", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "C-46", "section": "INSURANCE MARKETING FIRM", "chunk_id": "Final IC 38 -IMF_Composite -English_000", "metadata": {"file_size": 20962, "chunk_index": 0, "chunk_tokens": 990, "has_examples": false, "has_tables": true, "key_concepts": ["LIFE INSURANCE", "Institute of India, Mumbai.", "IC - 38", "INSURANCE MARKETING FIRM", "COMMON CHAPTERS"]}}
{"chunk": "|C-06|Claims Processing|60|\n|C-07|Documentation|67|\n|C-08|Customer Service|76|\n|C-09|Grievance Redressal Mechanism|93|\n|C-10|Regulatory Aspects for Insurance Marketing Firm|101|\n|**SECTION **|**LIFE INSURANCE **|**LIFE INSURANCE **|\n|L-01|What Life Insurance Involves|118|\n|L-02|Financial Planning|125|\n|L-03|Life Insurance Products: Traditional|139|\n|L-04|Life insurance products: Non-Traditional|150|\n|L-05|Applications of Life Insurance|156|\n|L-06|Pricing and Valuation in Life Insurance|161|\n|L-07|Life Insurance Documentation|170|\n|L-08|Life Insurance Underwriting|184|\n|L-09|Life Insurance Claims|198|\n|**SECTION **|**HEALTH INSURANCE **|**HEALTH INSURANCE **|\n|H-01|Introduction to Health Insurance|207|\n|H-02|Health Insurance Documentation|215|\n|H-03|Health Insurance Products|223|\n|H-04|Health Insurance Underwriting|250|\n|H-05|Health Insurance Claims|266|\n|**SECTION **|**GENERAL INSURANCE **|**GENERAL INSURANCE **|\n|G-01|General Insurance Documentation|283|\n|G-02|Underwriting and Rate Making|299|\n|G-03|Personal and Retail Insurance|309|\n|G-04|Commercial Insurance|319|\n|G-05|General Insurance Claims|343|\n|**SECTION **|**ANNEXURES **<br>|**ANNEXURES **<br>|\n|A-01|~~Annexures – Specimen Proposal forms and Claims Forms~~<br>for filling up|353|iv## SECTION **AN OVERVIEW**1## CHAPTER C-01## INTRODUCTION TO INSURANCE**Chapter Introduction**This chapter aims to introduce the basics of insurance, trace its evolution and\nhow it works. It intends to teach how insurance provides protection against\neconomic losses arising as a result of unforeseen events and serves as aninstrument of risk transfer.2**A.** **Insurance – History and Evolution**We live in a world of uncertainty. We hear about: Trains colliding Floods destroying entire communities Earthquakes destroying buildings Young people dying unexpectedly**Diagram 1:** **Events happening around us**Why do these events make people anxious and afraid?The reason is simple.**i.** Firstly these **events are unpredictable.** If one can anticipate and predictan event, one can prepare for it.**ii.** Secondly, such unpredictable and untoward events are often a **cause of****economic loss and grief** .The people around can come to the aid of individuals who are affected by such\nevents, by having a system of sharing and mutual support. The idea of insurance\nis thousands of years old. Yet, the present form of insurance, is only two or threecenturies old.**1.** **History of insurance**Insurance has existed in some form or other since 3000 BC. Many civilisations,\nhave practiced the concept of pooling and sharing among themselves, all the\nlosses suffered by some members of the community. Let us take a look at some\nof the ways in which this concept was applied.3**2.** **Insurance through the ages – Some instances**|Bottomry Loans|Traders of Babylon paid extra money to their lenders to write<br>off their loans if shipment was lost or stolen.<br>Traders of Bharuch and Surat also had similar practices.|\n|---|---|\n|**Benevolent**<br>**Societies/**<br>**Friendly**<br>**Societies**|Greeks of 7th Cy. AD, used to pay in advance to take care of the<br>family of members who died and also the funeral expenses of the<br>member.<br>Similar practices were followed in England as well.|\n|**Rhodes**|Traders of Rhodes who were sending goods by sea, were sharing<br>losses if any of them lost their goods due to jettison1.|\n|**Chinese Traders**|**Chinese traders**in ancient days used to send their goods in<br>different ships, so that even if some boats sank, their loss would<br>be partial.|**3.** **Modern concepts of insurance**In India the principle of life insurance was reflected in the joint-family\nsystem. Losses arising from the demise of a member were shared by various", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "C-06", "section": "SECTION", "chunk_id": "Final IC 38 -IMF_Composite -English_001", "metadata": {"file_size": 20962, "chunk_index": 1, "chunk_tokens": 993, "has_examples": false, "has_tables": true, "key_concepts": ["Rhodes", "ANNEXURES", "AN OVERVIEW", "Modern concepts of insurance", "Societies/"]}}
{"chunk": "|---|---|\n|**Benevolent**<br>**Societies/**<br>**Friendly**<br>**Societies**|Greeks of 7th Cy. AD, used to pay in advance to take care of the<br>family of members who died and also the funeral expenses of the<br>member.<br>Similar practices were followed in England as well.|\n|**Rhodes**|Traders of Rhodes who were sending goods by sea, were sharing<br>losses if any of them lost their goods due to jettison1.|\n|**Chinese Traders**|**Chinese traders**in ancient days used to send their goods in<br>different ships, so that even if some boats sank, their loss would<br>be partial.|**3.** **Modern concepts of insurance**In India the principle of life insurance was reflected in the joint-family\nsystem. Losses arising from the demise of a member were shared by various\nfamily members so that each member of the family continued to feel secure.The break-up of the joint family system and emergence of the nuclear family\nin the modern era, coupled with the stress of daily life has made it necessary\nto evolve alternative systems for security. This highlights the importance oflife insurance to an individual.**i.** **Lloyds** : The origins of modern commercial insurance started at Lloyd’sCoffee House in London, where traders agreed to share losses they\nsuffered due to various perils at sea.**ii.** **Amicable Society for a Perpetual Assurance** founded in 1706 in Londonis considered to be the first life insurance company in the world.**4.** **History of insurance in India****a)** **India** : Modern insurance in India began in early 1800 or thereabouts, with\nagencies of foreign insurers starting marine insurance business.|The Oriental Life<br>Insurance Co. Ltd|The first life insurance company to be set up in India<br>was an English company|\n|---|---|\n|**Triton Insurance Co. Ltd.**|The first non-life insurer to be established in India|1 Jettison/ Jettisoning’ refers to throwing away some of the cargo to reduce the weight of the ship while at sea.4|Bombay Mutual<br>Assurance Society Ltd.|The first Indian insurance company. It was formed<br>in 1870 in Mumbai|\n|---|---|\n|**National Insurance**<br>**Company Ltd.**|The oldest insurance company in India. It was<br>founded in 1906|Many other Indian companies were set up subsequently as a result of the Swadeshi\nmovement at the turn of the century.**Important**a) The **Insurance Act 1938** was the first legislation to regulate the conduct ofinsurance companies in India. This Act, as amended from time to timecontinues to be in force.b) Life insurance business was nationalised on 1st September 1956 and the **Life****Insurance Corporation of India (LIC)** was formed. From 1956 to 1999, the LIC\nheld exclusive rights to do life insurance business in India.c) In 1972, the non-life insurance business was also nationalised and the **General****Insurance Corporation of India (GIC) and its four subsidiaries** were set up.d) **The Malhotra Committee, in its report submitted in 1994, recommended**opening of the market for competitione) The Insurance market was liberalised in 2000, with the passing of the InsuranceRegulatory & Development Act, 1999 (IRDAI), which also established the\nInsurance Regulatory and Development Authority of India (IRDAI) in April 2000\nas a statutory regulatory body for the insurance industry.f) An amendment of the Insurance Act in 2021, has allowed Foreign investors, tohold up to 74% of the paid up equity capital in an Indian Insurance company.\nForeign insurers can now establish branches in India to do reinsurance.**a.** **Insurance industry today (As on 30** **[th]** **September 2021)**a) There are 24 Life insurance companies operating in India. Of these, LifeInsurance Corporation (LIC) of India is a public sector company (PSU) and\nthe remaining 23 life insurance companies are in the private sector.b) There are 34 General Insurance companies of which 4 - National InsuranceCo. Ltd, The New India Assurance Co. Ltd., The Oriental Insurance Co. Ltd\nand United India Insurance Co. Ltd. are PSU Companies dealing with all\nlines of general insurance. 26 Private Companies also deal with all lines of\ngeneral insurance. 6General Insurers deal only in Health insurance. 2 are\nspecialised insurers - Agricultural Insurance Company [AIC] and Export", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n1", "section": "Benevolent", "chunk_id": "Final IC 38 -IMF_Composite -English_002", "metadata": {"file_size": 20962, "chunk_index": 2, "chunk_tokens": 1007, "has_examples": true, "has_tables": true, "key_concepts": ["Rhodes", "National Insurance", "Modern concepts of insurance", "Insurance industry today (As on 30", "September 2021)"]}}
{"chunk": "Insurance Regulatory and Development Authority of India (IRDAI) in April 2000\nas a statutory regulatory body for the insurance industry.f) An amendment of the Insurance Act in 2021, has allowed Foreign investors, tohold up to 74% of the paid up equity capital in an Indian Insurance company.\nForeign insurers can now establish branches in India to do reinsurance.**a.** **Insurance industry today (As on 30** **[th]** **September 2021)**a) There are 24 Life insurance companies operating in India. Of these, LifeInsurance Corporation (LIC) of India is a public sector company (PSU) and\nthe remaining 23 life insurance companies are in the private sector.b) There are 34 General Insurance companies of which 4 - National InsuranceCo. Ltd, The New India Assurance Co. Ltd., The Oriental Insurance Co. Ltd\nand United India Insurance Co. Ltd. are PSU Companies dealing with all\nlines of general insurance. 26 Private Companies also deal with all lines of\ngeneral insurance. 6General Insurers deal only in Health insurance. 2 are\nspecialised insurers - Agricultural Insurance Company [AIC] and Export\nCredit and Guarantees Corporation [ECGC], both set up as Public sectorentities.5c) There is one Reinsurance Company – The General Insurance Corporation ofIndia [GIC Re] and 11 foreign Reinsurers that operate through branchoffices.d) The Department of Posts (called as India Post) of the Government of India,also transacts life insurance known as Postal Life Insurance. India post is\nexempt from the purview of the Insurance Regulator.**Test Yourself 1**Which among the following is the regulatory body for the insurance industry in\nIndia?I. Insurance Authority of IndiaII. Insurance Regulatory and Development Authority of IndiaIII. Life Insurance Corporation of IndiaIV. General Insurance Corporation of India**How insurance works**Modern commerce was founded on the principle of ownership of property. When\nan asset loses value (by loss or destruction), the owner of the asset suffers an\neconomic loss. This loss can be compensated from a common fund made up of\nsmall contributions from many similar asset owners. This process of transferring\nthe chance and consequence of a loss making event is insurance.This mechanism of pooling risks works differently in the case of death and\ndisability as there is no loss/ destruction of a commercial asset.**Definition**Insurance may thus be considered as a process by which the losses of a few are\nshared amongst many of those exposed to similar uncertain events/ situations.**Diagram 2:** **How insurance works**6There are however some questions that need to be answered.i. Would people agree to part with their hard earned money, to create sucha common fund?ii. How could they trust that their contributions are actually being used forthe desired purpose?iii. How would they know if they are paying too much or too little?iv. Who would take the responsibility of managing these funds and payingthose who suffer the loss?The need for an Insurer comes as an answer to all these questions. The Insurer\nassesses the risk, decides and collects the individual contributions (called\npremium), pools the risks and premiums, and arranges to pay to those who suffer\nthe loss. The insurer must also win the trust of the individuals and the community.**1.** **Insurance is about value**a) Firstly, there must be an asset which has an economic value. The **Asset** maybe:i. P **hysical** (like a car or a building) orii. N **on-physical** (like reputation, goodwill, liability to pay to someone)oriii. P **ersonal** (like one’s eyes, limbs, body and physical capabilities).b) The asset may lose its value if a certain event happens. This chance of loss iscalled as **risk** . The cause of the risk event is known as **peril** .c) There is a principle known as **pooling** . This consists of collecting numerousindividual contributions (known as premiums) from various persons. These\npersons have similar assets which are exposed to similar risks. Their assets\nare also referred to as ‘risks’ in many contexts.d) This pool of funds is used to compensate the few who might suffer the lossescaused by a **peril** .e) This process of pooling funds and compensating the unfortunate few is carriedout through an institution known as the **insurer** (Insurance Company).f) The insurer enters into an insurance **contract** with each person who seeks toparticipate in this mechanism of pooling. The persons who participate are\nknown as **insured.****2.** **Insurance reduces Risk Burden**The burden of risk refers to the costs, losses and disabilities one has to bear as a", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Insurance industry today (As on 30", "chunk_id": "Final IC 38 -IMF_Composite -English_003", "metadata": {"file_size": 20962, "chunk_index": 3, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Asset", "Insurance is about value", "Insurance industry today (As on 30", "Definition"]}}
{"chunk": "persons have similar assets which are exposed to similar risks. Their assets\nare also referred to as ‘risks’ in many contexts.d) This pool of funds is used to compensate the few who might suffer the lossescaused by a **peril** .e) This process of pooling funds and compensating the unfortunate few is carriedout through an institution known as the **insurer** (Insurance Company).f) The insurer enters into an insurance **contract** with each person who seeks toparticipate in this mechanism of pooling. The persons who participate are\nknown as **insured.****2.** **Insurance reduces Risk Burden**The burden of risk refers to the costs, losses and disabilities one has to bear as a\nresult of being exposed to a given loss situation/ event.**Diagram 3:** **Risk burdens that one carries**7There are two types of risk burdens that one carries – **primary and secondary** .**a)** **Primary burden of risk**The **primary burden of risk** consists of losses that are actually suffered by\nhouseholds (and business units), as a result of pure risk events. These losses\nare often direct and measurable; and can be easily compensated for byinsurance.**Example**When a factory gets destroyed by fire, the actual value of goods damaged or\ndestroyed can be estimated and the compensation can be paid to the owner\nof the factory who has suffered the loss.Similarly, if an individual undergoes a heart surgery, the medical cost of the\nsame is known and compensated. In addition there may be some indirectlosses.**Example**A fire may interrupt business operations and lead to loss of profits which also\ncan be estimated and the compensation can be paid to the one who sufferssuch a loss.Someone whose scooter hits a pedestrian is liable to pay the victim the\ncompensation that the Court decides.**b)** **Secondary burden of risk**Even when no such event occurs and there is no loss, the people who are\nexposed to the peril carry some burden. That is, apart from the primary\nburden, one also carries a secondary burden of risk.The **secondary burden of risk** consists of costs and strains that one has to\nbear, even if the said event does not occur, from the mere fact that one is\nexposed to a loss situation.Let us understand some of these burdens:8i. Firstly there is **physical and mental strain caused by fear and anxiety** .\nThis can cause stress and affect a person’s wellbeing.ii. Secondly when one is **uncertain about whether a loss would occur or****not**, it would be prudent to keep a reserve fund to meet such an\neventuality. Such funds may be held in liquid form and yield low returns.By transferring the risk to an insurer, it becomes possible to enjoy peace of mind\nand also invest one’s funds more effectively. It is precisely for these reasons thatinsurance is needed.In India, one must purchase third party insurance if he/ she owns a vehicle\nbecause it is mandatory if one wants to drive on a public road. At the same time\nit would be prudent to cover the possibility of loss of own damage to the car\nthough it is not mandatory. It is also compulsory to have a Personal Accident coverfor the Owner-Driver.**Test Yourself 2**Which among the following is a secondary burden of risk?\nI. Business interruption cost\nII. Goods damaged cost\nIII. Setting aside reserves as a provision for meeting potential losses in the future\nIV. Hospitalisation costs as a result of heart attack**B.** **The Principle of Risk Pooling**Insurance companies enter into contracts with different entities – policyholders,\nwho can be individuals or corporates. The benefits they pay to policyholders are\ncontractual obligations. Insurance contracts are meaningful only if the Insurers\nare financially capable of taking over the risks and compensating for the losses,\nif and when they occur. The structure arises from application of the mutuality or\nthe pooling principle.**Mutuality** and Diversification are two important ways to reduce risk in financial\nmarkets. They are fundamentally different.|Diversification|Mutuality|\n|---|---|\n|Here the funds are spread out among<br>various assets (eggs are placed in different<br>baskets).|Under mutuality or pooling, the funds of<br>various individuals are combined (all eggs<br>are placed in one basket).|\n|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|9**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured\nimmediately creates a large quantity of funds ( corpus)that is available to him/", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Insurance reduces Risk Burden", "chunk_id": "Final IC 38 -IMF_Composite -English_004", "metadata": {"file_size": 20962, "chunk_index": 4, "chunk_tokens": 1007, "has_examples": true, "has_tables": true, "key_concepts": ["Mutuality", "The Principle of Risk Pooling", "Example", "Primary burden of risk", "Secondary burden of risk"]}}
{"chunk": "who can be individuals or corporates. The benefits they pay to policyholders are\ncontractual obligations. Insurance contracts are meaningful only if the Insurers\nare financially capable of taking over the risks and compensating for the losses,\nif and when they occur. The structure arises from application of the mutuality or\nthe pooling principle.**Mutuality** and Diversification are two important ways to reduce risk in financial\nmarkets. They are fundamentally different.|Diversification|Mutuality|\n|---|---|\n|Here the funds are spread out among<br>various assets (eggs are placed in different<br>baskets).|Under mutuality or pooling, the funds of<br>various individuals are combined (all eggs<br>are placed in one basket).|\n|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|9**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured\nimmediately creates a large quantity of funds ( corpus)that is available to him/\nher in the event of a loss arising due to the insured risk. This potential corpus of\nmoney is what makes insurance unique and without any substitutes among all\nfinancial products.**C.** **Risk Management Techniques**One may also ask whether insurance is the right solution to all kinds of risksituations. The answer is ‘No’.Insurance is only one of the methods by which individuals may seek to manage\ntheir risks. Here they transfer the risks they face to an insurance company.\nHowever there are other methods of dealing with risks, which are explainedbelow:**1.** **Risk avoidance**Reducing risk by avoiding a loss situation is known as risk avoidance. Thus one\nmay try to avoid activities or situations, or avoid dealing with property or persons\ndue to which there can be an exposure.**Example**i. One may avoid certain manufacturing risks by contracting out the\nmanufacturing to someone else.ii. One may not venture outside the house for fear of meeting with an accidentor may not travel at all for fear of falling ill when abroad.Risk avoidance is considered a negative way to handle risk. Individuals and\nsocieties need to take some risks for doing activities for their progress. Avoiding\nsuch risk taking activities would lead to losing the benefits from such activity.**2.** **Risk retention**One tries to manage the impact of risk and decides to bear the risk and its effects\nby oneself. This is known as self-insurance.10**Example**A business house may decide, based on experience about its capacity to bear\nsmall losses upto a certain limit, to retain the risk with itself.**3.** **Risk reduction and control**This is a more practical and relevant approach than risk avoidance. It means\ntaking steps to lower the chance of occurrence of a loss and/ or to reduce severity\nof its impact if such loss should occur.**Important**Measures to reduce the chance of occurrence of loss causing events are known as\n‘ **Loss Prevention** ’. The measures to reduce the degree of loss, in case a loss\nhappens, are called ‘ **Loss Reduction** ’/ Loss Minimisation.Risk reduction involves reducing the frequency and/ or sizes of losses through:**a)** **Education and training of various types of employees in proper risk****practices – e.g.** (i) participating in ‘fire drills’; (ii)wearing of seatbeltshelmets on cars.**b)** **Making Environmental changes –** like improving physical conditions - e.g.(i) installing fire alarms; (ii) spraying chemicals to kill mosquitoes to reduce\nspread of Malaria.**c)** **Changes made in dangerous or hazardous operations,** while usingmachinery and equipment or in the performance of other task - e.g. (i)\nwearing helmets inside construction sites; (ii) wearing gloves and face\nshields while handling chemicals.**d)** **Leading a healthy lifestyle** - helps in reduce the incidence of falling ill\ne.g. (i) undergoing regular medical check-ups; (ii) practicing yoga\nregularly.**e)** **Separation**, or spreading out various items of property into varied locationsrather than concentrating them, to reduce impact of mishap in any one\nlocation - e.g. (i) storing large quantities of flammable substances at\nseparate locations; (ii) fixing fire proof doors in hazardous areas offactories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself asthey occur. The firm assumes and finances its own risk, either through its", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Mutuality", "chunk_id": "Final IC 38 -IMF_Composite -English_005", "metadata": {"file_size": 20962, "chunk_index": 5, "chunk_tokens": 1001, "has_examples": true, "has_tables": true, "key_concepts": ["Mutuality", "Making Environmental changes –", "Changes made in dangerous or hazardous operations,", "Leading a healthy lifestyle", "Separation"]}}
{"chunk": "spread of Malaria.**c)** **Changes made in dangerous or hazardous operations,** while usingmachinery and equipment or in the performance of other task - e.g. (i)\nwearing helmets inside construction sites; (ii) wearing gloves and face\nshields while handling chemicals.**d)** **Leading a healthy lifestyle** - helps in reduce the incidence of falling ill\ne.g. (i) undergoing regular medical check-ups; (ii) practicing yoga\nregularly.**e)** **Separation**, or spreading out various items of property into varied locationsrather than concentrating them, to reduce impact of mishap in any one\nlocation - e.g. (i) storing large quantities of flammable substances at\nseparate locations; (ii) fixing fire proof doors in hazardous areas offactories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself asthey occur. The firm assumes and finances its own risk, either through its\nown or borrowed funds, this is known as **self-insurance** .11**b)** **Risk retention within a bigger group:** If the risk is part of a bigger group,like a parent company, the risk can be retained within the larger group\nwhich would finance the losses. This can be a group formed by mutualconsent as well.**c)** **Risk transfer** is an alternative to risk retention. It involves transferringthe responsibility for losses to another party.**Insurance is one of the major forms of risk transfer. Instead of facing the**\n**uncertainty of many of the other forms, people prefer Insurance as it**\n**provides certainty and peace of mind.****5.** **Insurance vs Assurance**Insurance is used for most General insurance contracts which provide\nprotection against an event that may or may not happen, and where the loss\namount can be assessed only after the event.Assurance refers to financial coverage for extended periods or until death. In\nthe case of life, the happening of death (the loss making event), is certain.\nOnly the timing is uncertain. Further, it is not possible to estimate the amount\nof economic loss suffered when a person dies. The loss amount that is to be\npaid, must be fixed in advance. This is why people use the term ‘Assurance’in case of Life insurance.**Though there are such subtle technical differences, the terms ‘Insurance’**\n**and ‘Assurance’ are used interchangeably in most markets, including India.**_[One of the biggest general insurers in India carries the name – New India_\n_**Assurance**_ _Company Ltd. and no life company in India is using the word_\n_**‘Assurance’**_ _in its name!]_**Diagram 5:** **How insurance indemnifies the insured**12**Test Yourself 3**Which among the following is a method of risk transfer?\nI. Bank Fixed DepositII. InsuranceIII. Equity sharesIV. Real Estate**D.** **Insurance as a tool for managing risk**The term ‘Risk’ refers not to a loss that has actually been suffered but a loss that\nis likely to occur. It is thus an expected loss. The cost of this expected loss is the\nproduct of two factors:i. The **probability** that the peril being insured against may happen, leadingto the lossii. The **severity (impact)** or the amount of loss that may be suffered as aresult.The cost of risk would increase in direct proportion with both the **probability** and\nthe **severity** (amount of loss). This works in different ways – (a) If the amount of\nloss is very high, and the probability of its occurrence is small, the cost of the\nrisk would be low as such instances may be very few. (b) Even if the amount of\nloss is small, if the probability of its occurrence is very high, the cost of the risk\nwould be high, as there would be many such occurrences. Insurance can be seen13as a powerful tool for managing one’s risk. It protects one from the financial\nimpact of losing one’s assets/ wealth due to an insured loss.**Diagram 6:** **Considerations before opting for insurance****E.** **Considerations before opting for Insurance**When deciding whether to insure or not, one needs to evaluate the cost of\ntransferring the risk [the insurance premium] against the cost of bearing it\noneself. Insurance would be most required where the loss impact could be very\nhigh, but the probability (and hence the premium), is very low. E.g. (i) the chance", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n13", "section": "Changes made in dangerous or hazardous operations,", "chunk_id": "Final IC 38 -IMF_Composite -English_006", "metadata": {"file_size": 20962, "chunk_index": 6, "chunk_tokens": 964, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance vs Assurance", "Considerations before opting for insurance", "Risk financing", "Changes made in dangerous or hazardous operations,", "Separation"]}}
{"chunk": "the **severity** (amount of loss). This works in different ways – (a) If the amount of\nloss is very high, and the probability of its occurrence is small, the cost of the\nrisk would be low as such instances may be very few. (b) Even if the amount of\nloss is small, if the probability of its occurrence is very high, the cost of the risk\nwould be high, as there would be many such occurrences. Insurance can be seen13as a powerful tool for managing one’s risk. It protects one from the financial\nimpact of losing one’s assets/ wealth due to an insured loss.**Diagram 6:** **Considerations before opting for insurance****E.** **Considerations before opting for Insurance**When deciding whether to insure or not, one needs to evaluate the cost of\ntransferring the risk [the insurance premium] against the cost of bearing it\noneself. Insurance would be most required where the loss impact could be very\nhigh, but the probability (and hence the premium), is very low. E.g. (i) the chance\nof an earthquake; (ii) the chance of a ship sinking.**a)** **Do not risk a lot for a little** : A reasonable relationship must be therebetween the cost of transferring the risk and the value derived.Would it make sense to insure an ordinary ball pen?**b)** **Do not risk more than one can afford to lose:** If the loss that can arise as aresult of an event is large enough to cause bankruptcy, retention of the risk\nwould not be appropriate.If a large oil refinery gets destroyed, the owners cannot afford to bear theloss.**c)** **Consider the likely outcomes of the risk carefully:** It is best to insure thoseassets for which the probability of occurrence (frequency) of a loss is low but\nthe possible impact (severity), is high.The loss of a space satellite can be so costly that it has to be insured.**Test Yourself 4**Which among the following scenarios needs insurance?I. The sole bread winner of a family might die untimely\nII. A person may lose his wallet\nIII. Stock prices may fall drastically\nIV. A house may lose value due to natural wear and tear14**F.** **Insurance Market Players**The Insurance Companies (Insurers) are the major players in the insurance\nindustry. In addition to insurers, there are multiple parties who are part of the\nInsurance value chain. There is the Insurance Regulator, which regulates theentire market.Intermediaries like Agents, Brokers, Banks (through Bancassurance) Insurance\nMarketing Firms and Point of Sales Persons are in the field of interacting with the\nprospects/ insured finding out their needs, giving them information about the\npolicies available for covering their needs.Surveyors and Loss Assessors/ Adjusters go into assessing claims and ancillary\nwork. Third Party Administrators deal with Health and Travel Insurance Claims.\nRegulations provides that all intermediaries have a responsibility towards thecustomer.Agents, being intermediaries between the insurance company and the insured\nhave the responsibility to ensure all material information about the risk is\nprovided by the insured to insurer.**Important****Duty of an Insurance Agent/ Intermediary towards the Prospect (Customer)**IRDAI regulations provides that intermediaries have certain responsibilities\ntowards the prospect. The intermediary has a responsibility towards the insureras well.The regulation states that where the prospect depends upon the advice of the\ninsurer or his agent or an insurance intermediary, such a person must advise the\nprospect in a fair manner. It also says that “An insurer or its agent or other\nintermediary shall provide all material information in respect of a proposed cover\nto the prospect to enable the prospect to decide on the best cover that would bein his or her interest”.If the proposal and other connected papers are not filled by the customer, a\ncertificate may be incorporated at the end of proposal form from the customer\nthat the contents of the form and documents have been fully explained to him\nand that he has fully understood the importance of the proposed contract.When the customer pays the insurer towards premium, the insurer is bound to\nissue a receipt. That is, even if the premium is paid in advance.15**G.** **Role of Insurance in the Society**Insurance companies play an important role in a country’s economic\ndevelopment. They ensure that the wealth of the country is protected and\npreserved. Some of their contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunatefew members who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n13", "section": "Diagram 6:", "chunk_id": "Final IC 38 -IMF_Composite -English_007", "metadata": {"file_size": 20962, "chunk_index": 7, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Considerations before opting for insurance", "Considerations before opting for Insurance", "Test Yourself 4", "Do not risk more than one can afford to lose:", "Important"]}}
{"chunk": "to the prospect to enable the prospect to decide on the best cover that would bein his or her interest”.If the proposal and other connected papers are not filled by the customer, a\ncertificate may be incorporated at the end of proposal form from the customer\nthat the contents of the form and documents have been fully explained to him\nand that he has fully understood the importance of the proposed contract.When the customer pays the insurer towards premium, the insurer is bound to\nissue a receipt. That is, even if the premium is paid in advance.15**G.** **Role of Insurance in the Society**Insurance companies play an important role in a country’s economic\ndevelopment. They ensure that the wealth of the country is protected and\npreserved. Some of their contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunatefew members who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly\ninvested in speculative ventures.c) Insurance provides the benefit of protection to numerous insured - bothindividuals and enterprises –against losses caused by accidents or\nfortuitous events. It preserves capital and releases it for development of\nbusiness and industry, which helps the country’s growth.d) Insurance enables investment of capital leading to commercial andindustrial development. It also helps in removing the fear, worry and\nanxiety associated with entrepreneurship.e) Many Banks and Financial institutions do not advance loans on propertyunless it is insured against loss or damage. Many of them insist on assigning\nthe policy as collateral security.f) Before accepting large complicated risks, general insurers arrange forinspection of the property by qualified engineers/ other experts. They\nassess the risk and suggest risk management measures to reduce the risk\nand help in rating.g) Insurance earns foreign exchange for the country like trade, shipping andbanking services.h) Insurers are associated with institutions engaged in fire loss prevention,cargo loss prevention, industrial safety and road safety.i) Entrepreneurs get the confidence to invest in new or relatively unknownfields with the protection offered by Insurance.**Information****Insurance and Social Security**a) Social security is an obligation of the State. Social security schemes of theState involve the use of compulsory or voluntary insurance, as a tool of\nsocial security. The Employees State Insurance Act, 1948 provides for16**Employees State Insurance Corporation** to pay for the expenses of\nsickness, disablement, maternity and death for industrial employees and\ntheir families, who are covered.b) Insurers play an important role in social security schemes sponsored by theGovernment such as1. PMJJBY –Pradhan Mantri Jeevan Jyoti Bima Yojana\n2. PMSBY – Pradhan Mantri Suraksha Bima Yojana\n3. PMFBY- Pradhan Mantri Fasal Bima Yojana\n4. PMJAY – Pradhan Mantri Jan Arogya Yojana (Ayushmaan Bharat)\n5. PMVVY - Pradhan Mantri Vaya Vandana Yojana – a Pension plan\n6. APY - Atal Pension YojanaThese, and other Government schemes have been benefiting the Indian\nsociety/ community.c) In addition to supporting Government schemes, the insurance industryoffers insurance covers on a commercial basis which have the ultimateobjective of providing social security. The **rural insurance schemes**,\noperated on a commercial basis, are designed to provide social security tothe rural families.**Test Yourself 5**Which of the following insurance schemes are sponsored by the Government of\nIndia?I. PM Jan Arogya Yojana - Ayushmaan Bharat\nII. PM Fasal Bima Yojana\nIII. PM Suraksha Bima Yojana\nIV. All of the above**Summary**Insurance is risk transfer through risk pooling.Commercial insurance business as practiced today started at the Lloyd’sCoffee House in London.An insurance arrangement involves the following: Asset,\n Risk,\n Peril,\n Contract,\n Insurer and\n Insured17When persons having similar assets, exposed to similar risks, contribute into\na common pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,\n Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "r16", "section": "G.", "chunk_id": "Final IC 38 -IMF_Composite -English_008", "metadata": {"file_size": 20962, "chunk_index": 8, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance and Social Security", "Information", "Test Yourself 5", "Employees State Insurance Corporation", "Summary"]}}
{"chunk": "India?I. PM Jan Arogya Yojana - Ayushmaan Bharat\nII. PM Fasal Bima Yojana\nIII. PM Suraksha Bima Yojana\nIV. All of the above**Summary**Insurance is risk transfer through risk pooling.Commercial insurance business as practiced today started at the Lloyd’sCoffee House in London.An insurance arrangement involves the following: Asset,\n Risk,\n Peril,\n Contract,\n Insurer and\n Insured17When persons having similar assets, exposed to similar risks, contribute into\na common pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,\n Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and\n Do not risk a lot for a little**Key Terms**1. Risk2. Pooling3. Asset4. Burden of risk5. Risk avoidance6. Risk control7. Risk retention8. Risk financing9. Risk transfer**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is I.\n**Answer 5** - The correct option is IV.18#### CHAPTER C- 0 2## CORE ELEMENTS OF INSURANCE**Chapter Introduction**In this chapter, we shall learn about the various key elements and principles of\ninsurance that govern the working of insurance.**Learning Outcomes**After studying this chapter, one should be able to:1. Understand Assets are2. Understand Risk, Hazards and Perils3. Appreciate Risk Management4. Understand Risk Pooling in insurance19**A.** **Elements of insurance**We have seen that the process of insurance has four elements Asset Risk Risk poolingLet us now look at the various elements of the insurance process in some detail.**1.** **Asset****Definition**An asset may be defined as ‘anything that confers some benefits and has aneconomic value to its owner’.An asset must have the following features: **Economic value:** An asset must have economic value. Value can arise in twoways.**a)** **Income generation** : Asset may be productive and generate income.**Example**A machine used to manufacture biscuits, or a cow that yields milk, both generate\nincome for their owner. A healthy worker is an asset to an organization.**b)** **Serving needs** : An asset could also add value by satisfying one or a group ofneeds.**Example**A refrigerator cools and preserves food while a car provides comfort and\nconvenience in transportation, similarly a body free of illness adds value to\noneself and family also. **Scarcity and Ownership**What about air and sunlight? Are they not assets? - **The answer is ‘No’.**Few things are as valuable as air and sunlight. We cannot live without them. Yet\nthey are not considered as assets in the economic sense of the term.There are two reasons for this: Their supply is abundant and not scarce.\n They are not owned by any one individual but are freely available to all.20This implies that an asset must satisfy two more conditions to qualify as such - its\nscarcity and its ownership or possession by someone. **Insurance of assets**Insurance provides protection only against financial losses arising from\nunexpected events and not natural wear and tear, of assets due to usage overtime.We must note that **insurance cannot protect an asset from loss or damage** . An\nearthquake will destroy a house whether it is insured or not. The insurer can only\npay a sum of money, which would reduce the economic impact of the loss.Losses can arise in the event of breach of an agreement.**Example**An exporter would lose a great deal if the importer on the other side refused to\naccept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives\nand those of our loved ones. Our lives can be seriously affected when subjectedto an accident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death ordisability.These kinds of losses are covered by insurances of the person or personal lines of", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d17", "section": "Summary", "chunk_id": "Final IC 38 -IMF_Composite -English_009", "metadata": {"file_size": 20962, "chunk_index": 9, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Income generation", "Key Terms", "Answer 5", "Life insurance", "Serving needs"]}}
{"chunk": "scarcity and its ownership or possession by someone. **Insurance of assets**Insurance provides protection only against financial losses arising from\nunexpected events and not natural wear and tear, of assets due to usage overtime.We must note that **insurance cannot protect an asset from loss or damage** . An\nearthquake will destroy a house whether it is insured or not. The insurer can only\npay a sum of money, which would reduce the economic impact of the loss.Losses can arise in the event of breach of an agreement.**Example**An exporter would lose a great deal if the importer on the other side refused to\naccept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives\nand those of our loved ones. Our lives can be seriously affected when subjectedto an accident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death ordisability.These kinds of losses are covered by insurances of the person or personal lines of\ninsurance. Insurance is possible for anyone who has assets that have value [i.e.\nwhich generate income or meet some needs]; the loss of which [due to fortuitous\nor accidental events] cause financial loss that can be [measured in terms of\nmoney].Thus these assets are commonly referred to as subject matter of insurance in\ninsurance parlance.**2.** **Risk**The second element in the process of insurance is the concept of risk. Risk can\nbe defined as the **chance of a loss** . Risk thus refers to the likely loss or damage\nthat can arise on account of happening of an event. [Risk is sometimes used to\nrefer the subject matter of insurance, as well.] One do not usually expect one’s\nhouse to burn or one’s car to have an accident. Yet it can happen.21Examples of risks are the possibility of economic loss arising from the burning of\na house or a burglary or an accident which results in the loss of a limb.This has two implications.**i.** **Firstly,** it means that that the loss may or may not happen.**ii.** **Secondly,** the event, the occurrence of which actually leads to the loss,is known as a **peril** . It is the cause of the loss.**Example**Examples of perils are fire, earthquakes, floods, lightning, burglary, heart attacketc.**Natural wear and tear**It is true that nothing lasts forever. Every asset has a finite lifetime during which\nit is functional and yields benefits. This is a natural process and one discards or\nchanges one’s mobiles, washing machines and clothes when they are worn out.\nTherefore losses arising out of normal wear and tear are not covered in insurance.**Exposure to risk** : Occurrence of a peril need not necessarily lead to a loss. A\nperson staying in Mumbai does not suffer any loss due to a flood in coastal Andhra.\nFor loss to happen the asset must be exposed to the peril. Exposure to risk alone\nis not enough ground for insurance compensation.ExampleA fire may break out in factory premises without causing actual damage.\nInsurance comes into play only if there is an actual economic (financial) loss as a\nresult of a peril.**Degree of Risk Exposure:**Two assets may be exposed to the same peril but the likelihood of loss or the\namount of loss may vary greatly. A vehicle carrying explosives can yield far\ngreater loss from fire than tanker carrying water.**3.** **Risk Management** **Extent of damage likely to be suffered**This is given by the degree of loss and its impact on an individual or business.\nOn this basis one may identify three types of risk events or situations: **Critical**Where losses are of such a magnitude; that may result in total loss or\nbankruptcy. Losses can be critical when the accident results in significant and22severe impact, disability, damage to equipment and the environment, which\nmay be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.\n A torpedo from a pirate ship sinks an entire passenger ship but mostpassengers are saved.\n A major accident resulting in a kidney damage necessitating a kidneytransplant operation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of\npeople, widespread loss of assets, having significant environmental impact", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d22", "section": "Insurance of assets", "chunk_id": "Final IC 38 -IMF_Composite -English_010", "metadata": {"file_size": 20962, "chunk_index": 10, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Secondly,", "Insurance of assets", "Example: Critical", "Risk Management", "Critical"]}}
{"chunk": "On this basis one may identify three types of risk events or situations: **Critical**Where losses are of such a magnitude; that may result in total loss or\nbankruptcy. Losses can be critical when the accident results in significant and22severe impact, disability, damage to equipment and the environment, which\nmay be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.\n A torpedo from a pirate ship sinks an entire passenger ship but mostpassengers are saved.\n A major accident resulting in a kidney damage necessitating a kidneytransplant operation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of\npeople, widespread loss of assets, having significant environmental impact\nwhich are practically irreversible. Catastrophic losses usually signify disasters\nthat are sudden, widespread and unstoppable.**Example: Catastrophic** An earthquake or flood that completely destroys a few villages\n A major fire that completely destroys a multi crore installation over a largeterritory\n The terrorist attack of 9/ 11 on World Trade Centre which caused injuries toa large number of people\n A pandemic like Covid – 19 causing disease to people across the globe. **Marginal/ Insignificant**Where the possible losses are insignificant and can be easily met from an\nindividual or a firm’s existing assets or current income without imposing anyundue financial strain.**Example** A minor car accident results in the side being slightly grazed due to whichsome of the paint is damaged and a fender is slightly bent.\n An individual suffering from common cold and cough..**4.** **Hazards and Perils**The condition or conditions which increase the probability of a loss or its severity,\nand thus impact(s) the risk is known as hazard. When insurers make an assessment23of the risk, it is generally with reference to the hazards to which the asset is\nsubject.The term hazard in insurance language refers to those conditions or features or\ncharacteristics which create or increase the chance of loss arising from a given\nperil. A thorough knowledge of various hazards to which a risk is exposed to is\nmost essential for underwriting. Examples of the link between assets, peril and\nhazards are given below.|Asset|Peril|Hazard|\n|---|---|---|\n|**Life**|Cancer|Excessive Smoking|\n|**Factory**|Fire|Explosive material left Unattended|\n|**Car**|Car<br>Accident|Careless driving by driver|\n|**Cargo**|Storm|Water seeping in cargo and spoiling; Cargo not packaged in<br>waterproof containers|**Important** **Types of hazards****a)** **Physical hazard** is a physical condition that increases the chance of loss.**Example**i. Defective wiring in a building\nii. Indulging in water sports\niii. Leading a sedentary lifestyle**b)** **Moral hazard** refers to dishonesty or character defects in an individual thatinfluence the frequency or severity of the loss. A dishonest individual may\nattempt to commit fraud and make money by misusing the facility ofinsurance.**Example**If one deliberately sets a fire to one’s property and collects claims against losses\nunder the policy, such claims are clearly fraudulent and could be justifiably\nrejectedA classic instance of moral hazard is purchasing insurance for a factory and then\nburning it down to collect the insurance amount or buying health insurance after\nonset of a major ailment.24**c)** **Legal hazard** is more prevalent in cases involving a liability to pay fordamages. It arises when certain features of the legal system or regulatory\nenvironment can increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of accidents\ncan raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the\nprice [premiums] charged for insurance coverage would increase if the\nsusceptibility to loss, arising as a result of the presence of associated hazards, is\nhigh.**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d22", "section": "Critical", "chunk_id": "Final IC 38 -IMF_Composite -English_011", "metadata": {"file_size": 20962, "chunk_index": 11, "chunk_tokens": 1012, "has_examples": true, "has_tables": true, "key_concepts": ["Example: Critical", "Moral hazard", "Factory", "Types of hazards", "Physical hazard"]}}
{"chunk": "under the policy, such claims are clearly fraudulent and could be justifiably\nrejectedA classic instance of moral hazard is purchasing insurance for a factory and then\nburning it down to collect the insurance amount or buying health insurance after\nonset of a major ailment.24**c)** **Legal hazard** is more prevalent in cases involving a liability to pay fordamages. It arises when certain features of the legal system or regulatory\nenvironment can increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of accidents\ncan raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the\nprice [premiums] charged for insurance coverage would increase if the\nsusceptibility to loss, arising as a result of the presence of associated hazards, is\nhigh.**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause\nan average loss of Rs. 50000. If the chance of a house catching fire is 2 in 1000[or 2/ 1000 = 0.002] it would mean that the total amount of loss suffered would\nbe Rs 10000000 [= 50000x 0.002 x 100000].If an insurer were to get the owners of each of the 100000 houses to contribute\nRs 100 and if these contributions (100000 x 100 = Rs.10000000) were to be pooled\ninto a single fund, it would be enough to pay for the loss of the unfortunate fewwho suffered from the fire.To ensure that there is equity [fairness] among all those being insured, it is\nnecessary that the houses should all be similarly exposed to the risk. In the above\nexample risk exposure to mud houses will be different.**a)** **How exactly does the principle work in insurance?**It is by pooling number of risks of all the insured similarly placed and exposed\nto possibility of loss due to a peril that the insurer is able to assume that risk\nand its financial impact.25|Large<br>number<br>of people|Paying<br>Premium|Premium|Paying Claims to a<br>few who suffered<br>loss|\n|---|---|---|---|\n|**Many**<br>**people**<br>**pay**|**Small**<br>**amounts of**<br>**money as**<br>**Premiums**|**These small amounts are pooled**<br>**together as a Common Pool, big**<br>**enough to pay a statistically**<br>**estimated number of claims**|**Big amounts are**<br>**paid to those who**<br>**suffer a loss**|**b)** **Risk pooling and the law of large numbers**The probability of damage [derived as 2 out of 1000 or 0.002 in the example\nabove] forms the basis on which the premium is determined. The insurer\nwould face no risk of loss if the actual experience was as expected. In such a\nsituation the premiums of the numerous insured would be sufficient to\ncompletely compensate for the losses of those who have been affected by the\nperil. The insurer would however face a risk if the actual experience was more\nadverse than expected and the premiums collected were not sufficient to paythe claims.How can the insurer be sure about its predictions? This becomes possible\nbecause of a principle known as the “Law of large numbers”. It states that\nthe larger the size of the pool of risks, the actual average of losses would be\ncloser to the estimated or expected average loss.**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have\nthe sufficient money, they are considered solvent and if they do not have\nmoney to meet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or\nsolvency margin) to meet unforeseen deviations between expected and actual\nclaims situations. Solvency Ratio assesses the extent to which assets are\navailable to cover the insurers’ commitments towards future payments.\nDifferent countries use different measures to assess Solvency Ratio. In India,\nIRDAI has mandated that insurers are required to maintain a minimum", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Legal hazard", "chunk_id": "Final IC 38 -IMF_Composite -English_012", "metadata": {"file_size": 20962, "chunk_index": 12, "chunk_tokens": 1014, "has_examples": true, "has_tables": true, "key_concepts": ["How exactly does the principle work in insurance?", "Premiums", "These small amounts are pooled", "Example", "Legal hazard"]}}
{"chunk": "because of a principle known as the “Law of large numbers”. It states that\nthe larger the size of the pool of risks, the actual average of losses would be\ncloser to the estimated or expected average loss.**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have\nthe sufficient money, they are considered solvent and if they do not have\nmoney to meet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or\nsolvency margin) to meet unforeseen deviations between expected and actual\nclaims situations. Solvency Ratio assesses the extent to which assets are\navailable to cover the insurers’ commitments towards future payments.\nDifferent countries use different measures to assess Solvency Ratio. In India,\nIRDAI has mandated that insurers are required to maintain a minimum\nsolvency ratio of 1.5.26**Example**To give a simple illustration, the probability of getting heads on a toss of the coin\nis 1 out of 2. But one cannot be sure to actually get 2 heads if a coin is tossedfour times.Only when the number of tosses gets very large and closer to infinity, the chance\nof getting heads once for every two tosses will become closer to one.It follows that insurers can be sure of their ground only when they have been able\nto insure a large number of insured. An insurer who has insured only a few\nhundred houses, likely would be worse affected than one who has insured severalthousand houses.**Important****Conditions for insuring a risk**When does it make sense to insure a risk from the insurer’s point of view?Six broad requirements for a risk to be considered insurable are given below.**i.** **A sufficiently large number of homogenously [similar] exposed units** tomake the losses reasonably predictable. This follows from the **law of large**\n**numbers** . Without this it would be difficult to make predictions.**ii.** **Loss produced by the risk must be definite and measurable** . It is difficultto decide the compensation if one cannot say for sure that a loss has occurredand how much it is.**iii.** **Loss must be fortuitous or accidental** . It must be the result of an event thatmay or may not happen. The event must be beyond the control of insured. No\ninsurer would cover a loss that is intentionally caused by the insured.**iv.** **Sharing of losses of the few by many** can work only if a small percentage ofthe insured group suffers loss at any given period of time.**v.** **Economic feasibility:** The cost of insurance must not be high in relation tothe possible loss; otherwise the insurance would be economically unviable.**vi.** **Public policy:** Finally the contract should not be contrary to public policy andmorality.**Test Yourself 1**Which one of the following does not represent an insurable risk?I. FireII. Stolen goods\nIII. Burglary27IV. Loss of goods due to ship capsizing**Summary**a) The process of insurance has four elements (asset, risk, risk pooling and aninsurance contract).b) An asset may be anything that confers some benefit and is of economic valueto its owner.c) A chance of loss represents risk.d) Condition or conditions that increase the probability or severity of the lossare referred to as hazards.e) The mathematical principle, that makes insurance possible is known asprinciple of risk pooling.**Key terms**a) Asset\nb) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.28#### CHAPTER C-0 3## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk\nbeing proposed, whether requested or not\". All insurance contracts are based\non the principle of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss\non the occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y27", "section": "Insurance Companies to remain Solvent:", "chunk_id": "Final IC 38 -IMF_Composite -English_013", "metadata": {"file_size": 20962, "chunk_index": 13, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Sharing of losses of the few by many", "Conditions for insuring a risk", "Public policy:", "Test Yourself 1"]}}
{"chunk": "b) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.28#### CHAPTER C-0 3## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk\nbeing proposed, whether requested or not\". All insurance contracts are based\non the principle of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss\non the occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to\nthe subject matter of insurance, from the insured to the insurer.e) The principle of contribution implies that if the same property is insured with\nmore than one insurance company, the compensation paid by all the insurers\ntogether cannot exceed the actual loss suffered.f) Proximate cause is a key principle of insurance and is concerned with how\nthe loss or damage actually occurred and whether it is indeed as a result of\nan insured peril.29**A.** **Uberrima Fides**Insurance contracts have various special features that are discussed below:**1.** **Utmost Good Faith or** _**‘Uberrima Fides’**_Utmost Good Faith or \"Uberrima fides\", one of the fundamental principles of an\ninsurance contract, is defined as “a positive duty to voluntarily disclose,\naccurately and fully, all facts material to the risk being proposed, whether\nrequested or not\".All commercial contracts are based on Good Faith in so much as there shall be nofraud or deceit when giving information or doing the transaction. The rule\nobserved here is that of **“Caveat Emptor”** which means **Buyer Beware** . The\nparties to the contract are expected to examine the subject matter of the\ncontract and so long as one party does not mislead the other and the answers are\ngiven truthfully, there is no question of the other party avoiding the contract.Insurance contracts stand on a different footing as the subject matter of the\ncontract is intangible and cannot be easily known to the insurer. Again, there are\nmany facts, which may be known only to the proposer. The insurer has to rely\nentirely on the proposer for information. Hence the proposer has a legal duty to\ndisclose all material information about the subject matter of insurance to the\ninsurers. That is, the insured should not make any misrepresentation regarding\nany fact that is material for the insurance contract. This higher obligation of full\nrepresentation and full disclosure in respect of Insurance contracts makes themcontracts of Utmost Good Faith.**If Utmost Good Faith is not observed by either party, the contract may be**\n**avoided by the other.** This follows from the logic that no one should be allowed\nto take advantage of his own wrong especially while entering into a contract ofinsurance.**a)** **Material fact** has been defined as a fact that would affect the judgment of aninsurance underwriter in deciding whether to accept the risk and if so, the rate\nof premium and the terms and conditions. The insured has an obligation to\nfully and accurately disclose all facts that are material to an insurancecontract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk? If so, at what rate of premium and subject to what terms and conditions?30This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to\nmaterial facts which he ought to know. There is a corresponding duty of the\ninsurer not to withhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer\nshould disclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age,", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "C-0", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 -IMF_Composite -English_014", "metadata": {"file_size": 20962, "chunk_index": 14, "chunk_tokens": 969, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Material fact", "Example", "Utmost Good Faith or", "Chapter Introduction"]}}
{"chunk": "of premium and the terms and conditions. The insured has an obligation to\nfully and accurately disclose all facts that are material to an insurancecontract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk? If so, at what rate of premium and subject to what terms and conditions?30This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to\nmaterial facts which he ought to know. There is a corresponding duty of the\ninsurer not to withhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer\nshould disclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age,\nhobbies, financial information like income details of proposer, preexisting life insurance policies, occupation etc.**ii.** **Fire Insurance:** Construction, location/ situation of risk and usage ofbuilding, age of the building, nature of goods in premises etc.**iii.** **Marine Insurance:** Description of goods, method of packing and mode oftransit etc.**iv.** **Motor Insurance:** Description of vehicle, date of purchase and RegionalRegistration authority etc.**v.** **Health Insurance:** Pre-existing disease, age etc.**b)** **When a Fact becomes ‘Material’: Some types of material facts that one**needs to disclose are those indicating that the particular risk represents a\ngreater exposure than can be normally expected.**Example**Hazardous nature of cargo being sent by a ship, past history of illness, past history\nburglary of a house.i. Existence of policies taken from all insurers and their present statusii. All questions in the proposal form or application for insurance areconsidered to be material, as these relate to various aspects of the subject\nmatter of insurance and its exposure to risk. They need to be answered\ntruthfully and be full in all respects.The following are some scenarios wherein material facts need not be disclosed.**Information**a. **Material Facts that need not be disclosed:** Unless there is a specific enquiryby underwriters, the proposer has no obligation to disclose facts like:31**i.** **Measures implemented to reduce the risk. E.g.:** The presence of a fireextinguisher**ii.** **Facts which the insured does not know or is unaware of. E.g.:** Anindividual, who had high blood pressure but was not aware about the same\nat the time of taking the policy, cannot be charged with non-disclosure ofthis fact.**iii.** **Which could be discovered, by reasonable diligence.** It is not necessaryto disclose every minute material fact. The underwriters must be\nconscious enough to ask for the same if they require further information.\nE.g.: When insuring a textile shop one does not need to specifically say\nthat some of the synthetic clothes in the shop are highly combustible.**iv.** **Matters of law** : Everybody is supposed to know the law of the land. **E.g.:**Municipal laws about storing of explosives**v.** **About which insurer appears to be indifferent (or has waived the need****for further information)**In such cases, the insurer cannot later disclaim responsibility on grounds that the\nanswers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is\naccepted and a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose\nany material facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo\nsome surgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to_", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_015", "metadata": {"file_size": 20962, "chunk_index": 15, "chunk_tokens": 957, "has_examples": true, "has_tables": false, "key_concepts": ["Information", "Motor Insurance:", "Health Insurance:", "Example", "Matters of law"]}}
{"chunk": "answers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is\naccepted and a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose\nany material facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo\nsome surgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to_\n_disclose all facts that are material and relevant, as though it is a new policy.]_In the case he has Health Insurance, at the time of renewing the policy, Mr. Rajanhas to inform the insurer about this health issue.Similarly, in the case of General Insurance, at the time of renewing the Fire policy\nfor an enterprise/ factory, the insured has to inform the insurer if a change was\nmade in the occupancy of the building.32At the time of renewing the Hull policy for a ship, the insured has to inform the\ninsurer if the ship was modified to carry a different type cargo; say, hazardous\nchemicals instead of pulses.c. **Situations of Non-Disclosure** may arise when the insured is silent aboutmaterial facts because the insurer has not raised any specific enquiry. Such\nsituations may also arise through evasive answers to queries raised by theinsurer.Often non-disclosure may be inadvertent (meaning that it may be made\nwithout one’s knowledge or intention) or because the proposer thought that afact was not material. In such a case it is innocent.When a fact is intentionally suppressed it is treated as concealment. Here,there is the intent to deceive.d. **Misrepresentation:** Any statement made during negotiation of a contract ofinsurance is called representation. A representation may be a definite\nstatement of fact or a statement of belief, intention or expectation. It is\nexpected that the statement must be substantially correct. Representations\nthat concern matters of belief or expectation must be made in good faith.\nMisrepresentation is of two kinds:**i.** **Innocent Misrepresentation** relates to inaccurate statements, which aremade without any fraudulent intention.**ii.** **Fraudulent Misrepresentation** on the other hand refers to false statementsthat are made with deliberate intent to deceive the insurer or are maderecklessly without due regard for truth.An insurance contract generally becomes void when there is a clear case of\nconcealment with intent to deceive, or when there is fraudulent\nmisrepresentation.Amendments (March, 2015) to Insurance Act, 1938 have provided certain\nguidelines about the conditions under which a policy can be called into\nquestion for fraud. The new provisions are as followse. **Fraud:** The term “Fraud” has been specified under **Section 45 (2) of the****Insurance Act (amended in 2015).** Accordingly, a Life Insurance policy can be\ncalled in question on the ground of Fraud by the insurer only within a time\nperiod and not later. However, Insurers can do so only within three years from\n(a) the date of issuance of the policy (b) the date of commencement of risk,\n(c) the date of revival of the policy or (d) the date of the rider to the policy,whichever is later.33The insurer needs to communicate the reasons on which the policy is\nquestioned in writing to the insured or his/ her legal representatives, nominees\nor assignees.The expression \"fraud\" means any act committed by the insured, with theintent to deceive the insurer or to induce the insurer to issue an insurancepolicy. It is also provided that in case the policyholder is not alive, the onus of\ndisproving fraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Duty to Disclose:", "chunk_id": "Final IC 38 -IMF_Composite -English_016", "metadata": {"file_size": 20962, "chunk_index": 16, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Misrepresentation:", "Innocent Misrepresentation", "Section 45 (2) of the", "Fraud:", "Situations of Non-Disclosure"]}}
{"chunk": "(c) the date of revival of the policy or (d) the date of the rider to the policy,whichever is later.33The insurer needs to communicate the reasons on which the policy is\nquestioned in writing to the insured or his/ her legal representatives, nominees\nor assignees.The expression \"fraud\" means any act committed by the insured, with theintent to deceive the insurer or to induce the insurer to issue an insurancepolicy. It is also provided that in case the policyholder is not alive, the onus of\ndisproving fraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom\nof liability. By the same token, he must stand to lose financially by any loss,\ndamage, injury or creation of liability.Let us see how insurance differs from a gambling or wager agreement.**a)** **Gambling and insurance:** Unlike a card game, where one could win or lose, afire can have only one consequence – loss to the owner of the house.The owner takes insurance to ensure that the loss suffered is compensated\nfor in some way.In other words, Insurable Interest is the interest the insured has in the subjectmatter of insurance. Insurable interest makes an insurance contract valid andenforceable under the law.**Example**If Mr. Patel has brought a house with a mortgage loan of Rs 15 lakhs from a bank\nand he has repaid 12 lakhs of this amount, the bank’s interest would be only to\nthe tune of the balance three lakhs which is outstanding.Thus the bank also has an insurable interest financially in the house for the\nbalance amount of loan that is unpaid and would ensure that it is made a co\ninsured in the policy34Mr. Patel owns a house for which he has taken a mortgage loan of Rs. 15 lakhs\nfrom a bank. Ponder over the questions below: Does he have an insurable interest in the house? Does the bank have an insurable interest in the house? What about his neighbour?Mr. Dass has a family consisting of spouse, two kids and old parents. Ponder over\nthe below questions: Does he have an insurable interest in their well-being? Does he stand to financially lose if any of them are hospitalised? What about his neighbour’s kids? Would he have an insurable interest inthem?It would be relevant here to make a distinction between the subject matter of\ninsurance and the subject matter of an insurance contract.**The subject matter of insurance** relates to property being insured against, whichhas an intrinsic value of its own.**The subject matter of an insurance contract** on the other hand is the insured’s\nfinancial interest in that property. It is only when the insured has such an interest\nin the property that he/ she has the legal right to insure. The insurance policy in\nthe strictest sense covers not the property per se, but the insured’s financial\ninterest in the property.**Diagram 1:** **Insurable interest according to common law****b)** **Time when insurable interest should be present:** In life insurance, insurableinterest should be present at the time of taking the policy. In general\ninsurance, insurable interest should be present both at the time of taking the\npolicy and at the time of claim with some exceptions like marine policies inwhich case it must exist at the time of claim.35In case of fire and accident insurance, insurable interest should be present\nboth at the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses\nif the family meets with an accident or undergoes hospitalisation. However,\nin marine cargo insurance, insurable interest is required only at the time of\nloss as the ownership of the goods would change hands when the cost is paid,\nwhich can happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the\nloss or damage actually occurred and whether it is as a result of an insured peril.\nIf the loss has been caused by the insured peril, the insurer is liable. If the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y34", "section": "B.", "chunk_id": "Final IC 38 -IMF_Composite -English_017", "metadata": {"file_size": 20962, "chunk_index": 17, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["The subject matter of an insurance contract", "Time when insurable interest should be present:", "Diagram 1:", "Example", "Insurable interest according to common law"]}}
{"chunk": "insurance, insurable interest should be present both at the time of taking the\npolicy and at the time of claim with some exceptions like marine policies inwhich case it must exist at the time of claim.35In case of fire and accident insurance, insurable interest should be present\nboth at the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses\nif the family meets with an accident or undergoes hospitalisation. However,\nin marine cargo insurance, insurable interest is required only at the time of\nloss as the ownership of the goods would change hands when the cost is paid,\nwhich can happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the\nloss or damage actually occurred and whether it is as a result of an insured peril.\nIf the loss has been caused by the insured peril, the insurer is liable. If the\nimmediate cause is an insured peril, the insurer is bound to make good the loss,\notherwise he is not. This application of principle is practically more in respect ofnon-life insurance claims.When a loss occurs, there can often be a series of events leading up to the\nincident and so it is sometimes difficult to determine the nearest or proximate\ncause. Under this rule, the insurer looks for the predominant cause which sets\ninto motion the chain of events producing the loss. This may not necessarily be\nthe last event that immediately preceded the loss i.e. it is not necessarily an\nevent which is closest to, or immediately responsible for causing the loss. For\nexample, a fire might cause a water pipe to burst. Despite the resultant loss being\nwater damage, the fire would still be considered the proximate cause of the\nincident. Other causes may be classified as remote causes, which are separate\nfrom proximate causes. Remote causes may be present but are not effectual in\ncausing an event.**Definition**Proximate cause is defined as the active and efficient cause that sets in motiona chain of events which brings about a result, without the intervention of any\nforce started and working actively from a new and independent source.How does the principle of proximate cause apply to insurance contracts? Since\ninsurance provides for payment of a death benefit, regardless of the cause of\ndeath, the principle of proximate cause would not usually apply. However many\ninsurance contracts may also have an accident benefit add-on wherein an\nadditional sum assured is payable in the event of accidental death. In such a\nsituation, it becomes necessary to ascertain the cause - whether the death\noccurred as a result of an accident. The principle of proximate cause would\nbecome applicable in such instances.36To understand the principle of proximate cause, consider the following situation:**Example****Scenario 1:** Mr. Ajay had parked his car in the garage and gone on a long vacation.\nSix months later, when he came back and started the car, he noticed that the\nair-conditioning of the car was not working. Mr. Ajay filed a claim with the\ninsurance company for the cost of repairing the air-conditioning and the insurance\ncompany rejected the claim. The reason given by the insurance company was that\nthe damage was due to the ‘normal wear and tear’ of the car and the airconditioning system, which was an excluded peril in the insurance policy. Mr Ajay\napproached the Court and after examining the survey report which said that the\ncar was 12 years old and neither the car nor the air-conditioning had been\nserviced/ repaired during the previous 6 years, the damage was due to the\n‘normal wear and tear’ and the insurance company was not liable to pay theclaim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the\nimmediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "C.", "chunk_id": "Final IC 38 -IMF_Composite -English_018", "metadata": {"file_size": 20962, "chunk_index": 18, "chunk_tokens": 942, "has_examples": true, "has_tables": false, "key_concepts": ["Scenario 1:", "Example", "Scenario 2:", "Definition", "Proximate Cause"]}}
{"chunk": "the damage was due to the ‘normal wear and tear’ of the car and the airconditioning system, which was an excluded peril in the insurance policy. Mr Ajay\napproached the Court and after examining the survey report which said that the\ncar was 12 years old and neither the car nor the air-conditioning had been\nserviced/ repaired during the previous 6 years, the damage was due to the\n‘normal wear and tear’ and the insurance company was not liable to pay theclaim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the\nimmediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these\nlosses are customarily paid by business under fire insurance policies.Example of such losses can be – Damage to property caused by water used to extinguish fire Damage to property caused by fire brigade in execution of their duty Damage to property during its removal from a burning building to a safeplace**Test Yourself 1**Mr. Pinto contracted pneumonia as a result of lying on wet ground after a horse\nriding accident. The pneumonia resulted in death of Mr. Pinto. What is the\nproximate cause of the death?I. PneumoniaII. HorseIII. Horse riding accidentIV. Bad luck37**D.** **Indemnity**The Principle of Indemnity is applicable to Non-life insurance policies. **It means**\n**that the policyholder, who suffers a loss, is compensated so as to put him or**\n**her in the same financial position as he or she was before the occurrence of**\n**the loss event** . The insurance contract guarantees that the insured would be\nindemnified or compensated up to the amount of loss and no more.The philosophy is that one should not make a profit through insuring one’s assets\nand recovering more than the loss. The insurer would assess the economic value\nof the loss suffered and compensate accordingly.**Example**Ram has insured his house, worth Rs. 10 lakhs, for the full amount. He suffers loss\non account of fire estimated at Rs. 70,000. The insurance company would pay him\nan amount of Rs. 70,000. The insured can claim no further amount.The indemnity to be paid would depend on the type of insurance one\ntakes.Indemnity might take one or more of the following modes of settlement: Cash payment\n Repair of a damaged item\n Replacement of the lost or damaged item\n Reinstatement (Restoration). E.g. Rebuilding a house destroyed by fire**Diagram 2:** **Indemnity****a)** **Agreed Value:** However, there is some subject matter whose value cannot beeasily estimated or ascertained at the time of loss. For instance, it may be\ndifficult to put a price in the case of family heirlooms or rare artefacts.\nSimilarly in marine insurance policies it may be difficult to estimate the\nextent of loss suffered in a ship accident half way around the world.In such instances, a principle known as the ‘Agreed Value’ is adopted. The\ninsurer and insured agree on the value of the property to be insured, at the38beginning of the insurance contract. In the event of total loss, the insurer\nagrees to pay the agreed amount of the policy. This type of policy is known\nas “ **Agreed Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss\nonly in the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs.\n5 lakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this\nentire amount. It is deemed that the house owner has insured only to the\ntune of half its value and he is thus entitled to claim just 50% [Rs. 30,000] ofthe amount of loss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "k37", "section": "Scenario 2:", "chunk_id": "Final IC 38 -IMF_Composite -English_019", "metadata": {"file_size": 20962, "chunk_index": 19, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Indemnity", "Agreed Value Policy", "Test Yourself 1", "Agreed Value:", "Example"]}}
{"chunk": "insurer and insured agree on the value of the property to be insured, at the38beginning of the insurance contract. In the event of total loss, the insurer\nagrees to pay the agreed amount of the policy. This type of policy is known\nas “ **Agreed Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss\nonly in the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs.\n5 lakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this\nentire amount. It is deemed that the house owner has insured only to the\ntune of half its value and he is thus entitled to claim just 50% [Rs. 30,000] ofthe amount of loss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual\namount of loss i.e. the amount of money needed to replace lost or damaged\nproperty at current market prices less depreciation.**E.** **Subrogation**Subrogation means the transfer of all rights and remedies with respect to the\nsubject matter of insurance, from the insured to the insurer. Subrogation follows\nfrom the principle of Indemnity. Hence, it is often called a ‘corollary’ of\nIndemnity.In other words, if an insured suffers a loss and the loss has been indemnified by\nthe insurer, the insured’s right to get compensated by any third party for that\nloss, would get shifted to the insurer. Note that the amount of damage that can\nbe collected by the insurance company is only to the extent of the amount paid\nby the insurance company.**Important****Subrogation:** It is the process an insurance company uses to recover claim\namounts paid to a policy holder from a negligent third party.Subrogation can also be defined as surrender of rights by the insured to an\ninsurance company that has paid a claim against the third party.**Example**Mr. Kishore’s household goods were being carried in Sylvain Transport service.\nThey got damaged due to driver’s negligence, to the extent of Rs. 45,000 and the\ninsurer paid an amount of Rs. 30,000 to Mr. Kishore. The insurer stands subrogated\nto the extent of only Rs. 30,000 and collect that amount from Sylvain Transports.39In case the matter went into litigation and the Court directed Sylvain Transports\nto pay Rs.35,000 as compensation to Mr. Kishore, he is liable to pay the insurer\nthe claim amount of Rs 30,000 under the subrogation clause, and to keep the\nbalance amount of Rs 5,000 with himself.The Subrogation Clause prevents the insured from collecting more than the loss from the insurance company and from any third party. Subrogation arises only in\ncase of contracts of indemnity and not against benefit policies like Life Insurance\nPolicy or Personal Accident Policy.**Example**Mr. Suresh dies in an air crash. His family is entitled to collect the full Sum Assured\nof Rs 50 lakhs from the insurer who has issued a Personal Accident Policy plus the\ncompensation paid by the airline, say, Rs 15 lakhs.**F.** **Contribution:**Like Subrogation, ‘Contribution’ also follows from the Principle of Indemnity.\nHence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be metwhen the insured has taken insurance from more than one insurer. Contributionimplies that if the same property is insured with more than one insurance\ncompany, the compensation paid by all the insurers together cannot exceed the\nactual loss suffered. The policy holder can claim from each of the insurers only a\nportion of the loss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs.\nSuppose a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he canclaim an amount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e38", "section": "Agreed Value Policy", "chunk_id": "Final IC 38 -IMF_Composite -English_020", "metadata": {"file_size": 20962, "chunk_index": 20, "chunk_tokens": 974, "has_examples": true, "has_tables": false, "key_concepts": ["Subrogation:", "Agreed Value Policy", "Example", "Important", "Underinsurance:"]}}
{"chunk": "compensation paid by the airline, say, Rs 15 lakhs.**F.** **Contribution:**Like Subrogation, ‘Contribution’ also follows from the Principle of Indemnity.\nHence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be metwhen the insured has taken insurance from more than one insurer. Contributionimplies that if the same property is insured with more than one insurance\ncompany, the compensation paid by all the insurers together cannot exceed the\nactual loss suffered. The policy holder can claim from each of the insurers only a\nportion of the loss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs.\nSuppose a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he canclaim an amount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise\nin the case of Life Insurance, because there is no upper limit that can be placedon the losses suffered when there is a loss of life.**Test Yourself 2**Which among the following is an example of coercion?I. Ramesh signs a contract without having knowledge of the fine print\nII. Ramesh threatens to kill Mahesh if he does not sign the contract\nIII. Ramesh uses his professional standing to get Mahesh to sign a contract\nIV. Ramesh provides false information to get Mahesh to sign a contract40**Test Yourself 3**Which among the following options cannot be insured by Ramesh?I. Ramesh’s houseII. Ramesh’s spouseIII. Ramesh’s friendIV. Ramesh’s parents**Test Yourself 4**What is the significance of the principle of contribution?I. It ensures that the insured also contributes a certain portion of the claimalong with the insurer\nII. It ensures that all the insured who are a part of the pool, contribute to theclaim made by a participant of the pool, in the proportion of the premium\npaid by them\nIII. It ensures that multiple insurers covering the same subject matter; cometogether and contribute the claim amount in proportion to their exposure to\nthe subject matter\nIV. It ensures that the premium is contributed by the insured in equal instalmentsover the year.**Summary**The special features of insurance policies include:i. Uberrima fides,\nii. Insurable interest,\niii. Proximate cause,\niv. Indemnity\nv. Subrogationvi. Contribution**Key Terms**1. Non-Disclosure2. Misrepresentation3. Material facts4. Agreed Value5. Under Insurance41**Answers to Test Yourself****Answer 1** - The correct option is III\n**Answer 2** - The correct option is II\n**Answer 3** - The correct option is III\n**Answer 4** - The correct option is III42## CHAPTER C-04 **FEATURES OF INSURANCE CONTRACTS****Chapter Introduction**In this chapter, we discuss the elements that govern the working and specialfeatures of an insurance contract.43**A.** **Insurance contracts – Legal aspects and special features.**The chapter also deals with the legal aspects and special features of an insurancecontract.**1.** **The Insurance Contract**Insurance involves a contractual agreement in which the insurer agrees to\nprovide financial protection against certain specified risks for a price or\nconsideration known as the premium. The contractual agreement takes the\nform of an insurance policy.**2.** **Legal aspects of an insurance contract**This section looks at some features of an insurance contract and considers thelegal principles that govern insurance contracts in general.**Important**A contract is an agreement between parties, enforceable at law. The provisions\nof the Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**44**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "t40", "section": "F.", "chunk_id": "Final IC 38 -IMF_Composite -English_021", "metadata": {"file_size": 20962, "chunk_index": 21, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Insurance contract", "Contribution:", "Test Yourself 4", "Chapter Introduction"]}}
{"chunk": "provide financial protection against certain specified risks for a price or\nconsideration known as the premium. The contractual agreement takes the\nform of an insurance policy.**2.** **Legal aspects of an insurance contract**This section looks at some features of an insurance contract and considers thelegal principles that govern insurance contracts in general.**Important**A contract is an agreement between parties, enforceable at law. The provisions\nof the Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**44**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said\nto make an offer or proposal. Usually, the offer is made by the proposer, and\nacceptance made by the insurer.When a person to whom the offer is made signifies his assent thereto, this is\ndeemed to be an acceptance. Hence, when a proposal is accepted, it becomes a\npromise. The acceptance needs to be communicated to the proposer whichresults in the formation of a contract.When a proposer accepts the terms of the insurance plan and signifies his/ her\nassent by paying the deposit amount, which, on acceptance of the proposal, gets\nconverted to the first premium, the proposal becomes a policy. If any condition\nis put, it becomes a counter offer. The policy bond becomes the evidence of thecontract.**2.** **Consideration**This means that the contract must contain some mutual benefit for the parties.\nThe premium is the consideration from the insured, and the promise to indemnify,is the consideration from the insurers.45**3.** **Agreement between the parties (Consensus Ad-Idem)**Both the parties, the insurer and the policyholder, should agree to the same thing\nin the same sense. In other words, there should be “ **consensus ad-idem** ” between\nboth parties.**4.** **Free consent**There should be free consent while entering into a contract. Consent is said\nto be free when it is not caused by Coercion/ By Force\n Undue influence Fraud Misrepresentation\n MistakeWhen consent to an agreement is caused by coercion, fraud or\nmisrepresentation, the agreement is voidable.**5.** **Capacity of the parties**Both the parties to the contract must be legally competent to enter into the\ncontract. The policyholder must be legally an adult at the time of signing the\nproposal and should be of sound mind and not disqualified under law. For\nexample, minors cannot enter into insurance contracts.**6.** **Legality**The object of the contract must be legal, for example, no insurance can be\nhad for illegal acts. Every agreement of which the object or consideration is\nunlawful is void. The object of an insurance contract is a lawful object.Also one’s entering into an insurance contract should be done out of one’s\nfree will, without any kind of force, fear or mistake.**C.** **Paying Premium in Advance**As per Indian laws, Insurers are not allowed to assume risk unless they receive\nthe premium in advance. In other words, insurance protection cannot be sold oncredit basis in India.Section 64 VB of the Insurance Act 1938 states, “No risk to be assumed unless\npremium is received in advance”. No insurer shall assume any risk unless and until\nthe premium is received in advance or is guaranteed to be paid or a deposit is\nmade in advance in the prescribed manner. This is an important feature of the\ninsurance industry in India.46The Insurance Rules, 1939, provide certain exceptions to this condition of\nadvance payment of premium, in respect of particular categories of insurances.\nSection 59 of the Insurance Rules allows accepting premiums in instalments in\nrespect of Sickness Insurance, Group Personal Accident Insurance Medical\nBenefits Insurance and Hospitalisation Insurance Schemes, subject to certain\nconditions. Section 59 of the Insurance Rules allows relaxations for policies issued\nto Government and semi-Government bodies, Fidelity Guarantee Insurance\npolicies covering Government and semi-Government employees, Workmen's\nCompensation policies, Cash in Transit policies, and some other categories of\ninsurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Legal aspects of an insurance contract", "chunk_id": "Final IC 38 -IMF_Composite -English_022", "metadata": {"file_size": 20962, "chunk_index": 22, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Legality", "Capacity of the parties", "Agreement between the parties (Consensus Ad-Idem)", "Paying Premium in Advance", "Diagram 1:"]}}
{"chunk": "the premium in advance. In other words, insurance protection cannot be sold oncredit basis in India.Section 64 VB of the Insurance Act 1938 states, “No risk to be assumed unless\npremium is received in advance”. No insurer shall assume any risk unless and until\nthe premium is received in advance or is guaranteed to be paid or a deposit is\nmade in advance in the prescribed manner. This is an important feature of the\ninsurance industry in India.46The Insurance Rules, 1939, provide certain exceptions to this condition of\nadvance payment of premium, in respect of particular categories of insurances.\nSection 59 of the Insurance Rules allows accepting premiums in instalments in\nrespect of Sickness Insurance, Group Personal Accident Insurance Medical\nBenefits Insurance and Hospitalisation Insurance Schemes, subject to certain\nconditions. Section 59 of the Insurance Rules allows relaxations for policies issued\nto Government and semi-Government bodies, Fidelity Guarantee Insurance\npolicies covering Government and semi-Government employees, Workmen's\nCompensation policies, Cash in Transit policies, and some other categories of\ninsurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a\nproper understanding the product and not just bought/ sold. Hence, insurance\nis to be ‘solicited’ or asked for by the customer. Traditionally, insurers declare\nthat “Insurance is the subject matter of solicitation”. To elucidate, insurance\nis not a ready-made product like a packet of biscuits or a bar of chocolate to\nbe bought/ sold outright. Customers have to discuss their insurance needs\nwith a person qualified for the same and based on professional advice, the\nright insurance product is to be purchased. The Insurance product has to be\nunderstood and the offering most suited to the specific needs and\nrequirements of the customer in terms of the policy coverage, exclusions,\nterms and conditions, is to be considered.‘Solicitation’ is usually initiated when an insurer or an authorised\nintermediary approaches a prospect with a view to understand his/ her\ninsurance needs and provides professional advice in selecting appropriate\ninsurance products. The prospect solicits the proper solution and provides all\nrequisite details to the advisor. As per regulations of IRDAI, **Insurance Agents**\nare appointed by an insurer for the purpose of engaging in the solicitation\nprocess and procuring insurance business, including business relating to the\ncontinuance, renewal or revival of policies of insurance. Only authorised\nemployees of insurance companies, and specified persons of licensed\nintermediaries, who are trained and authorised for the purpose can be part of\nthe process of solicitation and sales of insurance.**D.** **Enabling Provisions****1.** **Grace Period**Grace period is the specified period of time immediately following the\npremium due date during which a payment can be made to renew or continue47a policy in force without loss of continuity benefits such as waiting periods\nand coverage of pre-existing diseases. Coverage is not available for the period\nfor which no premium is received. The days of grace are computed from the\nnext day after the due date fixed for payment of the premium.For **Life insurance**, if there is no grace period, a single delay in payment can\nlead to a policy lapse. This would be detrimental for the policyholder, the\ninsurer and the insurance industry in general. IRDAI Regulations allow a grace\nperiod of 15 days is applicable in case of Monthly mode of Premium collection and\n30 days in other modes.In respect of **Health insurance** also, certain number of days as grace period is\nallowed for renewal of individual health policies. This period depends on the\npolicy of the company and the product offered. All continuity benefits are\nmaintained if the policy is renewed within the grace period. However Claims, if\nany, during the break period will not be considered. As per IRDAI Regulations, the\ngrace period is 15 days in case of Monthly mode of Premium collection and 30\ndays in other modes.**Motor Policies** are usually valid for a period of one year and have to be\nrenewed before the due date. Grace period for paying the premium do not\napply. In case a comprehensive policy lapses for more than 90 days, the\naccrued No Claim Bonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condonedelays in renewal up to 30 days without deeming such condonation as\na break in policy. Insurers were requested to contact the policyholders", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e47", "section": "Solicitation", "chunk_id": "Final IC 38 -IMF_Composite -English_023", "metadata": {"file_size": 20962, "chunk_index": 23, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance Agents", "Health insurance", "Grace Period", "Motor Policies", "Solicitation"]}}
{"chunk": "policy of the company and the product offered. All continuity benefits are\nmaintained if the policy is renewed within the grace period. However Claims, if\nany, during the break period will not be considered. As per IRDAI Regulations, the\ngrace period is 15 days in case of Monthly mode of Premium collection and 30\ndays in other modes.**Motor Policies** are usually valid for a period of one year and have to be\nrenewed before the due date. Grace period for paying the premium do not\napply. In case a comprehensive policy lapses for more than 90 days, the\naccrued No Claim Bonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condonedelays in renewal up to 30 days without deeming such condonation as\na break in policy. Insurers were requested to contact the policyholders\nwell in advance to avoid discontinuance in coverage.iii. As regards Motor Vehicle Third Party Insurance policies that fell duefor renewal and premiums could not be paid due to the Covid-19\nsituation, IRDAI allowed a grace period till 15th May, 2020.**2.** **Free-Look Period introduced by “IRDAI”**Insurance contracts are drafted by the insurer, and the other party has to adhere\nto it if he/ she wants the insurance. Such contracts where someone has to accept\nthe contract as it is and cannot make any change to it are legally called Contracts\nof Adhesion. Because of this one-sided situation, the Courts always make insurers48liable for any ambiguity or confusion that may arise in interpreting these termsand conditions.To reduce this one-sidedness and make insurance transactions more customerfriendly, IRDAI has built into its regulations a consumer-friendly provision called\n‘Free-Look Period’ whereby, if the customer is not satisfied with any term and\nconditions of the policy, he/ she can return it and get a refund. This provision\nwhereby policyholders are given the option of cancelling the policy within 15 days\n(30 days, in case of electronic policies and policies sourced through distance\nmode) after receiving the policy document, in case they are not satisfied with\nthe policy, has been introduced for Life Insurance and Health Insurance policies\n(having a tenure of at least one year). The company has to be intimated in writing\nand the premium is refunded less, proportionate risk premium for the period of\ncover, expenses and charges.**Cancellation of Policies:** When policies are cancelled by the insurer, the\nproportion of the premium corresponding to the expired period of insurance is\ncharged/ retained by the insurer and the proportion corresponding to the\nunexpired period of insurance is returned to the insured, provided no claim has\nbeen paid under the policy. Such proportionate calculation of premium is called\nPro-rata premium.When annual policies are cancelled by the insured, insurers usually charge/ retain\npremiums at a higher rate and refund premiums at higher rates, instead of\ncalculating pro-rata premiums. This would prevent anti-selection against the\ninsurers and take care of the initial expenses of the insurer. Such rates are\ndisclosed as part of the terms and conditions of the insurance contract and\nreferred to as Short period scales.**Important****i.** **Coercion** - Involves pressure applied through criminal means.**ii.** **Undue influence** – using one’s position to dominate the will of anotherperson, to obtain an undue advantage over that person.**iii.** **Fraud** – inducing another to act on a false belief that is caused by arepresentation one does not believe to be true. It can arise either from\ndeliberate concealment of facts or through misrepresenting them.**iv.** **Mistake** - Error in one’s knowledge or belief or interpretation of a thing orevent. This can lead to an error in understanding and agreement about the\nsubject matter of the contract.49**Test Yourself 1**Which among the following cannot be an element in a valid insurance contract?I. Offer and AcceptanceII. CoercionIII. ConsiderationIV. Legality**Summary**i. Insurance involves a contractual agreement in which the insurer agrees toprovide financial protection against specified risks for a price or consideration\nknown as the premium.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d-19", "section": "Motor Policies", "chunk_id": "Final IC 38 -IMF_Composite -English_024", "metadata": {"file_size": 20962, "chunk_index": 24, "chunk_tokens": 957, "has_examples": true, "has_tables": false, "key_concepts": ["Motor Policies", "Test Yourself 1", "Cancellation of Policies:", "Mistake", "Free-Look Period introduced by “IRDAI”"]}}
{"chunk": "disclosed as part of the terms and conditions of the insurance contract and\nreferred to as Short period scales.**Important****i.** **Coercion** - Involves pressure applied through criminal means.**ii.** **Undue influence** – using one’s position to dominate the will of anotherperson, to obtain an undue advantage over that person.**iii.** **Fraud** – inducing another to act on a false belief that is caused by arepresentation one does not believe to be true. It can arise either from\ndeliberate concealment of facts or through misrepresenting them.**iv.** **Mistake** - Error in one’s knowledge or belief or interpretation of a thing orevent. This can lead to an error in understanding and agreement about the\nsubject matter of the contract.49**Test Yourself 1**Which among the following cannot be an element in a valid insurance contract?I. Offer and AcceptanceII. CoercionIII. ConsiderationIV. Legality**Summary**i. Insurance involves a contractual agreement in which the insurer agrees toprovide financial protection against specified risks for a price or consideration\nknown as the premium.\nii. A contract is an agreement between parties, enforceable at law.iii. The elements of a valid contract include:Offer and acceptanceConsideration,Consensus ad-idem,- Free consentCapacity of the parties andLegality of the object**Key Terms**1. Offer and Acceptance2. Lawful consideration3. Consensus ad idem**Test Yourself 2**During the Free-look period, if the policyholder, who has bought a policy through\nan Agent, disagrees to any of its terms and conditions, he/ she can return it and\nget a refund subject to the following conditions:I. He/ she can exercise this option within 15 days of receiving the policydocumentII. He/ she has to communicate to the company in writing\nIII. The premium refund will be adjusted for proportionate risk premium for theperiod on cover, expenses incurred by the insurer on medical examination and\nstamp duty chargesIV. All the above50**Test Yourself 3**If the policyholder has bought a policy and does not want it, he/ she can return\nit during the _________ period, and get a refund.I. Free evaluationII. Free-lookIII. CancellationIV. Free trial**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.51## CHAPTER C-05## UNDERWRITING AND RATING**Chapter Introduction**In this chapter you will learn the basics of underwriting and rating. You will learn\nabout the different methods of dealing with hazards in the process of rating of\nrisks. You will be able to appreciate the common aspects of underwriting, product\napproval and rating.**Learning Outcomes**After studying this chapter, you should be able to:1. Define the basics of underwriting2. Understand the basics of product approvals in India3. Appreciate rating factors and the importance of ratemaking52**A.** **Basics of Underwriting**In the previous chapters, we have seen that the concept of insurance involves\nmanaging risk through pooling. Insurers create a pool consisting of premiums that\nare made by several individuals/ commercial/ industrial firms/ organizations.This process of understanding risks, classifying risks, identifying which category\nthey fall into, **deciding whether to accept the risk or not** and if so, how much\npremium the insurer would require to accept the risk and whether any extra\nconditions are to be imposed on the risk - all these are part of **underwriting** .It is also important to know what rate is to be charged and how the rates aremade.**Definition**Underwriting is the process of determining whether a risk offered for insurance\nis acceptable, and if so, at what rates, terms and conditions.Underwriting comprises the following steps:i. Assessment and evaluation of hazard and risk in terms of frequency andseverity of lossii. Formulation of policy coverage and terms and conditionsiii. Fixing of rates of premiumThe underwriter decides on whether or not to accept the riskThe next step would be to decide the **rates, terms and conditions** under which\nthe risk is to be accepted.Underwriting skills are acquired through a continuous learning process involving\nadequate training, field exposure and deep insights. To be a fire insurance\nunderwriter one needs to have a good knowledge of the likely causes of fire,\nimpact of fire on various physical goods and property, the process involved in an\nindustry, geography, climatic conditions etc.Similarly a marine insurance underwriter must be aware about port/ road", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e2", "section": "Important", "chunk_id": "Final IC 38 -IMF_Composite -English_025", "metadata": {"file_size": 20962, "chunk_index": 25, "chunk_tokens": 989, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Test Yourself 1", "Answer 3", "Mistake"]}}
{"chunk": "premium the insurer would require to accept the risk and whether any extra\nconditions are to be imposed on the risk - all these are part of **underwriting** .It is also important to know what rate is to be charged and how the rates aremade.**Definition**Underwriting is the process of determining whether a risk offered for insurance\nis acceptable, and if so, at what rates, terms and conditions.Underwriting comprises the following steps:i. Assessment and evaluation of hazard and risk in terms of frequency andseverity of lossii. Formulation of policy coverage and terms and conditionsiii. Fixing of rates of premiumThe underwriter decides on whether or not to accept the riskThe next step would be to decide the **rates, terms and conditions** under which\nthe risk is to be accepted.Underwriting skills are acquired through a continuous learning process involving\nadequate training, field exposure and deep insights. To be a fire insurance\nunderwriter one needs to have a good knowledge of the likely causes of fire,\nimpact of fire on various physical goods and property, the process involved in an\nindustry, geography, climatic conditions etc.Similarly a marine insurance underwriter must be aware about port/ road\nconditions, problems encountered by cargo/ goods in transit or storage, ships andtheir seaworthiness and so on.A health underwriter needs to understand the risk profile of the insured, age,\nmedical aspects, fitness levels and family history and measure the effect of each\nfactor affecting the risk.53**Sources of information for underwriting**The first stage in any numerical (or statistical) analysis is the collection of data.\nWhen pricing a risk, an underwriter should gather as much information as possibleto aid accurate assessment.**Sources of information are:**i. **Proposal form or underwriting presentation**ii. **Risk surveys**iii. **Historic claims experience data:** For some classes of business, such aspersonal and motor lines, underwriters often utilise historic claims\nexperience data to provide an indication of the likely future claims\nexperience, and to arrive at a suitable premium **.****Underwriting, equity and business sustainability**The need for careful underwriting and risk classification in insurance arises from\nthe simple fact that **all risks are not equal** . Each risk thus needs to be\nappropriately assessed and priced in accordance with the likelihood of loss\noccurrence and severity.Since all risks are not equal, it would not be proper to ask all those who are to be\ninsured, to pay equal premium. **The purpose of underwriting is to classify risks**\n**so that, depending on their characteristics and degree of risk posed, an**\n**appropriate rate of premium may be charged.** It is important for the\nunderwriter to ensure that the risk evaluation is done properly and the premium\ncharged is neither too low to cover the risk nor too high to make it noncompetitive.The main features of underwriting are as followsi. To **identify risk** based upon the characteristicsii. To **determine the level** of risk presented by the proposerThe objectives of underwriting are achieved, in short, by deciding the level of\nacceptability, adequacy of premium and other terms.**B.** **Product Filing with IRDAI**Every Insurance product needs to be filed with IRDAI for approval before it is\noffered for sale. IRDAI allots a Unique Identification number (UIN) for every\ninsurance product. Once products are introduced in the market, there are\nguidelines to be followed for withdrawing the product as well.**1.** The Regulator asks for a clear commitment by the Board of the insurer that itis willing to accept the risks in the policy and agrees to pay the claims. It also54asks the insurer to commit that the policy wordings are fair to the customer\nand that the prices are decided on a scientific basis.**2.** The insurer should plan for the possibility of withdrawal of the products in thefuture and the options that would be available to the policyholder on such\nwithdrawal of the product.**3.** The withdrawn product shall not be offered to the prospective customers.**C.** **Basics of Ratemaking**Insurance is based on transfer of risk to the insurer. By purchasing an insurance\npolicy, the insured is able to reduce the impact of financial losses arising from\nthe peril against which the property is insured. The Insurer needs to adopt a\nprocess of calculating a price to cover the future cost of insurance claims and\nexpenses, including a margin for profit. This is known as **ratemaking.****A rate is the price of a given unit of insurance.** For example, a rate may be\nexpressed as Rs.1.00 per mile (per thousand) sum assured for earthquake\ncoverage. Each rate is established after looking at past trends and changes in the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "o54", "section": "Definition", "chunk_id": "Final IC 38 -IMF_Composite -English_026", "metadata": {"file_size": 20962, "chunk_index": 26, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Product Filing with IRDAI", "Sources of information for underwriting", "The purpose of underwriting is to classify risks", "Underwriting, equity and business sustainability", "Sources of information are:"]}}
{"chunk": "and that the prices are decided on a scientific basis.**2.** The insurer should plan for the possibility of withdrawal of the products in thefuture and the options that would be available to the policyholder on such\nwithdrawal of the product.**3.** The withdrawn product shall not be offered to the prospective customers.**C.** **Basics of Ratemaking**Insurance is based on transfer of risk to the insurer. By purchasing an insurance\npolicy, the insured is able to reduce the impact of financial losses arising from\nthe peril against which the property is insured. The Insurer needs to adopt a\nprocess of calculating a price to cover the future cost of insurance claims and\nexpenses, including a margin for profit. This is known as **ratemaking.****A rate is the price of a given unit of insurance.** For example, a rate may be\nexpressed as Rs.1.00 per mile (per thousand) sum assured for earthquake\ncoverage. Each rate is established after looking at past trends and changes in the\ncurrent environment that may affect potential losses in the future.**Note that rates are not the same as premiums.****Premium = (Sum Insured) x (rate)****Example**Taking an example of health insurance, numerical or percentage assessments are\nmade on each component of the risk. Factors like age, race, occupation, habits\netc. are examined and scored numerically based on predetermined criteria.The amount of premium to be paid by each depends on a rate, which is\ndetermined by two factors; The probability of loss due to a loss event (caused by an insured peril) and The estimated amount of loss that may arise due to the loss event**Example**Assume the average amount of a house being destroyed by fire is Rs 1,00,000.The probability of the loss of a house being destroyed by fire 1 out of 100 [or\n0.01]. That is, the experience is that out of a 100 insured houses, one house gets\ndestroyed by fire.The expected average loss would be Rs.1,00,000 x 0.01 = Rs. 1000.So, Insurers would need to charge a minimum of Rs.1000 to insure a house of\nRs.1,00,000 value.55How can the insurer ensure that the pool is sufficient to compensate for the losses\nthat are actually incurred?As seen earlier, the whole mechanism of insurance involves pooling of many\nsimilar risks so that the probability of the number of losses (frequency) as well as\nthe extent of loss (severity) becomes predictable. This principle, referred to as\n‘the law of large numbers’ states that as the sample size grows, the results come\ncloser to the expected value. Insurance companies need to sell more policies to\nmore and more people to make their expectations/ predictions work.An example is that if a coin is tossed, the chances of getting ‘heads’ or ‘tails’ is\n50:50. However, if the coin is tossed only once, the result can be 100% heads and\n0% ‘tails’ or 0% ‘heads’ and or 100% tails. However, if one tosses a coin many\ntimes, the chance of the average count of ‘heads’ and ‘tails’ being 100% and 0%\nreduces and will get closer to 50:50.**Example**In the field of property insurance, the chances of a wooden structure catching\nfire are more than stone structures; hence, a higher premium is required to insurethe wooden structure.The same concept applies to Life and Health Insurance also. An individual\nsuffering from high blood pressure or diabetes has higher chances of suffering aheart attack.**Test Yourself 1**Identify the two factors that affect insurance ratemaking.I. Probability and severity of riskII. Source and nature of riskIII. Source and timing of risk\nIV. Nature and impact of risk**1.** **Determining the rate of premium**The pure rate of premium is arrived at on the basis of past loss experience.\nTherefore, statistical data regarding past losses is most essential for purposes of\ncalculating rates. To fix the rates, it is necessary to give a ‘mathematical value’to the risks.**Example**If loss experience of a large number of motor cycles is collected for a period of\nsay 10 years, we will get the sum total of the losses resulting from damage to the\nvehicles. By expressing this amount of loss as percentage of the total value of56motor cycles we can fix the ‘mathematical value’ of the risk. This may be", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "f56", "section": "C.", "chunk_id": "Final IC 38 -IMF_Composite -English_027", "metadata": {"file_size": 20962, "chunk_index": 27, "chunk_tokens": 968, "has_examples": true, "has_tables": false, "key_concepts": ["Premium = (Sum Insured) x (rate)", "Determining the rate of premium", "Test Yourself 1", "Example", "A rate is the price of a given unit of insurance."]}}
{"chunk": "fire are more than stone structures; hence, a higher premium is required to insurethe wooden structure.The same concept applies to Life and Health Insurance also. An individual\nsuffering from high blood pressure or diabetes has higher chances of suffering aheart attack.**Test Yourself 1**Identify the two factors that affect insurance ratemaking.I. Probability and severity of riskII. Source and nature of riskIII. Source and timing of risk\nIV. Nature and impact of risk**1.** **Determining the rate of premium**The pure rate of premium is arrived at on the basis of past loss experience.\nTherefore, statistical data regarding past losses is most essential for purposes of\ncalculating rates. To fix the rates, it is necessary to give a ‘mathematical value’to the risks.**Example**If loss experience of a large number of motor cycles is collected for a period of\nsay 10 years, we will get the sum total of the losses resulting from damage to the\nvehicles. By expressing this amount of loss as percentage of the total value of56motor cycles we can fix the ‘mathematical value’ of the risk. This may be\nexpressed in the formula given below:Let us suppose that: The Value of a motor cycle: Rs. 50,000/  Loss experience: Out of 1000 motor cycles, 50 motor cycles get stolen over10 years\n On an average, 5 motor cycles become total losses due to theft every yearApplying the formula, the result will be:Losses per year (Rs. 50,000 X 5) = Rs. 2,50,000**Total Values of 1000 motor vehicles (Rs.** 50,000 X 1000) **= Rs. 5,00,00,000**This means that average loss percentage per vehicle (L/ V) x 100= [2,50,000/\n5,00,00,000] x 100 = 0.5%Therefore the rate of premium that a motor cycle owner pays is half a percent of\nRs. 50,000/ - i.e. Rs. 250/ - per year. This is called the **‘Pure’ premium,** also\nknown as ‘Burning Cost’.At the rate of Rs. 250 per motor cycle, Rs. 2.5 lakhs is collected which is paid outin claims on total losses of 5 vehicles.If the pure premium, which is arrived above, is collected it would constitute a\nfund which will be sufficient only to pay for losses.In the example above we can see that there is no surplus. But insurance\noperations also involve costs of administration (expenses of management) and\ncosts of procurement of business (agency commission). It is also necessary to\nprovide a margin for unexpected heavy losses.Finally, since insurance is transacted on a commercial basis, like any other\nbusiness, it is necessary to provide for a margin of profit which is a return on the\ncapital invested in the business.**Therefore, the ‘pure premium’ is suitably loaded or increased by adding**\n**percentages to provide for expenses, reserves and profits.****The final rate of premium will consist of the following components:** Loss payments\n Loss expenses (e.g. survey fees)\n Agency commission\n Expenses of management57 Margin for reserves for unexpected heavy losses e.g. 7 total losses against5 expected\n Margin for profitsBy taking all the relevant rating factors into consideration, one can ensure the\nrates are adequate, excessive or unfairly discriminatory as between risks of\nsimilar type and quality.**Test Yourself 2**What is pure premium?I. Premium sufficiently big enough to pay for losses only\nII. Premium applicable to marginal members of the society\nIII. Premium after loading for administrative costs\nIV. Premium derived from the most recent loss experience period**2.** **Deductible**‘Deductible’ or ‘excess’ is a cost-sharing provision between an insurer and\ninsured. Deductibles provide that only the claims in excess of a particular\nthreshold are payable by the insurer. In other words, the insurer will not be liable\nfor claims below a specified level. The level or the threshold would be set as a\nfixed amount, or a percentage or even as a specified period of time (when it is\ncalled time-excess.) In case of health policies, there could be a condition that\nclaims would be payable only if the hospitalization is beyond a specified number\nof days/ hours. Deductibles are not used in life policies.In products such as property, motor and home insurances, deductibles are\npredetermined amounts that the insured must bear towards an indemnity claim.\nDeductibles can be compulsory for some policies or voluntary. Insurers generally", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "f56", "section": "Test Yourself 1", "chunk_id": "Final IC 38 -IMF_Composite -English_028", "metadata": {"file_size": 20962, "chunk_index": 28, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Determining the rate of premium", "Test Yourself 1", "Example", "Deductible", "Total Values of 1000 motor vehicles (Rs."]}}
{"chunk": "similar type and quality.**Test Yourself 2**What is pure premium?I. Premium sufficiently big enough to pay for losses only\nII. Premium applicable to marginal members of the society\nIII. Premium after loading for administrative costs\nIV. Premium derived from the most recent loss experience period**2.** **Deductible**‘Deductible’ or ‘excess’ is a cost-sharing provision between an insurer and\ninsured. Deductibles provide that only the claims in excess of a particular\nthreshold are payable by the insurer. In other words, the insurer will not be liable\nfor claims below a specified level. The level or the threshold would be set as a\nfixed amount, or a percentage or even as a specified period of time (when it is\ncalled time-excess.) In case of health policies, there could be a condition that\nclaims would be payable only if the hospitalization is beyond a specified number\nof days/ hours. Deductibles are not used in life policies.In products such as property, motor and home insurances, deductibles are\npredetermined amounts that the insured must bear towards an indemnity claim.\nDeductibles can be compulsory for some policies or voluntary. Insurers generally\ncharge lower premiums when the insured voluntarily opt for higher deductibles.\nAn agent must examine how specific deductibles work and inform the insured\nwhether the deductible is applicable on a ‘per year’ or ‘per event’ basis.There are various reasons for having deductibles. Corporate customers covering\nfactories, multiple cargo consignments, large groups of employee, public liability\nexposures etc. and having huge amounts of Sum Insured, may prefer to bear small\nclaims themselves and avoid the documentation to prove claims. For example, a\nlarge factory owner paying lakhs or rupees as premium may not be bothered about\na minor repair cost of a machine amounting to around Rs.2,000.Some type of policies may need the insured also to bear some part of the loss to\nensure that he/ she takes due care. For instance, health insurers may insist on a\ndeductible so that insured would not overspend on costly hospital rooms just\nbecause insurance is there. Some Insurers also may not prefer spending time on58processing small claims. Also, in certain situations, insurers may not want to get\nexposed to the financial stress caused by accumulation of a large number of small\nlosses at one location. For example, a small flood in an industrial estate area can\ncause many low value claims from all the warehouses in the area.**Franchise:** Franchise refers to a threshold set, usually as a percentage of the sum\ninsured, below which no claim is admissible, as in the case of deductibles.\nHowever, when the claim amount is beyond the franchise limit, the entire claim\nis admissible by the insurer. In other words, franchise determines the minimum\nthreshold of the insurance companies' financial responsibility. Franchise will\napply to the policy in the same way and for the same reasons as a deductible in\ncase of claims below the threshold, but in the event of a claim exceeding the\nfranchise, the full amount of the loss will be paid.**D.** **Rating factors**The relevant elements that are used to add up the rates and make the rating plan\nare referred to as **rating factors** . Insurers use ‘rating factors’ to determine the\nrisk and to decide the price they will charge. The Insurer uses his assessments to establish a base rate. The Insurer then adjusts this rate with discounts applied for positivefeatures such as superior fire protection on property risk and loadings\napplied for adverse features such as presence of inflammable materials in\nthe premises. In Life Insurance the usual practice is to apply loading for adverse health,habits, heredity or occupational factors.**Key Terms**- Deductibles- Franchise**Answers to Test Yourself****Answer 1** - The correct option is I.**Answer 2** - The correct option is I.59## CHAPTER C-06## CLAIMS PROCESSING**Chapter Introduction**The insured get to taste the benefit of insurance only when they are affected by\nlosses. The entire insurance industry is sensitive to the losses faced by insured\nand try to settle the claims that arise as amicably as possible and as fast as\npossible.After studying this chapter, you should be able to understand:1. Claims settlement2. Importance of claim procedures60**A.** **Loss Assessment and Claim settlement**Claims Assessment (Loss Assessment) is the process of determining whether the\nloss suffered by the insured is covered by the insurance policy, i.e. the loss does\nnot fall under any exclusion and there is no breach of warranty.Settlement of claims has to be based on considerations of fairness. For anInsurance company, expeditious settlement of claim is the benchmark of", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n58", "section": "Test Yourself 2", "chunk_id": "Final IC 38 -IMF_Composite -English_029", "metadata": {"file_size": 20962, "chunk_index": 29, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Rating factors", "Chapter Introduction", "Key Terms"]}}
{"chunk": "the premises. In Life Insurance the usual practice is to apply loading for adverse health,habits, heredity or occupational factors.**Key Terms**- Deductibles- Franchise**Answers to Test Yourself****Answer 1** - The correct option is I.**Answer 2** - The correct option is I.59## CHAPTER C-06## CLAIMS PROCESSING**Chapter Introduction**The insured get to taste the benefit of insurance only when they are affected by\nlosses. The entire insurance industry is sensitive to the losses faced by insured\nand try to settle the claims that arise as amicably as possible and as fast as\npossible.After studying this chapter, you should be able to understand:1. Claims settlement2. Importance of claim procedures60**A.** **Loss Assessment and Claim settlement**Claims Assessment (Loss Assessment) is the process of determining whether the\nloss suffered by the insured is covered by the insurance policy, i.e. the loss does\nnot fall under any exclusion and there is no breach of warranty.Settlement of claims has to be based on considerations of fairness. For anInsurance company, expeditious settlement of claim is the benchmark of\nefficiency for its services. Each company has internal guidelines about time taken\nin claims processing, which its employees follow.This is generally known by the term “Turnaround time” (TAT). Some insurers have\nalso put in place, facility for the insured to check claim status online from time\nto time. Some insurance companies have also set up claims hub for speedy\nprocessing of claims.**Important aspects in an insurance claim**Although most companies are bound by their TAT it is important for an agent to\nknow the aspects that are looked into for settling a claim. Six of the most\nimportant aspects for Non-life claims are given below.i. Whether the loss causing event is within the scope of the policyii. Whether the insured has complied with his part of the policy conditionsiii. Compliance with warranties. The survey report would indicate whether or notwarranties have been complied with.iv. Observance of utmost good faith by the proposer, during the currency of thepolicy.v. On the occurrence of a loss, the insured is expected to act as if he isuninsured. In other words, he has a duty to take measures to minimise theloss.vi. Determination of the amount payable. The amount of loss payable is subjectto the sum insured. However, the amount payable will also depend upon the\nfollowing: The extent of the insured’s insurable interest in the property affected\n The value of salvage\n Application of underinsurance\n Application of contribution and subrogation conditionsIn the matter of claims relating to life insurance, the insurer checks whether1) Conditions of policy have not been breached\n2) Utmost good faith has been followed and613) No material facts have been concealed fraudulently.**B.** **Categories of claim**Insurance Claims fall into the following categories:**i.** **Standard claims**These are claims which are clearly within the terms and conditions of the policy.\nThe assessment of claim is done keeping in view scope and the sum insured opted\nfor and other methods of indemnity laid down for various classes of insurance.**ii.** **Condition of average or average clause**This is a condition in some policies which penalises the insured for insuring his\nproperty at a sum insured less than its actual value known as underinsurance. In\nthe event of a claim the insured gets an amount that is proportionately reducedfrom his actual loss in accordance to the amount underinsured. Such situationsoccur more in the case of non-life insurance.**iii.** **Act of God perils - Catastrophic losses**Natural perils like storm, cyclone, flood, inundation, and earthquake are termed\nas “Act of God” perils. These perils may result in losses to many policies of insurer\nin the affected region. Surveyors are appointed for assessment of certain\ncategories of non-life insurance claims.In such major and catastrophic losses, the surveyor is asked to proceed to the loss\nsite immediately for an early assessment and loss minimisation efforts.\nSimultaneously, insurers’ officials also visit the scene of loss particularly when\nthe amount involved is large. The purpose of the visit is to obtain an immediate,\non the spot idea of the nature and extent of loss.Preliminary reports are also submitted if the surveyors face some problems in\nregards to the assessment and may desire guidance and instructions from insurers\nwho are thus given an opportunity to discuss the issues with the insured, ifnecessary.**iv.** **On account payment**In Non-life insurance claims, apart from preliminary reports, interim reports may\nbe submitted from time to time where repairs and/ or replacements are made\nover a long period. Interim reports also give the insurer an idea of the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "C-06", "section": "Key Terms", "chunk_id": "Final IC 38 -IMF_Composite -English_030", "metadata": {"file_size": 20962, "chunk_index": 30, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Categories of claim", "On account payment", "Condition of average or average clause"]}}
{"chunk": "as “Act of God” perils. These perils may result in losses to many policies of insurer\nin the affected region. Surveyors are appointed for assessment of certain\ncategories of non-life insurance claims.In such major and catastrophic losses, the surveyor is asked to proceed to the loss\nsite immediately for an early assessment and loss minimisation efforts.\nSimultaneously, insurers’ officials also visit the scene of loss particularly when\nthe amount involved is large. The purpose of the visit is to obtain an immediate,\non the spot idea of the nature and extent of loss.Preliminary reports are also submitted if the surveyors face some problems in\nregards to the assessment and may desire guidance and instructions from insurers\nwho are thus given an opportunity to discuss the issues with the insured, ifnecessary.**iv.** **On account payment**In Non-life insurance claims, apart from preliminary reports, interim reports may\nbe submitted from time to time where repairs and/ or replacements are made\nover a long period. Interim reports also give the insurer an idea of the\ndevelopment of assessment of loss. It also helps in recommendation of \"On\naccount payment\" of the claim if desired by the insured. This usually happens if\nthe loss is large and the completion of assessment may take some time.If the claim is found to be in order, payment is made to the claimant and entries\nmade in the company records. Appropriate recoveries are made from the co62insurers and reinsurers, if any. In some cases, the insured may not be the person\nto whom the money is to be paid.**v.** **Discharge vouchers**Settlement of the claim is made only after obtaining a discharge under the policy.\nA sample of discharge receipt for claims (under personal accident insurance) for\ninjuries is worded along the following lines: (may vary from company to company)Name of the InsuredClaim No. Policy No.Received from the Company Ltd.The sum of Rs. ___________ in full and final settlement of compensation due\nto me/ us on account of injuries sustained by me/ us due to accident which\noccurred on or about the___________ I/ we give this discharge receipt to the\nCompany in full and final settlement of all my/ our claim present or future\narising directly or indirectly in respect of the said claim.Date (Signature)vi. **Post settlement action**The action taken after settlement of the non-life claim in relation to underwritingvaries from one class of business to another.**Example**Sum insured under a fire policy stands reduced to the extent of the amount of\nclaim paid. However, it can be reinstated on payment of pro-rata premium,\nwhich is deducted from the amount of claim paid.On payment of the capital sum insured under a personal accident policy, the\npolicy stands cancelled.Similarly, payment of a claim under individual fidelity guarantee policy\nautomatically terminates the policy.**vii.** **Salvage**Salvage generally refers to damaged property. On payment of loss, the salvage\nbelongs to insurers.**Example**When motor claims are settled on total loss basis, the damaged vehicle is taken\nover by insurers. Salvage can also arise in other non-life insurances like fire\nclaims, marine cargo claims etc.63Salvage is disposed of according to the procedure laid down by the companies for\nthe purpose. Surveyors, who have assessed the loss, will also recommend methods\nof disposal.**viii.** **Recoveries**After settlement of claims, the insurers under subrogation rights applicable to\ninsurance contracts, are entitled to the rights and remedies of the insured and to\nrecover the loss paid from a third party who may be responsible for the loss under\nrespective laws applicable. Thus, insurers can recover the loss from shipping\ncompanies, railways, road carriers, airlines, port trust authorities etc.**Example**In the case of non-delivery of consignment, the carriers are responsible for the\nloss. Similarly, the port trust is liable for goods which are safely landed but\nsubsequently missing. For this purpose, a letter of subrogation duly stamped isobtained from the insured before the settlement of the claim.**ix.** **Disputes related to claims**Despite best efforts, there could be delay in payment, non-payment (repudiation)\nof the claim, or the claim being admitted for a lesser amount, which might lead\nto dissatisfaction and dispute between Insurer and the insured.Apart from these, the most common reasons, to name a few are: Non-disclosure of material facts Lack of coverage Loss caused by excluded perils Lack of adequate sum insured Breach of warranty Issues regarding quantum due to underinsurance, depreciation, etc.All this could cause considerable grief to the insured at a time when he is already", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "o62", "section": "On account payment", "chunk_id": "Final IC 38 -IMF_Composite -English_031", "metadata": {"file_size": 20962, "chunk_index": 31, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Discharge vouchers", "Disputes related to claims", "On account payment", "Example", "Salvage"]}}
{"chunk": "respective laws applicable. Thus, insurers can recover the loss from shipping\ncompanies, railways, road carriers, airlines, port trust authorities etc.**Example**In the case of non-delivery of consignment, the carriers are responsible for the\nloss. Similarly, the port trust is liable for goods which are safely landed but\nsubsequently missing. For this purpose, a letter of subrogation duly stamped isobtained from the insured before the settlement of the claim.**ix.** **Disputes related to claims**Despite best efforts, there could be delay in payment, non-payment (repudiation)\nof the claim, or the claim being admitted for a lesser amount, which might lead\nto dissatisfaction and dispute between Insurer and the insured.Apart from these, the most common reasons, to name a few are: Non-disclosure of material facts Lack of coverage Loss caused by excluded perils Lack of adequate sum insured Breach of warranty Issues regarding quantum due to underinsurance, depreciation, etc.All this could cause considerable grief to the insured at a time when he is already\nsuffering from financial constraints arising due to losses. In order to reduce his\nsufferings, grievance redressal and dispute handling procedures are well laid out\nin the policy itself. Policies of fire or property have the condition of “Arbitration”\nin the policy itself.**C.** **Arbitration**Arbitration is a method of settling disputes arising out of contracts. Arbitration is\ndone in accordance with the provisions of the Arbitration and Conciliation Act,\n1996. The normal method of enforcing a contract or settling a dispute there under\nwould be to go to a court of law. Such litigation, however, involves considerable\ndelay and expense. The Arbitration Act allows the parties to submit disputes64under a contract to the more informal, less costly and private process ofarbitration.Arbitration may be done by a single arbitrator or by more than one, chosen by\nthe parties to the dispute themselves. In the event of a single arbitrator, the\nparties have to agree about that person. Many commercial insurance policies\ncontain an **arbitration clause** stating that disputes will be subject to arbitration.\nFire and most miscellaneous policies also contain an arbitration clause which\nprovides that if the liability under the policy is admitted by the company, and\nthere is a difference concerning the quantum to be paid, such a difference must\nbe referred to arbitration. Normally the arbitrator’s decision is considered final\nand binding on both the parties.The wording of the condition varies from policy to policy. Generally, it providesas follows:i. The dispute is submitted to the decision of a single arbitrator to be appointedby the parties, or in the event of any disagreement between them upon\nappointment of a single arbitrator, to the decision of two arbitrators each\nappointed by the parties.ii. These two arbitrators shall appoint an Umpire, who presides at the meetings.The procedure during these meetings resembles that of a court of law. Each\nparty states his case, if necessary, with the help of a counsel and witnessesare examined.iii. If the two arbitrators do not agree on a decision, the matter is submittedbefore the Umpire, who makes his award.iv. Costs are awarded at the discretion of the arbitrator/ arbitrators or Umpiremaking the award.Disputes relating to question of liability are to be settled through litigation.**Example**If the insurers contend that the loss is not payable because it is not covered under\nthe policy, the matter has to be decided by a Court of Law. Again, if the insurers\nrefuse to pay the claim on the ground that the policy is void because it was\nobtained through fraudulent non-disclosure of material facts (breach of the legal\nduty of ‘utmost good faith’), the issue has to be resolved through litigation.**D.** **Other dispute resolution mechanisms**As per IRDAI regulations, all policies have to mention about the grievanceredressal mechanism available to the insured in the event the insured isdissatisfied with the service of the insurer for any reason.65In case of claims under personal lines of business, a dissatisfied insured can\napproach Insurance Ombudsman. The procedure is discussed in detail in Chapter\n9. The Office details of Insurance Ombudsman are given in the policy. Decision of\nOmbudsman is binding on Insurer but not on insured.Matters like the financial authority and the limitations of Ombudsmen are also\ndiscussed in detail in Chapter 9.**Test Yourself 1**Which of the following activities would not be categorised under professionalsettlement of claims?I. Seeking information relating to the cause of the loss\nII. Approaching the claim with a prejudice", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s64", "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_032", "metadata": {"file_size": 20962, "chunk_index": 32, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Disputes related to claims", "Arbitration", "Test Yourself 1", "Example", "Other dispute resolution mechanisms"]}}
{"chunk": "refuse to pay the claim on the ground that the policy is void because it was\nobtained through fraudulent non-disclosure of material facts (breach of the legal\nduty of ‘utmost good faith’), the issue has to be resolved through litigation.**D.** **Other dispute resolution mechanisms**As per IRDAI regulations, all policies have to mention about the grievanceredressal mechanism available to the insured in the event the insured isdissatisfied with the service of the insurer for any reason.65In case of claims under personal lines of business, a dissatisfied insured can\napproach Insurance Ombudsman. The procedure is discussed in detail in Chapter\n9. The Office details of Insurance Ombudsman are given in the policy. Decision of\nOmbudsman is binding on Insurer but not on insured.Matters like the financial authority and the limitations of Ombudsmen are also\ndiscussed in detail in Chapter 9.**Test Yourself 1**Which of the following activities would not be categorised under professionalsettlement of claims?I. Seeking information relating to the cause of the loss\nII. Approaching the claim with a prejudice\nIII. Ascertaining whether the loss was a result of an insured peril\nIV. Quantifying the amount payable under the claim**Answers to Test Yourself****Answer 1** - The correct option is II.**Key Terms**Turn Around TimeSalvageRecoveriesClaims Assessment66## CHAPTER C-07## DOCUMENTATION**Chapter Introduction**In the insurance industry we deal with a large number of forms and documents.\nThese are required for the purpose of bringing clarity in the relationship between\nthe insured and the insurer. In this chapter, we shall deal with the various\ndocuments that are involved at the proposal stage and their significance.**After learning this Chapter you will be able to:**Understand proposal stage documentation and its importanceFamiliarize with the purposes of the ProspectusUnderstand the importance of the Proposal formAppreciate Anti-Money Laundering (AML), Know Your Customer (KYC) norms\nand the important documents, commonly applicable for practically all\npoliciesImportance of Age Proof and acceptable documents.67**A.** **Prospectus**Prospectus is a proposal stage document. The prospectus is a formal legal\ndocument used by insurance companies that provides details about the product.\nIt can mean a document issued by the insurer in physical, electronic or any other\nformat to sell or promote insurance products. For this purpose, Insurance\nproducts would also include the add-on covers/ riders offered, if any. The\nprospectus is like an introductory document which helps the prospective\npolicyholder to get familiar with the company’s products.As per IRDAI’s (Protection of Policyholders’ Interests) Regulations, 2017 the\nprospectus should contain all facts that are necessary for a prospective\npolicyholder to make an informed decision regarding purchase of a policy. It\nshould contain the following for each plan of insurance:The Unique Identification Number (UIN) allotted by the Authority for the\nconcerned insurance product- The extent of insurance coverThe Scope of benefits/ entitlements – guaranteed and non-guaranteedWarranties, exclusions/ exceptions of the insurance cover with\nexplanations- The terms and conditions of the insurance coverDescription of the contingency or contingencies to be covered byinsuranceThe class or classes of lives or property eligible for insurance under the\nterms of such prospectusWhether the plan is participative or non-participativeThe allowable Add-on covers (also called Riders in Life insurance) on the productand their benefits are also stated.Other important information which a Prospectus includes:1. Any differences in covers and premium. E.g. for different age groups or fordifferent entry ages\n2. Renewal terms of the policy\n3. Terms of cancellation of policy under certain circumstances\n4. The details of any discounts or loading applicable under differentcircumstances5. The possibility of any revision or modification of the terms of the policyincluding the premium686. Any incentives to reward policyholders for early entry, continued renewals,favourable claims experience etc. with the same insurer.\n7. Prospectus shall necessarily contain the product UIN allotted by IRDAI\n8. IRDAI Regulations mandate that Prospectus shall contain a copy of Section41. This section prohibits any direct or indirect inducement to any person\nfor buying a new insurance, continuing or renewing any kind of insurance\nrelating to lives or property in India, including any rebate of the whole or", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "t66", "section": "D.", "chunk_id": "Final IC 38 -IMF_Composite -English_033", "metadata": {"file_size": 20962, "chunk_index": 33, "chunk_tokens": 947, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus", "Test Yourself 1", "After learning this Chapter you will be able to:", "Other dispute resolution mechanisms"]}}
{"chunk": "terms of such prospectusWhether the plan is participative or non-participativeThe allowable Add-on covers (also called Riders in Life insurance) on the productand their benefits are also stated.Other important information which a Prospectus includes:1. Any differences in covers and premium. E.g. for different age groups or fordifferent entry ages\n2. Renewal terms of the policy\n3. Terms of cancellation of policy under certain circumstances\n4. The details of any discounts or loading applicable under differentcircumstances5. The possibility of any revision or modification of the terms of the policyincluding the premium686. Any incentives to reward policyholders for early entry, continued renewals,favourable claims experience etc. with the same insurer.\n7. Prospectus shall necessarily contain the product UIN allotted by IRDAI\n8. IRDAI Regulations mandate that Prospectus shall contain a copy of Section41. This section prohibits any direct or indirect inducement to any person\nfor buying a new insurance, continuing or renewing any kind of insurance\nrelating to lives or property in India, including any rebate of the whole or\npart of the commission payable on the policy.In particular the prospectus informs the proposer about the availability of facilityfor nomination.**Test Yourself 1**Which of the following it not usually part of the insurance prospectus?I. Name of OmbudsmanII. Date of Scope of benefitsIII. The EntitlementsIV. The Exceptions**B.** **Proposal Form**The insurance policy is a legal contract between the insurer and the policyholder.\nAs required for any contract, it has a proposal and its acceptance.The “Proposal form” is the application document that is used for making a\nproposal. It is a form to be filled in by the proposer in written or electronic or\nany other format approved by the Authority. It contains all information required\nby the insurer to decide whether to accept or reject to cover the risk. In case the\nrisk is accepted, the insurer can on the basis of this information, decide the rates,\nterms and conditions of the cover to be granted.The Principle of Utmost Good Faith and the Duty of Disclosure of material\ninformation begin with the Proposal Form for insurance. The proposer must\nprovide all information correctly and completely as this document becomes the\nbasis of granting insurance and any wrong or concealed information could resultin denial of claim.This duty to disclose continues beyond the proposal stage even after finalizing\nthe insurance contract. That is, any material change that happens anytime during\nthe period of insurance needs to be disclosed in non-life policies.Information collected from the Proposal Form during the course of solicitation of\nan insurance policy or issuance of an insurance policy are confidential and should69not be shared with any third party. Where a proposal deposit is refundable to a\nprospect for any reason, the same shall be refunded within 15 days from the date\nof underwriting decision on the proposal.As per IRDAI guidelines, it is the duty of the insurer to furnish to the insured, free\nof charge, within 30 days of the acceptance of a proposal, a copy of the proposal\nsubmitted by the Insured. The agent is expected to keep track of these timelines,\nfollow up internally and communicate with the prospect/ insured as and when\nrequired by way of customer service.**a)** **Proposal Form - Details**The proposal form is first stage of documentation through which the insuredinforms the insurer: Who he/ she is What kind of insurance he/ she needs Details of what he/ she wants to insure and For what period of time Details of the risk (E.g., for Life and Health insurances – details of healthor any ailments suffered are to be given) Details would include the monetary value proposed on the subject matterof insurance and all **material facts** connected with the proposedinsurance.In other words, the Proposal form collects details on the proposer’s identity such\nas name, father’s name, address and other identifying inputs. To determine the\ntrue identity of their customers, documents like address proof, PAN card,\nphotographs etc. are collected with the proposal.In respect of Life and Health insurances, details of the proposers’ family members\n(including parents) indicating their longevity, status of health and ailments\nsuffered by any of them are collected. Depending on the product, the medical\ndetails of the life proposed for insurance, personal characteristics and his/ her\npersonal history of disease may also be asked for.Details of the monetary value proposed on the subject matter of insurance and\nthe material facts connected with the proposed insurance would be collected for\nmany lines of insurance.The insurance advisor’s recommendations including the reasons for such\nrecommendation may also be part of the proposal form. There would be a\ndeclaration that the recommended policy’s details have been fully explained to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s5", "section": "Test Yourself 1", "chunk_id": "Final IC 38 -IMF_Composite -English_034", "metadata": {"file_size": 20962, "chunk_index": 34, "chunk_tokens": 1006, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 1", "Proposal Form - Details", "Proposal Form"]}}
{"chunk": "as name, father’s name, address and other identifying inputs. To determine the\ntrue identity of their customers, documents like address proof, PAN card,\nphotographs etc. are collected with the proposal.In respect of Life and Health insurances, details of the proposers’ family members\n(including parents) indicating their longevity, status of health and ailments\nsuffered by any of them are collected. Depending on the product, the medical\ndetails of the life proposed for insurance, personal characteristics and his/ her\npersonal history of disease may also be asked for.Details of the monetary value proposed on the subject matter of insurance and\nthe material facts connected with the proposed insurance would be collected for\nmany lines of insurance.The insurance advisor’s recommendations including the reasons for such\nrecommendation may also be part of the proposal form. There would be a\ndeclaration that the recommended policy’s details have been fully explained to\nthe proposer and the latter has acknowledged the same.70A Proposal form may have the following Sections starting with details of the\nInsurer, the Agent, the details of the product, the Sum Assured, the mode of\npayment of premiums etc. The form would also contain the signature of the\nproposer, as proof of the fact that he/ she has filled up the form and has\nsubmitted the proposal.Other details asked for are the Proposer’s name, date of birth, contact details,\nmarital status, nationality, names of parents and spouse, educational\nqualifications, habits and ID Proof, family particulars, employment details, bank\ndetails, name of nominee/ appointee; details of existing insurance and reasons\nfor opting for the policy.Depending on the Product, medical details of the life proposed for insurance,\npersonal characteristics and his/ her personal history of disease may be askedfor.Aspects related to the personal financial planning of the life being proposed\nincluding his/ her work span, projected income and expenses, as well as needs\nfor savings and investment, health, retirement and insurance may also be\nenquired about.The Agents recommendations including the reasons for such recommendation may\nalso be part of the proposal form. In compliance to the IRDAI regulations\nmentioned above, the Agent would make a declaration that the recommended\npolicy’s details have been fully explained to the proposer and the latter has\nacknowledged the same.Proposal forms are printed by insurers usually with the insurance company’s\nname, logo, address and the class/ type of insurance/ product that it is used for.\nIt is customary for insurance companies to add a printed note in the proposal\nform, though there is no standard format or practice in this regard.**b)** **Declaration in the Proposal Form**Insurance companies usually add a declaration at the end of the proposal form to\nbe signed by the proposer. This ensures that the insured takes the pain to fill up\nthe form accurately and has understood the facts given therein, so that at the\ntime of a claim there is no scope for disagreements on account of\nmisrepresentation of facts. Such declaration converts the common law principle\nof utmost good faith to a contractual duty of utmost good faith.**Example**Examples of such declarations are:71‘I/ We hereby declare and warrant that the above statements are true and\ncomplete in all respects and that there is no other information which is relevant\nto the application for insurance that has not been disclosed to you.’‘I/ We agree that this proposal and the declarations shall be the basis of the\ncontract between me/ us and (insurer’s name).’**Test Yourself 2**Which of the following is not relevant in respect of a Proposal form?I. Utmost Good-faith\nII. Amount expected to be claimed\nIII. Duty to Disclose material facts\nIV. Confidentiality of details given**Some examples of such notes are:**‘Non-disclosure of facts material to the assessment of the risk, providing\nmisleading information, fraud or non-co-operation by the insured will nullify the\ncover under the policy issued’.‘The company will not be on risk until the proposal has been accepted by the\nCompany and full premium paid’.**C.** **Know Your Customer (KYC) Norms****Anti-Money Laundering and KYC Norms**Money Laundering is the process by which criminals transfer funds to conceal the\ntrue origin and ownership of the proceeds of criminal activities. Money laundering\nprocesses are used by criminals to make funds obtained through illegal activities\nappear legal money. In the process, they try to cover up the criminal origin of the\nmoney and make it appear valid.Criminals attempt to use financial services, including banks and insurance, to\nlaunder their money. They make transactions using false identities, for example,\nby purchasing some form of insurance and then managing to withdraw that money\nand then disappearing once their purpose is served. Governments across the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Declaration in the Proposal Form", "chunk_id": "Final IC 38 -IMF_Composite -English_035", "metadata": {"file_size": 20962, "chunk_index": 35, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Example", "Some examples of such notes are:", "Declaration in the Proposal Form", "Test Yourself 2", "Anti-Money Laundering and KYC Norms"]}}
{"chunk": "II. Amount expected to be claimed\nIII. Duty to Disclose material facts\nIV. Confidentiality of details given**Some examples of such notes are:**‘Non-disclosure of facts material to the assessment of the risk, providing\nmisleading information, fraud or non-co-operation by the insured will nullify the\ncover under the policy issued’.‘The company will not be on risk until the proposal has been accepted by the\nCompany and full premium paid’.**C.** **Know Your Customer (KYC) Norms****Anti-Money Laundering and KYC Norms**Money Laundering is the process by which criminals transfer funds to conceal the\ntrue origin and ownership of the proceeds of criminal activities. Money laundering\nprocesses are used by criminals to make funds obtained through illegal activities\nappear legal money. In the process, they try to cover up the criminal origin of the\nmoney and make it appear valid.Criminals attempt to use financial services, including banks and insurance, to\nlaunder their money. They make transactions using false identities, for example,\nby purchasing some form of insurance and then managing to withdraw that money\nand then disappearing once their purpose is served. Governments across the\nworld, including India constantly try to prevent such money laundering attempts.72**Definition**Money laundering is the process of bringing illegal money into an economy by\nhiding its illegal origin so that it appears to be legally acquired. The Government\nof India launched the PMLA, 2002 to rein in money-laundering activities.The Prevention of Money Laundering Act (PMLA), 2002 came into effect from 2005\nto control money laundering activities and to provide for confiscation of property\nderived from money-laundering.The Anti-Money Laundering guidelines issued by IRDAI soon after have indicated\nsuitable measures to determine the true identity of customers requesting for\ninsurance services, reporting of suspicious transactions and proper record keeping\nof cases involving or suspected of involving money laundering. It is necessary to\nbe vigilant and ensure, right at the beginning of the contract that it is not\nintended to be a tool for money laundering of any sort.The Prevention of Money Laundering Act, 2002 (PMLA) was been brought into\nforce by the Government of India with effect from 1st July 2005. As per the Act,\nevery banking company, financial institution (which includes Insurance\ncompanies) and intermediary shall have to maintain a record of all the\ntransactions prescribed under the PMLA. Accordingly, IRDAI issued the Guidelines\non Anti-Money laundering/ Counter Financing of Terrorism (AML/ CFT) 31st March2006.Know your customer is the process used by a business to verify the identity of\ntheir clients. Banks and insurers are increasingly demanding their customers\nprovide detailed information to prevent identity theft, financial fraud and money\nlaundering. The objective of KYC guidelines is to prevent financial institutions\nfrom being used by criminal elements for money laundering activities.Insurers, hence, need to determine the true identity of their customers. Agents\nshould ensure that proposers submit the proposal form along with the following\nas part of the KYC procedure:i. Proof of identity – driving license, passport, voter ID card, PAN card,Photographs etc.ii. Proof of address – driving license, passport, telephone bill, electricity bill,bank passbook etc. Different documentation are prescribed for\nindividuals, corporates, partnership firms, trusts and foundationsiii. Income proof documents and financial status, esp. in case of high-valuetransactionsiv. Purpose of insurance contract73**a)** **Age Proof – for Personal Lines**While dealing with person related insurances like Life, Health, Personal Accident,\netc. Insurance companies use age as an important factor to determine the risk\nprofile of the insured. In life business, as age assumes great importance, life\ninsurers used to follow more detailed norms of age related documentation.[However, the Government, the Reserve Bank of India and the IRDAI are becoming\nstricter on following KYC norms.]An important part of the underwriting process is\nadmission of age, after verifying the proof of age.**i.** **Standard Age Proofs**There are two types of age proofs that insurers come across as evidence\nof age. Valid age proofs may be standard or non-standard. Standard **age proofs** are normally issued by a public authority, like birthcertificate issued by a municipality or other government body, school", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "h2006", "section": "Some examples of such notes are:", "chunk_id": "Final IC 38 -IMF_Composite -English_036", "metadata": {"file_size": 20962, "chunk_index": 36, "chunk_tokens": 938, "has_examples": true, "has_tables": false, "key_concepts": ["Definition", "Some examples of such notes are:", "Standard Age Proofs", "Age Proof – for Personal Lines", "Anti-Money Laundering and KYC Norms"]}}
{"chunk": "individuals, corporates, partnership firms, trusts and foundationsiii. Income proof documents and financial status, esp. in case of high-valuetransactionsiv. Purpose of insurance contract73**a)** **Age Proof – for Personal Lines**While dealing with person related insurances like Life, Health, Personal Accident,\netc. Insurance companies use age as an important factor to determine the risk\nprofile of the insured. In life business, as age assumes great importance, life\ninsurers used to follow more detailed norms of age related documentation.[However, the Government, the Reserve Bank of India and the IRDAI are becoming\nstricter on following KYC norms.]An important part of the underwriting process is\nadmission of age, after verifying the proof of age.**i.** **Standard Age Proofs**There are two types of age proofs that insurers come across as evidence\nof age. Valid age proofs may be standard or non-standard. Standard **age proofs** are normally issued by a public authority, like birthcertificate issued by a municipality or other government body, school\nleaving certificate, passport etc. Non-standard, when a standard age proof is not available (not to beaccepted readily)Some documents considered as standard age proofs are:i. School or college certificateii. Birth certificate extracted from municipal recordsiii. Passportiv. PAN cardv. Service registervi. Identity card in case of defence personnelvii. Marriage certificate issued by appropriate authority**ii.** **Non-standard age proofs**When standard age proofs like the above are not available, the life insurer\nmay allow submission of a non-standard age proof. Some documents\nconsidered as non-standard age proofs are:i. Horoscopeii. Ration cardiii. An affidavit by way of self-declarationiv. Certificate from village panchayat74**Test Yourself 3**Which of the following is not acceptable as valid Age Proof?I. Birth certificate extracted from municipal recordsII. Birth Certificate issued by Member of Legislative AssemblyIII. PassportIV. PAN Card**Answers to Test Yourself****Answer 1** -The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** – The correct option is II.**Summary**Prospectus is a formal legal document used by insurance companies that\nprovides details about the product.The application document used for making the proposal is commonly known\nas the ‘proposal form’.Some documents considered as standard age proofs include school or college\ncertificate, birth certificate extracted from municipal records etc.Insurers need to determine the true identity of their customers. KYC\ndocuments like address proof, PAN card and photographs etc. need to be\ncollected as a part of the KYC procedure.**Key Terms**1. Prospectus\n2. Proposal form\n3. Moral hazard\n4. Know your Customer (KYC)\n5. Age Proof\n6. Standard and non-standard age proofs\n7. Free-look period75#### CHAPTER C-08## CUSTOMER SERVICE**Chapter Introduction**In this chapter you will learn the importance of customer service. You will learn\nthe role of agents in providing service to customers. You will also learn how tocommunicate and relate with customers.After studying this chapter, you should be able to:Understand the importance of customer service1. Describe quality of service2. Examine the importance of service in the insurance industry3. Discuss the role of an insurance agent in providing good service4. Explain the process of communication5. Demonstrate the importance of non-verbal communication6. Recommend ethical behaviour76**A.** **Customer Service – General concepts****1.** **Why Customer Service?**Customers are the most important part of any industry and no enterprise can\nafford to treat them indifferently. The role of customer service and relationships\nis important in the service sector and more so for insurance.Every enterprise has a goal to delight its customers. This can be explained by\nexamining how buying insurance differs from buying a car.A car can be seen, touched, test driven and experienced, whereas the Insurance\nof the car is just a promise to pay if there is loss or damage to the car due to an\naccident. This promise is intangible – it cannot be seen, touched or experienced.While the customer of the car will be able to understand and experience the car\neasily, the customer of insurance can evaluate and experience the insurance\nprotection that he buys only when a loss happens and the insurance company\nsettles the claim. All customers do not get the chance to experience this. In\ninsurance, when such a situation arises, if the service exceeds expectations, the\ncustomer would be delighted.**2.** **Quality of service**It is necessary for insurance companies and their personnel, which includes their", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "t73", "section": "Age Proof – for Personal Lines", "chunk_id": "Final IC 38 -IMF_Composite -English_037", "metadata": {"file_size": 20962, "chunk_index": 37, "chunk_tokens": 991, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Customer Service – General concepts"]}}
{"chunk": "afford to treat them indifferently. The role of customer service and relationships\nis important in the service sector and more so for insurance.Every enterprise has a goal to delight its customers. This can be explained by\nexamining how buying insurance differs from buying a car.A car can be seen, touched, test driven and experienced, whereas the Insurance\nof the car is just a promise to pay if there is loss or damage to the car due to an\naccident. This promise is intangible – it cannot be seen, touched or experienced.While the customer of the car will be able to understand and experience the car\neasily, the customer of insurance can evaluate and experience the insurance\nprotection that he buys only when a loss happens and the insurance company\nsettles the claim. All customers do not get the chance to experience this. In\ninsurance, when such a situation arises, if the service exceeds expectations, the\ncustomer would be delighted.**2.** **Quality of service**It is necessary for insurance companies and their personnel, which includes their\nagents, to render high quality service and delight the customer.**But what is high quality service? What are its attributes?**The well-known SERVQUAL approach to service quality of Zeithaml, Parasuraman\nand Berry highlights 5 major indicators of service quality:**a)** **Reliability** : The ability to perform the promised service dependably andaccurately is considered the most important indicator of good service. Itis the foundation on which trust is built.**b)** **Responsiveness** : Refers to the willingness and ability of service personnelto help customers and provide prompt response to the customer’s needs.\nIt may be measured by indicators like speed, accuracy, and attitude while\ngiving the service.**c)** **Assurance** : Refers to the knowledge, competence and courtesy displayedby an employee or agent in understanding and meeting the needs of a\ncustomer, thus conveying trust and confidence.**d)** **Empathy** : Empathy is described as the human touch. It is reflected in thecaring attitude and individualised attention provided to customers.77**e)** **Tangibles** : Represent physical environmental factors like location, layoutand cleanliness as also the sense of professionalism that a customer feels\nwhen contacting a service provider. First impressions last long.**3.** **Customer service and insurance**Leading sales producers in the insurance industry state that the secret of reaching\nthe top and staying there is in getting the patronage and support of a large\nnumber of existing clients with whose help the business gets built. These clients\nare a source of commissions from renewal of existing contracts. These can be a\nvaluable source for acquiring new customers.One great mantra of success in insurance selling is to be able to convert one’s\ncustomers into one’s clients. Customers are those who buy a product. Clients, on\nthe other hand are people with whom an agent relates for life, who continue to\nbuy from him/ her as also help and possibly, support him/ her in reaching out to\nand selling to other customers.Clients are built by working with deep commitment to serving one’s customers.\nTo understand how keeping a customer happy benefits the agent and the\ncompany, one should understand the concept of Customer’s Lifetime Value.**Customer Lifetime Value** may be defined as the sum of economic benefits that\ncan be derived from building a sound relationship with a customer over a long\nperiod of time.**Diagram 1:** **Customer Lifetime Value**An agent who renders service and builds close relationships with her customers,\nbuilds goodwill and brand value, which helps in expanding the business.**Test Yourself 1**What is meant by customer lifetime value?I. Sum of costs incurred while servicing the customer over his lifetime78II. Rank given to customer based on business generated\nIII. Sum of economic benefits that can be achieved by building a long termrelationship with the customerIV. Maximum insurance that can be attributed to the customer**4.** **Customer Relationships and Service**While customer service is a key element in creating satisfied and loyal customers,\nit is also necessary to build a strong relationship with them. A Customer’s views\nabout an insurer depends on the service and relationships experience the insureroffers.What goes to make a healthy relationship? At its heart, of course, there is trust.\nAt the same time, there are other elements, which reinforce and promote thattrust. Let us illustrate some of the elements.**Diagram 2:** **Elements for Trust**i. Every relationship begins with **attraction** : Attraction means being liked andbeing able to build a rapport with the customer, starting with creating a great\nfirst impression. Attraction is regarded the key to unlocking every heart.\nWithout it a relationship is hardly possible. A sales person cannot make much", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e78", "section": "Quality of service", "chunk_id": "Final IC 38 -IMF_Composite -English_038", "metadata": {"file_size": 20962, "chunk_index": 38, "chunk_tokens": 986, "has_examples": true, "has_tables": false, "key_concepts": ["Customer service and insurance", "Diagram 1:", "Test Yourself 1", "Customer Lifetime Value", "Diagram 2:"]}}
{"chunk": "builds goodwill and brand value, which helps in expanding the business.**Test Yourself 1**What is meant by customer lifetime value?I. Sum of costs incurred while servicing the customer over his lifetime78II. Rank given to customer based on business generated\nIII. Sum of economic benefits that can be achieved by building a long termrelationship with the customerIV. Maximum insurance that can be attributed to the customer**4.** **Customer Relationships and Service**While customer service is a key element in creating satisfied and loyal customers,\nit is also necessary to build a strong relationship with them. A Customer’s views\nabout an insurer depends on the service and relationships experience the insureroffers.What goes to make a healthy relationship? At its heart, of course, there is trust.\nAt the same time, there are other elements, which reinforce and promote thattrust. Let us illustrate some of the elements.**Diagram 2:** **Elements for Trust**i. Every relationship begins with **attraction** : Attraction means being liked andbeing able to build a rapport with the customer, starting with creating a great\nfirst impression. Attraction is regarded the key to unlocking every heart.\nWithout it a relationship is hardly possible. A sales person cannot make much\nheadway if he/ she is not liked by the customer.ii. The second element of a relationship is one’s presence, being there whenneedediii. **Communication:** Even if one is not fully present and unable to do full justiceto all the expectations of one’s customers, one can still **maintain a strong**\n**relationship by communicating in a manner that is assuring, full of empathy**\n**and conveying a sense of responsibility.**The above dimensions of communication call for discipline and skills. They\nultimately reflect how one thinks and sees.Companies emphasise on customer relationship management, as the cost of\nretaining a customer is far lower than acquiring a new customer. A customer79relation opportunity arises at various touch points e.g. while understanding\ncustomers insurance needs, explaining coverage’s, handing over forms etc.**B.** **Insurance agent’s role in providing customer service.**Let us now consider how an agent can render great service to the customer. It is\nimportant to realise that from the moment a customer gets contacted by a sales\nperson to the final point of settlement of a claim, the customer goes on a journey\nof experience that we shall call the ‘ **Customer Journey’** . The agent needs to\npartner with the customer through the entire duration of the contract, hand\nholding him/ her in each step of the journey to create memorable experiences atevery step.Let us look at some milestones in the journey and the role played at each step.**1.** **The Sale**It is said that selling is both an art and a science. It is a science because it calls\nfor a set process which, if consistently and properly followed, is likely to lead to\nsuccess. It is also an art in the sense that each sales person brings his or her\ndistinctive beliefs, style and personality into the process and the results depend\non what each person puts into the process.- **Prospecting:** The Sales Process begins with **Prospecting**, which literally\nmeans ‘searching’ for a prospective customer. Searching is important as ‘ _**One**_\n_**cannot find till one searches’,**_ it is the most important step in the process.\nAn agent typically begins with his or her natural market, made up of known\nand easily approachable people. The challenge lies in getting across to more\nnetworks of people who are outside one’s immediate circle – getting to know\nthem and be known by them.All the people one knows and approaches may not be proper candidates for\ninsurance or they may not be interested in buying. It is thus necessary to\n**qualify** them so that one targets only those who are likely to buy insurance.\nThe prospecting process becomes successful only when an agent is able to\nbuild strong relationships with the prospect. The first task of any sales person\nis thus to **sell trust and build confidence.**_**Invite for an Interview:**_ While personal relationships are the foundation on\nwhich insurance business is built, it is necessary to convert the goodwill one\nearns into a sale. This begins when the sales person sets up a formal\nappointment for a detailed sales interview. This step is critical for establishing\none’s professional credentials and also to separate business from casualdiscussions.80- _**Determining the needs and recommending the Solution:**_ The heart of the\nSales Interview is the steps wherein the sales agent determines and makes\nthe prospective customer aware about the exact needs for which insurance is\na solution. A master sales person is distinguished by his/ her skill in guiding a\nprospect, through asking gentle questions, to understand the gaps in", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e78", "section": "Test Yourself 1", "chunk_id": "Final IC 38 -IMF_Composite -English_039", "metadata": {"file_size": 20962, "chunk_index": 39, "chunk_tokens": 995, "has_examples": true, "has_tables": false, "key_concepts": ["Customer Journey’", "Prospecting:", "Test Yourself 1", "Communication:", "Customer Relationships and Service"]}}
{"chunk": "them and be known by them.All the people one knows and approaches may not be proper candidates for\ninsurance or they may not be interested in buying. It is thus necessary to\n**qualify** them so that one targets only those who are likely to buy insurance.\nThe prospecting process becomes successful only when an agent is able to\nbuild strong relationships with the prospect. The first task of any sales person\nis thus to **sell trust and build confidence.**_**Invite for an Interview:**_ While personal relationships are the foundation on\nwhich insurance business is built, it is necessary to convert the goodwill one\nearns into a sale. This begins when the sales person sets up a formal\nappointment for a detailed sales interview. This step is critical for establishing\none’s professional credentials and also to separate business from casualdiscussions.80- _**Determining the needs and recommending the Solution:**_ The heart of the\nSales Interview is the steps wherein the sales agent determines and makes\nthe prospective customer aware about the exact needs for which insurance is\na solution. A master sales person is distinguished by his/ her skill in guiding a\nprospect, through asking gentle questions, to understand the gaps in\nprotection that give rise to the needs for insurance.The Agent has the responsibility to provide _Best Advice_ to the Prospect about the\nright kind of insurance solutions to meet his/ her needs. Firstly one must\ndetermine and make the prospective customer aware about the exact needs for\nwhich insurance is a solution. This also includes giving proper advice on the\namount of insurance to be purchased. For example the amount of life insurance\nto be purchased by an individual needs to be linked to his/ her income and paying\ncapacity.It is also important to keep a basic percept in mind, especially when buying nonlife insurance: Do not recommend insuring where the risk can be managedotherwise.Whether insurance is needed or not, depends on the circumstances. If the\npremium payments are high compared to the loss involved, it may be advisable\nto just bear the risk. On the other hand, if the loss consequences of a risk are\nlikely to be severe, it is wise to insure against it.**Example**To a homeowner living in a flood prone area, purchasing an add-on cover against\nfloods would prove to be helpful. On the other hand, if the home owner owns a\nhome at a place where the risk of floods is negligible it may not be necessary toobtain such cover.Many customers may not be much concerned about getting maximum insurance\nper rupee spent, but would be interested in **reducing the cost of handling risk** .\nThe concern would be thus on identifying those risks which a customer cannotretain and hence must be insured.The agent becomes successful when he/ she renders best advice. The agent needs\nto constantly ask himself/ herself about his/ her role vis-à-vis the customer. He/\nshe should go to the customer not just to get a sale but to relate to the customer\nas a coach and partner who can help him/ her to manage his/ her risks more\neffectively?_**Handling Objections and Closing the Sale:**_ It may not be enough to give best\nadvice and recommendations to a customer about the right products to buy.\nOne also needs to persuade him/ her to take the decision to buy. Quite often\nthe customer may have a number of questions and may raise objections that81need to be addressed before he/ she decides to commit to the purchase.\nWhilst handling these objections, it is vitally important to understand that the\nobjections being voiced may reflect underlying concerns that need to beidentified and resolved.In sum, the role of an insurance agent is more than that of a mere sales person.\nHe/ she also **needs to be a risk assessor, underwriter, risk management**\n**counsellor, designer of customised solutions and a relationship builder** (who\nthrives on building trust and long-term relationships), all rolled into one.**2.** **The Proposal stage**The agent has to support the customer in filling out the proposal for insurance.\nThe insured is required to take responsibility for the statements made therein.\nThe salient aspects of a proposal form have been discussed in a later chapter.The agent should explain and clarify to the proposer the details to be filled as\nanswers to each of the questions in the proposal form. A failure to give proper\nand complete information can jeopardise the customer’s claim.Sometimes, if additional information is required to complete the policy, the\ncompany may inform the customer directly or through the agent/ advisor. The\nagent should help the customer in completing such formalities, explaining why\nthey are necessary.IRDAI (Issuance of e-Insurance Policies) Regulations, 2016, provide for e – Proposal\nforms that are similar to the physical proposal form and having a provision to the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "t81", "section": "Invite for an Interview:", "chunk_id": "Final IC 38 -IMF_Composite -English_040", "metadata": {"file_size": 20962, "chunk_index": 40, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Handling Objections and Closing the Sale:", "The Proposal stage", "Invite for an Interview:", "Example"]}}
{"chunk": "He/ she also **needs to be a risk assessor, underwriter, risk management**\n**counsellor, designer of customised solutions and a relationship builder** (who\nthrives on building trust and long-term relationships), all rolled into one.**2.** **The Proposal stage**The agent has to support the customer in filling out the proposal for insurance.\nThe insured is required to take responsibility for the statements made therein.\nThe salient aspects of a proposal form have been discussed in a later chapter.The agent should explain and clarify to the proposer the details to be filled as\nanswers to each of the questions in the proposal form. A failure to give proper\nand complete information can jeopardise the customer’s claim.Sometimes, if additional information is required to complete the policy, the\ncompany may inform the customer directly or through the agent/ advisor. The\nagent should help the customer in completing such formalities, explaining why\nthey are necessary.IRDAI (Issuance of e-Insurance Policies) Regulations, 2016, provide for e – Proposal\nforms that are similar to the physical proposal form and having a provision to the\nProspect to give his consent to the proposal, which can be validated by one time\npassword (mobile phone OTP).**3.** **Acceptance stage****a)** **Cover notes/ Certificates of Insurance**After underwriting is completed it may take some time before the policy is issued.\nPending the preparation of the policy or when the negotiations for insurance are\nin progress and it is necessary to provide cover on a provisional basis or when\nthe premises are being inspected for determining the actual rate applicable,\na cover note is issued to confirm protection under the policy.As Cover notes and Certificates of Insurance are used predominantly in marine\nand motor classes of business, cover note is discussed in detail under theGeneral Insurance Section.It is the agent’s responsibility to ensure that the cover note is issued by the\ncompany, where applicable, to the insured. Promptness in this regardcommunicates to the client that his/ her interests are safe in the hands of theagent and the company.82**b)** **Policy Document**The policy is a formal document which provides an evidence of the contract\nof insurance. This document has to be stamped in accordance with the\nprovisions of the Indian Stamp Act, 1899. The insurer is duty bound to give\nthe policy document to the insured.**4.** **Premium Payment****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance.A good agent takes active interest in ensuring that the insured pays the\npremium for taking or continuing or renewing his policy and the customer is\nmade aware of various options available for payment of premium.**5.** **Method of payment of premium**The premium to be paid by any person proposing to take an insurance policy or\nby the policyholder to an insurer may be made in any one or more of the followingmethods:a) Cashb) Any recognised banking negotiable instrument such as cheques, demanddrafts, pay order, banker’s cheques drawn on any schedule bank in India;c) Postal money order;d) Credit or debit cards;e) Bank guarantee or cash deposit;f) Internet;g) E-transferh) Direct credits via standing instruction of proposer or the policyholder orthe life insured through bank transfers;i) Any other method or payment as may be approved by the Authority fromtime to time;As per IRDA Regulations, in case the proposer/ policyholder opts for premium\npayment through net banking or credit/ debit card, the payment must be\nmade only through net banking account or credit/ debit card issued on the\nname of such proposer/ policyholder.83**6.** **Service after issuance of Policy Document and Receipt for Premium**Once the premium is paid by the customer, the insurer is bound to issue a\nreceipt. A receipt is also to be issued even in case the premium is paid inadvance.The agent may approach the insured and enquire whether the Policy\nDocument has been received from the insurance company. It presents a great\nopportunity for the agent to connect with the customer. The agent will be\nable to clear any doubts and also explain the various policy provisions and\npolicy holders’ rights and privileges. This demonstrates commitment to the\ncustomer and provides an opportunity to pledge continued support and\nservice. One should also inform the customer about the free-look period\nprovision, during which period, the policy can be returned and refund of\npremium obtained.If the policy being purchased is an Electronic insurance policy, the agent can\nhelp the Customer to open an e-Insurance Account (e-I-A), through the\nRegistered Insurance Repository.This also paves the way for the next step which is to ask the customer for the\nnames and particulars of other individuals he/ she knows, who can possibly", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "The Proposal stage", "chunk_id": "Final IC 38 -IMF_Composite -English_041", "metadata": {"file_size": 20962, "chunk_index": 41, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Document", "Premium", "Acceptance stage", "Cover notes/ Certificates of Insurance", "Premium Payment"]}}
{"chunk": "name of such proposer/ policyholder.83**6.** **Service after issuance of Policy Document and Receipt for Premium**Once the premium is paid by the customer, the insurer is bound to issue a\nreceipt. A receipt is also to be issued even in case the premium is paid inadvance.The agent may approach the insured and enquire whether the Policy\nDocument has been received from the insurance company. It presents a great\nopportunity for the agent to connect with the customer. The agent will be\nable to clear any doubts and also explain the various policy provisions and\npolicy holders’ rights and privileges. This demonstrates commitment to the\ncustomer and provides an opportunity to pledge continued support and\nservice. One should also inform the customer about the free-look period\nprovision, during which period, the policy can be returned and refund of\npremium obtained.If the policy being purchased is an Electronic insurance policy, the agent can\nhelp the Customer to open an e-Insurance Account (e-I-A), through the\nRegistered Insurance Repository.This also paves the way for the next step which is to ask the customer for the\nnames and particulars of other individuals he/ she knows, who can possibly\nbenefit from the agent’s services. It would be even better if the client itself\ncontacted these people and introduced the agent to them.**7.** **Policy Renewal**Most general Insurance policies have to be renewed each year. For general\ninsurance policies, at the time of each renewal, the customer has a choice to\ncontinue insuring with the same company or switch to another company. In\ncase of Life Insurance, a policy would continue to be in force when the\ncustomer pays the premium at regular intervals based on premium payment\nterm. This does not apply to one-time payments.General Insurers usually send a Renewal Notice, well in advance of the date\nof expiry of the premium paying period, inviting renewal of the policy.The customer’s choice to renew or continue with the policy may often depend\non the trust and goodwill created by the agent and company and the agent\nneeds to be in touch to remind the customer about the renewal or continuity\nof policy well before the due date.High producer agents constantly keep in touch with their clients, and win their\ntrust and loyalty through various acts of service and relationships – like\ngreeting their clients on various occasions like festivals or family events and\nbeing with them to share their joys and sorrows.84**8.** **The claim stage**The crucial test comes at the time of claim settlement. The agent must ensure\nthat the incident giving rise to the claim is immediately informed to the\ninsurer and that the customer carefully follows all the formalities. The agent\nmay also assist in all the investigations that may need to be done to assess\nthe loss. A good agent assists the customers or his representatives in fulfilling\nthe claim lodgement formalities quickly, correctly and completely.**Test Yourself 2**Identify the scenario where a debate on the need for insurance is not required.I. Property insurance\nII. Business liability insurance\nIII. Motor insurance for third party liabilityIV. Fire insurance85**C.** **Communication skills in customer service**An agent needs to possess soft skills for effective performance in the work place.S **oft skills relate to one’s ability to interact effectively with others, both at**\n**work and outside. Communication skills are the most important of these soft**\n**skills.****1.** **Process of communication**What is communication?All communications require a sender, who sends a message, and a person who\nreceived that message. The process is complete once the receiver has understood\nthe message of the sender.**Diagram 3:** **Forms of communication**Communication may be face to face, over the phone, or by mail or internet. It\nmay be formal or informal. Whatever the content or form of the message or the\nmedia used, the effectiveness of communication depends on whether or not the\nrecipient has understood what was sought to be communicated.Since an insurance policy is essentially a promise, it is important that what is\npromised by the insurer is clearly understood by the insured. The agent as an\nintermediary has to not only provide complete, accurate and unambiguous\naccount of the terms of the insurance to the customer, but also seek and clarify\ndoubts or queries that a customer may have.**2.** **Barriers to effective communication**Different kinds of barriers to effective communication can arise at each step in\nthe above process, due to which communication can get distorted. The challenge", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e85", "section": "Service after issuance of Policy Document and Receipt for Premium", "chunk_id": "Final IC 38 -IMF_Composite -English_042", "metadata": {"file_size": 20962, "chunk_index": 42, "chunk_tokens": 940, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Renewal", "Barriers to effective communication", "Communication skills in customer service", "Diagram 3:", "Forms of communication"]}}
{"chunk": "**work and outside. Communication skills are the most important of these soft**\n**skills.****1.** **Process of communication**What is communication?All communications require a sender, who sends a message, and a person who\nreceived that message. The process is complete once the receiver has understood\nthe message of the sender.**Diagram 3:** **Forms of communication**Communication may be face to face, over the phone, or by mail or internet. It\nmay be formal or informal. Whatever the content or form of the message or the\nmedia used, the effectiveness of communication depends on whether or not the\nrecipient has understood what was sought to be communicated.Since an insurance policy is essentially a promise, it is important that what is\npromised by the insurer is clearly understood by the insured. The agent as an\nintermediary has to not only provide complete, accurate and unambiguous\naccount of the terms of the insurance to the customer, but also seek and clarify\ndoubts or queries that a customer may have.**2.** **Barriers to effective communication**Different kinds of barriers to effective communication can arise at each step in\nthe above process, due to which communication can get distorted. The challenge\nis to visualize, understand and remove the barriers.**Test Yourself 3**What does not go on to make a healthy relationship?I. AttractionII. TrustIII. CommunicationIV. Dislike86**D.** **Non-verbal Communication**Let us now look at some concepts that the agent needs to understand.**Important****1.** **Making a great first impression**The prospect judges an agent based on his appearance, body language,\nmannerisms, dress and speech. As attraction is the first pillar of a relationship\nand first impressions last long, some tips for making a good first impression are\ngiven below:**i.** **Be on time always** . Plan to arrive a few minutes early, allowing flexibilityfor all kinds of possible delays.**ii.** **Present yourself appropriately** . The appearance should to create the right first impression\n The dress must be appropriate for the meeting or occasion\n The look must be clean and tidy – with good haircut and shave, clean andtidy clothes, neat and tidy make up**iii.** **A warm, confident and winning smile** puts a person and his/ heraudience immediately at ease with one another.**iv.** **Being open, confident and positive** body language must project confidence and self-assurance stand tall, smile, make eye contact, greet with a firm handshake remain positive even in the face of some criticism or when the meetingis not going as well as expected**v.** **Interest in the other person** - The most important thing is about beinggenuinely interested in the other person. Take some time to find out about the customer as a person Be caring and attentive to what he or she says Be totally present and available to your customer Not engaging in one’s mobile phone during the interview?**2.** **Body language**Body language refers to movements, gestures, facial expressions. The way we\ntalk, walk, sit and stand, all says something about us, and what is happeninginside us.87It is often said that people listen to only a small percentage of what is actually\nsaid. What we don’t say may speak a lot more about us in a louder way. Obviously,\none needs to be very careful about one’s body language.**a)** **Confidence**Here are a few tips about how to appear confident and self-assured, giving\nthe impression of someone to be seriously listened to: Posture – standing tall with shoulders held back. Solid eye contact - with a \"smiling\" face Purposeful and deliberate gestures**b)** **Trust** Quite often, a sales person’s words fall on deaf ears because the audiencedoes not trust him/ her – his/ her body language does not give the\nassurance that he/ she is sincere about what he/ she says**3.** **Listening skills**The third set of communication skills that one needs to be aware about andcultivate are listening skills. These follow from a well-known principle of personal", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e86", "section": "Process of communication", "chunk_id": "Final IC 38 -IMF_Composite -English_043", "metadata": {"file_size": 20962, "chunk_index": 43, "chunk_tokens": 904, "has_examples": false, "has_tables": false, "key_concepts": ["Being open, confident and positive", "Making a great first impression", "A warm, confident and winning smile", "Non-verbal Communication", "Barriers to effective communication"]}}
{"chunk": "talk, walk, sit and stand, all says something about us, and what is happeninginside us.87It is often said that people listen to only a small percentage of what is actually\nsaid. What we don’t say may speak a lot more about us in a louder way. Obviously,\none needs to be very careful about one’s body language.**a)** **Confidence**Here are a few tips about how to appear confident and self-assured, giving\nthe impression of someone to be seriously listened to: Posture – standing tall with shoulders held back. Solid eye contact - with a \"smiling\" face Purposeful and deliberate gestures**b)** **Trust** Quite often, a sales person’s words fall on deaf ears because the audiencedoes not trust him/ her – his/ her body language does not give the\nassurance that he/ she is sincere about what he/ she says**3.** **Listening skills**The third set of communication skills that one needs to be aware about andcultivate are listening skills. These follow from a well-known principle of personal\neffectiveness – ‘first try to understand before being understood’.Active listening calls for: Allowing the speaker to finish each point before asking questions Not interrupting the speaker with any counter arguments This may require that we reflect on the message and ask questions toclarify what was said Another way to provide feedback is to summarize the speaker’s words andrepeat it back to him or her periodically or at the end of the conversation.**Let us look at the skills required for active listening:****a)** **Demonstrating that one is listening:** For instance one may: Give an occasional nod and smile Adopt a posture that is open and draws out the other to speak freely Have small verbal comments like \"I understand\", \"I see\", \"yes\" and \"uh\".88**b)** **Paying attention**One needs to give the speaker one’s undivided attention, and acknowledge\nhim. Some aspects of paying attention are as follows:Look at the speaker directly Put aside distracting thoughts Don't mentally prepare a rebuttal Avoid all external distractions [for instance, keep your mobile on silentmode] \"Listen\" to the speaker's body language**c)** **Removing filters:**A lot of what we hear may get distorted by one’s personal filters, like the\nassumptions, judgments, and beliefs one carries.**Not being judgemental: If the listener is judgemental,** even if he hears what\nthe speaker is saying, he will understand only according to his biased\ninterpretation.**d)** **Empathetic listening:****Empathy implies hearing and listening patiently, and with full attention,**\n**to what the other person has to say, even when one does not agree with**\n**it. It is important to show the speaker acceptance, not necessarily****agreement.****e)** **Responding appropriately:**Active listening implies much more than just hearing what a speaker says. The\ncommunication can be completed only when the listener responds in some\nway, through word or action. Certain rules need to be followed for ensuring\nthat the speaker is not put down but treated with respect.These include: Being candid, open, and honest in your response Asserting one’s opinions respectfully Treating another person in a way, one would like oneself to be treated**Example****Asking for clarity** – “I realize that we have not been able to clear about the\nbenefits of some of our health plans. Could you help us by asking us your doubts?”89**Paraphrasing the speaker’s exact words** – “So, you are saying that ‘our health\nplans are not attractive enough’ – Have I understood you correctly?”**Test Yourself 4**Which among the following is not an element of active listening?I. Paying good attention\nII. Being extremely judgemental\nIII. Empathetic listening\nIV. Responding appropriately**E.** **Ethical Behavior**In recent years, there are many reports of improper conduct, and serious concerns\nhave been raised about ethical behaviour in business causing betrayal of trust.This has led to discussions about concepts like accountability, corporate\ngovernance, and treating customers fairly in insurance, which form part of“Ethics” in business.It is not wrong to look after one’s interests. But it is wrong to do so at the cost ofthe interests of others. Unethical behaviour arises when there is no concern forothers and there is high concern for oneself.**Insurance is a business of trust** . Breach of trust amounts to cheating. When\nwrong information is given to prospects tempting them to buy insurance, or if the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Confidence", "chunk_id": "Final IC 38 -IMF_Composite -English_044", "metadata": {"file_size": 20962, "chunk_index": 44, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Paying attention", "Ethical Behavior", "Paraphrasing the speaker’s exact words", "Removing filters:", "Test Yourself 4"]}}
{"chunk": "benefits of some of our health plans. Could you help us by asking us your doubts?”89**Paraphrasing the speaker’s exact words** – “So, you are saying that ‘our health\nplans are not attractive enough’ – Have I understood you correctly?”**Test Yourself 4**Which among the following is not an element of active listening?I. Paying good attention\nII. Being extremely judgemental\nIII. Empathetic listening\nIV. Responding appropriately**E.** **Ethical Behavior**In recent years, there are many reports of improper conduct, and serious concerns\nhave been raised about ethical behaviour in business causing betrayal of trust.This has led to discussions about concepts like accountability, corporate\ngovernance, and treating customers fairly in insurance, which form part of“Ethics” in business.It is not wrong to look after one’s interests. But it is wrong to do so at the cost ofthe interests of others. Unethical behaviour arises when there is no concern forothers and there is high concern for oneself.**Insurance is a business of trust** . Breach of trust amounts to cheating. When\nwrong information is given to prospects tempting them to buy insurance, or if the\ninsurance given does not cater to the specific needs of the prospect, things gowrong.The Code of Ethics spelt out by the IRDAI in various regulations are directed\ntowards ethical behaviour. It is not enough just to know the code. What is more\nimportant for the insurers and their representatives is to always keep the\ninterests of the prospect/ policy holder as primary.**Characteristics:** Some characteristics of ethical behaviour are:a) Placing the best interests of the client above one’s own direct or indirectbenefitsb) Holding in strictest confidence and considering as privileged, all business andpersonal information pertaining to client’s affairsc) Making full and adequate disclosure of all facts to enable clients makeinformed decisionsThere could be a likelihood of ethics being compromised in the followingsituations:90a) Having to choose between two plans, one giving much less premium orcommission than the otherb) Temptation to recommend discontinuance of an existing policy and taking outa new onec) Being aware of circumstances that, if known to the insurer, could adverselyaffect the interests of the client or the beneficiaries of the claim.**Test Yourself 5**Which among the following is not a characteristic of ethical behaviour?\nI. Making adequate disclosures to enable the clients to make an informeddecision\nII. Maintaining confidentiality of client’s business and personal information\nIII. Placing self-interest ahead of client’s interests\nIV. Placing client’s interest ahead of self interest**Summary**a) The role of customer service and relationships is far more critical in the caseof insurance than in other products.b) Five major indicators of service quality include reliability, responsiveness,assurance, empathy and tangibles.c) Customer lifetime value may be defined as the sum of economic benefits thatcan be derived from building a sound relationship with a customer over a long\nperiod of time.d) The role of an insurance agent in the area of customer service is absolutelycritical.e) Active listening involves paying attention, providing feedback and respondingappropriately.f) Ethical behaviour involves placing the customer’s interest before one’s own.**Key terms**a) Quality of serviceb) Empathyc) Body languaged) Active listening91e) Ethical behavior**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is III.92## CHAPTER C-09## GRIEVANCE REDRESSAL MECHANISM**Chapter Introduction**Insurance industry is essentially a service industry where customer expectations\nare constantly rising. There is dissatisfaction with the standard of services.\nDespite continuous product innovation and significant improvement in the level\nof customer service, aided by use of modern technology, the industry suffers\nbadly in terms of customer dissatisfaction and poor image. The Government and\nthe regulator have taken a number of initiatives to improve the situation.IRDAI Regulations on Protection of Policyholders’ Interests 2017 mandate that\nevery Insurer shall have their own board approved policy for protection of\npolicyholders’ interests which shall includei. Service parameters including turnaround times for various servicesrendered.\nii. Procedure for speedy resolution of complaints.**Learning Outcomes**93**A.** **Grievance Redressal**The time for high priority action is when the customer has a complaint. Remember\nthat in the case of a complaint, the customer is angry due to a failure of service.\nThis is only a part of the story.Many times, Customers get upset because they understand the situation wrongly.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "g91", "section": "Paraphrasing the speaker’s exact words", "chunk_id": "Final IC 38 -IMF_Composite -English_045", "metadata": {"file_size": 20962, "chunk_index": 45, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Grievance Redressal", "Ethical Behavior", "Paraphrasing the speaker’s exact words"]}}
{"chunk": "**Answer 5** - The correct option is III.92## CHAPTER C-09## GRIEVANCE REDRESSAL MECHANISM**Chapter Introduction**Insurance industry is essentially a service industry where customer expectations\nare constantly rising. There is dissatisfaction with the standard of services.\nDespite continuous product innovation and significant improvement in the level\nof customer service, aided by use of modern technology, the industry suffers\nbadly in terms of customer dissatisfaction and poor image. The Government and\nthe regulator have taken a number of initiatives to improve the situation.IRDAI Regulations on Protection of Policyholders’ Interests 2017 mandate that\nevery Insurer shall have their own board approved policy for protection of\npolicyholders’ interests which shall includei. Service parameters including turnaround times for various servicesrendered.\nii. Procedure for speedy resolution of complaints.**Learning Outcomes**93**A.** **Grievance Redressal**The time for high priority action is when the customer has a complaint. Remember\nthat in the case of a complaint, the customer is angry due to a failure of service.\nThis is only a part of the story.Many times, Customers get upset because they understand the situation wrongly.\nAll service failures causes two types of feelings:1. A feeling that the insurer was unfair (a feeling of being cheated)2. A feeling of hurt ego (being made to look and feel small)The customers want to feel valued and human touch is critical in this situation.As a professional insurance advisor first of all, the agent would not allow such a\ncomplaint situation to happen. He would take up the matter with the appropriate\nofficer of the company.A complaint is a crucial “ **moment of truth** ” in the customer relationship. If the\nagent/ company can use the situation to clarify the position, the situation can\nactually improve customer loyalty.**Remember, no one else in the company has ownership of the client’s problems**\n**as much as an agent does** .Complaints/ grievances give us the chance to show how much we care for the\ncustomer’s interests. They are in fact the pillars on which an insurance agent\nbuilds goodwill and business. **Word of mouth publicity (Good/ Bad) plays a**\n**significant role in selling and servicing** .The procedure for grievance redressal is detailed at the end of every policy\ndocument. This should be bought to the notice of customers. As per the\nregulations, any grievance of a policy holder should be first referred to the\nInsurer’s Grievance Cell. If it is not satisfactorily resolved, the complainant may\napproach the Regulator through the Integrated Grievance Management System.**B.** **Integrated Grievance Management System (IGMS)**Each Insurer has its own grievance redressal mechanism. All operating/\ncontrolling/ corporate offices of Insurance companies have Grievance Redressal\nOfficers. A policyholder can approach them directly for any grievance.IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as an online consumer complaints registration system. Insurers have to\nregister all grievances that they receive in the system which is integrated with\nIGMS of IRDAI. IGMS helps IRDAI in monitoring grievance redress in the industry\nand also acts as a central repository of insurance grievance data.94Policyholders can approach the respective insurer first for any grievance. If he\ndoes not receive any response from the insurer or if the response/ resolution\nreceived is not to his satisfaction, he can approach the Regulator under the IGMS.\nThe complaint registration process involves two steps – (i) Registering oneself by\nentering one’s policy details and (ii) Registering one’s complaints and viewing the\nstatus of the complaints. Complaints are then forwarded to the respective\ninsurance companies and IRDAI facilitates disposal of Grievances.IGMS tracks complaints and the time taken for their redressal. The complaints\ncan be registered at the following URL:\nhttp://www.policyholder.gov.in/Integrated_ Grievance_Management.aspx**C.** **Consumer Protection****The Consumer Protection Act, 2019:** This original Act of 1986 was passed _“to_\n_provide for better protection of the interest of consumers and to make provision_\n_for the establishment of consumer councils and other authorities for the_\n_settlement of consumer’s disputes”_ . The Act was amended by the Consumer\nProtection (Amendment) Act, 2002 and later on 2019.Some definitions provided\nin the Act are as follows:“ **Service** ” means service of any description which is made available to potential\nusers and includes the provision of facilities in connection with banking,\nfinancing, **insurance**, transport, processing, supply of electrical or other energy,", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "C-09", "section": "Answer 5", "chunk_id": "Final IC 38 -IMF_Composite -English_046", "metadata": {"file_size": 20962, "chunk_index": 46, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Grievance Redressal", "Word of mouth publicity (Good/ Bad) plays a", "Chapter Introduction", "Integrated Grievance Management System (IGMS)", "Answer 5"]}}
{"chunk": "The complaint registration process involves two steps – (i) Registering oneself by\nentering one’s policy details and (ii) Registering one’s complaints and viewing the\nstatus of the complaints. Complaints are then forwarded to the respective\ninsurance companies and IRDAI facilitates disposal of Grievances.IGMS tracks complaints and the time taken for their redressal. The complaints\ncan be registered at the following URL:\nhttp://www.policyholder.gov.in/Integrated_ Grievance_Management.aspx**C.** **Consumer Protection****The Consumer Protection Act, 2019:** This original Act of 1986 was passed _“to_\n_provide for better protection of the interest of consumers and to make provision_\n_for the establishment of consumer councils and other authorities for the_\n_settlement of consumer’s disputes”_ . The Act was amended by the Consumer\nProtection (Amendment) Act, 2002 and later on 2019.Some definitions provided\nin the Act are as follows:“ **Service** ” means service of any description which is made available to potential\nusers and includes the provision of facilities in connection with banking,\nfinancing, **insurance**, transport, processing, supply of electrical or other energy,\nboard or lodging or both, housing construction, entertainment, etc. **Insurance is**\n**included as a service.** However, “Service” does not include the rendering of any\nservice free of charge or under a contract of personal service.“ **Consumer** ” means any person who Buys goods for a consideration. It includes any user of such goods. (It does notinclude a person who obtains such goods for resale or for any commercial\npurpose) or\n Hires or avails of any services for a consideration. It includes the beneficiaryof such services. (It does not include any person who avails of such service for\nany commercial purpose.)“ **Defect** ” means any fault, imperfection, shortcoming, inadequacy in the quality,\nnature and manner of performance which is required to be maintained by or under\nany law or has been undertaken to be performed by a person in pursuance of a\ncontract or otherwise in relation to any service.**“Complaint”** means any allegation in writing made by a complainant that: an unfair trade practice or restrictive trade practice has been adopted\n the goods bought by him suffer from one or more defects\n the services hired or availed of by him suffer from deficiency in any respect\n price charged is in excess of that fixed by law or displayed on package\n goods which will be hazardous to life and safety when used are being offeredfor sale to the public in contravention of the provisions of any law requiring95trader to display information in regard to the contents, manner and effect of\nuse of such goods.“ **Consumer dispute** ” means a dispute where the person against whom a\ncomplaint has been made, denies and disputes the allegations contained in the\ncomplaint.**D.** **Consumer** **disputes redressal agencies**Consumer disputes redressal agencies are established at district, state and\nnational levels.**i.** **District Consumer Disputes Redressal Commission** The District Consumer Disputes Redressal Commission (District\nCommission), has jurisdiction to entertain complaints, where value of the\ngoods or services does not exceed Rs. 1 crore. The District Commission has\nthe powers of a civil court.**ii.** **State Consumer Disputes Redressal Commission** The State Consumer Disputes Redressal Commission (State Commission) hasoriginal jurisdiction to entertain complaints where the value of goods/\nservice and compensation, if any claimed exceeds Rs. 1 crore but does not\nexceed Rs.10 crores.\n It also has appellate and supervisory jurisdiction to entertain appeals fromthe District Commission.\n Other powers and authority are similar to those of the District Commission.**iii.** **National Consumer Disputes Redressal Commission** The National Consumer Disputes Redressal Commission (NationalCommission) is the final authority established under the Act.\n It has original jurisdiction to entertain disputes, where goods/ services andthe compensation claimed exceeds Rs.10 crores.\n It has appellate as well as supervisory jurisdiction to hear the appeals fromthe orders passed by the State Commission.\nEvery order made by a District Commission, State Commission or the National\nCommission shall be enforced by it in the same manner as if it were a decree\nmade by a Court in a suit before it. Appeals against the orders of the National\nCommission have to be made only at the Supreme Court.96**Channels for Consumer Disputes Redressal**|Judicial Channels|Col2|", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "g95", "section": "C.", "chunk_id": "Final IC 38 -IMF_Composite -English_047", "metadata": {"file_size": 20962, "chunk_index": 47, "chunk_tokens": 1005, "has_examples": true, "has_tables": true, "key_concepts": ["Consumer", "Defect", "Consumer dispute", "State Consumer Disputes Redressal Commission", "Channels for Consumer Disputes Redressal"]}}
{"chunk": "service and compensation, if any claimed exceeds Rs. 1 crore but does not\nexceed Rs.10 crores.\n It also has appellate and supervisory jurisdiction to entertain appeals fromthe District Commission.\n Other powers and authority are similar to those of the District Commission.**iii.** **National Consumer Disputes Redressal Commission** The National Consumer Disputes Redressal Commission (NationalCommission) is the final authority established under the Act.\n It has original jurisdiction to entertain disputes, where goods/ services andthe compensation claimed exceeds Rs.10 crores.\n It has appellate as well as supervisory jurisdiction to hear the appeals fromthe orders passed by the State Commission.\nEvery order made by a District Commission, State Commission or the National\nCommission shall be enforced by it in the same manner as if it were a decree\nmade by a Court in a suit before it. Appeals against the orders of the National\nCommission have to be made only at the Supreme Court.96**Channels for Consumer Disputes Redressal**|Judicial Channels|Col2|\n|---|---|\n|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|\n|**Established by the**<br>**Central Government**|**Established by the**<br>**State Government**|**a)** **Procedure for filing a complaint**The procedure for filing a complaint is very simple in all the above three\nagencies. There is no fee for filing a complaint or filing an appeal whether\nbefore the State Commission or National Commission. The complaint can be\nfiled by the complainant himself or by his authorised agent. It can be filed\npersonally or can even be sent by post. It may be noted that no advocate is\nnecessary for the purpose of filing a complaint.**b)** **Consumer Commission Orders**If the Commission is satisfied (a) that the goods in question have the defects\nspecified in the complaint or (b) that the allegations about the services are\nproven; the Commission can issue orders directing the opposite party to do\nany of the following:\ni. To **return** to the complainant the **price** (or premium in case of insurance)and/ or charges paid by the complainant\nii. To award such amount as **compensation** to the consumers for any loss orinjury suffered by the consumer due to negligence of the opposite party\niii. To remove the defects or **deficiencies** in the services in question.\niv. To **discontinue the unfair trade practice** or the restrictive trade practiceor not to repeat them\nv. To provide for **adequate costs** to the complainants.**c)** **Nature of complaints**97The **majority of consumer disputes** with the three Commissions relating to\ninsurance business fall in the following main categories:i. Delay in settlement of claims\nii. Non-settlement of claims\niii. Repudiation of claims\niv. Amount or Quantum of loss\nv. Policy terms, conditions etc.**E.** **The Insurance Ombudsman**The Central Government under the powers of the Insurance Regulatory &\nDevelopment Authority Act, 1999 made **Insurance Ombudsman Rules 2017** by a", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "l2", "section": "National Consumer Disputes Redressal Commission", "chunk_id": "Final IC 38 -IMF_Composite -English_048", "metadata": {"file_size": 20962, "chunk_index": 48, "chunk_tokens": 984, "has_examples": false, "has_tables": true, "key_concepts": ["State Government", "Commission", "Procedure for filing a complaint", "Consumer Commission Orders", "The Insurance Ombudsman"]}}
{"chunk": "any of the following:\ni. To **return** to the complainant the **price** (or premium in case of insurance)and/ or charges paid by the complainant\nii. To award such amount as **compensation** to the consumers for any loss orinjury suffered by the consumer due to negligence of the opposite party\niii. To remove the defects or **deficiencies** in the services in question.\niv. To **discontinue the unfair trade practice** or the restrictive trade practiceor not to repeat them\nv. To provide for **adequate costs** to the complainants.**c)** **Nature of complaints**97The **majority of consumer disputes** with the three Commissions relating to\ninsurance business fall in the following main categories:i. Delay in settlement of claims\nii. Non-settlement of claims\niii. Repudiation of claims\niv. Amount or Quantum of loss\nv. Policy terms, conditions etc.**E.** **The Insurance Ombudsman**The Central Government under the powers of the Insurance Regulatory &\nDevelopment Authority Act, 1999 made **Insurance Ombudsman Rules 2017** by a\nnotification published in the official gazette on 25 [th] April 2017.Rules regarding Insurance Ombudsmen apply to all insurers and their agents and\nintermediaries in respect of complaints on all personal lines of insurance, group\ninsurance policies, policies issued to sole proprietorship and micro enterprises.[‘Personal lines’ here means insurances taken in an individual capacity, in\ncontrast to insurances sold to corporate entities.] Complaints relating to (a) delay\nin settlement of claims beyond the time specified by IRDAI, (b) partial or total\nrepudiation of claims by the insurer, (c) disputes about premium paid or payable\nin terms of insurance policy, (d) misrepresentation of policy terms and conditions\nat any time in the policy document or policy contract, (e) legal construction of\ninsurance policies that affect the claim; and (f) policy servicing and related\ngrievances against insurers and their agents and intermediaries.a) Issuance of life insurance policy, general insurance policy including healthinsurance policy which is not in conformity with the proposal form submitted\nby the proposer.\nb) Non issuance of insurance policy after receipt of premium in life insuranceand general insurance including health insurance and\nc) Any other matter resulting from the violation of provisions of the InsuranceAct, 1938 or the regulations, circulars, guidelines or instructions issued by\nthe IRDAI from time to time or the terms and conditions of the policy\ncontract, in so far as they relate to issues mentioned at clauses (a) to (f)\nThe objective of these rules is to resolve all types of complaints mentioned above,\nin a cost effective, and impartial manner.**The Ombudsman, by mutual agreement of the insured and the insurer can act**\n**as a mediator and counsellor within the terms of reference.****The decision of the Ombudsman, whether to accept or reject the complaint,**\n**is final.****a)** **Complaint to the Ombudsman**Any complaint made to the Ombudsman should be in writing, and must be\nsigned by the insured or his legal heirs, nominee or assignee, and addressed\nto an Ombudsman within whose jurisdiction, the insurer has a branch/ office.98It should contain the facts giving rise to the complaint, supported by\ndocuments, the nature and extent of the loss caused to the complainant and\nthe relief sought.**Complaints can be made to the Ombudsman if:**i. The complainant had made a previous written representation to theinsurance company and:\n the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.\nii. The complainant is not satisfied with the reply given by the insurer\niii. The complaint is made within one year from the date of rejection by theinsurance company\niv. The complaint is not pending in any court or consumer Commission or inarbitration\nv. The value of the claim including expenses claimed is not above Rs 30 lakhs.**b)** **Recommendations by the Ombudsman**The Ombudsman will send copies of complaints to both the complainant and\nthe insurance company. The Ombudsman will make his recommendations\nwithin one month of the receipt of the complaint.**c)** **Award**The dispute can be settled by intermediation. If this is not possible, the\nOmbudsman will pass an award to the insured which he thinks is fair within a\nperiod of 3 months from the date of receipt of all requirements from the\ncomplainant and sending a copy of the award to the complainant and the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Nature of complaints", "chunk_id": "Final IC 38 -IMF_Composite -English_049", "metadata": {"file_size": 20962, "chunk_index": 49, "chunk_tokens": 1014, "has_examples": false, "has_tables": false, "key_concepts": ["Complaints can be made to the Ombudsman if:", "Award", "The Insurance Ombudsman", "Nature of complaints", "Insurance Ombudsman Rules 2017"]}}
{"chunk": " the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.\nii. The complainant is not satisfied with the reply given by the insurer\niii. The complaint is made within one year from the date of rejection by theinsurance company\niv. The complaint is not pending in any court or consumer Commission or inarbitration\nv. The value of the claim including expenses claimed is not above Rs 30 lakhs.**b)** **Recommendations by the Ombudsman**The Ombudsman will send copies of complaints to both the complainant and\nthe insurance company. The Ombudsman will make his recommendations\nwithin one month of the receipt of the complaint.**c)** **Award**The dispute can be settled by intermediation. If this is not possible, the\nOmbudsman will pass an award to the insured which he thinks is fair within a\nperiod of 3 months from the date of receipt of all requirements from the\ncomplainant and sending a copy of the award to the complainant and the\ninsurer.The insurer shall comply with the award within 30 days of the receipt of the\naward and intimate compliance of the same to the Ombudsman. The award\nof the Ombudsman shall be binding on the insurer.**F.** **Right to Information**In addition to the rules and regulations that are specific for grievance redressal\nin insurance, there are certain general laws common to everyone in the country.\nThe Right to Information (RTI) Act, 2005 enacted by the Govt. of India is an\nimportant law that gives citizens of India access to the information available with\npublic authorities which promotes transparency and accountability in these\norganisations. The Act provides for appointment of a Chief Public Information\nOfficer (CPIO) to deal with requests for information. IRDAI is obliged to provide\ninformation to members of public in accordance with the provisions of the said\nAct. Agents should be aware that as per the RTI Act, IRDAI and Insurance\nCompanies may have to reveal certain information to customers and others; as\nalso allow them to inspect the work, document, records, extracts or certified\ncopies of documents/ records and also information stored in electronic form.99However, there are certain categories of information that are exempt from\ndisclosure.**Test Yourself 1**The ______________ has jurisdiction to entertain complaints, where value of the\ngoods or services and the compensation claimed is up to Rs.20 lakhs.I. District CommissionII. State CommissionIII. Zilla ParishadIV. National Commission**Summary**IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as a central repository of insurance grievance data and as a tool for\nmonitoring grievance redress in the industry.Consumer disputes redressal agencies are established in each district and\nstate and at national level.As far as insurance business is concerned, the majority of consumer disputes\nfall in categories such as delay in settlement of claims, non-settlement of\nclaims, repudiation of claims, quantum of loss and policy terms, conditions\netc.The Ombudsman, by mutual agreement of the insured and the insurer can act\nas a mediator and counsellor within the terms of reference.- If the dispute is not settled by intermediation, the Ombudsman will pass\naward to the insured which he thinks is fair, and is not more than what is\nnecessary to cover the loss of the insured.**Key Terms**1. Integrated Grievance Management System (IGMS)\n2. The Consumer Protection Act, 2019\n3. District Commission4. State Commission5. National Commission6. Insurance Ombudsman**Answers to Test Yourself****Answer 1** -The correct answer is I.100## CHAPTER C-10## REGULATORY ASPECTS FOR INSURANCE MARKETING **FIRM****Chapter Introduction**In this chapter, we discuss Regulatory aspects of Insurance marketing firm**Learning Outcomes**A. Regulations of Insurance marketing firm101Registration of Insurance Marketing Firm regulations came into effect from 21 [st]\nJanuary 2015.The following definitions are relevant.**1.** **Definitions:****i)** \"Act\" means the Insurance Act, 1938 (4 of 1938), as amended from time totime.\nii) “Applicant” meansa. A company formed under the Companies Act, 2013 (18 of 2013) or anyenactment thereof or under any previous company law which was in\nforce; or\nb. A limited liability partnership formed and registered under the LimitedLiability Partnership Act, 2008; or\nc. Co-operative Societies registered under Co-operative Societies Act,1912 or under any law for registration of Co-operative Societies; or", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n4", "section": "Recommendations by the Ombudsman", "chunk_id": "Final IC 38 -IMF_Composite -English_050", "metadata": {"file_size": 20962, "chunk_index": 50, "chunk_tokens": 1018, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "FIRM", "Test Yourself 1", "Award", "Definitions:"]}}
{"chunk": "3. District Commission4. State Commission5. National Commission6. Insurance Ombudsman**Answers to Test Yourself****Answer 1** -The correct answer is I.100## CHAPTER C-10## REGULATORY ASPECTS FOR INSURANCE MARKETING **FIRM****Chapter Introduction**In this chapter, we discuss Regulatory aspects of Insurance marketing firm**Learning Outcomes**A. Regulations of Insurance marketing firm101Registration of Insurance Marketing Firm regulations came into effect from 21 [st]\nJanuary 2015.The following definitions are relevant.**1.** **Definitions:****i)** \"Act\" means the Insurance Act, 1938 (4 of 1938), as amended from time totime.\nii) “Applicant” meansa. A company formed under the Companies Act, 2013 (18 of 2013) or anyenactment thereof or under any previous company law which was in\nforce; or\nb. A limited liability partnership formed and registered under the LimitedLiability Partnership Act, 2008; or\nc. Co-operative Societies registered under Co-operative Societies Act,1912 or under any law for registration of Co-operative Societies; or\nd. Any other person as may be recognized by the Authority to act as anInsurance Marketing Firm.\niii) “Approved Institution” means an institution engaged in education and/ortraining particularly in the area of insurance sales, service and marketing,\napproved and notified by the Authority from time to time.\niii-a) Aspirational District” means a district designated as such by the NITI\nAayog, Government of India or any other economically backward district, as\nmay be recognized by the Authority.\niv) \"Authority\" means the Insurance Regulatory and Development Authority ofIndia established under the provisions of Section 3 of the Insurance\nRegulatory and Development Authority Act, 1999 (41 of 1999).\nv) “Examination Body” for the purpose of these Regulations is theexamination body approved by the Authority for conducting certificationexams.\nvi) “Financial Service Executive” (FSE) is an individual employed by InsuranceMarketing Firm and holding a valid licence issued by respective financial\nregulators, other than the Authority, to market products specified by the\nregulator.\nvii) “Fit and Proper” is the criteria for determining the suitability for licensingan Applicant including his principal officer, directors or partners to act as\nInsurance Marketing Firm.\nviii) “Insurance Marketing Firm” is an entity registered by the Authority tosolicit or procure insurance products as specified by the regulator, to\nundertake insurance service activities as specified by the regulator and\nto distribute other financial products as specified by the regulator by\nemploying individuals licensed to market, distribute and service such\nother financial products.\nix) \"Insurance Sales Person\" (ISP) is an individual employed by InsuranceMarketing Firm to solicit or procure insurance products.102x) “Insurance Servicing Activity” means the activities specified in theregulation below.\nxi) \"Principal Officer” of Insurance Marketing Firm means a director or apartner or any officer or employee so designated by it, and approved by\nthe Authority, to exclusively supervise the activities of Insurance\nMarketing Firm and who possesses the requisite qualifications and\npractical training and who has passed examination as required under these\nRegulations.\nxii) “Regulations” means Insurance Regulatory and Development Authority ofIndia (Registration of Insurance Marketing Firm) Regulations, 2015.**2.** **Scope and applicability of these Regulations:**\nThese regulations shall covera. (i) Tie-ups with insurers:The Insurance Marketing Firms (IMF) shall engage Insurance Sales Persons (ISP)\nfor the purpose of soliciting and procuring insurance products of maximum of two\nLife insurers, two General insurers and two Health insurers at any point of time,\nunder intimation to the Authority.Provided that in addition to two General insurers, Insurance Marketing Firm shall\nhave option to engage with Agriculture Insurance Company of India Ltd. (AIC) and\nExport Credit Guarantee Corporation Ltd.(ECGC).Provided further that any change in the engagement with the insurers shall be\ngoverned by the terms of the agreement entered into between the Insurance\nMarketing Firm and the insurer, with suitable arrangements for servicing existing\npolicyholders by the concerned insurer, in case of cancellation / termination /\ndiscontinuity of agreement.The Insurance Marketing Firm shall intimate the Authority of any such change in\nthe engagement with insurers in the format specified by the Authority in this\nbehalf.(ii) Products allowed for Insurance Marketing Firms:The Insurance Marketing Firm shall be allowed to solicit or procure:", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n4", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 -IMF_Composite -English_051", "metadata": {"file_size": 20962, "chunk_index": 51, "chunk_tokens": 951, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Scope and applicability of these Regulations:", "FIRM", "Definitions:", "Chapter Introduction"]}}
{"chunk": "These regulations shall covera. (i) Tie-ups with insurers:The Insurance Marketing Firms (IMF) shall engage Insurance Sales Persons (ISP)\nfor the purpose of soliciting and procuring insurance products of maximum of two\nLife insurers, two General insurers and two Health insurers at any point of time,\nunder intimation to the Authority.Provided that in addition to two General insurers, Insurance Marketing Firm shall\nhave option to engage with Agriculture Insurance Company of India Ltd. (AIC) and\nExport Credit Guarantee Corporation Ltd.(ECGC).Provided further that any change in the engagement with the insurers shall be\ngoverned by the terms of the agreement entered into between the Insurance\nMarketing Firm and the insurer, with suitable arrangements for servicing existing\npolicyholders by the concerned insurer, in case of cancellation / termination /\ndiscontinuity of agreement.The Insurance Marketing Firm shall intimate the Authority of any such change in\nthe engagement with insurers in the format specified by the Authority in this\nbehalf.(ii) Products allowed for Insurance Marketing Firms:The Insurance Marketing Firm shall be allowed to solicit or procure:\n1. all kinds of products sold on individual and / or retail basis, including cropinsurance for non-loanee farmers and combi products.2. property, group personal accident, group health, GSLI and term insurancepolicies for Micro, Small and Medium Enterprises (MSME). The IMF shall\nnot be allowed to solicit and procure commercial lines of business for any\nsegment except for MSMEs.103_Explanation: For the purpose of these Regulations,_\n_a._ _“Combi products” mean any combination of products of life, general and__health insurance as approved by the Authority._\n_b._ _“Micro, Small and Medium Enterprises” shall have the meaning as defined__in ‘The Micro, Small and Medium Enterprises Development Act, 2006’, as_\n_amended from time to time_ .]b. Insurance Servicing Activities of the Insurance Marketing Firm by: InsuranceServicing Activities of the Insurance Marketing Firm by:i. undertaking such activities of insurers as allowed in the Insurance\nRegulatory and Development Authority of India (Outsourcing of Activities\nby Indian Insurers) Regulations, 2017, as amended from time to time;\nii. becoming approved person of Insurance Repositories;\niii. any other insurance related activity permitted by the Authority from time\nto time._Explanation: For the purpose of these Regulations, the Insurance_\n_Marketing Firm shall undertake the insurance servicing activities in_\n_respect of only those insurance companies with whom they have an_\n_agreement for soliciting or procuring insurance products;_c. Marketing of other financial products through the FSE engaged by theInsurance Marketing Firm namely:\ni) Mutual funds of mutual fund companies regulated by SEBI;\nii) Pension products regulated by PFRDA;\niii) Other financial products distributed by SEBI licensed Investment Advisors;\niv) Banking/ financial products of banks/ NBFC regulated by RBI;\nv) Non-insurance products offered by Department of Posts, Government ofIndia;\nAny other financial product or activity permitted by the Authority from time\nto time.d. An IMF shall abide by the guidelines /regulations/circulars issued by theAuthority from time to time on Distance Marketing of Insurance Products\nsubject to the following:Distance Marketing shall bei) undertaken by the IMF without engaging tele-marketer(s).\nii) undertaken after obtaining prior approval from the Authority.\niii) carried out only through ISPs.\niv) on behalf of those Insurer(s) with whom agreements are entered by IMFfor carrying out insurance business activity as specified.104**REGISTRATION OF INSURANCE MARKETING FIRM****3.** **Application for grant of Registration to Insurance Marketing Firm** :An Applicant desiring to obtain a Registration to act as an Insurance Marketing\nFirm shall follow the following procedure:**a.** Submit an application to the Authority (Form A).\n**b.** Remit the non-refundable application fees of five thousand rupees alongwith the application for grant of a registration.\n**c.** Submit all the necessary documents as mentioned in detail in theapplication Form - A along with declaration of principal officer / directors\n/ managing partners satisfying the fit & proper criteria in the prescribed\nform or as may be additionally prescribed by the Authority.\n**d.** Submit copy of the Insurance Marketing Firm Exam pass Certificate of thePrincipal Officer and the ISPs proposed to be engaged by the Insurance\nMarketing Firm.\n**e.** Submit copy of the approved person certificate of the InsuranceRepository of the Insurance Marketing Firm.\n**f.** Submit copy of the licenses or authorization or registration obtained bythe FSE proposed to be employed by the Insurance Marketing Firm issued\nby SEBI, RBI, PFRDA, Post Office for the line of activity proposed to be\nundertaken.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "REGISTRATION OF INSURANCE MARKETING FIRM", "chunk_id": "Final IC 38 -IMF_Composite -English_052", "metadata": {"file_size": 20962, "chunk_index": 52, "chunk_tokens": 983, "has_examples": false, "has_tables": false, "key_concepts": ["REGISTRATION OF INSURANCE MARKETING FIRM"]}}
{"chunk": "Firm shall follow the following procedure:**a.** Submit an application to the Authority (Form A).\n**b.** Remit the non-refundable application fees of five thousand rupees alongwith the application for grant of a registration.\n**c.** Submit all the necessary documents as mentioned in detail in theapplication Form - A along with declaration of principal officer / directors\n/ managing partners satisfying the fit & proper criteria in the prescribed\nform or as may be additionally prescribed by the Authority.\n**d.** Submit copy of the Insurance Marketing Firm Exam pass Certificate of thePrincipal Officer and the ISPs proposed to be engaged by the Insurance\nMarketing Firm.\n**e.** Submit copy of the approved person certificate of the InsuranceRepository of the Insurance Marketing Firm.\n**f.** Submit copy of the licenses or authorization or registration obtained bythe FSE proposed to be employed by the Insurance Marketing Firm issued\nby SEBI, RBI, PFRDA, Post Office for the line of activity proposed to be\nundertaken.\n**g.** Submit an undertaking stating that a tele marketer(s) shall not be engagedfor solicitation/lead generation of insurance business.**4.** **Consideration of application and eligibility criteria for Insurance Marketing****Firm:**\n**a.** The Authority while considering an application for grant of a registrationshall take into account, all matters relevant to carrying out of the\nfunctions by the Insurance Marketing Firm.\n**b.** Without prejudice to the above, the Authority in particular, shall take intoaccount the following, namely:i) Whether any of the Directors, Partners, Principal Officer or one ormore of its officers or other employees so designated by it and in the\ncase of any other person, the chief executive by whatever name\ncalled, or one or more of his employees designated by him of the\nApplicant is suffering from any of the disqualifications specified under\nsub-section (5) of section 42 D of the Insurance Act, 1938, as amended\nfrom time to time;\nii) Whether any person, directly or indirectly connected with theApplicant, has been refused in the past the grant of any license or\nregistration by the Authority.\niii) Whether the Applicant fulfils the capital adequacy requirements asspecified below.\niv) Whether the ‘Principal Officer, and ISP meet the criteria as laid downby the Authority.105v) Whether the Applicant has the necessary infrastructure like adequateoffice space earmarked for its Insurance Marketing Firm activities,\nequipment and trained manpower to effectively discharge its\nactivities.\nvi) Whether the Applicant has in its name the word “Insurance MarketingFirm” or “IMF”.\nvii) Whether the Applicant which is also engaged in activities other thaninsurance activities, has necessary approvals/ authorizations from\nrespective authorities;\nviii) Whether the Authority is of the opinion that the grant of registrationwill be in the interest of policyholders and other clients.**5.** **Capital Requirements of Insurance Marketing Firm** :a. The applicant shall have a net worth of:i) Not less than five lakh rupees, if the applicant is opting for only onedistrict, which is an aspirational district.\nProvided that increase in net worth arising out of change of status of\naspirational district is mandatory at the time of renewal of\nregistration\nii) Not less than ten lakh rupees for all other cases.\n_Explanation: For the purposes of these Regulations, “net worth” shall have_\n_the meaning assigned to it in the Companies Act, 2013 and as amended from_\n_time to time._\nb. The Applicant shall ensure that the net worth is maintained at all timesand Insurance Marketing Firm shall submit a certificate duly certified by a\nchartered accountant to this effect annually within three months from the\nclose of the financial year.\nc. The aggregate holdings of equity shares or contribution of the InsuranceMarketing Firm by a foreign investors, including portfolio investors, shall\nnot exceed such per cent of limits as prescribed by the Central\nGovernment from time to time, under Indian Insurance Companies\n(Foreign Investment) Rules, 2015.For the purposes of these regulations,\nthe calculations of foreign investment shall be made in the same manner\nas specified in the Insurance Regulatory and Development Authority\n(Registration of Indian Insurance Companies) Regulations, 2000 for an\ninsurer, as amended from time to time.**6. Period of validity of registration of the Insurance Marketing Firm:**a) The registration of an Insurance Marketing firm shall be valid for a periodof three years from the date of its issue, unless it is suspended or\ncancelled by the Authority [or surrendered by the Insurance Marketing\nFirm]. The Registration can be renewed by the authority on receipt of\nsuch application, documents and fee as are prescribed.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Consideration of application and eligibility criteria for Insurance Marketing", "chunk_id": "Final IC 38 -IMF_Composite -English_053", "metadata": {"file_size": 20962, "chunk_index": 53, "chunk_tokens": 975, "has_examples": true, "has_tables": false, "key_concepts": ["Firm:", "Capital Requirements of Insurance Marketing Firm"]}}
{"chunk": "_time to time._\nb. The Applicant shall ensure that the net worth is maintained at all timesand Insurance Marketing Firm shall submit a certificate duly certified by a\nchartered accountant to this effect annually within three months from the\nclose of the financial year.\nc. The aggregate holdings of equity shares or contribution of the InsuranceMarketing Firm by a foreign investors, including portfolio investors, shall\nnot exceed such per cent of limits as prescribed by the Central\nGovernment from time to time, under Indian Insurance Companies\n(Foreign Investment) Rules, 2015.For the purposes of these regulations,\nthe calculations of foreign investment shall be made in the same manner\nas specified in the Insurance Regulatory and Development Authority\n(Registration of Indian Insurance Companies) Regulations, 2000 for an\ninsurer, as amended from time to time.**6. Period of validity of registration of the Insurance Marketing Firm:**a) The registration of an Insurance Marketing firm shall be valid for a periodof three years from the date of its issue, unless it is suspended or\ncancelled by the Authority [or surrendered by the Insurance Marketing\nFirm]. The Registration can be renewed by the authority on receipt of\nsuch application, documents and fee as are prescribed.\nb) No Insurance Marketing Firm is allowed to function as such after theexpiry of registration unless it is renewed by the Authority. They shall not\nengage any person without a valid registration for the purposes of carrying\nout the functions of Insurance Marketing Firm.106**7.** **Principal Officer of the Insurance Marketing Firm:**a. The Insurance Marketing Firm shall designate a Principal Officer who shallbe the overall in charge and shall be responsible for regulatory\ncompliance to the Authority.\nb. On resignation or termination or death of the Principal Officer, theInsurance Marketing Firm shall endeavour to appoint a new Principal\nOfficer at the earliest, and seek approval, within a period not exceeding\n60 days, from the Authority.\nProvided that in the absence of a Principal Officer, a whole time director\nor managing partner or any other senior designated official of the\nInsurance Marketing Firm may, under intimation to the Authority, be\nauthorized to act and perform the duties of the Principal Officer to meet\nregulatory compliance requirements only; and shall not solicit insurance\nbusiness unless they have also undergone the training and passed the\nexamination, and meet all the eligibility criteria of a Principal Officer.**8.** **Principal Officer of the Insurance Marketing Firm – Eligibility Criteria**The Principal Officer of the Insurance Marketing Firm, shall fulfil any of the\neligibility conditions as given below:\n(a) Associate/Fellow of the Insurance Institute of India, Mumbai; or\n(b) Associate/Fellow of the Institute of Actuaries of India; or\n(c) Associate/Fellow of Chartered Insurance Institute, London; or\n(d) Post graduate qualification of the Institute of Insurance and RiskManagement, Hyderabad; or\n(e) Graduate with Insurance experience of two years preceding the year inwhich the application is made; or\n(f) Graduate with 5 years of experience in financial services sector precedingthe year in which the application is made.\n(g) Master’s in Business Administration or its equivalent from any institution/ university recognized by UGC / AICTE / any State Government or the\nGovt. of India; or\n(h) Associate / Fellow of the Institute of Chartered Accountants of India, NewDelhi; or\n(i) Associate / Fellow of the Institute of Cost Accountants of India, Kolkata;or\n(j) Executive/Professional of the Institute of Company Secretaries of India,New Delhi; or\n(k) Any other qualification specified by the Authority from time to time.**9.** **Training, Examination and Certification of Principal Officer**The Principal Officer of the Insurance Marketing Firm shall fulfil the\nrequirements for training, examination and certification as mentioned below:\n**a.** The Principal Officer shall undergo Fifty Hours of Insurance Marketing Firmtraining from an institution recognised by the Authority, and should pass\nan examination, at the end of the period of training, conducted by the\nExamination Body recognised by the Authority.107**b.** In case the Principal Officer of the Insurance Marketing Firm possesses anyone of the following qualifications, then he/she shall undergo Twenty Five\nHours of training and pass the examination:\n(i) Associate/ Fellow of the Insurance Institute of India, Mumbai; or\n(ii) Associate/ Fellow of the Institute of Actuaries of India; or\n(iii) Associate/Fellow of Chartered Insurance Institute, London; or\n(iv) Post graduate qualification of the Institute of Insurance and Risk\nManagement, Hyderabad.\n**c.** If the proposed Principal Officer has undergone training and passedexamination as required for the Principal Officer of an insurance broking\ncompany / Corporate Agent / Web Aggregator, then he / she shall be\nexempted from training and examination requirement to become the\nPrincipal Officer of the Insurance Marketing Firm.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Principal Officer of the Insurance Marketing Firm:", "chunk_id": "Final IC 38 -IMF_Composite -English_054", "metadata": {"file_size": 20962, "chunk_index": 54, "chunk_tokens": 1004, "has_examples": false, "has_tables": false, "key_concepts": ["Principal Officer of the Insurance Marketing Firm:"]}}
{"chunk": "requirements for training, examination and certification as mentioned below:\n**a.** The Principal Officer shall undergo Fifty Hours of Insurance Marketing Firmtraining from an institution recognised by the Authority, and should pass\nan examination, at the end of the period of training, conducted by the\nExamination Body recognised by the Authority.107**b.** In case the Principal Officer of the Insurance Marketing Firm possesses anyone of the following qualifications, then he/she shall undergo Twenty Five\nHours of training and pass the examination:\n(i) Associate/ Fellow of the Insurance Institute of India, Mumbai; or\n(ii) Associate/ Fellow of the Institute of Actuaries of India; or\n(iii) Associate/Fellow of Chartered Insurance Institute, London; or\n(iv) Post graduate qualification of the Institute of Insurance and Risk\nManagement, Hyderabad.\n**c.** If the proposed Principal Officer has undergone training and passedexamination as required for the Principal Officer of an insurance broking\ncompany / Corporate Agent / Web Aggregator, then he / she shall be\nexempted from training and examination requirement to become the\nPrincipal Officer of the Insurance Marketing Firm.\nProvided that the training and examination was undertaken within a period\nof five years preceding the date of application as Principal Officer of the\nIMF.**10.Fit & Proper Criteria for Principal Officer of the Insurance Marketing Firm**The Principal Officer of the Insurance Marketing Firm seeking registration\nshall be considered as a ‘fit and proper person’, if he fulfils the conditions,\nincluding, but not limited to the following criteria –i. Financial integrity;\nii. Absence of convictions or civil liabilities;\niii. Competence;iv. Good reputation and character;v. Efficiency and honesty; and\nvi. Absence of any disqualification to act as an intermediary as stipulatedin the Act, as amended from time to time.**11.Certification requirements for ISP & FSE****a.** The Insurance Marketing Firm can engage individuals to market Insuranceand/or Financial Products as specified before.\n**b.** Insurance Marketing Firm is not permitted to engage in marketing anyother financial products other than the financial products specified above.\n**c.** ISPs engaged by the Insurance Marketing Firm are allowed to solicit andprocure insurance products of those insurers with whom the IMF has\nentered into tie-up / agreement.\n**d.** FSEs engaged by the Insurance Marketing Firm to market financialproducts, should have valid license or certificate issued by the respective\nregulator as specified in these Regulations.\n**e.** FSEs shall be governed by the regulations of the respective regulators andshall be responsible for any act of omission and commission and subject\nto any disciplinary action initiated by the respective regulatory/ statutory\nauthorities.108**12.Qualifications and Eligibility criteria for ISP:**The ISP shall possess the minimum qualification of:\n**a.** Pass in 12th Class or equivalent examination from a recognizedBoard/Institution.\n**b.** Should have undergone the Insurance Marketing Firm Training prescribedby the Authority and qualified in the Insurance Marketing Firm\nExamination from an institution recognized by the Authority as stated\nbelow.\n**c.** Should be resident in the area of Registration of IMF.**13.Training, Examination and Certification of ISP**The ISP of an Insurance Marketing Firm shall meet the same requirements of\ntraining, examination and certification as those prescribed for the Principal\nOfficer of the Insurance Marketing Firm.**14.Engagement of FSE****a.** FSEs engaged by the Insurance Marketing Firm for marketing otherfinancial products as specified by the regulation shall possess valid\nlicense/ certificate/authorization issued by respective authorities\nempowered to issue such license/certificate/authorization.\n**b.** FSE deployed in the Insurance Marketing Firm shall meet the necessarytraining, qualifications, experience and other requirements as may be\nspecified by the other regulatory/ statutory authorities for the line of\nactivity undertaken on an on-going basis in order to be fully in compliance\nwith applicable law, regulations, rules, guidelines, circulars, etc.\n**15.Remuneration payable to the Insurance Marketing Firm**i. The Insurer shall make all remuneration for soliciting and procuring\ninsurance policies undertaken by an Insurance Marketing Firm, to the\nconcerned Insurance Marketing Firm only, and not to any other person or\nentity.\nThe payment of remuneration and/ or reward to an Insurance Marketing\nFirm by an insurer shall be as per Insurance Regulatory and Development\nAuthority of India (Payment of commission or remuneration or reward to\ninsurance agents and insurance intermediaries) Regulations, 2016 (as\namended from time to time).In addition, the Insurance Marketing Firm may receive reimbursement of\nexpenses from Life insurers towards recruitment, training and mentoring\nof their ISPs. This reimbursement shall not exceed 50% of first year\ncommission and 10% of renewal commission received by the IMF in case of", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": null, "chunk_id": "Final IC 38 -IMF_Composite -English_055", "metadata": {"file_size": 20962, "chunk_index": 55, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": []}}
{"chunk": "**b.** FSE deployed in the Insurance Marketing Firm shall meet the necessarytraining, qualifications, experience and other requirements as may be\nspecified by the other regulatory/ statutory authorities for the line of\nactivity undertaken on an on-going basis in order to be fully in compliance\nwith applicable law, regulations, rules, guidelines, circulars, etc.\n**15.Remuneration payable to the Insurance Marketing Firm**i. The Insurer shall make all remuneration for soliciting and procuring\ninsurance policies undertaken by an Insurance Marketing Firm, to the\nconcerned Insurance Marketing Firm only, and not to any other person or\nentity.\nThe payment of remuneration and/ or reward to an Insurance Marketing\nFirm by an insurer shall be as per Insurance Regulatory and Development\nAuthority of India (Payment of commission or remuneration or reward to\ninsurance agents and insurance intermediaries) Regulations, 2016 (as\namended from time to time).In addition, the Insurance Marketing Firm may receive reimbursement of\nexpenses from Life insurers towards recruitment, training and mentoring\nof their ISPs. This reimbursement shall not exceed 50% of first year\ncommission and 10% of renewal commission received by the IMF in case of\nLife insurers.ii. The Insurance Marketing Firm shall also be entitled to receive the fees for\nundertaking insurance service activities as may be mutually agreed\nbetween the Insurance Marketing Firm and the Insurance Company which\nshall be reasonable depending upon the time and effort and should be109evidenced by an agreement entered at the outset with basis of fees being\nclearly addressed.\niii. The Insurance Marketing Firm will also be entitled to collect the\n‘Applicable Service Charges’ from the financial entities for the services\nrendered by the FSE employed by the Insurance Marketing Firm.\niv. The settlement of accounts by insurers in respect of remuneration of\nInsurance Marketing Firm shall be done on a monthly basis.**16. Remuneration of ISPs and FSEs and migration of ISPs****1.** Minimum fixed salary of ISP and FSE:(i) Every ISP employed by the Insurance Marketing Firm shall be paid afixed minimum monthly salary as per the applicable laws. Variable pay\nover and above the fixed monthly salary may also be payable\ndepending on the arrangement between the IMF and the ISP.\n(ii) The FSE shall be paid remuneration by the financial entities as per theapplicable guidelines of respective regulators.\n(iii)An Insurance Marketing Firm found violating the condition set out inclause (i) above would be liable for cancellation of registration with\nnotice.\n**2.** Migration of insurance agents to Insurance Marketing Firm:(i) An individual agent cannot migrate or join Insurance Marketing Firmas PO / ISP / Managing Partner / Director unless he has resigned from\nhis existing agency appointment and meets the eligibility criteria as\nspecified in these Regulations.(ii) Provided that the continuation of agency benefits of an agentmigrating to or joining an Insurance Marketing Firm shall be governed\nby the Board approved policy of the respective insurers.\n(iii)An Individual employed as an ISP in an Insurance Marketing Firm shallnot be allowed to migrate to any insurance company, insurance\nmarketing firm or insurance broking firm unless he has obtained a No\nObjection Certificate (NOC) from the existing Insurance Marketing\nFirm.**17. Area of operation of the Insurance Marketing Firm****1.** The Insurance Marketing Firm shall employ ISPs who are resident in thearea for which the request for registration is made in the application and\napproved by Authority. However, the IMF shall be free to solicit or procure\nthe insurance business from all over the country;\n**2.** The “Area” is defined as the district for which the registration of theInsurance Marketing Firm is valid. Maximum of three districts within a\nState are allowed for registration/renewal.\n**3.** The Area selected by the Insurance Marketing Firm shall be clearlymentioned in the application Form A and renewal application Form AA\nwhile submitting the application to the Authority.\nProvided that if an applicant is opting for more than one district, then at\nleast one of the districts shall be aspirational.110**4.** Provided further that any addition of office or change in registeredaddress by the Insurance Marketing Firm shall be done only with prior\napproval from the Authority. Request for addition of office or change in\nregistered address shall be made to the Authority in the format as may be\nspecified in this behalf;\n**5.** The Authority shall incorporate the Area in the registration made in FormB to the Insurance Marketing Firm.\n**6.** The Insurance Marketing Firm may apply for more Areas subject tomaximum of three districts while filing the application for renewal of\nregistration.\n**7.** The Insurance Marketing Firm shall specify the details of the offices to beset up in the Area opted; including manpower deployment in the\napplication form for fresh registration and renewal. The additional areas", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e109", "section": null, "chunk_id": "Final IC 38 -IMF_Composite -English_056", "metadata": {"file_size": 20962, "chunk_index": 56, "chunk_tokens": 1003, "has_examples": false, "has_tables": false, "key_concepts": []}}
{"chunk": "State are allowed for registration/renewal.\n**3.** The Area selected by the Insurance Marketing Firm shall be clearlymentioned in the application Form A and renewal application Form AA\nwhile submitting the application to the Authority.\nProvided that if an applicant is opting for more than one district, then at\nleast one of the districts shall be aspirational.110**4.** Provided further that any addition of office or change in registeredaddress by the Insurance Marketing Firm shall be done only with prior\napproval from the Authority. Request for addition of office or change in\nregistered address shall be made to the Authority in the format as may be\nspecified in this behalf;\n**5.** The Authority shall incorporate the Area in the registration made in FormB to the Insurance Marketing Firm.\n**6.** The Insurance Marketing Firm may apply for more Areas subject tomaximum of three districts while filing the application for renewal of\nregistration.\n**7.** The Insurance Marketing Firm shall specify the details of the offices to beset up in the Area opted; including manpower deployment in the\napplication form for fresh registration and renewal. The additional areas\nopted at the time of renewal shall be considered on merits.\nProvided that if the Insurance Marketing Firm has more than one office,it will ensure that each office shall have at least one ISP.**8.** If additional Areas are not opted by the Insurance Marketing Firm in therenewal Application, renewal will be considered for the original\njurisdiction for which the registration was made.\n**9.** The Insurance Marketing Firm may opt for a change in the Area whileapplying for renewal of registration. The Authority may consider the\nrequest subject to the Insurance Marketing Firm submitting details of the\noffices to be set up in the newly opted areas; including manpower\ndeployment etc. in the Renewal Application form.**18. Duties and Obligations of Insurance Marketing Firm towards ISP****1.** Insurance Marketing Firm, on obtaining the registration from theAuthority, may enter into agreement with Insurance companies for\ncarrying out Insurance Business activity.\n**2.** Insurance Marketing Firm shall engage licensed ISP and FSE on salary andincentive basis.\n**3.** Insurance Marketing Firm shall include the relevant conditions and clausesin the agreement with the ISP engaged by the firm on matters relating to—\na. Engagement with the Insurance Marketing Firm\nb. Prescribed code of conduct,\nc. Sales processes/rules etc.\nd. Remuneration\ni. The remuneration payable to ISP by the Insurance Marketing Firm, forsolicitation and procurement of policies by the ISPs shall be on salary\nand incentive basis.\nii. In addition to the minimum amount specified above, the InsuranceMarketing Firm, depending upon ISPs performance can pay him\nadditional incentives, which are declared upfront and form part of\nthe employment agreement between him and the Insurance\nMarketing Firm.111e. The Insurance marketing Firm under no circumstances can dismiss theISP from employment during the period of the registration, except as\nallowed under Reg. 27 (2) (b).\nf. Any change of employer by the ISP shall be at the time of renewal ofthe registration of the Insurance Marketing Firm or by way of\nresignation submitted to the Insurance Marketing Firm subject to\nfulfilment of conditions as laid down in regulation 27(2)(b) of these\nregulations.\n**4.** Insurance Marketing Firm shall assist the individuals intending to becomeISPs to undergo the prescribed training and certification.\n**5.** Insurance Marketing Firm shall ensure continuous monitoring of theactivities of the ISP and be responsible for the compliance of these\nRegulations and the code of conduct by ISPs.**19. Duties and Obligations of Insurance Marketing Firm towards Authority**The Insurance Marketing Firm shall\n**a.** Undertake to immediately notify the Authority in writing within 30 daysof:\ni) Any change in the status of registration with regard to scope ofactivities of the Insurance Marketing Firm issued by the Authority;\nii) any change in the engagement with the insurers;\niii) any addition or deletion of ISPs;\niv) Any change in its constitution (including shareholding change),ownership, directors / partners;\nv) Any disciplinary proceedings or investigation by any other regulatory /statutory Authority.\n**b.** Ensure that ISPs responsible for solicitation of insurance business shall becompetent, qualified, have undergone the required training and passed\nthe examination as specified by the Authority;\n**c.** Not divulge any confidential information about its client, which has cometo its knowledge, without taking prior permission of its clients, except\nwhere such disclosures are required to be made in compliance with any\nlaw for the time being in force.\n**d.** Adhere to the IRDA (Advertisement & Disclosure) Regulation, 2000, asapplicable to intermediaries as amended from time to time and take", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": null, "chunk_id": "Final IC 38 -IMF_Composite -English_057", "metadata": {"file_size": 20962, "chunk_index": 57, "chunk_tokens": 992, "has_examples": true, "has_tables": false, "key_concepts": ["The Insurance Marketing Firm shall"]}}
{"chunk": "**a.** Undertake to immediately notify the Authority in writing within 30 daysof:\ni) Any change in the status of registration with regard to scope ofactivities of the Insurance Marketing Firm issued by the Authority;\nii) any change in the engagement with the insurers;\niii) any addition or deletion of ISPs;\niv) Any change in its constitution (including shareholding change),ownership, directors / partners;\nv) Any disciplinary proceedings or investigation by any other regulatory /statutory Authority.\n**b.** Ensure that ISPs responsible for solicitation of insurance business shall becompetent, qualified, have undergone the required training and passed\nthe examination as specified by the Authority;\n**c.** Not divulge any confidential information about its client, which has cometo its knowledge, without taking prior permission of its clients, except\nwhere such disclosures are required to be made in compliance with any\nlaw for the time being in force.\n**d.** Adhere to the IRDA (Advertisement & Disclosure) Regulation, 2000, asapplicable to intermediaries as amended from time to time and take\nmeasures to enhance the awareness of insurance.\n**e.** Display at their place of work/office, details of their registration issuedby the Authority such as, date of issue of registration and it validity, and\nlist of permitted business activities, grievance handling process, list of\nombudsman and such other relevant information as may be required under\nother applicable statute.\n**f.** Comply with all applicable provisions under the Act, as amended fromtime to time, including rules, regulations, circulars and guidelines issued\nby Authority from time to time.\n**g.** Perform its duties, functions in accordance with terms of the registrationin a manner that they do not work as fronting arrangements or a franchise\ninstitution and shall act in the public interest and in fiduciary capacity be112accountable for the omissions and commissions of their own\nemployees/persons engaged by them, in case of violations committed by\nsuch employees/persons;\n**h.** maintain a Professional Indemnity Insurance Cover as required underRegulations;**20. Duties and Obligations of Insurance Marketing Firm towards Insurance****Companies**\nInsurance Marketing Firm, on obtaining the registration from the Authority\nunder Sec. 42D of the Act, as amended from time to time, to act as an\ninsurance intermediary, may enter into agreements with Insurance companies\nfor carrying out Insurance Business activity. The Agreement shall include\nconditions relating to.\n(a) Engagement with the Insurance Marketing Firm\n(b) Prescribed code of conduct,\n(c) Sales processes/rules etc.\n(d) Remuneration basis\n(e) Minimum term\n(f) Sharing of records\n(g) Product training\n(h)Collection of premiums through Reserve Bank of India (RBI) recognizedmode of payments and as mutually agreed between the IMF and the insurer\nin the agreement.**21. Cancellation of Registration of the Insurance Marketing Firm with Notice**The Authority may suspend or cancel the registration of an Insurance\nMarketing Firm for any one or more of the following reasons:\ni) Suffers at any time during the period of the registration from any of thedisqualifications specified under subsection (5) of section 42D of the Act,\nas amended from time to time;\nii) Violates the provisions of the Act, as amended from time to time, IRDAAct 1999 and Rules, Regulations, Guidelines, Notices, Circulars made there\nunder, such as:\na. Fails to furnish any information relating to its activities as an InsuranceMarketing Firm as required by the Authority;\nb. Furnishes wrong or false information; or conceals or fails to disclosematerial facts in the application submitted for obtaining a\nregistration;\nc. Indulges in rebates or inducements in cash or kind to a client or any ofthe client's Directors or other employees or any person acting as an\nintroducer;\nd. Fails to carry out its obligations as specified in these Regulations;\ne. Fails to comply with any of the conditions subject to which theregistration has been granted;\nf. Fails to comply with duties and obligations of Insurance Marketing Firmtowards ISP;113g. Fails to comply with duties and obligations of Insurance Marketing Firmtowards Authority;\nh. Fails to comply with duties and obligations of Insurance Marketing Firmtowards Insurance Companies;\niii) Resort to spurious calls or mis-selling;\niv) Acts in a manner against the interest of the policyholders or against publicinterest.**22. Code of Conduct of ISP and FSE**Every ISP holding a valid certificate shall adhere to the code of conduct\nspecified below:\n**(i) Every ISP shall:**a. Identify himself and the Insurance Marketing Firm of whom he is anISP;", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e112", "section": "Companies", "chunk_id": "Final IC 38 -IMF_Composite -English_058", "metadata": {"file_size": 20962, "chunk_index": 58, "chunk_tokens": 984, "has_examples": false, "has_tables": false, "key_concepts": ["Companies"]}}
{"chunk": "b. Furnishes wrong or false information; or conceals or fails to disclosematerial facts in the application submitted for obtaining a\nregistration;\nc. Indulges in rebates or inducements in cash or kind to a client or any ofthe client's Directors or other employees or any person acting as an\nintroducer;\nd. Fails to carry out its obligations as specified in these Regulations;\ne. Fails to comply with any of the conditions subject to which theregistration has been granted;\nf. Fails to comply with duties and obligations of Insurance Marketing Firmtowards ISP;113g. Fails to comply with duties and obligations of Insurance Marketing Firmtowards Authority;\nh. Fails to comply with duties and obligations of Insurance Marketing Firmtowards Insurance Companies;\niii) Resort to spurious calls or mis-selling;\niv) Acts in a manner against the interest of the policyholders or against publicinterest.**22. Code of Conduct of ISP and FSE**Every ISP holding a valid certificate shall adhere to the code of conduct\nspecified below:\n**(i) Every ISP shall:**a. Identify himself and the Insurance Marketing Firm of whom he is anISP;\nb. Disclose his certificate particulars to the prospect on demand;\nc. Disseminate the requisite information in respect of insurance productsoffered; and take into account the needs of the prospect while\nrecommending an insurance product;\nd. Undertake needs analysis for clients;\ne. Compare products of insurers with which they have arrangement;\nf. Recommend the product based on clients’ needs;\ng. Indicate the premium to be charged by the insurer for the insuranceproduct offered;\nh. Disclose the scales of remuneration in respect of the insurance productoffered, if asked by the prospect;\ni. Explain to the prospect the nature of information required in theproposal form by the insurer, and also the importance of disclosure of\nmaterial information in the purchase of an insurance contract;\nj. bring to the notice of the insurer any adverse habits or incomeinconsistency of the prospect, in the form of a report (called\n“Insurance Confidential Report”) along with every proposal submitted\nto the insurer, and any material fact that may adversely affect the\nunderwriting decision of the insurer as regards acceptance of the\nproposal, by making all reasonable enquiries about the prospect;\nk. Inform promptly the prospect about the acceptance or rejection of theproposal by the insurer;\nl. Obtain the requisite documents at the time of filing the proposal formwith the insurer and other documents subsequently asked for by the\ninsurer for completion of the proposal;\nm. Render necessary assistance to the policyholders or claimants orbeneficiaries in complying with the requirements for settlement of\nclaims by the insurer;\nn. Advise every individual policyholder to effect nomination orassignment or change of address or exercise of options, as the case\nmay be, and offer necessary assistance in this behalf, wherevernecessary;\no. Forward any information received from the client regarding a claim oran incident that may give rise to a claim without delay;114p. Advise the client without delay of the insurer's decision or otherwiseof a claim;\nq. Ensure that statements made regarding the policies to the customerare not misleading or exaggerated;\nr. Ensure the compliance of Section 64-VB(4) of the Act, as amendedfrom time to time;\ns. Draw the attention of the client to Section 41 of the Act, as amendedfrom time to time, which prohibits rebating and sharing of commission\n/ remuneration;\nt. Ensure the compliance of AML and KYC guidelines in force.\nu. Act in a fiduciary capacity towards its clients and shall disclose allconflicts of interests as and when they arise;\nv. Follow recognized standards of professional conduct and discharge hisfunctions in the interest of the policyholders. Comply with provisions\nof the Act, as amended from time to time, IRDA Act, 1999, IRDA\n(Protection of Policyholders’ Interests) Regulations, 2002 and any\nother regulations, guidelines, circulars, directions issued by the\nAuthority from time to time.\n**(ii) No ISP shall--****a.** Solicit or procure insurance business without holding a validcertificate,\n**b.** Induce the prospect to omit any material information in the proposalform;\n**c.** Induce the prospect to submit wrong information in the proposal formor documents submitted to the insurer for acceptance of the proposal;\n**d.** Behave in a discourteous manner with the prospect;\n**e.** Interfere with any proposal introduced by any other insuranceintermediary;\n**f.** Offer different rates, advantages, terms and conditions other thanthose offered by his insurer;", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": null, "chunk_id": "Final IC 38 -IMF_Composite -English_059", "metadata": {"file_size": 20962, "chunk_index": 59, "chunk_tokens": 975, "has_examples": false, "has_tables": false, "key_concepts": []}}
{"chunk": "u. Act in a fiduciary capacity towards its clients and shall disclose allconflicts of interests as and when they arise;\nv. Follow recognized standards of professional conduct and discharge hisfunctions in the interest of the policyholders. Comply with provisions\nof the Act, as amended from time to time, IRDA Act, 1999, IRDA\n(Protection of Policyholders’ Interests) Regulations, 2002 and any\nother regulations, guidelines, circulars, directions issued by the\nAuthority from time to time.\n**(ii) No ISP shall--****a.** Solicit or procure insurance business without holding a validcertificate,\n**b.** Induce the prospect to omit any material information in the proposalform;\n**c.** Induce the prospect to submit wrong information in the proposal formor documents submitted to the insurer for acceptance of the proposal;\n**d.** Behave in a discourteous manner with the prospect;\n**e.** Interfere with any proposal introduced by any other insuranceintermediary;\n**f.** Offer different rates, advantages, terms and conditions other thanthose offered by his insurer;\n**g.** Demand or receive a share of proceeds from the beneficiary under aninsurance contract;\n**h.** Force a policyholder to terminate the existing policy and to effect anew proposal through him within three years from the date of such\ntermination;\niii) Every ISP shall, with a view to conserve the insurance business alreadyprocured through him, make every attempt to ensure remittance of the\npremiums by the policyholders within the stipulated time, by giving notice\nto the policyholder orally and in writing;\niv) FSE: Every FSE shall abide by the code of conduct prescribed by therespective regulatory/statutory authority which oversees that particular\nactivity.\nv) **Violation of Code of Conduct by the ISP** : The Code of Conduct specifiedabove has to be adhered to by the ISP. The Authority shall initiate\ndisciplinary action against the ISP and the IMF they are representing for\nany non-compliance.115## SECTION## LIFE INSURANCE116## CHAPTER L-01## WHAT LIFE INSURANCE INVOLVES**Chapter Introduction**We have seen some aspects related to Insurance in the common chapters.\nHowever, when it comes to Life insurance, we need to look at them more deeply. An asset\n The risk insured against\n The principle of pooling\n The contractLet us now examine the features of life insurance. This chapter will take a brief\nlook at the various components of life insurance mentioned above.**Learning Outcomes**117**A.** **Life insurance business – Components, human life value, mutuality****a)** **The Asset – Human Life Value (HLV)**We have already seen that an asset is a kind of property that yields value or a\nreturn. For most kinds of property both the value and loss of value amounts can\nbe measured in precise monetary terms.**Example**If the estimated damage of a car meeting an accident is Rs 50000, the insurer will\ncompensate the owner for this loss.How do we estimate the amount of loss when a person dies?Is he worth Rs. 50,000 or Rs. 5,00,000?An Agent must be able to answer the above question when meeting a customer.\nBased on this the agent can determine how much insurance to recommend to the\ncustomer. It is in fact the first lesson a life insurance agent must learn.Luckily we have a measure, developed almost seventy years ago by Prof. Hubener.\nIt is known as **Human Life Value (HLV)** and is used worldwide.The HLV concept considers human life as a kind of property or asset that earns\nan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings. Net earnings means the income a person expects\nto earn each year in the future, less the amount he would spend on himself. It\nthus indicates the economic loss a family would suffer if the wage earner were to\ndie prematurely. These earnings are capitalised, using an appropriate interest\nrate to discount them.Although there are multiple parameters used to calculate HLV including taking\ninto account inflation, wage rise, future earning capacity etc., a simple thumb\nrule to calculate HLV is to determine the amount that would generate the annual\nincome the family would be needing by way of interest. In other words HLV is the\nannual contribution for the family by the breadwinner divided by the prevailing\nrate of interest.**Example**Mr. Rajan earns Rs. 1,20,000 a year and spends Rs. 24,000 on himself. The net\nearnings his family would lose, were he to die prematurely, would be Rs. 96,000", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "E116", "section": "Violation of Code of Conduct by the ISP", "chunk_id": "Final IC 38 -IMF_Composite -English_060", "metadata": {"file_size": 20962, "chunk_index": 60, "chunk_tokens": 994, "has_examples": true, "has_tables": false, "key_concepts": ["Violation of Code of Conduct by the ISP", "The Asset – Human Life Value (HLV)", "Example", "Chapter Introduction", "Learning Outcomes"]}}
{"chunk": "It is known as **Human Life Value (HLV)** and is used worldwide.The HLV concept considers human life as a kind of property or asset that earns\nan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings. Net earnings means the income a person expects\nto earn each year in the future, less the amount he would spend on himself. It\nthus indicates the economic loss a family would suffer if the wage earner were to\ndie prematurely. These earnings are capitalised, using an appropriate interest\nrate to discount them.Although there are multiple parameters used to calculate HLV including taking\ninto account inflation, wage rise, future earning capacity etc., a simple thumb\nrule to calculate HLV is to determine the amount that would generate the annual\nincome the family would be needing by way of interest. In other words HLV is the\nannual contribution for the family by the breadwinner divided by the prevailing\nrate of interest.**Example**Mr. Rajan earns Rs. 1,20,000 a year and spends Rs. 24,000 on himself. The net\nearnings his family would lose, were he to die prematurely, would be Rs. 96,000\nper year. Suppose the rate of interest is 8% (expressed as 0.08).**Human-Life-Value (HLV) = Annual Contribution for Dependents ÷ Rate of****Interest**HLV = 96000/ 0.08 = Rs. 12,00,000118HLV helps to determine how much insurance one should have for full protection.\nIt also tells us the upper limit beyond which providing life insurance may not be\nreasonable.In general, the amount of insurance should be around 10 to 15 times one’s annual\nincome. Thus one should grow suspicious if Mr. Rajan was to ask insurance of Rs.\n2 crores, while earning only Rs. 1.2 lakhs a year. The actual amount of insurance\npurchased would depend on factors like how much insurance one can afford and\nwould like to buy.**B.** **Risk and Life Insurance**As we have seen above, life insurance provides protection against those risk\nevents that can destroy or reduce the value of human life as an asset. There are\nthree kinds of situations where such loss can occur. They are typical concerns\nwhich ordinary people face.**Diagram 1:** Typical concerns faced by ordinary peopleGeneral insurance on the other hand typically deals with risks that affect property\n– like fire, loss of cargo while at sea, theft and burglary and motor accidents.\nThey also cover events leading to loss of name and goodwill. These are covered\nby liability insurance.Finally there are risks that can affect the person. Termed as personal risks, these\nmay also be covered by general insurance.**Example**Accident insurance which protects against losses suffered due to an accident.**a)** **How exactly does life insurance differ from general insurance?**|General Insurance|Life Insurance|\n|---|---|\n| Indemnity: General insurance policies,<br>with the exception of Personal Accident<br>Insurance, are usually contracts of<br>indemnity i.e. after an event like fire,<br>the insurer assesses the exact amount of<br>loss that has occurred and compensates<br>only that amount of loss – no more, no<br>less.| **Assurance:** Life insurance policies<br>are contracts of assurance.<br> The amount of benefit to be paid in<br>the event of death is fixed at the<br>beginning of the contract.<br> An assured sum is paid to the<br>nominees or beneficiaries of the<br>insured when he dies.|119| Duration: The contract is generally short<br>period or for one year renewable basis| The contract is generally long term<br>though some one year renewable<br>contracts are also prevalent|\n|---|---|\n| Uncertainty: In general insurance<br>contracts, the concerned risk event is<br>uncertain. No one can be certain about<br>whether a house would catch fire or a<br>car meet an accident.| There is no such question Death is<br>certain once a person is born. What<br>is uncertain is the time of death.<br>Life insurance offers protection<br>against the risk of premature death.|\n| Increase in probability: In case of<br>General insurance perils like fire or<br>earthquake, the probability of happening<br>of the event does not increase with<br>time.| In life insurance the probability of<br>death increases with age.|**b)** **Nature of life insurance risk**Since probability of death increases with age, lower premiums are charged for\nthose who are young and higher premiums for older people. One result was that", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Human Life Value (HLV)", "chunk_id": "Final IC 38 -IMF_Composite -English_061", "metadata": {"file_size": 20962, "chunk_index": 61, "chunk_tokens": 1014, "has_examples": true, "has_tables": true, "key_concepts": ["Nature of life insurance risk", "Interest", "Diagram 1:", "Example", "Assurance:"]}}
{"chunk": "|---|---|\n| Uncertainty: In general insurance<br>contracts, the concerned risk event is<br>uncertain. No one can be certain about<br>whether a house would catch fire or a<br>car meet an accident.| There is no such question Death is<br>certain once a person is born. What<br>is uncertain is the time of death.<br>Life insurance offers protection<br>against the risk of premature death.|\n| Increase in probability: In case of<br>General insurance perils like fire or<br>earthquake, the probability of happening<br>of the event does not increase with<br>time.| In life insurance the probability of<br>death increases with age.|**b)** **Nature of life insurance risk**Since probability of death increases with age, lower premiums are charged for\nthose who are young and higher premiums for older people. One result was that\nold individuals who were in good health, tended to withdraw while unhealthy\nmembers remained in the scheme. Insurance companies faced serious problems\nas a result. Their attempts to develop life insurance policies that people could\nafford led to the development of level premiums.**c)** **Level premiums**The level premium is fixed such that it does not increase with age but remains\nconstant throughout the contract period. This means premiums collected in early\nyears is more than the amount needed to cover death claims of those dying when\nyoung, while premiums collected in later years are less than what is needed to\nmeet claims of those dying at higher ages. The level premium is an average of\nboth. The excess premiums of earlier ages compensate for the deficit of\npremiums in later ages. The level premium feature is illustrated below.**Diagram 2:** **Level Premium**120Level premiums are required because life insurance contracts are long term\ninsurance contracts that run for 10, 20 or many more years. The concept of level\npremiums, do not arise for general insurance policies, which are typically short\nterm and expire annually.**Example**The level premium rate is arrived at by the insurers based on the mortality\n(probability of death) during the term of the policy as the age of the insured\nwould increase every year. The rate once decided shall be constant for the entire\nterm of the policy.**d)** **The Principle of Risk Pooling and Life Insurance**We have already discussed the Principle of Pooling and Mutuality earlier. The\npooling principle plays two specific roles in life insurance.i. It **provides protection against the economic loss arising as a result of one’s****untimely death** . This is done by creating a fund that pools the contributions\nof many who have purchased a life insurance contract.**e)** **The Life Insurance Contract**The Policy document is the **evidence of the insurance contract** which a details\nall the terms and conditions of the **insurance** .The contract states the sum assured of the life insurance policy. Life insurance is\nregarded a **financial security** as the sum Insured is guaranteed by the contract.\nThe guarantee implies that life insurance is managed efficiently and\nconservatively; strongly regulated and strictly supervised.Since Life insurance contracts involve both risk cover and savings, they are often\ncompared with financial products. They are also seen as a way of holding wealth\nthan as protection. Indeed, many life insurance products have a large cash value\nor savings component which can form a significant part of an individual’s savings.\nSome do argue that it may be better to buy only Term Insurance from an insurance\ncompany and invest the balance premiums in instruments that yield higher\nreturns.Let us consider the arguments for and against traditional cash value insurance\ncontracts.**a)** **Advantages**i. Insurance has historically been proven as a **safe and secure investment**\n**offering** a minimum guaranteed rate of return, which may increase with\ncontract duration.ii. Regularity of premium payments requires compulsory planning of one’s\nsavings and results in savings **discipline** .iii. The Insurer takes care of professional investment management and **frees**the **individual** of this responsibility121iv. Insurance **provides liquidity** . The insured can take a loan on or surrenderthe policy and convert it into cash.v. Both cash value type life insurance and annuities may enjoy some **income**\n**tax advantages.**vi. Insurance may be **safe from creditors’ claims**, generally in the event ofthe insured’s bankruptcy or death.**b)** **Disadvantages**i. As insurance gives relatively fixed and stable returns, it can be seriously\naffected by inflation.ii. High marketing and other initial costs reduces the amount of cash value", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y121", "section": "Nature of life insurance risk", "chunk_id": "Final IC 38 -IMF_Composite -English_062", "metadata": {"file_size": 20962, "chunk_index": 62, "chunk_tokens": 967, "has_examples": true, "has_tables": true, "key_concepts": ["Nature of life insurance risk", "The Life Insurance Contract", "Level premiums", "Example", "Advantages"]}}
{"chunk": "Some do argue that it may be better to buy only Term Insurance from an insurance\ncompany and invest the balance premiums in instruments that yield higher\nreturns.Let us consider the arguments for and against traditional cash value insurance\ncontracts.**a)** **Advantages**i. Insurance has historically been proven as a **safe and secure investment**\n**offering** a minimum guaranteed rate of return, which may increase with\ncontract duration.ii. Regularity of premium payments requires compulsory planning of one’s\nsavings and results in savings **discipline** .iii. The Insurer takes care of professional investment management and **frees**the **individual** of this responsibility121iv. Insurance **provides liquidity** . The insured can take a loan on or surrenderthe policy and convert it into cash.v. Both cash value type life insurance and annuities may enjoy some **income**\n**tax advantages.**vi. Insurance may be **safe from creditors’ claims**, generally in the event ofthe insured’s bankruptcy or death.**b)** **Disadvantages**i. As insurance gives relatively fixed and stable returns, it can be seriously\naffected by inflation.ii. High marketing and other initial costs reduces the amount of cash value\naccumulated in earlier years of life insurance policies.iii. The guaranteed yield may be below that of other financial instruments**Test Yourself 1**How does diversification reduce risks in financial markets?I. Collecting funds from multiple sources and investing them in one placeII. Investing funds across various asset classesIII. Maintaining time difference between investmentsIV. Investing in safe assets**Summary**a) Asset is a kind of property that yields value or a return.b) The HLV concept considers human life as a kind of property or asset that earnsan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings.c) The level premium is a premium fixed such that it does not increase with agebut remains constant throughout the contract period.d) Mutuality is one of the important ways to reduce risk in financial markets, theother being diversification.e) The element of guarantee in a life insurance contract implies that lifeinsurance is subject to stringent regulation and strict supervision.**Key Terms**1. Asset2. Human Life Value1223. Level premium4. Mutuality5. Diversification**Answers to Test Yourself****Answer 1** - The correct answer is II.123## CHAPTER L-02## FINANCIAL PLANNING**Chapter Introduction**In previous chapters we discussed life insurance and its role in providing financial\nprotection. Security is only one of the concerns of individuals who seek to allocate\ntheir income and wealth to meet various needs of the present and the future.\nLife insurance must be understood in the wider context of “Personal Financial\nPlanning”. The purpose of this chapter is to introduce the subject of financial\nplanning.**Learning Outcomes**124**A.** **Financial planning and the individual life cycle****1.** **What is financial planning?**Most of us spend a major part of our lives working to make money. Financial\nplanning is a smart way to make money work for us.**Definition**Financial planning is a process of identifying one’s life’s goals, translating these\ngoals into financial goals and managing one’s finances to achieve those goals.Financial planning involves preparing a roadmap to meet both current and future\nneeds, which may be unforeseen. It plays a crucial role in building a life with less\nworry. Careful planning can help to set one’s priorities and work to achieve your\nvarious goals.**Diagram 1:** **Types of Goals**i. Goals may be **short term** : Buying an LCD TV set or a family vacationii. They could be **medium term** : Buying a house or a vacation abroadiii. The **long term** goals may include: Education or marriage of one’s child orpost retirement provision**2.** **Individual’s life cycle**From the day a person is born till the day of his/ her death, he/ she goes through\nvarious stages in life, during which he/ she is expected to play a series of roles\nThese stages are illustrated in the diagram given below.**Diagram 2:** **The Economic Life Cycle**125**Life Stages and Priorities****a)** **Learner (till say age 20 -25)** :The stage when one is preparing for hisfuture byimproving his or her knowledge and skills. Funds are\nrequired for financing one’s education. For instance, meeting the\nhigh cost of fees for Medical or Management Education.**b)** **Earner (from 25 onwards)** :When one has found employment andperhaps earns enough to meet his or her needs and has some surplus\nto spare.There are family responsibilities and one may also save and\ninvest in order to have money to meet the needs that may arise in", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y121", "section": "Advantages", "chunk_id": "Final IC 38 -IMF_Composite -English_063", "metadata": {"file_size": 20962, "chunk_index": 63, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Financial planning and the individual life cycle", "Key Terms", "What is financial planning?", "The Economic Life Cycle"]}}
{"chunk": "various stages in life, during which he/ she is expected to play a series of roles\nThese stages are illustrated in the diagram given below.**Diagram 2:** **The Economic Life Cycle**125**Life Stages and Priorities****a)** **Learner (till say age 20 -25)** :The stage when one is preparing for hisfuture byimproving his or her knowledge and skills. Funds are\nrequired for financing one’s education. For instance, meeting the\nhigh cost of fees for Medical or Management Education.**b)** **Earner (from 25 onwards)** :When one has found employment andperhaps earns enough to meet his or her needs and has some surplus\nto spare.There are family responsibilities and one may also save and\ninvest in order to have money to meet the needs that may arise in\nthe immediate future.For instance, a young man takes a housing loan\nand invests in a house.**c)** **Partner(on getting marriage at say 28 - 30)** : The stage when one ismarried and has a family of one’s own.This creates new needs like\nhaving a house of one’s own, perhaps a car, consumer durables,\nplanning for children’s future etc.**d)** **Parent(say 28 to 35)** : The years when one becomes the parent ofone or more children.One now has to worry about their health and\neducation - getting them into good schools etc.**e)** **Provider(say age 35 to 55)** : The stage when children have grown intoteenagers, and includes their high school and college years. One is\nconcerned about the high cost of education to make the child\nqualified to face the challenges of life.For instance, consider the\namount that needs to be set up to finance a medical course that runs\nfor five years.In many Indian homes, making provision for marriage\nand settlement of girl children is a critical area of concern.Indeed,\nmarriage and education of children is a prime motive for savings for\nmost Indian families today.**f)** **Empty Nester(age 55 to 65):** The term ‘empty nester’ implies thatthe offspring have flown away leaving the nest [the household]\nempty.This is the period when children have married and sometimes\nhave migrated to other places for work, leaving the\nparents.Hopefully by this stage, one has liquidated one’sliabilities[like housing loan and other mortgages] and has built up a fund for126reirement.It is also the period when ailments like BP and Diabetes\nbegin to manifest and plague one’s life.Health care,financial\nindependence and security of income become very important at this\nstage.**g)** **Retirement – the twilight years (age 60 and beyond):** The age whenone has retired from active work and spends one’s savings to meet\nthe needs of life.The living needs of the husband and wife as long as\nboth are alive is the focus.One is concerned abouthealth\nissues,adequateincome and loneliness.This is also the period when\none would seek to enhance the quality of life and enjoy many of the\nthings that one had dreamt of but could not achieve – like pursuing a\nhobby or going on a vacation or a pilgrimage.Whether one ages\ngracefully or in poverty would depend on how much one has provided\nfor these years.As we can see above, the economic life cycle has three phases: a student or Pre\n– job phase; the working phase that begins between ages 18 to 25 and lasts for 35\nto 40 years; and the retirement years that begin after one has stopped working.**3.** **Why does one need to save and purchase various financial assets?**The reason is that during each stage in an individual’s life, when one performs a\nparticular role, a number of needs come up for which funds have to be provided.**Example**When a person gets married and starts a family of his own, he may need to have\nhis own house. As children grow older, funds are needed for their higher\neducation. As an individual goes well past middle age, the concern is for having\nmoney to meet health costs and post retirement savings so that one does not\nneed to depend on one’s children and become a burden. Living with independence\nand dignity becomes important.The Savings – Investment process may be considered as being made of two\ndecisions.**i.** **Postponement of consumption:** an allocation of resources between presentand future consumption.**ii.** **Parting with liquidity** (or ready purchasing power) in exchange for less liquidassets. For instance, purchase of a life insurance policy would mean\nexchanging money for a contract which is less liquid.Financial planning includes both kinds of decisions. One needs to plan in order to\nsave for the future and also must invest wisely in appropriate assets to meet the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "r126", "section": "Diagram 2:", "chunk_id": "Final IC 38 -IMF_Composite -English_064", "metadata": {"file_size": 20962, "chunk_index": 64, "chunk_tokens": 1020, "has_examples": true, "has_tables": false, "key_concepts": ["The Economic Life Cycle", "Life Stages and Priorities", "Diagram 2:", "Empty Nester(age 55 to 65):", "Example"]}}
{"chunk": "particular role, a number of needs come up for which funds have to be provided.**Example**When a person gets married and starts a family of his own, he may need to have\nhis own house. As children grow older, funds are needed for their higher\neducation. As an individual goes well past middle age, the concern is for having\nmoney to meet health costs and post retirement savings so that one does not\nneed to depend on one’s children and become a burden. Living with independence\nand dignity becomes important.The Savings – Investment process may be considered as being made of two\ndecisions.**i.** **Postponement of consumption:** an allocation of resources between presentand future consumption.**ii.** **Parting with liquidity** (or ready purchasing power) in exchange for less liquidassets. For instance, purchase of a life insurance policy would mean\nexchanging money for a contract which is less liquid.Financial planning includes both kinds of decisions. One needs to plan in order to\nsave for the future and also must invest wisely in appropriate assets to meet the\nvarious needs that will arise in future.**4.** **Individual needs**If we look at the stages of the life cycle that has been discussed above, we would\nsee that three types of needs can arise. These give rise to three types of financial\nproducts.127a) **Enabling future transactions**The first set of needs arise from funds for meeting a range of anticipated\nexpenditures that are expected to arise at different stages of the life cycle.\nThere are two types of such needs:**i.** **Specific transaction needs** : that are linked to specific life events whichrequire a commitment of resources. For instance making a provision for\nhigher education/ marriage of dependents; or purchase of a house or\nconsumer durables**ii.** **General transaction needs:** Amounts set aside from current consumptionwithout being earmarked for any specific purposes – these are popularly\ntermed as ‘future provisions’**b)** **Meeting contingencies**Contingencies are unforeseen life events that may call for large funds. These\ncannot met from current income and need to be pre-funded. Some of these\nevents, like death and disability or unemployment, lead to a loss of income.\nOthers, like a fire, may result in a loss of wealth.Such needs may be addressed through insurance, if the probability of their\noccurrence is low but cost impact is high. One may alternatively meet them\nby setting aside a large amount of liquid assets as a reserve.**c)** **Wealth accumulation**The accumulation motive refers to an individual’s desire to invest for\naccumulating wealth, taking advantage of favourable market opportunities.\nSome individuals may take a cautious approach while investing, while some\nmay be willing to take more risks, with a view to earn a higher return. Higher\nreturn is desired because it helps to increase one’s wealth or net worth more\nrapidly. Wealth is linked with independence, enterprise, power and influence.**5.** **Financial products**Corresponding to the above sets of needs there are three types of products in the\nfinancial market:|Transactional<br>products|Bank deposits and other savings instruments that enable<br>one to have adequate purchasing power (liquidity) at the<br>right time and quantum.|\n|---|---|\n|**Contingency**<br>**products like**<br>**insurance**|These provide protection against large losses that may be<br>suffered in the event of sudden unforeseen events.|\n|**Wealth**<br>**accumulation**<br>**products**|Shares and high yielding bonds or real estate are examples<br>of such products. Here the investment is made with a view<br>to committing money for making more money.|128An individual would typically have a mix of all of the above needs and thus may\nneed to have all three types of products. In a nutshell one may say there is:i. A need to save – For cash requirementsii. A need to insure – Against uncertaintiesiii. A need to invest – For wealth creation**6.** **Risk profile and investments**As an individual moves through various stages in the life cycle, from young earner\ntowards middle ages and then towards the final years of one’s work life, the risk\nprofile, or approach towards taking risks also changes.When one is young, one may be quite aggressive and willing to take risks in order\nto accumulate as much wealth as possible. As the years pass however, one may\nbecome more prudent and careful about investing. One is now concerned to\nsecure and consolidate one’s investments.Finally, as one nears retirement one may be more conservative. The focus is now\nto have a corpus from which one can spend in the post retirement years. One may", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_065", "metadata": {"file_size": 20962, "chunk_index": 65, "chunk_tokens": 1000, "has_examples": true, "has_tables": true, "key_concepts": ["Wealth accumulation", "Individual needs", "Financial products", "Contingency", "Risk profile and investments"]}}
{"chunk": "need to have all three types of products. In a nutshell one may say there is:i. A need to save – For cash requirementsii. A need to insure – Against uncertaintiesiii. A need to invest – For wealth creation**6.** **Risk profile and investments**As an individual moves through various stages in the life cycle, from young earner\ntowards middle ages and then towards the final years of one’s work life, the risk\nprofile, or approach towards taking risks also changes.When one is young, one may be quite aggressive and willing to take risks in order\nto accumulate as much wealth as possible. As the years pass however, one may\nbecome more prudent and careful about investing. One is now concerned to\nsecure and consolidate one’s investments.Finally, as one nears retirement one may be more conservative. The focus is now\nto have a corpus from which one can spend in the post retirement years. One may\nalso think about making donations for one’s children, for gifting to charity etc.**One’s investment style also changes to keep pace with the risk profile.** This is\nindicated below:**Diagram 3:** **Risk Profile and Investment Style****Risk Profile** **Investment Style****Test Yourself 1**Which among the following gives specific protection against unforeseen events?I. InsuranceII. Transactional products like bank Fixed DepositsIII. SharesIV. Debentures129**B.** **Role of financial planning****1.** **Financial planning**Financial planning is the process of carefully evaluating a ~~c~~ lient’s current and\nfuture needs along with his or her risk profile and income, to chart out a road\nmap for meeting various anticipated/ unforeseen needs through recommending\nappropriate financial products.Elements of financial planning include: Investing - allocating assets based on one’s risk taking appetite, Risk management, Retirement planning, Tax and estate planning, and Financing one’s needsTo put it in a nutshell financial planning involves 360 degrees planning.**Diagram 4:** **Elements of Financial Planning****2.** **Role of Financial planning**Financial planning is not a new discipline. It was practiced in simple form by our\nfore fathers. There were limited investment options then. A few decades ago\nmany considered equity investment as akin to gambling. Savings were largely\nchannelled in bank deposits, postal savings schemes and other fixed income\ninstruments. The challenges facing our society and our customers are far different\ntoday. Some of them are:**i.** **Disintegration of the joint family**The joint family has given way to the nuclear family, consisting of father,\nmother and children. The typical head and earning member of this family has\nto bear the responsibility for taking care of oneself and one’s immediate\nfamily. This may call for a lot of proper planning and advice from a\nprofessional financial planner.130**ii.** **Multiple investment choices**A large number of investment instruments are available today for wealth\ncreation, each offering varying degrees of risk and return. To achieve financial\ngoals, one has to choose wisely and make the right investment decisions based\non one’s risk taking appetite. Financial planning can help with one’s asset\nallocation.**iii.** **Changing lifestyles**Instant pleasure seems to be the order of the day. Individuals want to have\nthe latest mobile phones, cars, large homes, memberships of prestigious\nclubs, etc. To satisfy these desires, people often borrow heavily and spend a\ngood part of their income to pay off loans, leaving little scope to save.\nFinancial planning helps to plan and one’s expenditure so that one can cut\ndown unnecessary expenses so as to maintain one’s present standard of living\nwhile upgrading it over time.**iv.** **Inflation**Inflation is a rise in the general level of prices of goods and services in an\neconomy over a period of time. This leads to a fall in the value of money. As\na result, the purchasing power of money gets reduced. Inflation can play\nhavoc post retirement. Financial planning can help to ensure that one is\nequipped to deal with inflation, especially in later years.**v.** **Other contingencies and needs**Financial planning also enables individuals to meet a number of other needs\nand challenges like medical emergencies and tax liabilities. Individuals also\nneed to ensure that their estate consisting of their wealth and properties,\nsmoothly pass on to their loved ones after their death. There are other needs\nlike the need to do charity or meet certain social and religious obligations\nduring one’s lifetime and even thereafter. Financial planning is the means to\nachieve all this.3. **When is the right time to start financial planning?****Financial planning** is not meant only for the wealthy. Indeed, Planning should\nideally start one earns one’s first salary. There is no trigger point to tell when", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s129", "section": "Risk profile and investments", "chunk_id": "Final IC 38 -IMF_Composite -English_066", "metadata": {"file_size": 20962, "chunk_index": 66, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Risk profile and investments", "Multiple investment choices", "Risk Profile", "Test Yourself 1", "Role of Financial planning"]}}
{"chunk": "while upgrading it over time.**iv.** **Inflation**Inflation is a rise in the general level of prices of goods and services in an\neconomy over a period of time. This leads to a fall in the value of money. As\na result, the purchasing power of money gets reduced. Inflation can play\nhavoc post retirement. Financial planning can help to ensure that one is\nequipped to deal with inflation, especially in later years.**v.** **Other contingencies and needs**Financial planning also enables individuals to meet a number of other needs\nand challenges like medical emergencies and tax liabilities. Individuals also\nneed to ensure that their estate consisting of their wealth and properties,\nsmoothly pass on to their loved ones after their death. There are other needs\nlike the need to do charity or meet certain social and religious obligations\nduring one’s lifetime and even thereafter. Financial planning is the means to\nachieve all this.3. **When is the right time to start financial planning?****Financial planning** is not meant only for the wealthy. Indeed, Planning should\nideally start one earns one’s first salary. There is no trigger point to tell when\none should begin to plan.**There is however an important principle that should guide us – the longer the**\n**time period of our investments, the more they will multiply.**Hence one should start early. One’s investments would then get the maximum\nbenefit of time. Again, planning is not only for wealthy individuals. It is for\neveryone. To achieve one’s financial goals, one must follow a disciplined\napproach. An unplanned, impulsive approach to financial planning is one of the\nprime causes of financial distress of individuals.131**Test Yourself 2**When is the best time to start financial planning?I. Post retirement\nII. As soon as one gets his first salary\nIII. After marriage\nIV. Only after one gets rich**C.** **Financial planning - Types**Let us now look at the various types of financial planning exercises that an\nindividual may need to do.**Diagram 5:** **Financial Planning Advisory Services**Consider the various advisory services that may be provided. There are six such\nareas that are taken up Cash planning Investment planning Insurance planning Retirement planning Estate planning Tax planning**1.** **Cash planning**Managing cash flows has two purposes.i. To manage income and expenditures flow including establishing andmaintaining a reserve of liquid assets to meet unanticipated needs.ii. To systematically create and maintain a surplus of cash for capitalinvestment.Cash Planning involves a number of steps. One must prepare a budget and analyse\none’s income and expenditure flows to check on what regular and lump sum costs132have been incurred. While fixed expenses cannot be controlled easily, one can\nreduce, postpone and manage expenses that are variable. The next step is to\n**predict future monthly income and expenses over the whole year and** design\na plan for managing these cash flows.Another part of the cash planning process is to design strategies for maximizing\ndiscretionary income.**Example**One can restructure one’s outstanding debts.One can meet outstanding credit card debts through consolidating them and\npaying them off through a bank loan with lower interest.One may reallocate one’s investments to make them earn more income.**2.** **Insurance planning**There are certain risks to which individuals are exposed that can keep them from\nattaining their personal financial goals. Insurance planning involves constructing\na plan of action to provide adequate insurance against such risks.The task here is to estimate how much insurance is needed and determining what\ntype of policy is best suited.**i.** **Life insurance** may be decided by estimating the income and expenserequirements of the dependents in the event of premature death of the\nbread winner.**ii.** **Health insurance** requirements may be assessed in terms of thehospitalisation expenses that are likely to be incurred in any family\nmedical emergency.a. Finally **insurance for one’s assets** may be considered in terms ofthe type and quantum of cover required to protect one’s home/\nvehicle/ factory etc. from the risk of loss.**3.** **Investment planning**There is no one right way to invest. What is appropriate would vary from\nindividual to individual. Investment planning is a process of determining the most\nsuitable investment and asset allocation strategies based on an individual’s risk\ntaking appetite, financial goals and the time horizon to meet those goals.**a)** **Investment parameters****Diagram 6:** **Investment Parameters**133The first step here is to define certain investment parameters. These include:**i.** **Returns** : Returns on Investment is often the most important parameterthat people look for when they invest their money. The rate of return", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s132", "section": "Inflation", "chunk_id": "Final IC 38 -IMF_Composite -English_067", "metadata": {"file_size": 20962, "chunk_index": 67, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Financial Planning Advisory Services", "Health insurance", "Investment planning", "Returns", "Example"]}}
{"chunk": "type of policy is best suited.**i.** **Life insurance** may be decided by estimating the income and expenserequirements of the dependents in the event of premature death of the\nbread winner.**ii.** **Health insurance** requirements may be assessed in terms of thehospitalisation expenses that are likely to be incurred in any family\nmedical emergency.a. Finally **insurance for one’s assets** may be considered in terms ofthe type and quantum of cover required to protect one’s home/\nvehicle/ factory etc. from the risk of loss.**3.** **Investment planning**There is no one right way to invest. What is appropriate would vary from\nindividual to individual. Investment planning is a process of determining the most\nsuitable investment and asset allocation strategies based on an individual’s risk\ntaking appetite, financial goals and the time horizon to meet those goals.**a)** **Investment parameters****Diagram 6:** **Investment Parameters**133The first step here is to define certain investment parameters. These include:**i.** **Returns** : Returns on Investment is often the most important parameterthat people look for when they invest their money. The rate of return\ndetermines how fast one’s wealth from investments would grow over time.\nThe role of returns can be appreciated when one considers the ‘Power of\ncompounding’. For instance, if an amount of Rs 1000 is invested today at\n8% rate of interest, at the end of five years, it would accumulate to Rs\n1469 and at the end of 10 years it would more than double to reach Rs\n2159. This expectation of returns which helps to accumulate wealth is one\nof the prime motives of investment. At the same time, one must note that\nhigher rates of return may be typically accompanied with higher levels of\nrisk. One has to make a trade-off between return and risk. This depends\non an individual’s risk tolerance.**ii.** **Risk tolerance** : A measure of how much risk someone is willing to take inpurchasing an investment.**iii.** **Time horizon** : This is the amount of time available to attain a financialobjective. The longer the time horizon, the less concern is there about\nshort term liability. One can invest in longer term, in less liquid assets\nthat earn a higher return.**iv.** **Liquidity** : Individuals with limited investment capacity, or uncertainincome and expenditure flows, or who are investing for meeting a\nparticular personal or business expenditure, would be concerned with\nliquidity [This refers to the ability to convert investment into cash without\nloss of value.]**v.** **Marketability** : The ease with which an asset can be bought or sold.**vi.** **Diversification** : The extent to which one seeks to diversify or spread theinvestments to reduce the risks.134**vii.** **Taxes** : Many investments confer certain income tax benefits and one maylike to consider the post-tax returns of various investments.**b)** **Selection of appropriate investment vehicles**The next step is selection of appropriate investment vehicles based on the above\nparameters. The actual selection would depend on the individual’s expectations\nabout return and risk.In India there are a variety of products that may be considered for the purpose\nof investments. These include: Fixed deposits of banks/ corporates, Small savings schemes of post office, Public issues of shares, Debentures or other securities, Mutual funds Unit linked policies that are issued by life insurance companies etc.**4.** **Retirement planning**It is the process of determining the amount of money that an individual needs to\nmeet his needs post retirement and deciding on various retirement options for\nmeeting these needs. Retirement planning involves three phases**a)** **Accumulation:** Accumulation of funds is done through various kinds ofstrategies to set aside money for investment with this purpose.**b)** **Conservation:** Conservation refers to the efforts made to ensure that one’sinvestments are put to hard work and that the principal gets maximised\nduring the individual’s working years.**c)** **Distribution:** Distribution refers to the optimal method of converting thecorpus or principal into withdrawals/ annuity payments for meeting income\nneeds after retirement.**5.** **Estate planning**It is a plan for the devolution and transfer of one’s estate after one’s demise.\nThere are various processes like nomination and assignment or preparation of a\nwill. The basic idea is to ensure that one’s property and assets are smoothly\ndistributed and or utilised according to one’s wishes after one is no more.**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Life insurance", "chunk_id": "Final IC 38 -IMF_Composite -English_068", "metadata": {"file_size": 20962, "chunk_index": 68, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Investment planning", "Time horizon", "Estate planning", "Risk tolerance", "Retirement planning"]}}
{"chunk": "meet his needs post retirement and deciding on various retirement options for\nmeeting these needs. Retirement planning involves three phases**a)** **Accumulation:** Accumulation of funds is done through various kinds ofstrategies to set aside money for investment with this purpose.**b)** **Conservation:** Conservation refers to the efforts made to ensure that one’sinvestments are put to hard work and that the principal gets maximised\nduring the individual’s working years.**c)** **Distribution:** Distribution refers to the optimal method of converting thecorpus or principal into withdrawals/ annuity payments for meeting income\nneeds after retirement.**5.** **Estate planning**It is a plan for the devolution and transfer of one’s estate after one’s demise.\nThere are various processes like nomination and assignment or preparation of a\nwill. The basic idea is to ensure that one’s property and assets are smoothly\ndistributed and or utilised according to one’s wishes after one is no more.**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full\nadvantage of the tax breaks. As per the tax laws in India, life insurance premium\npaid by an individual on a life insurance policy on his/ her own life, on the life of\nhis/ her spouse and children is eligible for deduction under Section 80C of the\nIncome Tax Act for calculating the taxable income. Currently, this deduction is\nallowed up to Rs.1,50,000 subject to conditions. The maturity proceeds (sum135assured plus bonus) of such policies are also exempted under Section 10 (10D).\nSimilarly, Death Claim amounts are exempt from Income Tax at the hands of the\nrecipient. One must note that the purpose here is to minimise and not evade\ntaxes.Life insurance agents may be often required by their clients and prospective\ncustomers to advise them not only about meeting their insurance needs but also\nfor support in meeting their other financial needs as well. A sound knowledge of\nfinancial planning would be of great value to any insurance agent.**Test Yourself 3**Which among the following is not an objective of tax planning?I. Maximum tax benefitII. Reduced tax burden as a result of prudent investmentsIII. Tax evasionIV. Full advantage of tax breaks**Summary**Financial planning is a process of: Identifying one’s life’s goals, Translating these identified goals into financial goals and Managing one’s finances in ways that will help one to achieve those goalsBased on the individual life cycle three types of financial products are needed.\nThese help in: Enabling future transactions, Meeting contingencies and Wealth accumulationThe need for financial planning is further increased by the changing societal\ndynamics like disintegration of the joint family, multiple investment choices\nthat are available today and changing lifestyles etc.The best time to start financial planning is right after one receives the first\nsalary.Financial planning advisory services include: Cash planning,\n Investment planning,\n Insurance planning,\n Retirement planning,\n Estate planning and\n Tax planning136**Key Terms**1. Financial planning\n2. Life stages\n3. Risk profile\n4. Cash planning\n5. Investment planning\n6. Insurance planning\n7. Retirement planning\n8. Estate planning\n9. Suitability information\n10. Tax planning**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.137## CHAPTER L-03## LIFE INSURANCE PRODUCTS: TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of life insurance products. It begins by\ntalking about products in general and then proceeds to discussing the need for\nlife insurance products and the role they play in achieving various life goals.\nFinally we look at some traditional life insurance products.**Learning Outcomes**138**A.** **Overview of life insurance products****1.** **What is a product?**To begin with, let us understand what is meant by a ‘product’. In popular terms\na product is normally just considered as a commodity or good that is brought and\nsold in the market.It is necessary to understand that every Product is a bundle of features or\nattributes that confer certain benefits.All Companies try to differentiate their products by making them more attractive\nto customers and offering different kinds of features and benefits. A life insurance\nagent’s role is to understand and pitch on these features and benefits to make\nthe products of their companies unique and attractive compared to others.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "m135", "section": "Accumulation:", "chunk_id": "Final IC 38 -IMF_Composite -English_069", "metadata": {"file_size": 20962, "chunk_index": 69, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Estate planning", "Answer 3", "Tax planning"]}}
{"chunk": "**Answer 3** - The correct option is III.137## CHAPTER L-03## LIFE INSURANCE PRODUCTS: TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of life insurance products. It begins by\ntalking about products in general and then proceeds to discussing the need for\nlife insurance products and the role they play in achieving various life goals.\nFinally we look at some traditional life insurance products.**Learning Outcomes**138**A.** **Overview of life insurance products****1.** **What is a product?**To begin with, let us understand what is meant by a ‘product’. In popular terms\na product is normally just considered as a commodity or good that is brought and\nsold in the market.It is necessary to understand that every Product is a bundle of features or\nattributes that confer certain benefits.All Companies try to differentiate their products by making them more attractive\nto customers and offering different kinds of features and benefits. A life insurance\nagent’s role is to understand and pitch on these features and benefits to make\nthe products of their companies unique and attractive compared to others.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the\nfeatures of each brand is different from the other.Products may be:**i.** **Tangible** : refers to physical objects that can be directly seen or felt by touch\n(for instance a car or a television set)**ii.** **Intangible:** refers to products that can only be perceived indirectly.Life insurance is a product that is intangible.**2.** **Purpose of Life Insurance products.**Human beings possess **an immensely valuable asset** - **human capital – which is**\n**the source of our productive earning capacity.** However, there is an uncertainty\nabout life and human well-being. Events like death and disease can destroy our\nEarning capabilities and life savings. Insurance provides protection for such\nsituations.Life insurance products offer protection against the loss of economic value of an\nindividual’s productive abilities, as a result of death or disability. The moment\nan individual takes a life insurance policy and pays the first premium, **an**\n**immediate estate is created** in his/ her name and its proceeds are available to\nhis/ her dependents or loved ones.Life insurance provides peace of mind and protection to the near and dear ones\nof an individual, in case of one’ unfortunate death. Beyond providing such\nprotection, life insurance fulfils other needs of the market, such as savings,\nwealth accumulation, safety and security of investment and certain rates of\nreturn, which are not discussed in this course.Life insurance industry has seen enormous innovations in product offerings over\nthe last two centuries. The journey began with death benefit products but over139the period, multiple living benefits like endowment, disability benefits, dreaded\ndisease covers and so on were added.One of the major innovations of recent years was the creation of market linked\npolicies where the insured was invited to participate in choosing and managing\nhis investment assets. Another major innovation was the evolution of flexible\nunbundled products, in which different benefits as well as cost components could\nbe varied by the policy holder as per changing needs, affordability and life-stages.**3.** **Suitability Information**In order to make insurance intermediaries including agents and brokers more\naccountable and reduce instances of mis-selling, IRDAI has created a concept of\n‘product suitability’. ‘Suitability information’ is the information of a prospect on\nage, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, etc. That is, before selling an\ninsurance policy to a client, an Agents should be able to justify the suitability of\nthe product for the client’s needs.In other words, the Agent takes into account the particular prospect’s risk profile- age, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, insurance needs etc. and decides\nwhether the product is suitable for that prospect. The nature of product, the\namount of premium, the mode of premium payment and tenure of the policy as\nwell as the manner of premium payment are also part of the parameters of\n‘Suitability’.IRDAI mandates that the suitability information collected should be signed by the\nprospect and the agent; and preserved by the Insurer as part of the policy records\nand made available for inspection by the Authority.**4.** **Riders in Life Insurance Products**A rider is a provision typically added through an endorsement, which becomes\npart of the contract. Riders are commonly used to provide supplementary benefits\nlike increasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "L-03", "section": "Answer 3", "chunk_id": "Final IC 38 -IMF_Composite -English_070", "metadata": {"file_size": 20962, "chunk_index": 70, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Riders in Life Insurance Products", "Tangible", "Answer 3", "Suitability Information", "Example"]}}
{"chunk": "insurance policy to a client, an Agents should be able to justify the suitability of\nthe product for the client’s needs.In other words, the Agent takes into account the particular prospect’s risk profile- age, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, insurance needs etc. and decides\nwhether the product is suitable for that prospect. The nature of product, the\namount of premium, the mode of premium payment and tenure of the policy as\nwell as the manner of premium payment are also part of the parameters of\n‘Suitability’.IRDAI mandates that the suitability information collected should be signed by the\nprospect and the agent; and preserved by the Insurer as part of the policy records\nand made available for inspection by the Authority.**4.** **Riders in Life Insurance Products**A rider is a provision typically added through an endorsement, which becomes\npart of the contract. Riders are commonly used to provide supplementary benefits\nlike increasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different\nrequirements of a person into a single plan.Riders provide a means to provide benefits like Disability cover, accident cover\nand Critical Illness cover as additional benefits in a standard life insurance\ncontract. Policy holders can avail of them by paying an extra premium.**Test Yourself 1**Which among the following is an intangible product?\nI. CarII. HouseIII. Life insurance\nIV. Soap140**B.** **Traditional life insurance products**We shall now learn about some of the traditional types of life insurance products.**Diagram 1:** **Traditional Life Insurance Products****1.** **Term insurance plans**Term insurance is a contract that is valid only during a certain time period. This\nmay range from the short time required to complete an airplane trip to multiple\nyears. Protection may extend up to age 65 or 70. One-year term policies are quite\nsimilar to property and casualty insurance contracts. There is no savings or cash\nvalue element in this policy.In October 2020, IRDAI has introduced a Standard Individual Term Life Insurance\nProduct called, “Saral Jeevan Bima” (the Insurer’s name shall be prefixed to the\nproduct name), a non-linked non-participating individual pure risk premium life\ninsurance plan, which provides for payment of Sum Assured in lump sum to the\nnominee in case of the Life Assured’s unfortunate death during the policy term.Apart from certain benefits and riders specified by the Regulator, no other riders/\nbenefits/ options/ variants are allowed to be offered. Also, there shall be no\nexclusions under the product other than the suicide exclusion. Saral Jeevan Bima\nis to be offered to individuals without restrictions on gender, place of residence,\ntravel, occupation or educational qualifications.**a)** **Purpose**A Term Life insurance plan fulfils the main and basic idea behind life\ninsurance, which is to provide an assured sum of money to the dependents of\nthe insured on his/ her death.**The policy works as an income replacement plan also.** Here the payment of\na lump-sum amount is replaced by a series of monthly, quarterly or similar\nperiodical payments to the dependent beneficiaries.141**b)** **Disability**\nNormally a Term insurance policy covers only death. However, it is possible\nto buy a Disability Protection Rider on the main policy. In such a case, if the\ninsured suffers from a specified disability during the term of the contract, a\ndisability benefit would be paid to the beneficiaries/ insured person. The\nbenefits will continue till the death of the insured person.**Diagram 2:** **Disability****c)** **Term insurance as a rider**Protection under Term Life is usually provided as a stand-alone policy but it\ncould also be provided through a rider in a policy.**Example**A rider to a pension plan provides for a death benefit to be payable if one dies\nbefore the date when pension is to start.**d)** **Convertibility**Convertible term insurance policies allow a policyholder to change or convert\na term insurance policy into a permanent plan like “Whole Life” without\nproviding fresh evidence of insurability. This privilege helps those who wish\nto have permanent cash value insurance but are unable to afford its high\npremiums. When the term policy is converted into permanent insurance the\nnew premium rate would be higher.**e)** **Unique Selling Proposition** ( **USP)**The unique selling proposition (USP) of term assurance is its low price,\nenabling one to buy relatively large amounts of life insurance on a limited", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "p140", "section": "Riders in Life Insurance Products", "chunk_id": "Final IC 38 -IMF_Composite -English_071", "metadata": {"file_size": 20962, "chunk_index": 71, "chunk_tokens": 996, "has_examples": true, "has_tables": false, "key_concepts": ["Riders in Life Insurance Products", "Disability", "Convertibility", "Term insurance as a rider", "Purpose"]}}
{"chunk": "insured suffers from a specified disability during the term of the contract, a\ndisability benefit would be paid to the beneficiaries/ insured person. The\nbenefits will continue till the death of the insured person.**Diagram 2:** **Disability****c)** **Term insurance as a rider**Protection under Term Life is usually provided as a stand-alone policy but it\ncould also be provided through a rider in a policy.**Example**A rider to a pension plan provides for a death benefit to be payable if one dies\nbefore the date when pension is to start.**d)** **Convertibility**Convertible term insurance policies allow a policyholder to change or convert\na term insurance policy into a permanent plan like “Whole Life” without\nproviding fresh evidence of insurability. This privilege helps those who wish\nto have permanent cash value insurance but are unable to afford its high\npremiums. When the term policy is converted into permanent insurance the\nnew premium rate would be higher.**e)** **Unique Selling Proposition** ( **USP)**The unique selling proposition (USP) of term assurance is its low price,\nenabling one to buy relatively large amounts of life insurance on a limited\nbudget.**f)** **Variants**A number of variants of term assurance are possible.**Diagram 3:** **Variants of Term Assurance**142**i.** **Decreasing Term Assurance**\nThese plans typically consist of decreasing term insurance which provides an\namount of death benefit that is equal to the balance that is due on a loan, if\nthe borrower dies before the loan is paid. These are often marketed as\nMortgage Redemption (discussed in Chapter 15) or Credit Life Insurance. The\nplans are usually sold to lending institutions as group insurance to cover the\nlives of their borrowers. Purchase of mortgage redemption insurance is often\na condition of the mortgage loan. Such plans may also be available for\nautomobile or other personal loans.**ii.** **Increasing term assurance**\nAs the name suggests, the plan provides a death benefit, which increases\nalong with the term of the policy. Premium generally increases as the amount\nof coverage increases.**iii.** **Term insurance with return of premiums**\nAnother type of policy (quite popular in India) is term assurance with return\nof premiums. Though the premium paid would be much higher than for a\nsimilar term insurance plan without return of premiums, some customers may\nneed such policies.**g)** **Relevant scenarios**Term insurance may have relevance in the following situations:\ni. Where the need for insurance protection is purely temporary, as in caseof mortgage redemption\nii. As an additional supplement to a savings plan.\niii. As part of a “buy term and invest the rest” philosophy, where one seeksonly cheap term insurance protection from the insurance company and\nwants to invest the difference of premiums in other attractive\ninvestments.**Important****Limitations of term plans:** Term Insurance plans are available only for specific\nperiods and one may not be able to continue the coverage beyond a certain\nage, say 65 or 70.**2.** **Whole life insurance**Whole life insurance is an example of a permanent life insurance policy. Here,\nthe life insurer offers to pay the agreed death benefit when the insured dies, no\nmatter when the death might occur. The premiums can be paid throughout one’s\nlife or for a limited time as specified.Whole life premiums are much higher than term premiums as whole life policies\nare designed to remain in force until the death of the insured, and pay the death\nbenefit anytime. The Plan also provides for a cash value in the policy holder’s\naccount. He/ she can withdraw cash in the form of a policy loan from this cash\nvalue or even redeem it by surrendering the policy for its cash value.143In case of outstanding loans, the amount of loan and interest get deducted from\nthe pay-out to the beneficiaries upon death.**A whole life policy is a good plan for the main earner of the family who wishes**\n**to protect his/ her loved ones in the event of premature death and preserve**\n**his/ her capital against erosion from various events like terminal illness.** One\ncan also use the cash value of the whole life insurance policy for retirement\nneeds, if required. Whole life insurance thus plays an important role in household\nsaving and creating wealth to be passed on to the next generation.**3.** **Endowment Assurance**It is a contract in which the sum assured is payable to the nominees of the insured\nin case of the death of the insured during the term of the policy. If the insured\nsurvives the term the sum assured is paid to the insured.**The product has both death and survival benefit components.** Endowment\nAssurance links one’s insurance and savings programmes by offering a safe and", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "Final IC 38 -IMF_Composite -English_072", "metadata": {"file_size": 20962, "chunk_index": 72, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Disability", "Whole life insurance", "Convertibility", "Variants", "Term insurance as a rider"]}}
{"chunk": "account. He/ she can withdraw cash in the form of a policy loan from this cash\nvalue or even redeem it by surrendering the policy for its cash value.143In case of outstanding loans, the amount of loan and interest get deducted from\nthe pay-out to the beneficiaries upon death.**A whole life policy is a good plan for the main earner of the family who wishes**\n**to protect his/ her loved ones in the event of premature death and preserve**\n**his/ her capital against erosion from various events like terminal illness.** One\ncan also use the cash value of the whole life insurance policy for retirement\nneeds, if required. Whole life insurance thus plays an important role in household\nsaving and creating wealth to be passed on to the next generation.**3.** **Endowment Assurance**It is a contract in which the sum assured is payable to the nominees of the insured\nin case of the death of the insured during the term of the policy. If the insured\nsurvives the term the sum assured is paid to the insured.**The product has both death and survival benefit components.** Endowment\nAssurance links one’s insurance and savings programmes by offering a safe and\ncompulsory method of savings accumulation.People buy endowment plans as a sure method of providing against old age or for\nmeeting specific purposes like having a fund for (a) educational purposes, (b)\nmeeting children’s marriage expenses or(c) paying a mortgage (housing) loan.**Government usually offers tax benefits on the premiums paid, which make it**\n**attractive.** Many endowment policies mature at ages 55 to 65, when the insured\nis planning for his/ her retirement. In such cases such policies can supplement\nretirement savings.**Variants:** Endowment assurance has certain variants - discussed below.**4.** **Money Back Policy**\nThe Money Back policy is a popular endowment plan in India. It has a provision\nfor returning some part of the sum assured in instalments during the term and\nthe balance sum assured at the end of the term.**Example**A Money Back policy for 20 years may provide for paying survival benefits of 20%\nof the sum assured each at the end of the 5 [th], 10 [th] and 15 [th] years and the balance\n40% at the end of the full term of 20 years. If the life assured dies at the end of,\nsay 18 years, the full sum assured and bonuses (explained in the next section)\naccrued are paid as death benefit, even though the insured would have been paid\na benefit of 60% of the face value already, as money back.Money Back plans have been popular because of their liquidity (cash back)\nelement, which make them attractive for meeting short and medium term needs.\nSuch plans provide full death protection also, if the individual dies at any point\nduring the term of the policy.144**5.** **Participating (Par) and Non-Participating (Non-Par)Plans**The Life Insurance products can also be classified as Participating (Par) and Nonparticipating (Non-Par) products. The term “Par” implies policies which are\nparticipating in the profits of the life insurer. “Non–Par”, on the other hand,\nrepresents policies which do not participate in the profits. Both kinds are present\nin traditional life insurance. Under all traditional plans, the pooled life funds,\nwhich are derived from policyholders’ premiums, are invested as per regulatory\nnorms. Policy holders who opt for ‘par products’ are eligible to receive, in\naddition to a guaranteed sum assured, a share in the surpluses( bonuses) that are\ngenerated by the insurer. These are known as ‘With Profit’ plans.**6.** **Non-participating products**The Policy holders who buy non-linked without profit [non par] plans are paid a\nbenefit that is fixed and guaranteed at the beginning of the contract and nothing\nmore. Non-participating products may be offered either under a ‘linked platform’\nor a ‘non-linked platform’. These are known as ‘Without Profits’ plans.**Example**One may have an endowment policy of twenty years providing a guaranteed\naddition of 2% of sum assured for each year of term, so that the maturity benefit\nis sum assured plus a total addition of 40% of the sum assured.Under the IRDAI’s guidelines on traditional non-par policies, the benefits to be\npaid on the happening of a specified event, have to be explicitly stated at the\noutset and not linked to an index or benchmark. The same applies to additional\nbenefits that are accrued at regular intervals. This means that the return on these", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "A whole life policy is a good plan for the main earner of the family who wishes", "chunk_id": "Final IC 38 -IMF_Composite -English_073", "metadata": {"file_size": 20962, "chunk_index": 73, "chunk_tokens": 996, "has_examples": true, "has_tables": false, "key_concepts": ["Non-participating products", "Variants:", "Example", "Money Back Policy", "Endowment Assurance"]}}
{"chunk": "addition to a guaranteed sum assured, a share in the surpluses( bonuses) that are\ngenerated by the insurer. These are known as ‘With Profit’ plans.**6.** **Non-participating products**The Policy holders who buy non-linked without profit [non par] plans are paid a\nbenefit that is fixed and guaranteed at the beginning of the contract and nothing\nmore. Non-participating products may be offered either under a ‘linked platform’\nor a ‘non-linked platform’. These are known as ‘Without Profits’ plans.**Example**One may have an endowment policy of twenty years providing a guaranteed\naddition of 2% of sum assured for each year of term, so that the maturity benefit\nis sum assured plus a total addition of 40% of the sum assured.Under the IRDAI’s guidelines on traditional non-par policies, the benefits to be\npaid on the happening of a specified event, have to be explicitly stated at the\noutset and not linked to an index or benchmark. The same applies to additional\nbenefits that are accrued at regular intervals. This means that the return on these\npolicies must be disclosed at the time of taking the policy.**Important**Death benefits are subject to regulations of IRDAI issued from time to time. At\npresent, as per the new Regulation 9 of IRDAI (Non-linked) Products Regulation,\n2019 pertaining to traditional products, the minimum death cover is as follows:For all non-linked individual life insurance products, the minimum Sum Assured\non death during the entire term of the policy shall not be less than 7 times the\nannualized premium, for limited or regular premium products, and 1.25 times the\nsingle premium for single premium products.For participating products, in addition to the sum assured on death, the bonus\nand additional benefits as stated in the policy and accrued till the date of death\nshall become payable on death as part of the death benefit, if not paid earlier.\nIn essence, there are **two variants**, participating and non-participating plans.i. For **participating polices** the bonus is linked to the investmentperformance of the fund and is not declared or guaranteed before. The\n**bonus, once it is announced, becomes a guarantee** . It is usually paid in145case of death of the policyholder or maturity benefit. This bonus is also\ncalled **reversionary bonus** .\nii. In case of **non-participating policies**, the return on the policy is disclosedin the beginning of the policy itself.**7.** **Pension Plans and Annuities**A pension plan is typically a fund into which money is paid during a person’s\nemployment years and from which money is drawn to support the person after\n[his retirement from work in the form of periodic payments.](https://en.wikipedia.org/wiki/Retirement)Pension plans are designed on group (usually employer driven) or individual basis.\nA group pension may be a \"defined benefit plan\", where a fixed sum is paid\nregularly to a person, or a \"defined contribution plan\", under which a fixed sum\nis invested which becomes available at retirement age. Pensions are essentially\n[guaranteed life annuities, thus insuring against the risk of longevity. A pension](https://en.wikipedia.org/wiki/Life_annuity)\ncreated by an employer for the benefit of an employee is commonly referred to\nas an occupational or employer pension.On retirement, the money in the member's account is used to provide retirement\nbenefits, typically by purchasing an annuity which then provides a regular\nincome. An annuity is a long-term investment issued by an insurance company\ndesigned to help protect one from the risk of outliving one’s income. Through\nannuitization, one’s contributions are converted into periodic payments that can\nlast for life.Individuals can avail of pension benefits by purchasing pension plans from\ninsurance companies. Pension plans can be **on accumulation or deferred** **basis**\nwhich allows a person to contribute in two ways, (i) in lump sum, or (ii) over a\nperiod of time; so that he/ she can get a pension from the desired age/ date\n(called as the ‘vesting’ date). One can opt to receive pensions/ annuities on\nmonthly, quarterly, half-yearly or annual modes. Pension plans are available on\nan **immediate basis** also, from the very next month of purchase, on payment of\na lump sum amount, called as immediate annuity.The Indian insurance industry has several deferred and immediate annuity\nproducts marketed by Life Insurers. Each product has its own features, terms,\nconditions and annuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n145", "section": "Non-participating products", "chunk_id": "Final IC 38 -IMF_Composite -English_074", "metadata": {"file_size": 20962, "chunk_index": 74, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Non-participating products", "Example", "Important", "Pension Plans and Annuities", "Saral Pension:"]}}
{"chunk": "designed to help protect one from the risk of outliving one’s income. Through\nannuitization, one’s contributions are converted into periodic payments that can\nlast for life.Individuals can avail of pension benefits by purchasing pension plans from\ninsurance companies. Pension plans can be **on accumulation or deferred** **basis**\nwhich allows a person to contribute in two ways, (i) in lump sum, or (ii) over a\nperiod of time; so that he/ she can get a pension from the desired age/ date\n(called as the ‘vesting’ date). One can opt to receive pensions/ annuities on\nmonthly, quarterly, half-yearly or annual modes. Pension plans are available on\nan **immediate basis** also, from the very next month of purchase, on payment of\na lump sum amount, called as immediate annuity.The Indian insurance industry has several deferred and immediate annuity\nproducts marketed by Life Insurers. Each product has its own features, terms,\nconditions and annuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly\nmeet the needs of an average customer, in January 2021, IRDAI mandated all Life\nInsurers to introduce a standard, immediate annuity product, with simple\nfeatures and standard terms and conditions on an individual (not group) basis.\nSuch a standard product will make it easier for the customers to make an\ninformed choice, enhance the trust between the Insurers and the insured, and\nreduce mis-selling as well as potential disputes.The standard individual immediate annuity product is called, “Saral Pension”,\nprefixed by the Insurer’s name. The product offer two (and only two) annuity\noptions as follows:146a) Life annuity with 100% Return of Purchase Price; andb) Joint Life annuity with a provision of 100% annuity to the secondary\nannuitant on death of the primary annuitant and return of 100% Purchase Price\non death of last survivor.Mode of Annuity payment would be Monthly, Quarterly, Half-Yearly and Yearly.\nDetails are available on IRDAI’s website at the following link\n=\n[https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1) PageNo\n[4353&flag=1](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1)**Test Yourself 2**The premium paid for whole life insurance is _____________ than the premium\npaid for term assurance.I. Higher\nII. Lower\nIII. Equal\nIV. Substantially higher**Summary**Life insurance products offer protection against the loss of economic value of\nan individual’s productive abilities, which is available to his/ her dependents\nor to the self.A life insurance policy, at its core, provides peace of mind and protection to\nthe near and dear ones of the individual in case something unfortunate\nhappens to him or her.Term insurance provides valid cover only during a certain time period that has\nbeen specified in the contract.The unique selling proposition (USP) of term assurance is its low price,\nenabling one to buy relatively large amounts of life insurance on a limited\nbudget.While term assurance policies are examples of temporary assurance, where\nprotection is available for a temporary period of time, whole life insurance is- an example of a permanent life insurance policy.**Key Terms**1. Term insurance2. Whole life insurance3. Endowment assurance\n4. Money back policy\n5. Par and non-par schemes\n6. Reversionary bonus147**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is I.148## CHAPTER L-04## LIFE INSURANCE PRODUCTS: NON-TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of non-traditional life insurance\nproducts. We start by examining the limitations of traditional life insurance\nproducts and then have a look at the appeal of non-traditional life insurance\nproducts. Finally we look at some of the different types of non-traditional life\ninsurance products available in the market.**Learning Outcomes**149**A.** **Overview of non-traditional life insurance products****1.** **Non-traditional life insurance products – Purpose and need**In the previous chapters we have considered some of the traditional life insurance\nproducts which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "o4353", "section": "Saral Pension:", "chunk_id": "Final IC 38 -IMF_Composite -English_075", "metadata": {"file_size": 20962, "chunk_index": 75, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Chapter Introduction", "Key Terms", "Answer 1"]}}
{"chunk": "4. Money back policy\n5. Par and non-par schemes\n6. Reversionary bonus147**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is I.148## CHAPTER L-04## LIFE INSURANCE PRODUCTS: NON-TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of non-traditional life insurance\nproducts. We start by examining the limitations of traditional life insurance\nproducts and then have a look at the appeal of non-traditional life insurance\nproducts. Finally we look at some of the different types of non-traditional life\ninsurance products available in the market.**Learning Outcomes**149**A.** **Overview of non-traditional life insurance products****1.** **Non-traditional life insurance products – Purpose and need**In the previous chapters we have considered some of the traditional life insurance\nproducts which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to\nprovide a rate of return comparable to other assets in the financial market. Issues\nhave also been raised about the way they are structured into a single package of\nbenefits and premiums.**2.** **Limitations of traditional products**a) A critical examination would reveal the following areas of concern:b) **Cash value component:** The savings or cash value component in traditional\npolicies is not well defined. This makes it less transparent about mortality,\ninterest rates, expenses and other parameters that are made.c) **Rate of return:** It is not easy to ascertain the rate of return on traditional policies\nbecause the value of the benefits under “With Profit policies” can be known only\nwhen the contract ends. This makes it difficult to compare these policies with\nother financial instruments.d)e)f) **Surrender value:** The method of arriving at the cash and surrender values (at any\npoint of time), are set by the life insurer and not transparent.**Yield:** The yield on these policies are much lower than those from other\ninvestments.**3.** **Features of Non-Traditional Policies:** Life insurance companies starteddesigning policies with certain innovative features, some of which are given\nbelow:a) **Direct linkage with investment gains:** Policies with direct linkage withthe capital market were designed in an attempt to make investment gains.\nb) **Policies that can beat inflation:** Policies were designed to give returnscloser to the inflation rates. The change was that insurers started thinking\nthat life policies need to match if not beat inflation.\nc) **Policies with Flexibility:** Policies which allowed customers to decide(within certain limits) the amount of premium they wanted to pay; and\nthe amount of death benefits and cash values they wanted, got designed.\nd) **Surrender value:** Policies that gave better surrender values availableunder traditional policies were also designed by insurers.These policies became very popular and even began to replace traditional\nproducts in many countries, including India.150**Test Yourself 1**Which among the following is a non-traditional life insurance product?I. Term assuranceII. Universal life insuranceIII. Endowment insuranceIV. Whole life insurance**B.** **Non-traditional life insurance products****Some non-traditional products**We shall discuss some of the non-traditional products which have emerged in the\nIndian market and elsewhere.**1.** **Universal Life and Variable Life**Universal Life policy was introduced in the United States in 1979 and quickly\nbecame very popular. Its features are **flexible premiums, flexible face amount**\n**and death benefit amounts.** Unlike traditional policies, where fixed premiums\nhave to be paid periodically to keep the contract in force, universal life policies\nallow the policyholder (within limits) to decide the amount of premiums he or\nshe wants to pay for the coverage.Variable Life was introduced in the United States in 1977.It is a typeof “Whole\nLife” policy where the death benefit and cash value of the policy fluctuates\naccording to the investment performance of a special investment account into\nwhich premiums are credited.The design and sale of the above two kinds of products, both of which were called\nVariable Insurance Products, have been discontinued and are not allowed in India\nsince2019,further to the issue of IRDAI (ULIP) Regulations, 2019.**2.** **Unit linked insurance**Unit Linked Plans, also known as ULIPs were first introduced in UK during the\n1960s.They have today emerged as one of the most popular and significant\nproducts, displacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s147", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 -IMF_Composite -English_076", "metadata": {"file_size": 20962, "chunk_index": 76, "chunk_tokens": 973, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Limitations of traditional products", "Some non-traditional products", "Yield:", "Policies that can beat inflation:"]}}
{"chunk": "became very popular. Its features are **flexible premiums, flexible face amount**\n**and death benefit amounts.** Unlike traditional policies, where fixed premiums\nhave to be paid periodically to keep the contract in force, universal life policies\nallow the policyholder (within limits) to decide the amount of premiums he or\nshe wants to pay for the coverage.Variable Life was introduced in the United States in 1977.It is a typeof “Whole\nLife” policy where the death benefit and cash value of the policy fluctuates\naccording to the investment performance of a special investment account into\nwhich premiums are credited.The design and sale of the above two kinds of products, both of which were called\nVariable Insurance Products, have been discontinued and are not allowed in India\nsince2019,further to the issue of IRDAI (ULIP) Regulations, 2019.**2.** **Unit linked insurance**Unit Linked Plans, also known as ULIPs were first introduced in UK during the\n1960s.They have today emerged as one of the most popular and significant\nproducts, displacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.\nThe premium paid by the policyholder gets divided into two major portionsthe first portion which is utilised for providing insurance cover, andthe second portion that gets invested into the fund opted by the insured.151The benefits under such contracts are wholly or partially determined by the value\nof units credited to the policyholder’s account at the date when payment is due.In many markets these policies were positioned and sold as investment vehicles\nwith an attached insurance component.Unlike traditional savings policies that are bundled, Unit linked contracts are\nunbundled. Their structure is transparent with the charges to pay for the\ninsurance and expenses component being clearly specified.**Diagram 1:** **Premium break-up**After deducting the charges from the premium, the balance of the account and\nincome are invested in **units** .**The Value of Units**The value of units is defined by a rule or formula, which is outlined in advance.\nTypically the value of the units is given by the Net Asset Value (NAV), which\nreflects the market value of the assets in which the fund is invested. Different\npersons could arrive at the same benefits payable by following the formula.The Formula is as follows:Net Asset Value [NAV] = Market Value of Assets of the fund/ Number of units of\nthe fundsThus, Policyholder benefits do not depend on the assumptions of the life\ninsurance company.Unit linked policies allow policy holders to choose between different kinds of\nfunds. Each fund would have a different portfolio mix. The investor gets to choose\nbetween a broad option of debt, balanced and equity funds, defined below. Even\nwithin these broad categories there may be other types of options.|Equity Fund|Debt Fund|Balanced Fund|Money Market Fund|\n|---|---|---|---|\n|~~This fund invests~~<br>the major portion of<br>the money in equity|~~This fund invests~~<br>major portion of the<br>money in Govt.|~~This fund~~<br>invests in a mix<br>of equity and|~~This fund invests~~<br>money mainly in<br>instruments such as|152There is also provision to switch from one kind of fund to another if performance\nof one or more funds is not found to be up to the mark.Some of the specific features of ULIP Policies are given below:**i.** **Unitising**Benefits under ULIP policies are determined by the value of units credited to the\npolicyholder’s account at the date when the claim payment is due to be made. A\nunit is created by dividing an investment fund into a number of equal parts.**ii.** **Transparent structure**The charges for insurance cover and expenses in ULIPs are clearly specified. Once\nthese charges are deducted from the premium, the balance of the account and\nincome from it are invested in units.**iii.** **Pricing**Under ULIPs, the insured decides the amount of premium that he/ she can\ncontribute at regular intervals.In all Life Insurance policies, the initial costs are very high. Under traditional\npolicies, the premium charges for meeting these costs are spread throughout the\npolicy term.In the case of ULIPs, they are deducted from the initial premiums itself. This\nsignificantly reduces the amount allocated for investment. This is why the value\nof the benefits, vis-à-vis the premiums paid, would be very low and even less than\nthe premiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy,", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e2019", "section": "Unit linked insurance", "chunk_id": "Final IC 38 -IMF_Composite -English_077", "metadata": {"file_size": 20962, "chunk_index": 77, "chunk_tokens": 1005, "has_examples": false, "has_tables": true, "key_concepts": ["Transparent structure", "Diagram 1:", "Unitising", "Death Benefit", "The Value of Units"]}}
{"chunk": "policyholder’s account at the date when the claim payment is due to be made. A\nunit is created by dividing an investment fund into a number of equal parts.**ii.** **Transparent structure**The charges for insurance cover and expenses in ULIPs are clearly specified. Once\nthese charges are deducted from the premium, the balance of the account and\nincome from it are invested in units.**iii.** **Pricing**Under ULIPs, the insured decides the amount of premium that he/ she can\ncontribute at regular intervals.In all Life Insurance policies, the initial costs are very high. Under traditional\npolicies, the premium charges for meeting these costs are spread throughout the\npolicy term.In the case of ULIPs, they are deducted from the initial premiums itself. This\nsignificantly reduces the amount allocated for investment. This is why the value\nof the benefits, vis-à-vis the premiums paid, would be very low and even less than\nthe premiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy,\nthe beneficiary would be paid the higher of the Sum Assured [which is a multiple\nof the premium] or the Fund Value (unit price multiplied by the number of units)\nstanding to his or her account.**v.** **The bearing of investment risk**The value of the units depends on the value of the life insurer’s investments,\nwhich are not guaranteed.153The life insurer, though expected to manage the portfolio efficiently, does not\ngive any guarantee about unit values. Hence, the investment risk is borne by the\npolicyholder/ unit holder.**Test Yourself 2**Which of the following statements is/ are incorrect?I. Variable life insurance is a temporary life insurance policy\nII. Variable life insurance is a permanent life insurance policy\nIII. The policy has a cash value account\nIV. The policy provides a minimum death benefit guarantee**Summary**A critical concern with respect to life insurance policies was giving a\ncompetitive rate of return comparable to other assets in the financial\nmarketplace.Some of the trends that led to the increase in non-traditional life products\ninclude unbundling, investment linkage and transparency.Universal life insurance is a form of permanent life insurance characterised\nby its flexible premiums, flexible face amount and death benefit amounts,\nand the unbundling of its pricing factors.ULIPs became one of the most popular and significant products, replacing\ntraditional plans in many markets.ULIPs provide the means for directly and immediately cashing on the benefits\nof a Life Insurer’s investment performance.**Key Terms**1. Universal life insurance2. Variable life insurance3. Unit linked insurance4. Net asset value**Answers to Test Yourself****Answer 1** -The correct option is II.**Answer 2** - The correct option is I.154## CHAPTER L-05## APPLICATIONS OF LIFE INSURANCE**Chapter Introduction**Life insurance does not merely seek to protect individuals from premature death.\nIt has other applications as well. It can be applied to the creation of trusts with\nresultant insurance benefits; it can be applied for creating a policy covering key\npersonnel of industries and also for redeeming mortgages. We shall briefly\ndescribe these various applications of life insurance.**Learning Outcomes**155N’s\n**A.** **Applications of Life insurance****1.** **Married Women’s Property Act**Section 6 of the Married Women’s Property Act, 1874 tries to ensure that the\nbenefits under a life insurance policy will pass on in a secure manner to the wife\nand children through creation of a trust for the purpose.**Diagram 1:** **Beneficiaries under MWP Act**The section provides that when a married man takes a policy on his own life and\nclearly expresses on the face of such policy that it is for the benefit of his wife\nor his wife and children, and to be held in a trust for their benefit only, the\nproceeds of such a policy shall not, so long as the objects of the trust remains,\nbe subject to the control of the husband or to his creditors or form part of his", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e2", "section": "Transparent structure", "chunk_id": "Final IC 38 -IMF_Composite -English_078", "metadata": {"file_size": 20962, "chunk_index": 78, "chunk_tokens": 894, "has_examples": false, "has_tables": false, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Transparent structure", "Diagram 1:"]}}
{"chunk": "It has other applications as well. It can be applied to the creation of trusts with\nresultant insurance benefits; it can be applied for creating a policy covering key\npersonnel of industries and also for redeeming mortgages. We shall briefly\ndescribe these various applications of life insurance.**Learning Outcomes**155N’s\n**A.** **Applications of Life insurance****1.** **Married Women’s Property Act**Section 6 of the Married Women’s Property Act, 1874 tries to ensure that the\nbenefits under a life insurance policy will pass on in a secure manner to the wife\nand children through creation of a trust for the purpose.**Diagram 1:** **Beneficiaries under MWP Act**The section provides that when a married man takes a policy on his own life and\nclearly expresses on the face of such policy that it is for the benefit of his wife\nor his wife and children, and to be held in a trust for their benefit only, the\nproceeds of such a policy shall not, so long as the objects of the trust remains,\nbe subject to the control of the husband or to his creditors or form part of his\nestate.**Features of a policy under the MWP Act**i. Each policy will remain a separate Trust. Either the wife or child (over 18years of age) can be a trustee.ii. The policy shall be beyond the control of court attachments, creditors andeven the life assured.iii. The claim money shall be paid to the trustees.iv. The policy cannot be surrendered and neither nomination nor assignmentis allowed.v. If the policyholder does not appoint a special trustee to receive andadminister the benefits under the policy, the sum secured under the policy156becomes payable to the Official Trustee of the State in which the office\nat which the insurance was effected is situated.**Benefits**The Trust is set up under a deed that cannot be revoked or amended. It can\ncontain one or more insurance policies. It is important to appoint a trustee who\nwould be responsible for administering the trust property, including investing the\ninsurance proceeds, on behalf of the beneficiaries. These benefits are secured\nfrom passing to future creditors**2.** **Key-man Insurance**Keyman insurance is an important form of business insurance.**Definition**Key-man Insurance can be described as an insurance policy taken out by a business\nto compensate that business for financial losses that would arise from the death\nor extended incapacity of an important member of the business.Many businesses have key persons responsible for a major part of its profits or has\nknowledge and skills that are vital to the organisation and difficult to replace.\nKey man insurance is taken by employers on the life of such key persons to\nfacilitate business continuity and offset the costs and losses which are likely to\nbe suffered in the event of the loss of a key person. Keyman insurance does not\nindemnify the actual losses incurred but compensates with a fixed monetary sum\nas specified on the insurance policy.Keyman insurance is allowed as a term insurance policy where the sum assured is\nlinked to the profitability of the company rather than the key person’s own\nincome. The premium is paid by the company. In case the key person dies, the\nbenefit is paid to the company. The proceeds of Keyman insurance is taxable at\nthe hands of the company.**a)** **Who can be a key-man?**A key person can be anyone directly associated with the business whose loss\ncan cause financial strain to the business. For example, the person could be\na director of the company, a partner, a key sales person, key project\nmanager, or someone with specific skills or knowledge which is especially\nvaluable to the company.**b)** **Insurable losses**The following are the losses for which key person insurance can provide\ncompensation:157i. Losses related to the extended period when a key person is unable towork, to provide temporary personnel and, if necessary to finance the\nrecruitment and training of a replacementii. Insurance to protect profits. For example, offsetting lost income from lostsales, losses resulting from the delay or cancellation of any business\nproject that the key person was involved in, loss of opportunity to expand,\nloss of specialised skills or knowledge**3.** **Mortgage Redemption Insurance (MRI)**A person taking a loan to buy a property, may be required to pay for mortgage\nredemption insurance by the bank, as part of the loan arrangement. “Mortgage\nRedemption Insurance” is popularly referred to “Credit Life Insurance policy”.**a)** **What is MRI?**It is an insurance policy that provides financial protection for home loan\nborrowers. It is basically a decreasing term life insurance policy taken by\nmortgagor to repay the balance on a mortgage loan if he/ she dies before its", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y156", "section": "Learning Outcomes", "chunk_id": "Final IC 38 -IMF_Composite -English_079", "metadata": {"file_size": 20962, "chunk_index": 79, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Mortgage Redemption Insurance (MRI)", "Diagram 1:", "What is MRI?", "Married Women’s Property Act", "Learning Outcomes"]}}
{"chunk": "manager, or someone with specific skills or knowledge which is especially\nvaluable to the company.**b)** **Insurable losses**The following are the losses for which key person insurance can provide\ncompensation:157i. Losses related to the extended period when a key person is unable towork, to provide temporary personnel and, if necessary to finance the\nrecruitment and training of a replacementii. Insurance to protect profits. For example, offsetting lost income from lostsales, losses resulting from the delay or cancellation of any business\nproject that the key person was involved in, loss of opportunity to expand,\nloss of specialised skills or knowledge**3.** **Mortgage Redemption Insurance (MRI)**A person taking a loan to buy a property, may be required to pay for mortgage\nredemption insurance by the bank, as part of the loan arrangement. “Mortgage\nRedemption Insurance” is popularly referred to “Credit Life Insurance policy”.**a)** **What is MRI?**It is an insurance policy that provides financial protection for home loan\nborrowers. It is basically a decreasing term life insurance policy taken by\nmortgagor to repay the balance on a mortgage loan if he/ she dies before its\nfull repayment. It can be called a loan protector policy. This plan is suitable\nfor people whose dependents may need assistance in clearing their debts in\ncase of the unexpected demise of the policyholder.**b)** **Features**The insurance cover under this policy decreases each year unlike a term\ninsurance policy where insurance cover is constant during the policy period.**Test Yourself 1**What is the objective behind Mortgage Redemption Insurance?I. Facilitate cheaper mortgage rates\nII. Provide financial protection for home loan borrowers\nIII. Protect value of the mortgaged property\nIV. Evade eviction in case of default**Summary**Section 6 of the Married Women’s Property Act, 1874 provides for security of\nbenefits under a life insurance policy to the wife and children.The policy effected under MWP Act shall be beyond the control of court\nattachments, creditors and even the life assured.158Keyman insurance is an important form of business insurance. It can be\ndescribed as an insurance policy taken out by a business to compensate at for\nfinancial losses that would arise from the death or extended capacity of an\nimportant member of the business.Mortgage redemption insurance is basically a decreasing term life insurance\npolicy taken by a mortgagor to repay the balance on a mortgage loan if he/\nshe dies before its full repayment.**Key Terms**1. Married Women’s Property Act\n2. Keyman insurance\n3. Mortgage Redemption Insurance**Answers to Test Yourself****Answer 1** - The correct option is II.159## CHAPTER L-06## PRICING AND VALUATION IN LIFE INSURANCE**Chapter Introduction**The objective of this chapter is to introduce to the learner the basic elements\nthat are involved in the pricing and benefits of life insurance contracts. We shall\nfirst discuss the elements that constitute the premium and then discuss the\nconcept of surplus and bonus.**Learning Outcomes**160**A.** **Insurance pricing – Basic elements****1.** **Premium**In ordinary language, the term premium denotes the price that is paid by an\ninsured for purchasing an insurance policy. It is normally expressed as a rate of\npremium per thousand rupees of sum assured. The premium rates depend on the\nage of the prospect and the plan.These premium rates are available in the form of tables of rates that are available\nwith insurance companies.**Diagram 1:** PremiumThe rates printed in these tables are known as “Office Premiums”. They are in\nmost cases the same throughout the term and are expressed as an annual rate.**Example**If the premium for a twenty year endowment policy for a given age is Rs. 4,800,\nit means that Rs. 4,800 has to be paid each year for twenty years.However it is possible to have some policies in which the premiums are payable\nonly in the first few years. Companies also have single premium contracts in which\nonly one premium is payable at the beginning of the contract. These policies are\nusually investment oriented.**2.** **Rebates**Life insurance companies may also offer certain types of rebates on the premium\nthat is payable. Two such rebates are: For sum assured161 For mode of premum**Rebate for sum assured**The rebate **for sum assured** is offered to those who buy policies with higher\namounts of sum assured. It is offered as a way of passing on to the customer,\nthe gains that the insurer may make when servicing higher value policies. The\nlogic is that the effort and cost required to process a policy of Rs 50,000 or\n5,00,000 remains the same. But higher sum assured policies yield more", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "L-06", "section": "Insurable losses", "chunk_id": "Final IC 38 -IMF_Composite -English_080", "metadata": {"file_size": 20962, "chunk_index": 80, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Mortgage Redemption Insurance (MRI)", "Rebates", "Test Yourself 1", "Insurance pricing – Basic elements"]}}
{"chunk": "most cases the same throughout the term and are expressed as an annual rate.**Example**If the premium for a twenty year endowment policy for a given age is Rs. 4,800,\nit means that Rs. 4,800 has to be paid each year for twenty years.However it is possible to have some policies in which the premiums are payable\nonly in the first few years. Companies also have single premium contracts in which\nonly one premium is payable at the beginning of the contract. These policies are\nusually investment oriented.**2.** **Rebates**Life insurance companies may also offer certain types of rebates on the premium\nthat is payable. Two such rebates are: For sum assured161 For mode of premum**Rebate for sum assured**The rebate **for sum assured** is offered to those who buy policies with higher\namounts of sum assured. It is offered as a way of passing on to the customer,\nthe gains that the insurer may make when servicing higher value policies. The\nlogic is that the effort and cost required to process a policy of Rs 50,000 or\n5,00,000 remains the same. But higher sum assured policies yield more\npremium and so more profits.**Rebate for mode of premium**Similarly a rebate may be offered **for the mode of premium** . Life insurance\ncompanies may allow premiums to be paid on annual, half yearly, quarterly\nor monthly basis. More frequent the mode, more the administrative costs for\ncollecting and accounting the premium. Again, in the yearly mode, the insurer\ncan utilise this amount during the entire year and earn interest on it. Insurers\nwould hence encourage payment via yearly and half yearly modes by allowing\na rebate on these. They may also charge a little extra for monthly mode of\npayments, to cover additional administrative expenses involved.**3.** **Extra charges**The tabular premium is charged for those individuals who are not subject to\nany significant factors that would pose an extra risk. They are known as\n**standard lives** and the rates charged are known as ordinary rates.If a person proposing for insurance suffers from certain health problems like\nheart ailments or diabetes that can pose a hazard to his life, he or she is\nconsidered to be sub-standard. The insurer may decide to impose an extra\npremium by way of a health extra. Similarly an occupational extra may be\nimposed on those engaged in a hazardous occupation, like a circus acrobat.\nThese extras would result in the premium being more than the tabular\npremium.Again, an insurer may offer certain extra benefits under a policy, which are\navailable on payment of an extra premium.**Example**A life insurer may offer a Double Accident Benefit or DAB (where double the\nsum assured is payable as a claim if death is a result of accident). For this it\nmay charge an extra premium of one rupee per thousand sum assured.162Similarly a benefit known as Permanent Disability Benefit (PDB) may be\navailed by paying an extra per thousand sum assured.**4.** **Determining the premium**Let us now examine how life insurers arrive at the rates that are presented in\nthe premium tables. This task is performed by an actuary. The process of\nsetting the premium in case of traditional life insurance policies like term\ninsurance, whole life and endowment considers following elements: Mortality\n Interest\n Expenses of management\n Reserves\n Bonus loading**Diagram 2:** **Components of Premium**The first two elements give us the Net premium. By adding [also called\n‘loading’] the other elements to the net premium we get the gross or office\npremium**a)** **Mortality and Interest**Mortality is the first element in premiums. It is the chance or likelihood that\na person of a certain age would die during a given year. To find out the\nexpected Mortality of a person, “Mortality Tables” are used.**Example**If the mortality rate for age 35 is 0.0035 it implies that out of every 1000\npeople who are alive as on age 35, 3.5 (or 35 out of 10,000) are expected to\ndie between age 35 and 36.163The table may be used to calculate mortality cost for different ages. For\nexample the rate of 0.0035 for age 35 implies a cost of insurance of 0.0035 x\n1000 (sum assured) = Rs. 3.50 per thousand sum assured.The above cost may be also called the “Risk Premium”. For higher ages the\nrisk premium would be higher.**Example**If we need to have Rs. 5 per thousand to meet the cost of insurance after five", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d161", "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_081", "metadata": {"file_size": 20962, "chunk_index": 81, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Extra charges", "Rebates", "Example", "Rebate for sum assured", "Components of Premium"]}}
{"chunk": "‘loading’] the other elements to the net premium we get the gross or office\npremium**a)** **Mortality and Interest**Mortality is the first element in premiums. It is the chance or likelihood that\na person of a certain age would die during a given year. To find out the\nexpected Mortality of a person, “Mortality Tables” are used.**Example**If the mortality rate for age 35 is 0.0035 it implies that out of every 1000\npeople who are alive as on age 35, 3.5 (or 35 out of 10,000) are expected to\ndie between age 35 and 36.163The table may be used to calculate mortality cost for different ages. For\nexample the rate of 0.0035 for age 35 implies a cost of insurance of 0.0035 x\n1000 (sum assured) = Rs. 3.50 per thousand sum assured.The above cost may be also called the “Risk Premium”. For higher ages the\nrisk premium would be higher.**Example**If we need to have Rs. 5 per thousand to meet the cost of insurance after five\nyears and if we assume a rate of interest of 6%, the present value of Rs. 5\npayable after five years would be 5 x 1/ (1.06) [5 ] = 3.74.If instead of 6% we were to assume 10%, the present value would be only 3.10.\nIn other words the higher the rate of interest assumed, the lower the present\nvalue.From our study of mortality and interest there are two major conclusions we\ncan derive Higher the mortality rate in the mortality table, higher the premiumswould be\n Higher the interest rate assumed, lower the premium**Net premium**\nThe estimates of mortality and interest give the “Net Premium”**Gross premium**\nGross premium is the net premium plus an amount called loading. There are\nthree considerations or guiding principles that needs to be borne in mind when\ndetermining the amount of loading:**b)** **Expenses and reserves**Life insurers have to incur various types of operating expenses including: Agents training and recruitment,\n Commissions of agents,\n Staff salaries,\n Office accommodation,\n Office stationery,\n Electricity charges,\n Other miscellaneous etc.All these have to be paid from premiums that are collected by insurers.\nThese expenses are suitably loaded to the net premium.164**c)** **Lapses and contingencies**In addition to expenses, there are other factors that can make the calculations\nof life insurers go wrong.One source of risk is that of lapses and withdrawals. A lapse means that the\npolicyholder discontinues payment of premiums. In case of withdrawals, the\npolicyholder surrenders the policy and receives an amount from the policy’s\nacquired cash value.Lapses usually happen within the first three years, especially in the first year\nof the contract.**d)** **With Profit (participating) policies and Bonus loading**The concept of ‘With Profit’ policies originated when Life insurers started the\npractice of charging a high loading in advance to create a buffer to keep them\nsolvent even in adverse situations. If subsequent experience proved to be\nmore favourable, the life insurer would share some of the profits it made as\na result with policy holders by way of bonus.In sum we can say that:**Gross premium = Net premium + Loading for expenses + Loading for**\n**contingencies + Bonus loading****Test Yourself 1**What does a policy lapse mean?I. Policyholder completes premium payment for a policy\nII. Policyholder discontinues premium payment for a policy\nIII. Policy attains maturity\nIV. Policy is withdrawn from the market**B.** **Surplus and bonus****1.** **Determination of surplus and bonus**Every life insurance company is expected to undertake a periodic valuation of its\nassets and liabilities. Such a valuation has two purposes:i. To assess the financial state of the life insurer and determine if it issolvent or insolvent\nii. To determine the surplus available for distribution among policyholders/share holders165**Definition**Surplus is the excess of value of assets over value of liabilities. If it is negative,\nit is known as a strain.Let us now see how the concept of surplus in life insurance is different from that\nof profit of a firm.Firms in general look at profits in two ways. Firstly, profit is the **excess of income**\n**over outgo** for a given accounting period, as it appears in the profit and loss\naccount. Profit also forms part of the balance sheet of a firm - it may be defined", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s165", "section": "Mortality and Interest", "chunk_id": "Final IC 38 -IMF_Composite -English_082", "metadata": {"file_size": 20962, "chunk_index": 82, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Surplus and bonus", "Net premium", "Test Yourself 1", "Example", "Lapses and contingencies"]}}
{"chunk": "**contingencies + Bonus loading****Test Yourself 1**What does a policy lapse mean?I. Policyholder completes premium payment for a policy\nII. Policyholder discontinues premium payment for a policy\nIII. Policy attains maturity\nIV. Policy is withdrawn from the market**B.** **Surplus and bonus****1.** **Determination of surplus and bonus**Every life insurance company is expected to undertake a periodic valuation of its\nassets and liabilities. Such a valuation has two purposes:i. To assess the financial state of the life insurer and determine if it issolvent or insolvent\nii. To determine the surplus available for distribution among policyholders/share holders165**Definition**Surplus is the excess of value of assets over value of liabilities. If it is negative,\nit is known as a strain.Let us now see how the concept of surplus in life insurance is different from that\nof profit of a firm.Firms in general look at profits in two ways. Firstly, profit is the **excess of income**\n**over outgo** for a given accounting period, as it appears in the profit and loss\naccount. Profit also forms part of the balance sheet of a firm - it may be defined\nas the **excess of assets over liabilities** . In both instances, profits are determined\nat the end of the accounting period.**Surplus = Assets - Liabilities**Let us understand what liabilities mean in life insurance. For a given block of life\ninsurance policies, the life insurer has to make provision for meeting future\nclaims, expenses and other expected pay-outs that may arise. The insurer also\nexpects to receive premiums in future for these policies.Liabilities are thus the present value of all payments that have to be made less\nthe present value of premiums expected to be received on these policies. The\npresent value is arrived at by applying a suitable rate of discount [the interest\nrate]\nSurplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed. Life insurers are obliged to share the benefits arising as a\nresult with holders of it’s with profit policies.**Example**The profits of XYZ firm as on 31 [st] March 2013, is given as its income less expenses\nor its assets less liabilities as on that date.In both instances, the profit is clearly defined and is known.**2.** **Bonus**Insurers have to declare and distribute its divisible surplus among the policy\nholders and shareholders of the company [if any] in the form of a bonus. In India,\nthe United Kingdom and many other countries, distribution of surplus is popular.Bonus is paid as an addition to the basic benefit payable under a contract.\nTypically it may appear as an addition to basic sum assured or basic pension per\nannum. It is expressed, for example, as Rs. 60 per thousand sum assured166The most common form of bonus is the **reversionary bonus** . Once declared these\nbonus additions, made each year, get attached to the policy and cannot be taken\naway. They are called ‘Reversionary’ bonuses because they are received only at\nthe time of a claim by death or maturity. Bonuses may also be payable on\nsurrender provided the contract is eligible through having run for a minimum term[say 5 years]**Types of reversionary bonuses****Diagram 3:** **Types of Reversionary Bonuses****i.** **Simple Reversionary Bonus**This is a bonus expressed as a percentage of the basic cash benefit under the\ncontract. In India for example, it is declared as amount per thousand sum\nassured.**ii.** **Compound Bonus**Here the company expresses a bonus as a percentage of basic benefit and\nalready attached bonuses. It is thus a bonus on a bonus. A way to express it\nmay be as @ 8% of basic sum assured plus attached bonus.**iii.** **Terminal Bonus**As the name suggests, this bonus attaches to the contract only at the time of\nits termination [by death or maturity]. It is applicable only for the claims\narising in the ensuing year. Thus terminal bonus declared for 2013 would only\napply to claims that have arisen during 2013-14 and not for subsequent years.\nTerminal bonuses depend on the time duration of the contract and increase\nwith it. A contract that has run for 25 years would have higher terminal bonus\nthan one which has run for 15 years.167**3.** **The Contribution Method**Another method of distribution of surplus adopted in North America is the\n“Contribution” method. Here, the surplus, i.e. the difference between what was\nexpected to happen and what actually happened over the year with respect to\nmortality, interest and expenses is declared and distributed as dividends.The dividends can be paid in cash, by way of adjustments/ reductions in future", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s165", "section": "Test Yourself 1", "chunk_id": "Final IC 38 -IMF_Composite -English_083", "metadata": {"file_size": 20962, "chunk_index": 83, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Compound Bonus", "Surplus and bonus", "Simple Reversionary Bonus", "Test Yourself 1", "Example"]}}
{"chunk": "already attached bonuses. It is thus a bonus on a bonus. A way to express it\nmay be as @ 8% of basic sum assured plus attached bonus.**iii.** **Terminal Bonus**As the name suggests, this bonus attaches to the contract only at the time of\nits termination [by death or maturity]. It is applicable only for the claims\narising in the ensuing year. Thus terminal bonus declared for 2013 would only\napply to claims that have arisen during 2013-14 and not for subsequent years.\nTerminal bonuses depend on the time duration of the contract and increase\nwith it. A contract that has run for 25 years would have higher terminal bonus\nthan one which has run for 15 years.167**3.** **The Contribution Method**Another method of distribution of surplus adopted in North America is the\n“Contribution” method. Here, the surplus, i.e. the difference between what was\nexpected to happen and what actually happened over the year with respect to\nmortality, interest and expenses is declared and distributed as dividends.The dividends can be paid in cash, by way of adjustments/ reductions in future\npremiums, by allowing purchase of non-forfeitable paid up additions to the policy\nor as accumulations to the credit of the policy.**4.** **Unit Linked Policies**The Principles of Pricing and other features of ULIP Policies have already been\ncovered in an earlier chapter.**Summary**In ordinary language, the term premium denotes the price that is paid by an\ninsured for purchasing an insurance policy.The process of setting the premium for life insurance policies involves\nconsideration of mortality, interests, expense management and reserves.Gross premium is the net premium plus an amount called loading.A lapse means that the policyholder discontinues payment of premiums. In\ncase of withdrawals, the policyholder surrenders the policy and receives an\namount from the policy’s acquired cash value.Surplus arises as a result of the life insurer’s actual experience being better\nthan what it had assumed.Surplus allocation could be towards maintaining solvency requirements,\nincreasing free assets etc.The most common form of bonus is the reversionary bonus.**Key Terms**1. Premium2. Rebate3. Bonus\n4. Surplus\n5. Reserve\n6. Loading\n7. Reversionary bonus**Answers to Test Yourself****Answer 1** - The correct option is II.168## CHAPTER L-07## LIFE INSURANCE DOCUMENTATION**Chapter Introduction**We have seen that the insurance industry deals with a large number of forms and\ndocuments in Chapter 7. There are some documents specific to life insurance,\nwhich are discussed in this chapter. Here, we are also discussing the main\nprovisions incorporated in a policy document. Provisions related to grace period,\npolicy lapse and non-forfeiture and certain other privileges are also discussed.**Learning Outcomes**169**A. Proposal stage documentation**Further to the common points discussed about the Prospectus and the Proposal\nForm in Chapter 7, there are some additional points that Life Insurers need to\nunderstand.**Prospectus:** In insurance, ‘Prospectus’ means a document in physical, electronic\nor any other format issued by the insurer to sell or promote the insurance product.\nThe prospectus of an insurance product shall clearly state(a) the Unique Identification Number (UIN) allotted by the Authority for theconcerned insurance product:\n(b) the scope of benefits;\n(c) the extent of insurance cover;\n(d) the warranties, exclusions/exceptions and conditions of the insurancecover along with explanations.\nThe prospectus should also provide:(a) a description of the contingency or contingencies to be covered by\ninsurance;\n(b) the class or classes of lives or property eligible for insurance under theterms of such prospectus.\nIn Life insurance, the prospectus should also mention about the Riders (also called\nAdd-on covers in Health and General Insurance) allowable on the product and\ntheir benefits.**Proposal Form:** In respect of Life insurance, the details of the proposers’ family\nmembers (including parents) indicating their longevity, status of health and\nailments suffered by any of them, are collected through the Proposal form.\nDepending on the product, the medical details of the life proposed for insurance,\nhis/ her personal history of disease and personal characteristics may also be asked\nfor. The Proposal Form is the document by which insurers get all the information\nthat they need from the prospect.Section 45 of the Insurance Act, provides that the Policy shall not be called in\nquestion on the ground of mis-statement after three years. Agents have an\nimportant role in guiding the prospect to give answers to all the questions in the\nProposal Form/ Medical Forms etc. truthfully and advising them of the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "m2", "section": "Terminal Bonus", "chunk_id": "Final IC 38 -IMF_Composite -English_084", "metadata": {"file_size": 20962, "chunk_index": 84, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus:", "Proposal Form:", "The Contribution Method", "Chapter Introduction"]}}
{"chunk": "The prospectus should also provide:(a) a description of the contingency or contingencies to be covered by\ninsurance;\n(b) the class or classes of lives or property eligible for insurance under theterms of such prospectus.\nIn Life insurance, the prospectus should also mention about the Riders (also called\nAdd-on covers in Health and General Insurance) allowable on the product and\ntheir benefits.**Proposal Form:** In respect of Life insurance, the details of the proposers’ family\nmembers (including parents) indicating their longevity, status of health and\nailments suffered by any of them, are collected through the Proposal form.\nDepending on the product, the medical details of the life proposed for insurance,\nhis/ her personal history of disease and personal characteristics may also be asked\nfor. The Proposal Form is the document by which insurers get all the information\nthat they need from the prospect.Section 45 of the Insurance Act, provides that the Policy shall not be called in\nquestion on the ground of mis-statement after three years. Agents have an\nimportant role in guiding the prospect to give answers to all the questions in the\nProposal Form/ Medical Forms etc. truthfully and advising them of the\nimplications of not doing so in terms of Section 45.Proposal Forms for Life Insurance should state the requirements of Section 45 of\nthe Act. While answering the questions in the Proposal Form for obtaining life\ninsurance cover, the prospect is to be guided by the provisions of Section 45 of\nthe Act.Similarly, Section 39 of the Act is about the provision of nomination. Wherever\nthe facility of Nomination is available to the proposer, the Agent shall inform\nhim/ her of the provisions of Section 39 of the Act and encourage the proposer to\navail the facility.170Aspects related to the personal financial planning of the life proposed including\nhis/ her work span, projected income and expenses, as well as needs for savings\nand investment, health, retirement and insurance may also be asked in the Life\nInsurance Proposal Form.**Age Proof:** Age being an important factor for assessing the risk profile of the life\nto be insured, Life insurers collect documentary evidence to verify correct age.\nValid age proofs may be standard or non-standard, as discussed in Chapter 7.Life insurers look into the following documents as well.**a)** **Agent’s Confidential Report**The agent is the primary underwriter. All material facts and particulars about the\npolicyholder, relevant to risk assessment, need to be revealed by the agent in\nhis/ her report. This means that matters of health, habits, occupation, income\nand family details need to be mentioned in the report.**b)** **Medical Examiner’s report**In many cases, the life to be insured has to be medically examined by a doctor\nwho is empanelled by the insurance company. Details of physical features like\nheight, weight, blood pressure, cardiac status etc. are recorded and mentioned\nby the doctor in his report called the medical examiner’s report. The underwriter\nof the insurance company thereby gets an account of the current health position\nof the life to be insured.Many proposals are underwritten and accepted for insurance without calling for\na medical examination. They are known as non–medical cases. The medical\nexaminer’s report is required typically when the proposal cannot be considered\nunder non-medical underwriting because the sum proposed or the age of the\nproposed life is high or there are certain characteristics which are revealed in the\nproposal, which call for examination and report by a medical examiner.**c)** **Moral Hazard report**Moral Hazard is the likelihood that a client's behaviour might change as a result\nof purchasing a life insurance policy and such a change would increase the chance\nof a loss. This is one factor that Life insurance underwriters take into account\nseriously when assessing the risk.Life insurance companies seek to guard against the possibility of individuals\nseeking to make a profit from the purchase of life insurance through actions like\nending one’s own life or the life of another. Life insurance underwriters would\nthus look for any factors which might suggest such hazard. For this purpose, the\ncompany may require that a Moral Hazard Report has to be submitted by an\nofficial of the insurance company.**Example**Vikas recently purchased a life insurance policy. He then decided to go on a skiing\nexpedition at a site which was touted to be one of the most dangerous skiing\nplaces on earth. In the past he had refused to undertake such expeditions.171**B. Policy Stage Documentation****1.** **First Premium Receipt**An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR).\n**The FPR is the evidence that the policy contract has begun.** The first premium\nreceipt contains the following information:i. Name and address of the life assured\nii. Policy number", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Proposal Form:", "chunk_id": "Final IC 38 -IMF_Composite -English_085", "metadata": {"file_size": 20962, "chunk_index": 85, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Proposal Form:", "B. Policy Stage Documentation", "Example", "First Premium Receipt"]}}
{"chunk": "of purchasing a life insurance policy and such a change would increase the chance\nof a loss. This is one factor that Life insurance underwriters take into account\nseriously when assessing the risk.Life insurance companies seek to guard against the possibility of individuals\nseeking to make a profit from the purchase of life insurance through actions like\nending one’s own life or the life of another. Life insurance underwriters would\nthus look for any factors which might suggest such hazard. For this purpose, the\ncompany may require that a Moral Hazard Report has to be submitted by an\nofficial of the insurance company.**Example**Vikas recently purchased a life insurance policy. He then decided to go on a skiing\nexpedition at a site which was touted to be one of the most dangerous skiing\nplaces on earth. In the past he had refused to undertake such expeditions.171**B. Policy Stage Documentation****1.** **First Premium Receipt**An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR).\n**The FPR is the evidence that the policy contract has begun.** The first premium\nreceipt contains the following information:i. Name and address of the life assured\nii. Policy number\niii. Premium amount paid\niv. Method and frequency of premium payment\nv. Next due date of premium payment\nvi. Date of commencement of the risk\nvii. Date of final maturity of the policy\nviii.Date of payment of the last premium\nix. Sum assuredAfter the issue of the FPR, the insurance company will issue subsequent premium\nreceipts when it receives further premiums from the proposer. These receipts are\nknown as renewal premium receipts (RPR). The RPRs act as proof of payment in\nthe event of any disputes related to premium payment.**2.** **Policy Document**The policy document is the most important document associated with insurance.\n**It is evidence of the contract between the assured and the insurance**\n**company.** It is not the contract itself. If the policy document is lost by the policy\nholder, it does not affect the insurance contract. The insurance company will\nissue a duplicate policy without making any changes to the contract. The policy\ndocument has to be signed by a competent authority and should be stamped\naccording to the Indian Stamp Act. Life insurers are very careful while designing\nthe policy document because they bear onus of responsibility for any ambiguity\nor confusion that may arise in the interpretation of its wordings.The standard policy document typically has three parts:**a)** **Policy Schedule**The policy schedule forms the first part. It is usually found on the face page\nof the policy. The schedules of life insurance contracts would be generally\nsimilar. They would normally contain the following information:172**Diagram 1:** **Policy document components**i. Name of the insurance companyii. Some common details of a policy are: Policy owner’s name and address\n Date of birth and age last birthday\n Plan and term of policy contract\n Sum assured\n Amount of premium\n Premium paying term\n Date of commencement, date of maturity and due date of lastpremium\n Whether policy is with or without profits\n Name of nominee\n Mode of premium payment – yearly; half yearly; quarterly; monthly;via deduction from salary\n The policy number – which is the unique identity number of the policycontractiii. The insurer’s promise to pay. The events on the happening of which andthe amounts that are promised to be paid. This forms the heart of the\ninsurance contractiv. The signature of the authorised signatory and policy stampv. The address of the local Insurance Ombudsman.**b)** **Standard Provisions**The second component of the policy document is made up of standard policy\nprovisions, such as relating to proof of age, premium payment grace period\netc. which are normally present in all life insurance contracts. Some of these\nprovisions may not be applicable in the case of certain kinds of contracts, like\nterm, single premium or non-participating (with profits) policies. These\nstandard provisions define the rights and privileges and other conditions,\nwhich are applicable under the contract.173**c)** **Specific Policy Provisions**The third part of the policy document consists of specific policy provisions\nthat are specific to the individual policy contract. These may be printed on\nthe face of the document or inserted separately in the form of an attachment.While standard policy provisions, like days of grace or non-forfeiture in case\nof lapse, are often statutorily provided under the contract, specific provisions\nare generally linked to the particular contract between the insurer and the\ninsured.**Example**A clause precluding death due to pregnancy for a lady who is expecting at the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_086", "metadata": {"file_size": 20962, "chunk_index": 86, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Standard Provisions", "Policy Schedule", "Diagram 1:", "Specific Policy Provisions", "Example"]}}
{"chunk": "insurance contractiv. The signature of the authorised signatory and policy stampv. The address of the local Insurance Ombudsman.**b)** **Standard Provisions**The second component of the policy document is made up of standard policy\nprovisions, such as relating to proof of age, premium payment grace period\netc. which are normally present in all life insurance contracts. Some of these\nprovisions may not be applicable in the case of certain kinds of contracts, like\nterm, single premium or non-participating (with profits) policies. These\nstandard provisions define the rights and privileges and other conditions,\nwhich are applicable under the contract.173**c)** **Specific Policy Provisions**The third part of the policy document consists of specific policy provisions\nthat are specific to the individual policy contract. These may be printed on\nthe face of the document or inserted separately in the form of an attachment.While standard policy provisions, like days of grace or non-forfeiture in case\nof lapse, are often statutorily provided under the contract, specific provisions\nare generally linked to the particular contract between the insurer and the\ninsured.**Example**A clause precluding death due to pregnancy for a lady who is expecting at the\ntime of writing the contract.**Test Yourself 1**What does a first premium receipt (FPR) signify? Choose the most appropriate\noption.I. Free-look period has ended\nII. It is evidence that the policy contract has begun\nIII. Policy cannot be cancelled now\nIV. Policy has acquired a certain cash value.**C. Policy conditions and privileges****Grace Period**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during\nthe grace period. Every life insurance contract undertakes to pay the death\nbenefit on the condition that the premiums have been paid up to date and the\npolicy is in force. The “Grace Period” clause grants the policyholder an additional\nperiod of time to pay the premium after it has become due.The premium however remains due and if the policyholder dies during this period,\nthe insurer deducts the premium from the death benefit. If premiums remain\nunpaid even after the grace period is over, the policy would then be considered\nlapsed and the company is not under obligation to pay the death benefit. The\nonly amount payable would be whatever is applicable under the non-forfeiture\nprovisions.**Important****Lapse and Reinstatement/ Revival**We have already seen that a policy may be said to be in lapse condition if premium\nhas not been paid even during the days of grace. The good news is that most\nlapsed life insurance policies can be reinstated [revived]. As per IRDAI Product\nRegulations, a Non-Linked Policy can be revived within 5 years from the date of\nunpaid premium, whereas a Linked Policy can be revived within 3 years.174**Definition**Reinstatement is the process by which a life insurance company puts back into\nforce a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A revival of the policy cannot however be an unconditional right of the insured.\nIt can be accomplished only under certain conditions:**i.** **Revival application within specific time period:** The policy owner must\ncomplete the revival application within the time frame stated in the\nprovision for such reinstatement, say five years from the date of lapsation.**ii.** **Satisfactory evidence of continued insurability:** The insured mustpresent to the insurance company satisfactory evidence of continued\ninsurability of the insured. Not only must her health be satisfactory but\nother factors such as financial income and morals must not have\ndeteriorated substantially.**iii.** **Payment of overdue premiums with interest:** The policy owner isrequired to make payment of all overdue premiums with interest from due\ndate of each premium.**iv.** After having evaluated the evidence of continued insurability the insurermay decide to revive the policy as per existing terms and premium or even\noffer revival with increase in premium or reduced risk cover or both.**Perhaps the most significant of the above conditions is that which requires**\n**evidence of insurability at revival.** The type of evidence called for would depend\non the circumstances of each individual policy. If the policy has been in a lapsed\nstate for a very short period of time, the insurer may reinstate the policy without\nany evidence of insurability or may only require a simple statement from the\ninsured certifying that he is in good health.The company may however require a medical examination or other evidence of", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Standard Provisions", "chunk_id": "Final IC 38 -IMF_Composite -English_087", "metadata": {"file_size": 20962, "chunk_index": 87, "chunk_tokens": 985, "has_examples": true, "has_tables": false, "key_concepts": ["Grace Period", "Specific Policy Provisions", "Test Yourself 1", "Example", "Payment of overdue premiums with interest:"]}}
{"chunk": "insurability of the insured. Not only must her health be satisfactory but\nother factors such as financial income and morals must not have\ndeteriorated substantially.**iii.** **Payment of overdue premiums with interest:** The policy owner isrequired to make payment of all overdue premiums with interest from due\ndate of each premium.**iv.** After having evaluated the evidence of continued insurability the insurermay decide to revive the policy as per existing terms and premium or even\noffer revival with increase in premium or reduced risk cover or both.**Perhaps the most significant of the above conditions is that which requires**\n**evidence of insurability at revival.** The type of evidence called for would depend\non the circumstances of each individual policy. If the policy has been in a lapsed\nstate for a very short period of time, the insurer may reinstate the policy without\nany evidence of insurability or may only require a simple statement from the\ninsured certifying that he is in good health.The company may however require a medical examination or other evidence of\ninsurability under certain circumstances:i. If the grace period has expired since long and the policy is in a lapsedcondition for say, nearly a year.ii. If the insurer has reason to suspect that a health or other problem may bepresent. Fresh medical examination may also be required if the sum\nassured or face amount of the policy is large.**Important**Revival of lapsed policies is an important service function that life insurers seek\nto actively encourage since policies in lapsed state may do little good to either\ninsurer or policyholder.175**Non-forfeiture provisions**The Insurance Act, 1938 (Section 113) protects policies (which have acquired\nsurrender value), from lapsation, by keeping them alive to the extent of paid-up\nsum assured even without payment of further premiums. This is because the\npolicyholder has a claim to the cash value accumulated under the policy.**a)** **Surrender values**Surrender value is the amount you stand to get when you decide to make a\npremature exit from the plan, i.e. when you have decided to completely\nwithdraw or terminate the policy before its maturity.Life insurers normally have a chart that lists the surrender values at various times\nand also the method that will be used for calculating the surrender values. The\nformula takes into account the type and plan of insurance, age of the policy and\nthe length of the policy premium-paying period.The actual amount of cash one gets in hand on surrender may be different from\nthe surrender value amount prescribed in the policy. The actual amount may\ndiffer on account of any accrued bonuses, recoveries etc.**Guaranteed Surrender Value [GSV]:** The law in India as per IRDAI Guidelines\n(revised in 2019) provides for a Guaranteed Surrender Value [GSV] to be payable\nif all premiums have been paid for at least two consecutive years. This Value\narrived as a percentage (say 30%) of premiums paid is called Guaranteed\nSurrender Value. The value depends on the duration of premium paid. The GSV is\nrequired to be mentioned in the policy document.**b)** **Policy loans**Life insurance policies that accumulate a cash value also have a provision to grant\nthe policyholder the right to borrow money from the insurer by using the cash\nvalue of the policy as a security for the loan. The policy loan is usually limited to\na percentage of the policy’s surrender value (say 90%). Note that the policyholder\nborrows from his own account. He or she would have been eligible to get the\namount if the policy had been surrendered. In that case the insurance would have\nbeen terminated.Insurers charge interest on policy loans, which are payable semi-annually or\nannually. Although loan and interest are repayable periodically, If the loan has\nnot been repaid, the insurer deducts the amount of outstanding (unpaid) loan and\ninterest from the policy benefit that is payable. A loan provides relief to\npolicyholder in case of financial emergencies while keeping the insurance alive.Since the loan is granted on the policy being kept as security, the policy has to\nbe assigned (explained in later para) in favour of the insurer. Where the\npolicyholder has nominated (explained in later para) someone to receive the\nmoney in the event of death of the insured, this nomination shall not be cancelled\nbut the nominee’s right will be affected to the extent of the insurer’s interest in\nthe policy.176**Example**Arjun bought a life insurance policy wherein the total death claim payable under\nthe policy was Rs. 2.5 lakhs. Arjun’s total outstanding loan and interest under the\npolicy amounts to Rs. 1.5 lakhs. Hence in the event of Arjun’s death, the nominee", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Payment of overdue premiums with interest:", "chunk_id": "Final IC 38 -IMF_Composite -English_088", "metadata": {"file_size": 20962, "chunk_index": 88, "chunk_tokens": 1020, "has_examples": true, "has_tables": false, "key_concepts": ["Policy loans", "Non-forfeiture provisions", "Example", "Payment of overdue premiums with interest:", "Important"]}}
{"chunk": "amount if the policy had been surrendered. In that case the insurance would have\nbeen terminated.Insurers charge interest on policy loans, which are payable semi-annually or\nannually. Although loan and interest are repayable periodically, If the loan has\nnot been repaid, the insurer deducts the amount of outstanding (unpaid) loan and\ninterest from the policy benefit that is payable. A loan provides relief to\npolicyholder in case of financial emergencies while keeping the insurance alive.Since the loan is granted on the policy being kept as security, the policy has to\nbe assigned (explained in later para) in favour of the insurer. Where the\npolicyholder has nominated (explained in later para) someone to receive the\nmoney in the event of death of the insured, this nomination shall not be cancelled\nbut the nominee’s right will be affected to the extent of the insurer’s interest in\nthe policy.176**Example**Arjun bought a life insurance policy wherein the total death claim payable under\nthe policy was Rs. 2.5 lakhs. Arjun’s total outstanding loan and interest under the\npolicy amounts to Rs. 1.5 lakhs. Hence in the event of Arjun’s death, the nominee\nwill be eligible to get the balance of Rs. 1 lakh.**Special policy provisions and endorsements****a)** **Nomination**i. Under Section 39 of the Insurance Act 1938, the holder of a policy on his/her own life may nominate the person or persons to whom the money\nsecured by the policy shall be paid in the event of his/her death.\nii. The life assured can **nominate one or more than one person** as nominees.\niii. Nominees are entitled for **valid discharge** and have to **hold the money as****a trustee** on behalf of those entitled to it.\niv. Nomination can be done either **at the time the policy is bought or later**at any time before the maturity of the Policy.\nv. Nomination may be incorporated in the text of the Policy itself or by anendorsement on the Policy. Nominations need be communicated to the\ninsurer and registered by the insurer in the records relating to the Policy.\nvi. Nomination can be cancelled or changed at any time before Policymatures, by an endorsement or a further endorsement or a will as the case\nmay be.**Important**Nomination only gives the nominee the right to receive the policy monies from\nthe insurer in the event of the death of the life assured. However, the money\nwould be belonging to the legal heir only. **A nominee does not have any right**\n**to the whole (or part) of the claim.** However vide Section 39(7) of Insurance\nAct,1938, in respect of all policies maturing for payment after 26 [th] December,\n2014, nomination in favour of parents, spouse, children or spouse and children\nby the owner of the policy on his/ own life makes the nominees beneficially\nentitled to the amount payable by the insurance company.Where the nominee is a minor, the policy holder needs to appoint an\nappointee. The appointee needs to sign the policy document to show his or\nher consent to acting as an appointee. The appointees lose their status when\nthe nominee reaches majority age. The policy holder can change the\nappointee at any time. If no appointee is given, and the nominee is a minor,\nthen on the death of the life assured, the death claim is paid to the legal heirs\nof the policyholder.Where more than one nominee is appointed, the death claim will be payable\nto them jointly, or to the survivor or survivors. Nominations made after the\ncommencement of the policy have to be intimated to the insurers to be\neffective.177Section 39(11) of the Insurance Act says that where a policyholder dies after\nthe maturity of the policy but the proceeds and benefit of his policy has not\nbeen made to him because of his death, his nominee shall be entitled to the\nproceeds and benefit of his policy.**Diagram 2:** **Provisions related to nomination****b)** **Assignment**Since life insurance policy carries a promise or a debt that the insurance\ncompany owes the insured, it is considered a security for money or property.\nWe have seen that loan is advanced against by the insurers against the\nsurrender value of the policy. Similarly, many financial institutions including\nbanks advance loan against the security of the insurance policy by having it\nassigned it in their favour.The term assignment ordinarily refers to transfer of property by writing in\nfavour of another person.The assignment of a life insurance policy implies the act of transferring the\nrights, title and interest in the policy (as property) from one person to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_089", "metadata": {"file_size": 20962, "chunk_index": 89, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Special policy provisions and endorsements", "Example", "Provisions related to nomination", "Important", "A nominee does not have any right"]}}
{"chunk": "to them jointly, or to the survivor or survivors. Nominations made after the\ncommencement of the policy have to be intimated to the insurers to be\neffective.177Section 39(11) of the Insurance Act says that where a policyholder dies after\nthe maturity of the policy but the proceeds and benefit of his policy has not\nbeen made to him because of his death, his nominee shall be entitled to the\nproceeds and benefit of his policy.**Diagram 2:** **Provisions related to nomination****b)** **Assignment**Since life insurance policy carries a promise or a debt that the insurance\ncompany owes the insured, it is considered a security for money or property.\nWe have seen that loan is advanced against by the insurers against the\nsurrender value of the policy. Similarly, many financial institutions including\nbanks advance loan against the security of the insurance policy by having it\nassigned it in their favour.The term assignment ordinarily refers to transfer of property by writing in\nfavour of another person.The assignment of a life insurance policy implies the act of transferring the\nrights, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called **assignor** and the person\nto whom property is transferred is called **assignee** . On assignment, the\nownership of the policy changes and hence nomination is cancelled, except\nwhen assignment is made to the insurance company for a policy loan.There are two types of assignments.**Diagram 3:** **Types of Assignment**178Absolute assignment is more commonly seen in many commercial situations\nwhere the policy is typically mortgaged against a debt assumed by the\npolicyholder, like a housing loan.**Conditions for valid assignment**Let us now look at the conditions that are necessary for a valid assignment.i. The assignor must have **absolute right and title or assignable interest** tothe policy being assigned.ii. The assignment should **not be opposed to any law in force** .iii. Assignee can do another assignment, but cannot do nomination becauseassignee is not the life assured.**Important** : A life insurance policy can be assigned wholly or partially The assignment must be signed by the transferor or assignor or dulyauthorized agent and attested by at least one witness. The transfer of title has to be specifically set forth in the form of anendorsement on the policy or a separate instrument.\n The policyholder must give notice of the assignment to the insurer,without which the assignment will not be valid. Section 38(2) specifies that an insurer may accept the assignment, ordecline the same, if it has sufficient reason to believe that such\nassignment is not bona fide or is not in the interest of the policyholder\nor in public interest or is for the purpose of trading of insurance policy. However, the insurer shall, before refusing to act upon theendorsement, record in writing the reasons for such refusal and\ncommunicate the same to the policyholder not later than thirty days\nfrom the date of the policyholder giving notice of such transfer or\nassignment.179**Diagram 4:** **Provisions related to assignment of insurance policies****Commonly extended privileges to policyholders**a) **Duplicate Policy:**A life insurance policy document is only an evidence of a promise. Loss or\ndestruction of the policy document does not in any way absolve the company\nof its liability under the contract. Life insurance companies generally have\nstandard procedures to be followed in case of loss of the policy document.Normally the office would examine the case to see if there is any reason to\ndoubt the alleged loss. Satisfactory proof may need to be produced that the\npolicy has been lost and not dealt with in any manner. Generally the claim\nmay be settled on the claimant furnishing an indemnity bond with or without\nsurety.If payment is shortly due and the amount to be paid is high, the office may\nalso insist that an advertisement be placed in a national paper with wide\ncirculation, reporting the loss. A duplicate policy may be issued on being sure\nthat there is no objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year\nof the policy, except for change in the mode of premium or alterations which\nare of a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "Final IC 38 -IMF_Composite -English_090", "metadata": {"file_size": 20962, "chunk_index": 90, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Commonly extended privileges to policyholders", "Types of Assignment", "Provisions related to nomination", "Conditions for valid assignment", "Important"]}}
{"chunk": "doubt the alleged loss. Satisfactory proof may need to be produced that the\npolicy has been lost and not dealt with in any manner. Generally the claim\nmay be settled on the claimant furnishing an indemnity bond with or without\nsurety.If payment is shortly due and the amount to be paid is high, the office may\nalso insist that an advertisement be placed in a national paper with wide\ncirculation, reporting the loss. A duplicate policy may be issued on being sure\nthat there is no objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year\nof the policy, except for change in the mode of premium or alterations which\nare of a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a\nseparate paper. Other alterations, which require a material change in policy180conditions, may require the cancellation of existing policies and issue of new\npolicies.Some of the main types of alterations that are permitted arei. Change in certain classes of insurance or term [where risk is not increased]\nii. Reduction in the sum assured\niii. Change in the mode of payment of premium\niv. Change in the date of commencement of the policy\nv. Splitting up of the policy into two or more policies\nvi. Removal of an extra premium or restrictive clause\nvii. Change from without profits to with profits plan\nviii. Correction in name\nix. Settlement option for payment of claim and grant of double accidentbenefitThese alterations generally do not involve an increase in the risk. There are\nother alterations in policies that are not allowed. These may be alterations\nthat have the effect of lowering the premium. Examples are extension of the\npremium paying term; change from with profit to without profit plans; change\nfrom one class of insurance to another, where it increases the risk: and\nincrease in the sum assured.**Test Yourself 2**Under what circumstances would the policyholder need to appoint an appointee?I. Insured is minorII. Nominee is a minor\nIII. Policyholder is not of sound mind\nIV. Policyholder is not married**Summary**Matters of health, habits and occupation, income and family details need to\nbe mentioned by the agent in the agent’s report.Details pertaining to physical features like height, weight, blood pressure,\ncardiac status etc. are recorded and mentioned by the doctor in his/ her\nreport called the medical examiner’s report.Moral hazard is the likelihood that a client's behaviour might change as a result\nof purchasing a life insurance policy and such a change would increase the\nchance of a loss.An insurance contract commences when the life insurance company issues a\nfirst premium receipt (FPR). The FPR is the evidence that the policy contract\nhas begun.The policy document is the most important document associated with\ninsurance. It is the evidence of the contract between the assured and the\ninsurance company.The standard policy document typically has three parts which are the policy\nschedule, standard provisions and the policy’s specific provisions.181The grace period clause grants the policyholder an additional period of time\nto pay the premium after it has become due.Reinstatement is the process by which a life insurance company puts back into\nforce a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A policy loan is different from an ordinary commercial loan in two respects,\nfirstly the policy owner is not legally obligated to repay the loan and the\ninsurer need not perform a credit check on the insured.Nomination is where the life assured proposes the name of the person(s) to\nwhich the sum assured should be paid by the insurance company after their\ndeath.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except\nfor some simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y180", "section": "Alteration", "chunk_id": "Final IC 38 -IMF_Composite -English_091", "metadata": {"file_size": 20962, "chunk_index": 91, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Key Terms", "Alteration", "Test Yourself 2"]}}
{"chunk": "force a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A policy loan is different from an ordinary commercial loan in two respects,\nfirstly the policy owner is not legally obligated to repay the loan and the\ninsurer need not perform a credit check on the insured.Nomination is where the life assured proposes the name of the person(s) to\nwhich the sum assured should be paid by the insurance company after their\ndeath.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except\nfor some simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period\n10. Policy lapse\n11. Policy revival\n12. Surrender value13. Nomination\n14. Assignment**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.182## CHAPTER L-08## LIFE INSURANCE UNDERWRITING**Chapter Introduction**A life insurance agent’s work does not stop once a proposal is secured from a\nprospective customer. The proposal must also be accepted by the insurance\ncompany and result in a policy.Every life insurance proposal has to pass through a gateway where the life insurer\ndecides whether to accept the proposal and if so, on what terms. In this chapter\nwe shall know more about the process of underwriting and the elements involved\nin the process.**Learning Outcomes**183**A.** **Underwriting – Basic concepts****1.** **Underwriting purpose**Underwriting has two purposesi. To assess the risk, classify the risk and decide the terms of acceptance orto decline the risk.\nii. To prevent anti-selection against the insurer**Definition**The term **underwriting** refers to the process of evaluating each proposal for life\ninsurance in terms of the degree of risk it represents and then deciding whether\nor not to grant insurance and on what terms.**Anti-selection** is the tendency of people, who suspect or know that their chance\nof experiencing a loss is high, to seek out insurance with a view to gain in theprocess.**Example**If life insurers were to be not selective about whom they offered insurance, there\nis a chance that people with serious ailments like heart problems or cancer, who\ndid not expect to live long, would seek to buy insurance.In other words, if an insurer did not exercise underwriting discretion, it would be\nselected against and may suffer losses in the process.**2.** **Equity among risks**The term “Equity” means that applicants who are exposed to similar degrees of\nrisk must be placed in the same premium class. The Mortality table, used to\ndetermine premiums, represents the mortality experience of standard lives or\naverage risks. They include the vast majority of individuals who propose to take\nlife insurance.**a)** **Risk classification**To usher equity, the underwriter engages in a process known as **risk classification**\ni.e. individual lives are categorised and assigned to different risk classes\ndepending on the degree of risks they pose. There are four such risk classes.**Diagram 1:** **Risk classification**184**i.** **Standard lives**\nThese consist of those whose anticipated mortality corresponds to the\nstandard lives represented by the mortality table.**ii.** **Preferred risks**\nThese are the ones whose anticipated mortality is significantly lower than\nstandard lives and hence could be charged a lower premium.**iii.** **Substandard lives**\nThese are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable\ncost. Sometimes an individual’s proposal may also be temporarily declined if\nhe or she has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e13", "section": "Key Terms", "chunk_id": "Final IC 38 -IMF_Composite -English_092", "metadata": {"file_size": 20962, "chunk_index": 92, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Field or Primary level", "Equity among risks", "Substandard lives", "Chapter Introduction"]}}
{"chunk": "These consist of those whose anticipated mortality corresponds to the\nstandard lives represented by the mortality table.**ii.** **Preferred risks**\nThese are the ones whose anticipated mortality is significantly lower than\nstandard lives and hence could be charged a lower premium.**iii.** **Substandard lives**\nThese are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable\ncost. Sometimes an individual’s proposal may also be temporarily declined if\nhe or she has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes\ninformation gathering by an agent or company representative to decide\nwhether an applicant is suitable for granting insurance coverage. The agent\nplays a critical role as primary underwriter. He is in the best position to know\nthe life to be insured.Many insurance companies may require that agents complete a statement or\na confidential report, asking for specific information, opinion and\nrecommendations to be provided by the agent with respect to the proposed\nlife.185**Fraud monitoring and role of agent as primary underwriter**Much of the decision with regard to acceptance of a risk depends on the facts\nthat have been disclosed by the proposer in the proposal form. It may be\ndifficult for an underwriter who is sitting in the underwriting department to\nknow whether these facts are untrue and have been fraudulently\nmisrepresented with deliberate intent to deceive.The agent plays a significant role here. He or she is in the best position to\nensure that the facts that have been represented are true, due to his/ her\ndirect and personal contact with the proposed life.**b)** **Underwriting at the Department level**The main level of Underwriting is at the Department or Office level. It involves\nspecialists and persons who consider all the relevant data on the case to\ndecide whether to accept a proposal for Life insurance and on what terms.**4.** **Methods of underwriting****Diagram 2:** **Methods of Underwriting**Underwriters may use two types of methods for the purpose:|Judgment Method|Numerical Method|\n|---|---|\n|~~Under~~<br>~~this~~<br>~~method~~<br>subjective<br>judgment<br>is<br>used,<br>especially<br>when<br>deciding on a case that is<br>complex.<br>|~~Under this method underwriters assign positive~~<br>rating points for all negative or adverse factors<br>(negative points for any positive or favourable<br>factors).<br>|\n|~~**Example:**Deciding whether~~<br>life insurance can be given<br>to a person staying in a<br>disturbed country/ area.<br>|~~**Example:** A person with history of cardiac~~<br>ailments and/ or early deaths in the family may<br>be assigned positive points. The total number<br>of points so assigned will help an underwriter<br>in deciding the extent of risk involved.<br>|\n|~~In such situations, the~~<br>department may get the<br>expert opinion of a medical<br>doctor who is also called a<br>medical referee.|~~The sum total of these positive/negative~~<br>points, and/or is referred to as Extra Mortality<br>Rating (EMR). Higher EMR indicates that the<br>life is substandard. If the EMR is very high,<br>underwriters may decline insurance.|186**Underwriting Decisions**Let us now consider the various kinds of decisions that underwriters may take\nwith regard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. Thisrating indicates that the risk is accepted at the same rate of premium as\nwould apply to an ordinary or standard life.**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing withthe large majority of sub-standard risks. It involves charging an extra over\nthe tabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount\nof benefit it has to pay in the event of a claim.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Preferred risks", "chunk_id": "Final IC 38 -IMF_Composite -English_093", "metadata": {"file_size": 20962, "chunk_index": 93, "chunk_tokens": 1005, "has_examples": true, "has_tables": true, "key_concepts": ["Underwriting at the Department level", "Methods of Underwriting", "Methods of underwriting", "Acceptance with a lien on the sum assured:", "Substandard lives"]}}
{"chunk": "with regard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. Thisrating indicates that the risk is accepted at the same rate of premium as\nwould apply to an ordinary or standard life.**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing withthe large majority of sub-standard risks. It involves charging an extra over\nthe tabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount\nof benefit it has to pay in the event of a claim.\n**Example: Consider the case of an insured who** has suffered and\nrecovered from a certain disease like TB. Imposition of Lien would imply\nthat if this person were to die from a relapse of the TB, within a given\nperiod, only a decreased amount of death benefit may be payable.\n**d)** **Acceptance with a restrictive clause:** For certain kinds of hazards arestrictive clause may be applied which limits death benefit in the event\nof death under certain circumstances.**Example** is a pregnancy clause imposed on pregnant ladies that limits\ninsurance payable in the event of pregnancy related deaths occurring\nwithin say three months of delivery.187**e)** **Decline or postpone:** Finally, a life insurance underwriter may decide todecline or reject a proposal for insurance. This would happen when there\nare certain health/ other features which are so adverse that they\nconsiderably increase the risk.**Example:** An individual who suffers from cancer and has little chance of\nremission, would be a candidate for rejection,Similarly in some cases it may be prudent to postpone acceptance of the risk\nuntil such time as the situation has improved and become more favourable.**Example**A lady who has just had a hysterectomy operation may be asked to wait for a few\nmonths before insurance on her life is allowed, to allow any post operation\ncomplications that may have arisen to disappear.**Test Yourself 1**Which of the following cases is likely to be declined or postponed by a life insurer?I. A healthy 18 year old\nII. A sports person\nIII. A person suffering from AIDS\nIV. A housewife with no income of her own**B.** **Non-medical underwriting****1.** **Non-medical underwriting**A large number of life insurance proposals may typically get selected for\ninsurance without conducting a medical examination to check the insurability of\na life to be insured. Such cases are termed as **non-medical proposals** .In view of multiple reasons including the costs involved, in some types of policies,\nLife insurers grant insurance without insisting on a medical examination\n**2.** **Conditions for non-medical underwriting**However non-medical underwriting calls for conditions like applicability to\ncertain class of lives, certain plans of insurance, certain upper limits of sum\ninsured, entry age limits, maximum term of insurance etc.to be followed.\n**3.** **Rating factors in underwriting**Rating factors refer to various aspects related to financial situation, life style,\nhabits, family history, personal history of health and other personal\ncircumstances in the prospective insured’s life that may pose a hazard and\nincrease the risk. Underwriting involves identifying these hazards and their likely\nimpact and classifying the risk accordingly.Rating factors may be broadly divided into two – those which contribute to moral\nhazard and those which contribute to physical [medical] hazards. Life insurance\ncompanies often divide their underwriting into categories accordingly. Factors188like income, occupation, lifestyle and habits, which contribute to moral hazard,\nare assessed as part of **financial underwriting**, while medical aspects of health\nfall under **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face\nsome problems with respect to moral hazard. This is because many women in\nIndian society are victims of male domination and social exploitation. Evils\nlike dowry deaths exist even today. Longevity of women can also be affected\nfrom problems connected with pregnancy.Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only\nto those who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**Minors have no contracting power of their own. Hence a proposal on the life\nof a minor has to be submitted by another person who is related to the minor\nin the capacity of a parent or legal guardian. It would also be necessary to\nascertain the need for insurance, since minors usually have no earned income", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s188", "section": "Acceptance at ordinary rates (OR)", "chunk_id": "Final IC 38 -IMF_Composite -English_094", "metadata": {"file_size": 20962, "chunk_index": 94, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Example: Consider the case of an insured who", "Acceptance with a restrictive clause:", "Minors", "Acceptance with a lien on the sum assured:", "Test Yourself 1"]}}
{"chunk": "are assessed as part of **financial underwriting**, while medical aspects of health\nfall under **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face\nsome problems with respect to moral hazard. This is because many women in\nIndian society are victims of male domination and social exploitation. Evils\nlike dowry deaths exist even today. Longevity of women can also be affected\nfrom problems connected with pregnancy.Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only\nto those who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**Minors have no contracting power of their own. Hence a proposal on the life\nof a minor has to be submitted by another person who is related to the minor\nin the capacity of a parent or legal guardian. It would also be necessary to\nascertain the need for insurance, since minors usually have no earned income\nof their own. Three conditions would generally be sought when considering\ninsurance for minors:**i.** **Whether they have a properly developed physique**Poor physique can be a result of malnutrition or other health problems\nposing grave risks.**ii.** **Proper family history and personal history**If there are adverse indicators here, it may pose risks.**iii.** **Whether the family is adequately insured**It is necessary to check if the family has a culture of insurance. One must\nbe on guard if no other member of the minor’s family has been insured.\nAmount of insurance is generally linked to that of parents.\n**c)** **Large sums assured**An underwriter needs to be wary when the amount of insurance is very large\nrelative to annual income of the proposed insured. Generally sum assured may\nbe assumed to be around ten to twelve times one’s annual income. If the ratio\nis much higher than this, it raises the possibility of selection against the\ninsurer.**Example**\nIf an individual has an annual income of Rs. 5 lakhs and proposes for a life\ninsurance cover of Rs. 3 crores, it raises a cause for concern.Typically concerns can arise in such instances because of the possibility that\nsuch a large amount of insurance is being proposed in anticipation of suicide189or as a result of expected deterioration in health. A third reason for such large\nsums could be excessive misselling by the sales person.Large sums assured would also mean premiums increasing in proportion and\nraise the question of whether the payment of such premiums would be\ncontinued. In general, the premium payable should be within one third of an\nindividual’s annual income**d)** **Age**\nMortality risk is closely related to age. The underwriter needs to be careful\nwhen considering insurance for people of advanced ages.**Example**\nIf the insurance is being proposed for the first time after age 50, there is a\nneed to suspect moral hazard and enquire about why such insurance was not\ntaken earlier.We must also note that chances of occurrence of degenerative diseases like\ndiseases of the heart and kidney failure increase with age and become higher\nat older ages. Life insurers may also seek for some special reports when\nproposals are submitted for high sums assured/ advanced ages or a\ncombination of both.**Example**\nExamples of such reports are ECG; EEG; X-Ray of the chest and Blood Sugar\ntest. These tests may reveal deeper insights about the health of the proposed\nlife than the answers given in the proposal or an ordinary medical examination\ncan provide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of\nthe life proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard190**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus\nartistes, scaffolding workers, demolition experts and film stunt artistes.**ii.** **Health hazards** arise when the nature of the job is such as to give rise to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e189", "section": "Female insurance", "chunk_id": "Final IC 38 -IMF_Composite -English_095", "metadata": {"file_size": 20962, "chunk_index": 95, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Minors", "Occupation", "Accidental hazards", "Health hazards"]}}
{"chunk": "can provide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of\nthe life proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard190**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus\nartistes, scaffolding workers, demolition experts and film stunt artistes.**ii.** **Health hazards** arise when the nature of the job is such as to give rise to\npossibility of medical impairment. There are various kinds of health hazards. Some jobs like that of **rickshaw pullers** involve a lot of physical strainand impact the respiratory system. Situations where one may be exposed to **toxic substances** like miningdust or carcinogenic substances (that cause cancer) like chemicals and\nnuclear radiation. Working in **high pressure environments** like underground tunnels ordeep sea, can cause acute decompression sickness. Finally, **overexposure** to certain job situations (like sitting crampedbefore a computer or working in a high noise setting) can impair\nfunctioning of certain body parts in the longer run.**iii.** **Moral hazard** can arise when a job involves proximity or can cause\npredisposition towards criminal elements or to drugs and alcohol. An\nexample is that of a dancer in a nightclub or an enforcer in a liquor bar or\nthe ‘bodyguard’ of a businessman with suspected criminal links. Again the\njob profiles of certain individuals like superstar entertainers may lead them\nto intoxicating lifestyles, which sometimes come to tragic ends.When an occupation falls under any such hazardous category, the applicant\nfor insurance may need to complete an occupational questionnaire that asks\nfor specific details of the job, duties involved and risks exposed to. A rating\nmay also be imposed for occupation in the form of a flat extra (for example\nRupees two per thousand sums assured.) Such extra may be reduced or\nremoved when the insured’s occupation changes.**f)** **Lifestyle and habits**Lifestyle and habits are terms, covering a wide range of individual lifestyle\ncharacteristics, which may be brought out in the agent’s confidential reports191and moral hazard reports, suggesting an exposure to risk. In particular three\nfeatures are important:**Smoking and tobacco use** : Use of tobacco is not only a risk in itself but also\ncontributes to increasing other medical risks. Companies charge differential\nrates today for smokers and non-smokers and users of other forms of tobacco\nusage like _gutkha_ and _paan masala_ .**Alcohol:** Drinking alcohol occasionally or in modest quantities is not\nconsidered a hazard. However, long term heavy drinking can impair liver\nfunctioning, affect the digestive system and lead to mental disorders.\nAlcoholism is also linked with accidents, violence, family abuse, depression\nand suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants.\nSome of these are even illegal and their use indicates criminal disposition and\nmoral hazard.**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical\nunderwriting. They may often call for a medical examiner’s report. Let us look at\nsome of the factors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision**192**a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d190", "section": "Examples", "chunk_id": "Final IC 38 -IMF_Composite -English_096", "metadata": {"file_size": 20962, "chunk_index": 96, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Moral hazard", "Health hazards", "Occupation", "Accidental hazards"]}}
{"chunk": "and suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants.\nSome of these are even illegal and their use indicates criminal disposition and\nmoral hazard.**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical\nunderwriting. They may often call for a medical examiner’s report. Let us look at\nsome of the factors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision**192**a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to\nanother, say from parents to children.**ii.** **Average longevity of the family** : When the parents have died early onaccount of certain diseases like heart trouble or cancer, it may be a\npointer that the offspring may also not live long.**iii.** **Family environment** : Thirdly, the environment in which the family livescan cause exposure to infection and other risks.Life insurers have thus to be careful when entertaining cases of individuals\nwith adverse family history. They may call for other reports and may impose\nan extra mortality rating in such cases.**b)** **Personal history**Personal history refers to past impairments of various systems of the human\nbody which the life to be insured has suffered from. The proposal form for\nlife insurance typically contains a set of questions which enquire whether the\nlife to be insured has been under treatment for any of these.The major kinds of ailments that are considered by the underwriters include\nCardiovascular diseases, diseases of the respiratory system, malignant\ntumours/ cancer, ailments of the renal system, impairments of the endocrine\nsystem, diseases of the digestive system like gastric ulcers and cirrhosis of the\nliver and diseases of the nervous system.**c)** **Personal characteristics**These can also be significant indicators of the tendency to disease.**i.** **Build**A person’s build consists of his height, weight, chest and girth of the\nabdomen. For given age and height, there is a standard weight that has been\ndefined and if the weight is too high or low in relation to this standard weight,\nwe can say that the person is overweight or underweight.Similarly, it is expected that the chest should be expanded at least by four\ncentimetres in a normal person and that the abdominal girth should not be\nmore than one’s expanded chest.**ii.** **Blood pressure**Another indicator is a person’s blood pressure. There are two measures of this Systolic Diastolic193When the actual readings are much higher than the normal values, we say\nthat the person has high blood pressure or hypertension. When it is too low,\nit is termed as hypotension. The former can have serious consequences.**iii.** **Urine – Specific gravity**Finally, a reading of the specific gravity of one’s urine can indicate the\nbalance among various salts in the urinary system. It can indicate any\nmalfunctioning of the system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought\nit in April 2013. You and your insurance company agree to change the policy\nto officially start it from April, 2013. In this case, you have backdated the\npolicy. Usually, no interest is charged if the policy is backdated by less than\na month.Backdating is done for the following purposes:(i) **Getting a lower premium based on age:** While issuing the policy,insurers consider the nearest age of the policyholder. It means if you are\n32 years and 7 months old, the insurer will consider your age as 33 years.\nThis nearest age may put you in a higher premium slab. However, if you\nbackdate the policy by 2 months, the insurer will consider your age as 32\nyears and 5 months only. Now you will be paying lower premiums based", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "c193", "section": "Substance abuse", "chunk_id": "Final IC 38 -IMF_Composite -English_097", "metadata": {"file_size": 20962, "chunk_index": 97, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Substance abuse", "Backdating:", "Getting a lower premium based on age:", "Average longevity of the family", "Blood pressure"]}}
{"chunk": "balance among various salts in the urinary system. It can indicate any\nmalfunctioning of the system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought\nit in April 2013. You and your insurance company agree to change the policy\nto officially start it from April, 2013. In this case, you have backdated the\npolicy. Usually, no interest is charged if the policy is backdated by less than\na month.Backdating is done for the following purposes:(i) **Getting a lower premium based on age:** While issuing the policy,insurers consider the nearest age of the policyholder. It means if you are\n32 years and 7 months old, the insurer will consider your age as 33 years.\nThis nearest age may put you in a higher premium slab. However, if you\nbackdate the policy by 2 months, the insurer will consider your age as 32\nyears and 5 months only. Now you will be paying lower premiums based\non a plan for a 32-year old.(ii) **Set the timing of payment:** There are specific professions where theincome flow is not steady. In such a scenario if an individual accidently\nbuys a life insurance policy in its off-season then the policy can be\nbackdated to the period of maximum earnings. For instance, a farmer\nmay have a seasonal income. He would prefer to make insurance\npayments only after he has received his crop proceedings. In this case, a\nfarmer could backdate the policy to start it in the harvest season.(iii) **To coincide with special dates:** You can backdate the policy to coincidewith your important dates, such as birthday and anniversary. It keeps\neasy for you to remember your premium due date.(iv) **Early maturity claims** : Backdating reduces the tenure of a policy andfacilitates early maturity. For instance, if a 30-year life insurance cover\nbought on March 2000 is backdated to April 1999, the policy would mature\non April, 2029 instead of March 2030. In case of endowment policies, this\ncould be beneficial as maturity benefits accrue earlier.194**Test Yourself 3**Why is heredity history of importance in medical underwriting?I. Rich parents have healthy kids\nII. Certain diseases can be passed on from parents to children\nIII. Poor parents have malnourished kids\nIV. Family environment is a critical factor**Summary**To bring equity, the underwriter engages in risk classification where individual\nlives are categorised and assigned to different risk classes depending on the\ndegree of risks they pose.Underwriting process may be said to take place at two levels: At field level and At underwriting department levelUnderwriting decisions made by underwriters include acceptance of standard\nrisk at standard rates or charging extra for sub-standard risks. Sometimes\nthere is acceptance with lien on sum assured or acceptance is based on\nrestrictive clauses. Where the risk is large the proposal is declined or\npostponed.A large number of life insurance proposals may typically get selected for\ninsurance without conducting a medical examination. Such cases are termed\nas non-medical proposals.Some of the rating factors for non-medical underwriting include Age Large sum assured Moral hazard etc.Some of the factors considered in medical underwriting include Family history, Heredity and personal history etc.**Key Terms**1. Underwriting\n2. Standard life\n3. Non-medical underwriting\n4. Rating factor1955. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.196## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the\nforms to be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**197**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a\npolicy results into a claim. The true value of life insurance is judged by the way\na claim is settled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "r1955", "section": "Backdating:", "chunk_id": "Final IC 38 -IMF_Composite -English_098", "metadata": {"file_size": 20962, "chunk_index": 98, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Set the timing of payment:", "To coincide with special dates:", "Answers to Test Yourself", "Answer 2", "Backdating:"]}}
{"chunk": "2. Standard life\n3. Non-medical underwriting\n4. Rating factor1955. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.196## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the\nforms to be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**197**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a\npolicy results into a claim. The true value of life insurance is judged by the way\na claim is settled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that\nlife insurers, shall process death claims without delay and call for all\nrequirements together, within 15 days of the receipt of the death intimation.A death claim shall be paid, rejected or repudiated giving all the relevant\nreasons, within 30 days from the date of receipt of all relevant papers/\nclarifications.If, in the opinion of the insurer, the claim warrants investigation, it shall\ncomplete the same expeditiously, within 90 days from the date of intimation and\nsettle the claim within 30 days thereafter.IRDAI specifies that in respect of Maturity clams, Survival Benefit claims and\nAnnuities, the Life Insurer shall initiate the claim process by sending advance\nintimation, by sending post-dated cheque or by giving direct credit to the bank\naccount of the claimant through any electronic mode approved by RBI, so as to\npay the claim on or before the due date.**Definition**A claim is a demand that the insurer should make good the promise specified in\nthe contract.A claim under a life insurance contract is triggered by the happening of one or\nmore of the events covered under the insurance contract. While in some claims,\nthe contract continues, in others, the contract is terminated.Claims can be of two types:**i.** survival claims payable when the life assured is alive and**ii.** death claim**Diagram 1:** **Types of claims**While a **death claim** arises only upon the death of the life assured, **survival claims**\nare payable on happening of events specified in the policy.198**Important**In all claims situations, the insurer has to ensure that the identity of the claimant\nis proven and well documented as per KYC norms.**Example**Such specified events where the claims are paid to the insured.i. The insured reaching the maturity period of the policy;\nii. The insured reaching the pre-decided duration(s) under a money-backpolicy, when instalment(s) become payable; or under annuity plans.\niii. Occurrences of Critical illnesses covered under the policy (as a riderbenefit or otherwise);\niv. Surrender of the policy either by the policyholder or assignee;**B.** **Ascertaining whether a claim situation has occurred****i.** **Survival claim** is payable to the insured on reaching the period of maturityor fulfilling conditions stipulated in the policy.**ii.** **Maturity claims and money-back instalment claims** are easily establishedas they are based on dates which are determined at the beginning of the\ncontract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy\nare clearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments.Here, unlike other claims, the event is triggered by the decision of the\npolicy holder or assignee to cancel the contract and withdraw what is due\nto him or her under the contract. There is typically a penalty for\npremature withdrawal. The amount paid would be less than what would\nbe due under a full claim and hence would be less than what would have\nbeen due if the full claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned,", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "r1955", "section": "Answers to Test Yourself", "chunk_id": "Final IC 38 -IMF_Composite -English_099", "metadata": {"file_size": 20962, "chunk_index": 99, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Survival claim", "Answer 3", "Diagram 1:"]}}
{"chunk": "contract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy\nare clearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments.Here, unlike other claims, the event is triggered by the decision of the\npolicy holder or assignee to cancel the contract and withdraw what is due\nto him or her under the contract. There is typically a penalty for\npremature withdrawal. The amount paid would be less than what would\nbe due under a full claim and hence would be less than what would have\nbeen due if the full claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned,\nall the benefits would be payable to the assignee and it would not meet the\nintended purpose of the critical illness benefit. To avoid this situation, policy\nholders need to be educated about the extent of benefits they may assign by way\nof a conditional assignment.199A **maturity or death claim** or a surrender leads to termination of the insurance\ncover under the contract and no further insurance cover is available.**Types of claims:** The following payments may occur during the policy term:\n**a)** **Survival Benefit Payments**Periodical payments are made by the insurer to the insured at specified times\nduring the term of the policy.**I.** **Surrender of Policy**Surrender value reflects the value of investments and depends on various\nfactors such as sum assured, bonuses, policy term and premiums paid.\nPremature closing of a life insurance policy is a voluntary termination of the\npolicy contract. A policy can be surrendered only if it has acquired paid-up\nvalue. The amount payable to the insured is the **surrender value** which is\nusually a percentage of the premiums paid. The actual surrender value paid\nto the insured is more than the Guaranteed Surrender Value (GSV).**II.** **Rider Benefit**A payment under a rider is made by an insurance company on the occurrence\nof a specified event according to the terms and conditions.Under a **critical illness rider**, in the event of diagnosis of a critical illness, a\nspecified amount is paid as per terms. The illness should have been covered\nin the list of critical illnesses specified by the insurance company.Under **hospital care rider**, the insurer pays the treatment costs in the event\nof hospitalisation of the insured, subject to terms and conditions.The policy contract continues even after the rider payments are made.The following claim payments are made at the end of the policy term specified\nin the insurance contract.**III.** **Maturity Claim**In such claims, the insurer promises to pay the insured a specified amount at\nthe end of the term, if the insured survives the plan’s entire term. This is\nknown as a **maturity claim.****i.** **Participating Plan:** The maturity claim amount payable under aparticipating plan is the sum assured plus accumulated bonuses less dues\nsuch as outstanding premium and policy loans and interests thereon.\n**ii.** **Return of Premium (ROP) Plan:** In some cases premiums paid over theterm period are returned when the policy matures.\n**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.200**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which\nis paid to the nominee or assignee or legal heir whatever the situation may\nbe. A death claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Surrender value payments", "chunk_id": "Final IC 38 -IMF_Composite -English_100", "metadata": {"file_size": 20962, "chunk_index": 100, "chunk_tokens": 986, "has_examples": true, "has_tables": false, "key_concepts": ["Maturity Claim", "Participating Plan:", "Rider Benefit", "III.", "Annuities:"]}}
{"chunk": "**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.200**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which\nis paid to the nominee or assignee or legal heir whatever the situation may\nbe. A death claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,\ndate and place of death.**i.** **Forms to be submitted for death claim**Usually, the following forms are to be submitted by the beneficiary to the\ninsurer to facilitate processing of the claim: Claim form by nominee\n Certificate of burial or cremation\n Treating physician’s certificate\n Hospital’s certificate\n Employer’s certificate\n Death certificate issued by municipal authorities etc., as proof ofdeath\n Certified court copies of police reports like First Information Report(FIR), Inquest Report, Post-Mortem Report, and Final Report - these\nreports are required in case of death by accident.**Diagram 2:** **Forms to be submitted for Death Claim**201**ii.** **Repudiation of death claim**The death claim may be paid or repudiated. If, while processing the claim,\nthe insurer detects that the proposer had made any incorrect statements or\nhad suppressed material facts relevant to the policy, the contract would be\ndeclared as void. All benefits under the policy are forfeited.**iii.** **Section 45: Indisputability Clause**However this penalty is subject to **Section 45** of the Insurance Act, 1938.**Important****Section 45 states:**“No policy of life insurance shall be called in question on any ground\nwhatsoever after the expiry of three years from the date of the policy, i.e.\nfrom the date of issuance of the policy or the date of commencement of risk\nor the date of revival of the policy or the date of the rider to the policy,\nwhichever is later”.**C.** **Claim Procedure for Life Insurance Policy****Although there is no laid down standard claims procedure for all insurers,**\n**the IRDAI has laid down guidelines for insurers in the matter of claim**\n**settlement.****Regulation 8: Claims procedure in respect of a life insurance policy**i. A life insurance policy shall state the **primary documents** which arenormally required to be submitted by a claimant in support of a claim.ii. A life insurance company, upon receiving a claim, shall process the claimwithout delay. Any queries or requirement of additional documents, to the\nextent possible, shall be raised all at once and not in a piece-meal manner,\nwithin a period of 15 days of the receipt of the claim.iii. As per the IRDAI (Protection of Policyholders’ Interests) Regulations, 2017,a death claim under a life insurance policy shall be paid, rejected or\nrepudiated giving all the relevant reasons, within 30 days from the date\nof receipt of all relevant papers and required clarifications. However, if\nthe insurer needs the claim to be investigated, it shall initiate and\ncomplete the investigation at the earliest, in any case not later than 90\ndays from the date of receipt of claim intimation. The claim should be\nsettled within 30 days of completing the investigation.iv. Where a claim is ready for payment but the payment cannot be made dueto any reasons of proper identification of the payee, the life insurer shall\nhold the amount for the benefit of the payee and it shall earn interest at\nthe rate applicable to a savings bank account with a scheduled bank202(effective from 30 days following the submission of all papers and\ninformation).v. Where there is a delay on the part of the insurer in processing a claim fora reason other than the one covered by sub-regulation (iv), the life\ninsurance company shall pay **interest on the claim amount at a rate**\n**which is 2% above the bank rate** prevalent at the beginning of the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "k202", "section": "Unit Linked Insurance Plan (ULIP):", "chunk_id": "Final IC 38 -IMF_Composite -English_101", "metadata": {"file_size": 20962, "chunk_index": 101, "chunk_tokens": 999, "has_examples": false, "has_tables": false, "key_concepts": ["Repudiation of death claim", "Section 45", "Section 45: Indisputability Clause", "Unit Linked Insurance Plan (ULIP):", "Important"]}}
{"chunk": "repudiated giving all the relevant reasons, within 30 days from the date\nof receipt of all relevant papers and required clarifications. However, if\nthe insurer needs the claim to be investigated, it shall initiate and\ncomplete the investigation at the earliest, in any case not later than 90\ndays from the date of receipt of claim intimation. The claim should be\nsettled within 30 days of completing the investigation.iv. Where a claim is ready for payment but the payment cannot be made dueto any reasons of proper identification of the payee, the life insurer shall\nhold the amount for the benefit of the payee and it shall earn interest at\nthe rate applicable to a savings bank account with a scheduled bank202(effective from 30 days following the submission of all papers and\ninformation).v. Where there is a delay on the part of the insurer in processing a claim fora reason other than the one covered by sub-regulation (iv), the life\ninsurance company shall pay **interest on the claim amount at a rate**\n**which is 2% above the bank rate** prevalent at the beginning of the\nfinancial year in which the claim is reviewed by it.**Role of an agent**An agent shall render all possible service to the nominee/ legal heir or the\nbeneficiary in filling up of claim forms accurately and assisting in submission of\nthese at the insurer’s office.Apart from discharging obligations, goodwill is generated from such a situation\nwhereby there exists ample opportunity for the agent to procure business or\nreferrals in future from the family of the deceased.**Test Yourself 1**Which of the below statement best describes the concept of claim? Choose the\nmost appropriate option.I. A claim is a request that the insurer should make good the promise specifiedin the contract\nII. A claim is a demand that the insurer should make good the promise specifiedin the contract\nIII. A claim is a demand that the insured should make good the commitmentspecified in the agreement\nIV. A claim is a request that the insured should make good the promise specifiedin the agreement**Summary**A claim is a demand that the insurer should make good the promise specified\nin the contract.A claim can be survival claim or death claim. While a death claim arises only\nupon the death of the life assured, survival claims can be caused by one or\nmore eventsFor payment of a survival claim, the insurer has to ascertain that the event\nhas occurred as per the conditions stipulated in the policy.The following payments may occur during the policy term:\n Survival Benefit Payments\n Surrender of Policy\n Rider Benefit\n Maturity Claim\n Death Claim203Section 45 (Indisputability Clause) of the Insurance Act offers protection\nagainst rejection of claim by the insurer on flimsy grounds provided and sets\na time limit of 3 years for the Insurer for calling a policy into question.Under the IRDAI (Protection of Policyholders Interests) Regulations, 2017, the\nIRDAI has laid down regulations to safeguard/ protect the insured or\nbeneficiary in case of claims.**Answers to Test Yourself****Answer 1** The correct option is II.204## SECTION## HEALTH SECTION205## CHAPTER H-01## INTRODUCTION TO HEALTH INSURANCE**Chapter Introduction**This chapter will tell you about how insurance evolved over time. It will also\nexplain what healthcare is, levels of healthcare and types of healthcare. You will\nalso learn about the healthcare system in India and factors affecting it. Finally,\nit will explain how health insurance evolved in India and also the various players\nin the health insurance market in India.**Learning Outcomes**After studying this chapter, you should be able to:a) Understand how insurance evolved.\nb) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.206**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness\nof the body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was\nHippocrates (460 to 370 BC) who came up with the reasons behind illness.\nAccording to him, illness is caused due to various factors relating to environment,\nsanitation, personal hygiene and diets. Vedic texts of ancient India speak about\n_‘Arogyame Mahabhagyam’_ meaning ‘Health is great luck’ or in other words,\n‘Health is Wealth’. Many treatises of ancient India like _Atharva Veda, Charaka_", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "k202", "section": "Role of an agent", "chunk_id": "Final IC 38 -IMF_Composite -English_102", "metadata": {"file_size": 20962, "chunk_index": 102, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 1", "Chapter Introduction", "Understanding Healthcare", "Answer 1"]}}
{"chunk": "b) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.206**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness\nof the body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was\nHippocrates (460 to 370 BC) who came up with the reasons behind illness.\nAccording to him, illness is caused due to various factors relating to environment,\nsanitation, personal hygiene and diets. Vedic texts of ancient India speak about\n_‘Arogyame Mahabhagyam’_ meaning ‘Health is great luck’ or in other words,\n‘Health is Wealth’. Many treatises of ancient India like _Atharva Veda, Charaka_\n_Samhita, Sushruta Samhita, Ashtangahrdayam, Ashtangasamgraha, Bhela_\n_Samhita_, and _Kashyapa Samhita_ discuss healing traditions practiced in India in\nolden times.**Definition**A widely accepted definition of health was given by World Health Organization\n(WHO) _–‘Health is a state of complete physical, mental and social wellbeing and_\n_not merely the absence of disease or infirmity.’_**Determinants of health**It is generally believed that the following factors determine the health of any\nindividual:**a)** **Lifestyle factors**Lifestyle factors are those which are mostly in the control of the individual\nconcerned e.g. exercising and eating within limits, avoiding worry and the\nlike leading to good health; leading to diseases such as cancer, aids,\nhypertension and diabetes, to name a few.**b)** **Environmental factors**Communicable diseases like Influenza and Chickenpox etc. are spread due to\nbad hygiene, diseases like Malaria and Dengue are spread due to bad\nenvironmental sanitation, while certain diseases are also caused due to\nenvironmental factors.**c)** **Genetic factors**Diseases may be passed on from parents to children through genes. Such\ngenetic factors result in differing health trends amongst the population spread\nacross the globe based on race, geographical location and even communities.It is quite obvious that a country’s social and economic progress depends on the\nhealth of its people. This poses a question as to whether different types of\nhealthcare are required for different situations.207**Test Yourself 1**Which of the following diseases is not attributed to Lifestyle factors (i.e. not in\nthe control of the individual)?I. CancerII. AidsIII. Malaria\nIV. Hypertension**B.** **Levels of Healthcare**Healthcare is nothing but a set of services provided by various agencies and\nproviders including the government, to promote, maintain, monitor or restore\nhealth of people. Health care to be effective must be:Appropriate to the needs of the peopleComprehensiveAdequateEasily available- Affordable\nThe health care facilities should be based upon the probability of the incidence\nof disease for the population. For example, a person may get fever, cold, cough,\nskin allergies etc. many times a year, but the probability of him/ her suffering\nfrom Hepatitis B is less as compared to cold and cough.Hence, the need to set up the healthcare facilities in any area whether a village\nor a district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres\nfor primary, secondary and tertiary health care and takes other measures to make\nappropriate healthcare affordable and accessible to the population.208**C.** **Types of Healthcare**Healthcare is broadly categorized as follows:**1.** **Primary healthcare**Primary health care refers to the services offered by the doctors, nurses and other\nsmall clinics which are contacted first by the patient for any sickness, that is to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "A.", "chunk_id": "Final IC 38 -IMF_Composite -English_103", "metadata": {"file_size": 20962, "chunk_index": 103, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Environmental factors", "Determinants of health", "Genetic factors", "Test Yourself 1", "Understanding Healthcare"]}}
{"chunk": "or a district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres\nfor primary, secondary and tertiary health care and takes other measures to make\nappropriate healthcare affordable and accessible to the population.208**C.** **Types of Healthcare**Healthcare is broadly categorized as follows:**1.** **Primary healthcare**Primary health care refers to the services offered by the doctors, nurses and other\nsmall clinics which are contacted first by the patient for any sickness, that is to\nsay that primary healthcare provider is the first point of contact for all patients\nwithin a health system.For example, if a person visits a doctor for fever and the first diagnosis is\nindicative of Dengue fever, the primary health care provider will prescribe some\nmedicines but also direct the patient to get admitted in a hospital for specialized\ntreatment.At a country level, Primary Health care centres are set up both by Government\nand private players. Government primary health care centres are established\ndepending upon the population size and are present right up to the village level\nin some form or the other.**2.** **Secondary healthcare**Secondary health care refers to the healthcare services provided by medical\nspecialists and other health professionals who generally do not have first contact\nwith patient. It includes acute care requiring treatment for a short period for a\nserious illness, often (but not necessarily) as an in-patient, including Intensive\nCare services, ambulance facilities, pathology, diagnostic and other relevant\nmedical services.**3.** **Tertiary healthcare**Tertiary Health care is specialized consultative healthcare, usually for inpatients\nand on referral from primary/ secondary care providers.Examples of Tertiary Health care providers are those who have advanced medical\nfacilities and medical professionals, beyond the scope of secondary health care\nproviders e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk\npregnancy specialists etc.It is to be noted that as the level of care increases, the expenses associated with\nthe care also increase. The infrastructure for different levels of care also varies\nfrom country to country, rural-urban areas, while socio-economic factors also\ninfluence the same.**Test Yourself 2**Which of the following are part of primary healthcare?I. FeverII. Cancer\nIII. Organ Transplant\nIV. High risk pregnancy209**D.** **Evolution of Health Insurance in India**While the government had been busy with its policy decisions on healthcare, it\nalso put in place health insurance schemes. Insurance companies came with their\nhealth insurance policies only later. Here is how health insurance developed in\nIndia:**1.** **Employees’ State Insurance Scheme**Health Insurance in India formally began with the beginning of the Employees’\nState Insurance Scheme, introduced vide the ESI Act, 1948, shortly after the\ncountry’s independence in 1947. This scheme was introduced for blue-collar\nworkers employed in the formal private sector and provides comprehensive\nhealth services through a network of its own dispensaries and hospitals.ESIC (Employees State Insurance Corporation) is the implementing agency\nwhich runs its own hospitals and dispensaries and also contracts public/\nprivate providers wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme\n(CGHS), which was introduced in 1954 for the central government employees\nincluding pensioners and their family members working in civilian jobs. It aims\nto provide comprehensive medical care to employees and their families and\nis partly funded by the employees and largely by the employer (central\ngovernment).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers\nbefore as well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and\ntheir families was launched in the Indian market by all the four nationalized\nnon-life insurance companies (these were then the subsidiaries of the General\nInsurance Corporation of India). This product, **Mediclaim** was introduced to\nprovide coverage for the hospitalisation expenses up to a certain annual limit\nof indemnity with certain exclusions such as maternity, pre-existing diseases\netc.\nThe hospitalization indemnity-based annual contract continues to be the most", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y209", "section": "C.", "chunk_id": "Final IC 38 -IMF_Composite -English_104", "metadata": {"file_size": 20962, "chunk_index": 104, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Secondary healthcare", "Employees’ State Insurance Scheme", "Central Government Health Scheme", "Evolution of Health Insurance in India", "Tertiary healthcare"]}}
{"chunk": "which runs its own hospitals and dispensaries and also contracts public/\nprivate providers wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme\n(CGHS), which was introduced in 1954 for the central government employees\nincluding pensioners and their family members working in civilian jobs. It aims\nto provide comprehensive medical care to employees and their families and\nis partly funded by the employees and largely by the employer (central\ngovernment).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers\nbefore as well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and\ntheir families was launched in the Indian market by all the four nationalized\nnon-life insurance companies (these were then the subsidiaries of the General\nInsurance Corporation of India). This product, **Mediclaim** was introduced to\nprovide coverage for the hospitalisation expenses up to a certain annual limit\nof indemnity with certain exclusions such as maternity, pre-existing diseases\netc.\nThe hospitalization indemnity-based annual contract continues to be the most\npopular form of private health insurance in India today. With private players\ncoming into the insurance sector in 2001, health insurance has grown\ntremendously. However, there is a large untapped market even today.The Government has encouraged individuals to purchase Health Insurance\npolicies. Premiums paid by the individuals towards Health Insurance of self,\nspouse and family members are allowed to be deducted from taxable income\nunder Section 80 D of the Income Tax Act. The Section allows higher limits for\npaying premiums of parents/ parents in law above 60 years of age.210Considerable variations in covers, exclusions and newer add-on covers have\nbeen introduced which will be discussed in later chapters.**Test Yourself 3**The first standardised health insurance product for individuals and their families\nwas launched in the Indian market by all the four nationalized non-life insurance\ncompanies in the year _____.I. 1948II. 1954III. 1986IV. 2001**E.** **Health Insurance Market**The health insurance market today consists of a number of players some providing\nthe health care facilities called providers, others the insurance services and also\nvarious intermediaries. Some form the basic infrastructure while others provide\nsupport facilities. Some are in the government sector while others are in the\nprivate sector.**1.** **Private sector Health Care providers**India has a very large private health sector providing all three types of healthcare\nservices - primary, secondary as well as tertiary. These range from voluntary,\nnot-for-profit organisations and individuals to for-profit corporate, trusts, solo\npractitioners, stand-alone specialist services, diagnostic laboratories, pharmacy\nshops, and also the unqualified providers (quacks).India also has the largest number of qualified practitioners in other systems of\nMedicine (Ayurveda/ Siddha/ Unani/ Homeopathy) which is over 7 lakh\npractitioners. These are located in the public as well as the private sector. Apart\nfrom the for-profit private providers of health care, the NGOs and the voluntary\nsector have also been engaged in providing health care services to the\ncommunity.**Insurance Companies** in the general insurance sector provide the bulk of the\nhealth insurance services. Stand Alone Health Insurance (SAHI) Companies are\nallowed to transact all types of Health Insurances, while Life Insurance Companies\nare also permitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance211brokers, reinsurance brokers, insurance consultants, surveyors and loss assessors\nas well as Third Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:\na. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or\nboth, as per the underlying terms and conditions of the respective policy and\nwithin the framework of the guidelines issued by the insurers for settlement\nof claims.\nb. Servicing of claims for Hospitalization cover, if any, under Personal AccidentPolicy and domestic travel policy.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e211", "section": "Central Government Health Scheme", "chunk_id": "Final IC 38 -IMF_Composite -English_105", "metadata": {"file_size": 20962, "chunk_index": 105, "chunk_tokens": 968, "has_examples": true, "has_tables": false, "key_concepts": ["Health Insurance Market", "Central Government Health Scheme", "Private sector Health Care providers", "Test Yourself 3", "Commercial Health insurance"]}}
{"chunk": "allowed to transact all types of Health Insurances, while Life Insurance Companies\nare also permitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance211brokers, reinsurance brokers, insurance consultants, surveyors and loss assessors\nas well as Third Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:\na. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or\nboth, as per the underlying terms and conditions of the respective policy and\nwithin the framework of the guidelines issued by the insurers for settlement\nof claims.\nb. Servicing of claims for Hospitalization cover, if any, under Personal AccidentPolicy and domestic travel policy.\nc. Facilitating carrying out of pre-insurance medical examinations in connectionwith underwriting of the health insurance policies.**Summary**a) Insurance in some form or other existed many centuries ago but its modernform is only a few centuries old. Insurance in India has passed through many\nstages with government regulation.b) Health of its citizens being very important, governments play a major role increating a suitable healthcare system.c) Level of healthcare provided depends on many factors relating to a country’spopulation.d) The three type of healthcare are primary, secondary and tertiary dependingon the level of medical attention required. Cost of healthcare rises with each\nlevel with tertiary care being the costliest.\ne) India has its own peculiar challenges such as population growth andurbanization which require proper healthcare.f) The public sector insurance companies were the first to come up with schemesfor health insurance followed later by commercial insurance by private\ninsurance companies.g) The health insurance market is made up of many players some providing theinfrastructure, with others providing insurance services, intermediaries such\nas brokers, agents and third party administrators servicing health insurance\nbusiness and also other regulatory, educational as well as legal entities\nplaying their role.**Answers to Test Yourself**212**Answer 1** The correct option is III.\n**Answer 2** The correct option is I.\n**Answer 3** The correct option is III.**Key terms**\na) Healthcare\nb) Commercial insurance\nc) Nationalization\nd) Primary, Secondary and Tertiary Healthcare\ne) Third Party Administrator213## CHAPTER H-02## HEALTH INSURANCE DOCUMENTATION**Chapter Introduction**In the insurance industry, we deal with a large number of forms, documents etc.\nThis chapter takes us through the documents and their importance in a health\ninsurance contract.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of proposal form.\nb) Describe the importance of Prospectus\nc) Explain terms and wordings in insurance policy document.\nd) Discuss policy conditions and warranties.\ne) Appreciate why endorsements are issued.\nf) Understand the premium receipt.\ng) Appreciate why renewal notices are issued.214**A.** **Proposal forms****1.** **Health Insurance Proposal forms**As discussed in the common chapters, the Proposal Form contains information\nwhich is useful for the insurance company to accept the risk offered for insurance.\nGiven below are some of the details of the proposal form for a health insurance\npolicy:1. The proposal form incorporates a prospectus which gives details of the cover,such as coverage, exclusions, provisions etc. The prospectus forms part of the\nproposal form and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address,occupation, date of birth, sex, and relationship of each insured person with the\nproposer, average monthly income and income tax PAN No., name and address\nof the Medical Practitioner, his qualifications and registration number. Bank\ndetails of the insured are also now a days collected to make payment of claim\nmoney directly through bank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment\nb. Date of first treatment", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e211", "section": "Intermediaries:", "chunk_id": "Final IC 38 -IMF_Composite -English_106", "metadata": {"file_size": 20962, "chunk_index": 106, "chunk_tokens": 996, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Proposal forms", "Answer 3", "Chapter Introduction"]}}
{"chunk": "policy:1. The proposal form incorporates a prospectus which gives details of the cover,such as coverage, exclusions, provisions etc. The prospectus forms part of the\nproposal form and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address,occupation, date of birth, sex, and relationship of each insured person with the\nproposer, average monthly income and income tax PAN No., name and address\nof the Medical Practitioner, his qualifications and registration number. Bank\ndetails of the insured are also now a days collected to make payment of claim\nmoney directly through bank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment\nb. Date of first treatment\nc. Name and address of attending Doctor\nd. Whether fully recovered\n6. The proposer as to state any additional facts which should be disclosed to insurersand if he has any knowledge of any positive existence or presence of any illness\nor injury which may require medical attention.\n7. The form also includes questions relating to past insurance and claims history andadditional present insurance with any other insurer.\n8. The special features of the declaration to be signed by the proposer must benoted.\n9. The insured person agrees and authorises the insurer to seek medical informationfrom any hospital/ medical practitioner who has at any time attended or may\nattend concerning any illness which affects his physical or mental health.\n10. The insured person confirms that he has read the prospectus forming part of theform and is willing to accept the terms and conditions.\n11. The declaration includes the usual warranty regarding the truth of thestatements and the proposal form as the basis of the contract.**2.** **Medical Questionnaire**In case of adverse medical history in the proposal form, the insured person has to\ncomplete a detailed questionnaire relating to diseases such as Diabetes,\nHypertension, Chest pain or Coronary Insufficiency or Myocardial Infarction.215These have to be supported by a form completed by a consulting physician. This form\nis scrutinised by company’s panel doctor, based on whose opinion, acceptance,\nexclusion, etc. are decided.**Standard form of Declaration**The IRDAI has specified the format of the standard declaration in the health\ninsurance proposal as under:1. I/ We hereby declare, on my behalf and on behalf of all persons proposed tobe insured, that the above statements, answers and/ or particulars given by\nme are true and complete in all respects to the best of my knowledge and that\nI/ We am/ are authorized to propose on behalf of these other persons.2. I understand that the information provided by me will form the basis of theinsurance policy, is subject to the Board approved underwriting policy of the\ninsurance company and that the policy will come into force only after full\nreceipt of the premium chargeable.3. I/ We further declare that I/ we will notify in writing any change occurring inthe occupation or general health of the life to be insured/ proposer after the\nproposal has been submitted but before communication of the risk acceptance\nby the company.4. I/ We declare and consent to the company seeking medical information fromany doctor or from a hospital who at any time has attended on the life to be\ninsured/ proposer or from any past or present employer concerning anything\nwhich affects the physical or mental health of the life to be assured/ proposer\nand seeking information from any insurance company to which an application\nfor insurance on the life to be assured/ proposer has been made for the\npurpose of underwriting the proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting\nand/ or claims settlement and with any Governmental and/ or Regulatory\nAuthority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal\nforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits, past\nhealth-insurance experience etc. along with the proposer’s profession,", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Medical Questionnaire", "chunk_id": "Final IC 38 -IMF_Composite -English_107", "metadata": {"file_size": 20962, "chunk_index": 107, "chunk_tokens": 1004, "has_examples": false, "has_tables": false, "key_concepts": ["Standard form of Declaration", "Nature of questions in a proposal form", "Medical Questionnaire"]}}
{"chunk": "insured/ proposer or from any past or present employer concerning anything\nwhich affects the physical or mental health of the life to be assured/ proposer\nand seeking information from any insurance company to which an application\nfor insurance on the life to be assured/ proposer has been made for the\npurpose of underwriting the proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting\nand/ or claims settlement and with any Governmental and/ or Regulatory\nAuthority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal\nforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits, past\nhealth-insurance experience etc. along with the proposer’s profession,\noccupation or business which important as they could have a material bearing on\nthe risk.216**Example 1** A delivery man of a fast-food restaurant, who has to frequently travel on motorbikes at a high speed to deliver food to his customers, may be more exposed\nto accidents than the accountant of the same restaurant. A person working in a coal mine or a cement plant may be exposed to dustparticles leading to lung ailments.**Example 2** For the purpose of overseas travel insurance, the proposer is required to state(who is travelling, when, to which country, for what purpose) or For the purpose of health insurance, the proposer is asked about his/ her\nhealth (with person’s name, address and identification) etc. depending on thecase.**Example 3** In case of health insurance, it could be the cost of hospital treatment, whilefor personal accident insurance this could be a fixed amount for loss of life,\nloss of a limb, or loss of sight due to an accident.**a)** **Previous and Present insurance**The proposer is required to inform the details about his previous insurances to\nthe insurer. This is to understand his insurance history. In some markets there are\nsystems by which insurers confidentially share data about the insured.The proposer is also required to state whether any insurer had declined his\nproposal, imposed special conditions, required an increased premium at renewal\nor refused to renew or cancelled the policy. Details of current insurance with any\nother insurer including the names of the insurers are also required to be disclosed.\nFurther, in personal accident insurance an insurer would like to restrict the\namount of coverage (sum insured) depending on the sum insured under other PA\npolicies taken by the same insured.**b)** **Claim Experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about\nthe subject matter of insurance and how the insured has managed the risk in the\npast. It means the insurance company has a duty to record all the information\nreceived even orally, which the agent has to keep in mind by way of follow up.**B.** **Acceptance of the proposal (underwriting)**A completed proposal form broadly gives the following information: Details of the insured\n Details of the subject matter\n Type of cover required217 Details of the physical features both positive and negative\n Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the\nprospective customer e.g. above 45 years of age to a doctor and/ or for medical\ncheck-up. Based on the information available in the proposal and, where medical\ncheck-up has been advised, based on the medical report and the recommendation\nof the doctor, the insurer takes the decision. Sometimes, where the medical\nhistory is not satisfactory, an additional questionnaire to get more information is\nalso required to be obtained from the prospective client. The insurer then decides\nabout the rate to be applied to the risk factor and calculates the premium based\non various factors, which is then conveyed to the insured.**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the\nprospective buyers of insurance. It is usually in the form of a brochure or leaflet\nor it can be in electronic form also and serves the purpose of introducing a\nproduct to such prospective buyers. Issue of prospectus is governed by the\nInsurance Act, 1938 as well as by Protection of Policyholders’ Interest Regulations", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d217", "section": "Nature of questions in a proposal form", "chunk_id": "Final IC 38 -IMF_Composite -English_108", "metadata": {"file_size": 20962, "chunk_index": 108, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Example 3", "Prospectus", "Previous and Present insurance", "Acceptance of the proposal (underwriting)", "Nature of questions in a proposal form"]}}
{"chunk": " Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the\nprospective customer e.g. above 45 years of age to a doctor and/ or for medical\ncheck-up. Based on the information available in the proposal and, where medical\ncheck-up has been advised, based on the medical report and the recommendation\nof the doctor, the insurer takes the decision. Sometimes, where the medical\nhistory is not satisfactory, an additional questionnaire to get more information is\nalso required to be obtained from the prospective client. The insurer then decides\nabout the rate to be applied to the risk factor and calculates the premium based\non various factors, which is then conveyed to the insured.**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the\nprospective buyers of insurance. It is usually in the form of a brochure or leaflet\nor it can be in electronic form also and serves the purpose of introducing a\nproduct to such prospective buyers. Issue of prospectus is governed by the\nInsurance Act, 1938 as well as by Protection of Policyholders’ Interest Regulations\n2017 and the Health Insurance Regulations 2016 of the IRDAI. Insurers of Health\npolicies usually publish Prospectuses about their Health insurance products. The\nproposal form in such cases would contain a declaration that the customer has\nread the Prospectus and agrees to it.As discussed in Chapter 4, Section 64 VB of the Insurance Act 1938 stipulates that\nPremiums have to be collected in advance. However, considering the need for\neasing the payment of health insurance premiums in view of conditions owing to\nCOVID-19 outbreak, IRDAI allowed insurers to collect premiums of individual\nhealth insurance products in instalments. It was also mandated that Insurance\ncompanies would announce the availability of the facility of payment of premiums\nin instalments, and the conditions thereof, on their websites. This facility would\nbe offered to all policyholders without any discrimination.**D.** **Policy Document**IRDAI Regulations for protecting policy holder’s interest act 2017 specified that a Health\nInsurance Policy document should contain:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter\nb) Full description of the persons or interest insured\nc) The sum insured under the policy person and/ or peril wise\nd) UIN of the product, name, code number, contact details of the personinvolved in sales process;\ne) Date of birth of the insured and corresponding age in completed years;\nf) The period of insurance and the date from which the policyholder has beencontinuously obtaining health insurance cover in India from any of the\ninsurers without break218g) The sub-limits, Proportionate Deductions and the existence of Packagerates if any, with cross reference to the concerned policy section;\nh) Co-pay limits if any;\ni) The pre-existing disease (PED) waiting period, if applicable;\nj) Specific waiting periods as applicable;\nk) Deductible as applicable – general and specific, if any Perils covered andexclusions\nl) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium along with periodicity of\ninstalments if any\nm) Policy terms, conditions and warranties\nn) Action to be taken by the insured upon occurrence of a contingency likelyto give rise to a claim under the policy\no) The obligations of the insured in relation to the subject-matter ofinsurance upon occurrence of an event giving rise to a claim and the rights\nof the insurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings.\nThese are called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made\nor used in support thereof or if any fraudulent means or devices are used by\nthe Insured or any one acting on his behalf to obtain any benefit under the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "D-19", "section": "C.", "chunk_id": "Final IC 38 -IMF_Composite -English_109", "metadata": {"file_size": 20962, "chunk_index": 109, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Prospectus", "EXAMPLES:", "Policy Document", "Conditions:"]}}
{"chunk": "of the insurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings.\nThese are called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made\nor used in support thereof or if any fraudulent means or devices are used by\nthe Insured or any one acting on his behalf to obtain any benefit under the\npolicy or if the loss or damage be occasioned by the wilful act, or with the\nconnivance of the Insured, all benefits under this policy shall be forfeited.**b.** **The Claim Intimation condition in a Health policy may state:**Claim must be filed within certain days from date of discharge from the\nHospital. However, waiver of this Condition may be considered in extreme\ncases of hardship.A breach of condition makes the policy voidable at the option of the insurer.2192. **Warranties:** A warranty is an agreement between insurer and insured that must\nbe carried out fully. It forms a part of the policy document. For example, the\nInsurer may be covering the risk of a particular disease on the condition that the\ninsured shall do a quarterly consultations with a specialist. In the above example,\nfailure of the insured to fulfil his part of the agreement shall either negate or\nreduce the liability in respect of that particular section/ warranty.Warranties must be observed and complied with strictly and literally, whether it\nis material to the risk or not.**Test Yourself 1**Which of the below statement is correct with regards to a warranty?I. A warranty is a condition which is implied without being stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot bepart of the policy document\nIV. Claims will be payable even if a warranty is breached.**Endorsements in Health Insurance**It is the practice of insurers to issue policies in a standard form; covering certain\nperils and excluding certain others.**Definition**If certain terms and conditions of the policy need to be changed at the time of\nissuance, it is done by setting out the amendments/ changes through a document called\nendorsement.It is attached to the policy and forms part of it. The policy and the endorsement\ntogether make up the contract. Endorsements may also be issued during the currency\nof the policy to record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy relate to:a) Variations/ changes in sum insured\nb) Addition and deletion of insured family members\nc) Change of insurable interest by way of taking of a loan and mortgaging thepolicy to a bank.\nd) Extension of insurance to cover additional perils/ extension of policy period\ne) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.220**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of\nissuance, it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.221## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product –\nMediclaim to hundreds of products of different kinds, the customer has a wide\nrange to choose appropriate cover. The chapter explains the features of various\nhealth products that can cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "H-03", "section": "E.", "chunk_id": "Final IC 38 -IMF_Composite -English_110", "metadata": {"file_size": 20962, "chunk_index": 110, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Warranties:", "Answers to Test Yourself", "Answer 2", "EXAMPLES:"]}}
{"chunk": "d) Extension of insurance to cover additional perils/ extension of policy period\ne) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.220**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of\nissuance, it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.221## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product –\nMediclaim to hundreds of products of different kinds, the customer has a wide\nrange to choose appropriate cover. The chapter explains the features of various\nhealth products that can cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance\nb) Describe the IRDAI guidelines on standardization in health insurance\nc) Discuss the various types of health products available in the Indian markettoday\nd) Explain Personal Accident insurance\ne) Discuss overseas travel insurance\nf) Understand key terms and clauses in health policies222**A.** **Classification of health insurance products****1.** **Introduction to health insurance products**“Health insurance business” is defined under Section 2(6C) of the Insurance Act,\n1938 as _“the effecting of contracts which provide for sickness benefits or_\n_medical, surgical or hospital expense benefits, whether in-patient or out-patient_\n_travel cover and personal accident cover.”_ IRDAI follows this definition of Health\ninsurance business.Health insurance products available in the Indian market are mostly in the nature\nof **hospitalization products.** These products cover the expenses incurred by an\nindividual during hospitalization.Therefore, health insurance is important mainly for two reasons: **Providing financial assistance to pay for medical facilities** in case of anyillness. **Preserving the savings of an individual** which may otherwise be wiped outdue to illness.Today, the health insurance segment has developed to a large extent, with\nhundreds of products offered by almost all general Insurance companies,\nstandalone health insurers and life insurers. However, the basic benefit structure\nof the Mediclaim policy i.e. cover against hospitalization expenses still remains\nthe most popular form of insurance.**2.** **Broad classification of health insurance products**Whatever be the product design, health insurance products can be broadly\nclassified into two categories:**a)** **Indemnity covers**These products constitute the bulk of the health insurance market and pay\nfor actual medical expenses incurred due to hospitalization.**b)** **Fixed benefit covers**Also called as ‘hospital cash’, these products pay for a fixed sum per day for\nthe period of hospitalization. Some products also provide for a pre-decided\namount for different surgeries.**3.** **Classification based on customer segment**Products can also be classified on the basis of the target customer segment.\nProducts classified based on customer segments are:a) **Individual cover** offered to retail customers and their family members223b) **Group cover** offered to corporate clients, covering employees and groups,covering their membersc) **Mass policies** for government schemes like/ Pradhan Mantri Jan ArogyaYojana/ various State health insurance schemes covering very poor sections\nof the population.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought\nin Health Regulations, 2016 regarding Health Products, some of which have been\ngiven below:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General\nInsurers and Health-Insurers, can offer these products for policy tenure of\n1 Year, but not exceeding 5 Years. Group Health Policies can be offered by\nany insurer for a term of one year except credit linked products where the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "H-03", "section": "Test Yourself 2", "chunk_id": "Final IC 38 -IMF_Composite -English_111", "metadata": {"file_size": 20962, "chunk_index": 111, "chunk_tokens": 979, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Preserving the savings of an individual", "Answer 2", "Introduction to health insurance products", "Mass policies"]}}
{"chunk": "of the population.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought\nin Health Regulations, 2016 regarding Health Products, some of which have been\ngiven below:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General\nInsurers and Health-Insurers, can offer these products for policy tenure of\n1 Year, but not exceeding 5 Years. Group Health Policies can be offered by\nany insurer for a term of one year except credit linked products where the\nterm can be extended up to the loan period not exceeding five years.4. No Group Health Insurance Policy shall be issued where a Group is formedwith the main purpose of availing itself of insurance. The Group shall have\na size as determined by the Insurer which shall be applicable for all its\ngroup policies, subject to a minimum of 7.5. General Insurers and Health Insurers may also offer Credit Linked GroupPersonal Accident policies for a term extended up to the loan period not\nexceeding five years.6. Multiple policies –In case insured has taken health policies from more thanone insurance company which provide fixed benefits, each insurer shall\nmake the claim payment, on occurrence of an insured event, independent\nof payments received from other similar policies in accordance with the\nterms and conditions of the policies.If two or more policies are taken by an insured during a period from one or\nmore insurers to indemnify treatment costs, the policyholder shall have the\nright to ask for a settlement of his/ her claim in terms of any of his/ her\npolicies. The insurer on whom the claim is made shall make the claim\npayment and balance claim or claims disallowed under the earlier chosen\npolicy/ policies may be made from the other policy/ policies even if the\nsum insured is not exhausted in the earlier chosen policy/ policies.224**B.** **IRDA Guidelines on Standardization in health insurance**With so many insurers providing numerous varied products and with different\ndefinitions of various terms and exclusions, confusion arose in the market. It\nbecame difficult for the customer to compare products and take a considered\ndecision. Moreover, in critical illness policies, there is no clear understanding as\nto what is meant by critical illness and what is not.To remove the confusion among insurers, service providers, TPAs and hospitals\nand the grievances of the insuring public, the regulator tried to provide some kind\nof standardization in health insurance. Based on a common understanding, IRDA\nissued Guidelines on standardization in health insurance in 2016 which was\nfurther amended in 2020. These are applicable to all General and Health Insurers\noffering indemnity based Health insurance (excluding PA and Domestic/ Overseas\nTravel) products (both Individual and Group)The guidelines now provide for standardization of:1. definitions of commonly used insurance terms\n2. definitions of critical illnesses\n3. list of optional items of expenses in hospitalization indemnity policies\n4. claim forms and pre-authorization forms\n5. billing formats\n6. discharge summary of hospitals\n7. standard contracts between TPAs, insurers and hospitals\n8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get\nrecovery of medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s10", "section": "Regulations for Health Insurance", "chunk_id": "Final IC 38 -IMF_Composite -English_112", "metadata": {"file_size": 20962, "chunk_index": 112, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Hospitalization indemnity", "Regulations for Health Insurance", "Example"]}}
{"chunk": "8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get\nrecovery of medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical\nbill raised was Rs. 1.25 lakhs. The insurance company paid Rs 1 lakh according to225the plan coverage and Raghu had to pay the remaining amount of Rs. 25,000 from\nhis own pocketThe main features of the indemnity based Mediclaim policy are detailed below,\n**though variations in limits of cover, additional exclusions or benefits or some**\n**add-ons may apply to products marketed by each insurer** .**1.** **Inpatient hospitalization expenses**The policy pays the insured the cost of hospitalization expenses incurred on\naccount of illness/ accident. The policy has a minimum prescribed period of\nhospitalization (generally 24 hours) after which the policy provisions come\ninto force. However once this period is reached then the expenses for the\nentire period become payable.Most of the expenses related with the treatment are paid, yet certain expenses\nthat includes items of personal comfort, cosmetic surgeries are not. It is therefore\nimportant for the customer to be made aware of the excluded items of expenses\nthat are not covered under the policy.i. Room, boarding and nursing expenses as provided by the hospital/ nursinghome. This includes nursing care, RMO charges, IV fluids/ blood\ntransfusion/ injection administration charges and similar expensesii. Intensive Care Unit (ICU) expensesiii. Surgeon, anaesthetist, medical practitioner, consultants, specialists feesiv. Anaesthetic, blood, oxygen, operation theatre charges, surgicalappliances,v. Medicines and drugs,vi. Dialysis, chemotherapy, radiotherapyvii. Cost of prosthetic devices implanted during surgical procedure likepacemaker, orthopaedic implants, infra cardiac valve replacements,\nvascular stentsviii.Relevant laboratory/ diagnostic tests and other medical expenses relatedto the treatmentix. Hospitalization expenses (excluding cost of organ) incurred on donor inrespect of organ transplant to the insured.**2.** **Day Care Procedures**There are many surgeries that do not require can be conducted at specialized\nhospitals. Treatments such as eye surgeries, chemotherapy; dialysis etc. can be\nclassified under day-care surgeries and the list is ever growing. These are also\ncovered under the policy.**3.** **OPD cover**Coverage of outpatient expenses is still very limited in India, with few such\nproducts offering OPD covers. However there are some plans that provide cover226treatment as outpatient and also related health care expenses associated with\ndoctor visits, regular medical tests, dental and pharmacy costs.**4.** **Pre and post hospitalization expenses****i.** **Pre hospitalization expenses**Hospitalization could be either emergency hospitalization or planned. If a\npatient goes in for a planned surgery, there would be expenses incurred by\nhim prior to the hospitalization. Such expenses are known as Pre\nhospitalisation expenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized\nanda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissibleby the Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s10", "section": "C.", "chunk_id": "Final IC 38 -IMF_Composite -English_113", "metadata": {"file_size": 20962, "chunk_index": 113, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Day Care Procedures", "Hospitalization indemnity", "Example", "Inpatient hospitalization expenses", "Post hospitalization expenses"]}}
{"chunk": "patient goes in for a planned surgery, there would be expenses incurred by\nhim prior to the hospitalization. Such expenses are known as Pre\nhospitalisation expenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized\nanda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissibleby the Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if\na) They are incurred for the same condition for which the Insured Person’sHospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissibleby the Insurance Company.\nPost hospitalization expenses would be relevant medical expenses incurred\nduring period up to the defined number of days after hospitalization and will\nbe considered as part of claim.\nPost hospitalization expenses could be in the form of medicines, drugs, review\nby doctors etc. after discharge from hospital. Such expenses have to be\nrelated to the treatment taken in hospital and are covered under the health\npolicies.Though the duration of cover for pre and post hospitalization expenses would\nvary from insurer to insurer and is defined in the policy, the most common\ncover is for **thirty days pre and sixty days post hospitalization** .227Pre and post-hospitalization expenses form part of the overall sum insured for\nwhich cover is granted under the policy.**iii.** **Domiciliary Hospitalization**\n**iv.** There is also a benefit available for patients whose illness otherwise needshospitalisation but avail treatment at home either for accommodation in\nhospitals or in a position that they cannot be moved to a hospital.To prevent misuse of the provision, this cover usually carries an **excess clause**\n**of three to five days** meaning that treatment costs for the first three to five\ndays have to be borne by the insured. The cover excludes domiciliary\ntreatments for certain chronic or common ailments such as Asthma,\nBronchitis, Diabetes Mellitus, Hypertension, Influenza Cough, Cold, and fevers\netc.**Example**Mira had taken a health insurance policy for coverage of expenses in the event of\nhospitalisation. The policy had a clause for initial waiting period of 30 days.\nUnfortunately, 20 days after she took the policy, Mira contracted malaria and was\nhospitalised for 5 days. She had to pay heavy hospital bills.When she asked for reimbursement from the insurance company, they denied\npayment of the claim because the event of hospitalization occurred within the\nwaiting period of 30 days from taking the policy.**a)** **COVERAGE OPTIONS AVAILABLE****i.** **Individual coverage:** An individual insured can cover himself along with familymembers such as spouse, dependent children, dependent parents, dependent\nparents in law, dependent siblings etc. Some insurers do not have a restriction\non the dependents who can be covered. It is possible to cover each of such\ndependent insured’s under a single policy with a separate sum insured chosen\nfor each insured person. In such covers, each person insured under the policy\ncan claim up to the maximum amount of his sum insured during the currency\nof the policy. Premium will be charged for each individual insured according\nto his age and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered\na single sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during\nthe policy period, it will pay for claims related to more than one family member\nor multiple claims of a single member of the family. All these together cannot\nexceed the total coverage of Rs. 5 lacs. Premium will normally be charged based\non the age of the oldest member of the family proposed for insurance228The covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets\ncoverage for an overall sum insured which can be chosen at a higher level at a\nreasonable premium.**Pre-Existing diseases**\nInsurance is designed to cover accidents/ diseases etc. that happen", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e228", "section": "Definition", "chunk_id": "Final IC 38 -IMF_Composite -English_114", "metadata": {"file_size": 20962, "chunk_index": 114, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["COVERAGE OPTIONS AVAILABLE", "Example", "Individual coverage:", "Pre-Existing diseases", "Post hospitalization expenses"]}}
{"chunk": "can claim up to the maximum amount of his sum insured during the currency\nof the policy. Premium will be charged for each individual insured according\nto his age and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered\na single sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during\nthe policy period, it will pay for claims related to more than one family member\nor multiple claims of a single member of the family. All these together cannot\nexceed the total coverage of Rs. 5 lacs. Premium will normally be charged based\non the age of the oldest member of the family proposed for insurance228The covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets\ncoverage for an overall sum insured which can be chosen at a higher level at a\nreasonable premium.**Pre-Existing diseases**\nInsurance is designed to cover accidents/ diseases etc. that happen\nunexpectedly. Covering the costs of treating existing medical conditions is not\npart of insurance, as it is unfair to healthy people who would have to pay for the\nexisting illnesses of some others. It goes against the principle of creating risk\npools covering similarly placed risks. So, it is very important to collect details of\nthe existing ailments/ injuries of each insured person before issuing a health\npolicy. This will enable the insurer to decide on accepting the proposal for\ninsurance, charging proper premiums and/ or providing additional conditions for\nthose who are more likely to make claims.**What is a pre-existing disease?**\nDiseases suffered by an insured person within 48 months prior to commencement\nof the policy are regarded as pre-existing diseases. Based on the same logic,\ninsurers are not allowed to exclude pre-existing diseases after a person is covered\nfor insurance continuously for 48 months.**Renewability:** Although Healthcare policies have a contract life of one year, and\na fresh policy is to be issued every year, Lifelong renewability has been made\ncompulsory by IRDAI for all policies.**SPECIAL FEATURES**In order to provide new features in the product as also to maintain the pricing,\ninsurance companies have come out innovative modifications in the products. For\nexample, the Mediclaim Policy, which was the most popular policy before 2000,\nhas undergone many changes and new special features have been added to the\ncoverage. Some features have been added to the basic indemnity cover. These\nfeatures may vary from insurer to insurer and product to product and may not be\navailable uniformly for all products.**i.** **Sub limits and Disease specific capping**Some of the products have disease specific capping e.g. cataract. A few also have\nsub limits on room rent linked to sum insured e.g. per day room rent restricted\nto 1% of sum insured and ICU charges to 2% of sum insured. As expenses under\nother heads such as ICU charges, OT charges and even surgeon’s fees are linked\nto the type of room opted for, room rent capping helps in restricting expenses\nunder other heads also and hence the overall hospitalization expenses.229**ii.** **Co-payment (popularly called Co-pay)**Co-payment is defined by IRDAI as a cost sharing requirement under a health\ninsurance policy that provides that the policyholder/ insured will bear a specified\npercentage of the admissible claims amount. A co-payment does not reduce the\nSum Insured.\nCo-payment is the concept of the insured bearing a portion of each and every\nclaim under a health policy. These could be compulsory or voluntary depending\non the product. Co-payment brings in a certain discipline among the insured to\navoid unnecessary hospitalizations. This ensures that the insured exercises\ncaution in selecting his healthcare options and avoids luxurious ones.\nWhen an insured event occurs, many health policies require the insured to share\na part of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay\namount is 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a\nspecified number of days/ hours in case of hospital cash policies which will apply\nbefore any benefits are payable by the insurer. In Health policies, it is the fixed", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e228", "section": "Family floater:", "chunk_id": "Final IC 38 -IMF_Composite -English_115", "metadata": {"file_size": 20962, "chunk_index": 115, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["What is a pre-existing disease?", "Co-payment (popularly called Co-pay)", "Example", "Sub limits and Disease specific capping", "Deductible/ Excess"]}}
{"chunk": "percentage of the admissible claims amount. A co-payment does not reduce the\nSum Insured.\nCo-payment is the concept of the insured bearing a portion of each and every\nclaim under a health policy. These could be compulsory or voluntary depending\non the product. Co-payment brings in a certain discipline among the insured to\navoid unnecessary hospitalizations. This ensures that the insured exercises\ncaution in selecting his healthcare options and avoids luxurious ones.\nWhen an insured event occurs, many health policies require the insured to share\na part of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay\namount is 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a\nspecified number of days/ hours in case of hospital cash policies which will apply\nbefore any benefits are payable by the insurer. In Health policies, it is the fixed\namount of money the insured is required to pay initially before the claim is paid\nby insurer, for e.g. if the deductible in a policy is Rs. 10,000, the insured pays\nfirst Rs. 10,000 in each insured loss claimed for. To illustrate, if the claim is for\nRs. 80,000, the insured bears the first Rs. 10,000 and the insurer pays Rs. 70,000.\nA deductible does not reduce the Sum Insured.Deductible may also be a specified number of days/ hours in case of hospital cash\npolicies which will apply before any benefits are payable by the insurer.An agent must examine and inform the insured whether the deductible is\napplicable per year, per life or per event and the specific deductible to be\napplied.**iv.** **Waiting Period**A waiting period of 30 days from inception of policy is normally applicable in most\npolicies for making any claim. This however will not be applied for hospitalization\ndue to an accident.**v.** **Waiting periods for specific diseases**This is applicable for diseases for which treatment can be delayed and planned.\nDepending on the product waiting periods of one/ two/ four years are imposed\nby the insurance companies and claims are paid for these ailments only after\nexpiry of this period. Some of the diseases are Cataract, Benign Prostatic\nHypertrophy, Hysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele,\nCongenital internal disease, Fistula in anus, piles, Sinusitis and related disorders\netc.230**vi.** **Coverage for Day care procedure**Advancement of medical science has seen inclusion of large number of procedures\nunder day care category as already discussed earlier**vii.** **Cost of pre policy check up**Cost of medical examination was earlier borne by prospective clients. Now insurer\nreimburses the cost, provided the proposal is accepted for underwriting, the\nreimbursement varying from 50% to 100%.Now this has also been mandated by\nIRDAI that insurer would bear at least 50% of health check-up expenses.**viii.** **Add on covers**Various new additional covers called Add-on covers have been introduced by some\nof the insurers. Some of them are: **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end versionproducts for certain ailments which are life threatening and entail expensive\ntreatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured(which gets reduced on payment of a claim) can be restored to the original\nlimit by paying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage\nof the hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in\npatient hospitalization expenses. Few companies now offer limited cover for", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Deductible/ Excess", "chunk_id": "Final IC 38 -IMF_Composite -English_116", "metadata": {"file_size": 20962, "chunk_index": 116, "chunk_tokens": 971, "has_examples": false, "has_tables": false, "key_concepts": ["Maternity cover:", "Coverage for Day care procedure", "Deductible/ Excess", "Cost of pre policy check up", "Add on covers"]}}
{"chunk": "of the insurers. Some of them are: **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end versionproducts for certain ailments which are life threatening and entail expensive\ntreatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured(which gets reduced on payment of a claim) can be restored to the original\nlimit by paying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage\nof the hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in\npatient hospitalization expenses. Few companies now offer limited cover for\nout-patient expenses under some of the high-end plans. **Hospital cash:** This provides for fixed lump sum payment for each day ofhospitalization for a specified period. Normally the period is granted for 7 days\nexcluding the policies deductible of 2/ 3 days. Thus, the benefit would trigger\nonly if hospitalization period is beyond the deductible period. This is in\naddition to the hospitalization claim but within the overall sum insured of the\npolicy or may be with a separate sub-limit. **Recovery benefit:** Lump sum benefit is paid if the total period of stay inhospital due to sickness and/ or accident is not less than 10 days.231 **Donor’s expenses:** The policy provides for reimbursement of expenses towardsdonor in case of major organ transplant as per the terms and condition defined\nin the policy. **Reimbursement of ambulance:** Expenses incurred towards ambulance byInsured/ insured person are reimbursed up to a certain limit specified in the\nschedule of the policy. **Expenses for accompanying person:** This is intended to cover the expensesincurred by accompanying person towards food, transportation whilst\nattending to insured patient during the period of hospitalization. Lump sum\npayment or reimbursement payment as per the policy terms is paid, up to the\nlimit specified in the schedule of the policy. **Family definition:** Definition of family has undergone changes in few healthproducts. Earlier, primary insured, spouse, dependent children were granted\ncover. Now there are policies where parents and in-laws can also be granted\ncover under the same policy.**x.** **Failure to seek or follow medical advice or failure to follow treatment**Initially the health insurance cover was denied to persons suffering from preexisting diseases. Such cases are now being offered cover by excluding such\ndiseases.**Standard Health Product** **– Arogya Sanjeevani** : In the background of the Covid19 pandemic, IRDAI asked all Insurance Companies to come out with a standard\nhealth product called Arogya Sanjeevani with no variations in terms and\nconditions to make it easy to understand. The premium may however vary\naccording to the pricing policy of each company. This is to ensure better\npenetration of Health Insurance in market. All Insurers are required to offer this\nproduct called Arogya Sanjeevani. [The context for this move was that there were\ndifferent Health Insurances available in the market and customers were not able\nto compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder canbecome the beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.232**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by\ninsurers, provide cover for high sums insured over and above a specified amount\n(called threshold).This policy works along with a basic health cover having a low\nsum insured and comes at a comparatively reasonable premium. For example,\nIndividuals covered by their employers can also opt for a top-up cover for\nadditional protection (keeping the sum insured of the first policy as the\nthreshold).To be eligible to receive a claim under the top-up policy, the medical costs must", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d19", "section": "Maternity cover:", "chunk_id": "Final IC 38 -IMF_Composite -English_117", "metadata": {"file_size": 20962, "chunk_index": 117, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Hospital cash:", "Standard Health Product", "Recovery benefit:", "Reinstatement of sum insured:"]}}
{"chunk": "to compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder canbecome the beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.232**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by\ninsurers, provide cover for high sums insured over and above a specified amount\n(called threshold).This policy works along with a basic health cover having a low\nsum insured and comes at a comparatively reasonable premium. For example,\nIndividuals covered by their employers can also opt for a top-up cover for\nadditional protection (keeping the sum insured of the first policy as the\nthreshold).To be eligible to receive a claim under the top-up policy, the medical costs must\nbe greater than the deductible (or threshold) level chosen under the plan and the\nreimbursement under the high deductible plan would be the amount of expense\nincurred i.e. greater than the deductible.**Example**An individual is covered for a sum insured of Rs. 3 lacs by his employer. He could\nopt for a top-up policy of Rs. 10 lacs in excess of Rs. Three lacs. If the cost of a\nsingle hospitalization is Rs. 5 lacs, the basic policy would cover up to Rs. Three\nlacs only. With the top-up cover, the balance sum of Rs. Two lacs would be paid\nout by the top-up policy.Top-up policies come cheap and the cost of a single Rs. 10 lacs policy would be\nfar higher than the top-up policy of Rs. 10 lacs in excess of Rs. Three lacs.These covers are available on individual basis and family basis the top-up plan\nrequires the deductible amount to be crossed at every single event of\nhospitalization. However some top-up plans that allow the deductible to be\ncrossed post a series of hospitalizations during the policy period are known as\nAggregate based high deductible plans or Super top-up cover as known in the\nIndian market. A super top-up plan covers the total of all hospitalisation bills (up\nto the super top-up plan limit) above the deductible amount, that is, the\ndeductible is applied to the total claims in one year. Hence, once the deductible\nis paid, the plan becomes active for subsequent claims.**E.** **Senior Citizen Policy**These plans are designed to offer cover to elderly people who often were denied\ncoverage after certain age (e.g. people over 60 years of age). The structure of\nthe coverage and exclusions are much like a hospitalization policy.Special attention is paid to diseases of the elderly in setting coverage and waiting\nperiod. Entry age is mostly after 60 years and renewable lifelong. Sum insured\nrange from Rs. 50,000 to Rs. 5,00,000. There is variation of waiting period\napplicable to certain ailments.233Example: Cataract may have 1 year waiting for one insurer and 2 year waiting\nperiod for some other insurer.Example: Sinusitis does not fall in waiting period clause of some insurers but few\nothers include it in their waiting period clause.Some policies have waiting periods or capping in respect of Pre-existing diseases.\nPre-post hospital expenses are either paid as a percentage of hospital claims or a\nsub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90\ndays.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of\nthe amount spent by him for the named treatment. In this product, commonly\noccurring treatments are listed under segments such as ENT, Ophthalmology,\nObstetrics and Gynaecology, etc. and the maximum pay out for each of these is\nspelt out in the policy.These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a\ndaily cash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find\na place in the list named in the policy. Multiple claims for different treatments", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Individual Plan", "chunk_id": "Final IC 38 -IMF_Composite -English_118", "metadata": {"file_size": 20962, "chunk_index": 118, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Senior Citizen Policy", "Example", "Family Floater Plan", "Individual Plan"]}}
{"chunk": "Pre-post hospital expenses are either paid as a percentage of hospital claims or a\nsub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90\ndays.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of\nthe amount spent by him for the named treatment. In this product, commonly\noccurring treatments are listed under segments such as ENT, Ophthalmology,\nObstetrics and Gynaecology, etc. and the maximum pay out for each of these is\nspelt out in the policy.These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a\ndaily cash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find\na place in the list named in the policy. Multiple claims for different treatments\nare possible during the policy period. However the claims are finally limited by\nthe sum insured chosen under the policy.Some of the fixed benefit insurance plans are: Hospital daily cash insurance plans\n Critical illness insurance plans**1.** **HOSPITAL DAILY CASH POLICY****a)** **Per day amount limit**\nHospital cash coverage provides a fixed sum to the insured person for each\nday of hospitalization. Per day cash coverage could vary from (for example)\nRs. 1,500 per day to Rs. 5,000 or even more per day. An upper limit is provided\non the daily cash pay-out per illness as well as for the duration of the policy,\nwhich is usually an annual policy.234**b)** **Number of payment days**\nIn some of the variants of this policy, the number of days of daily cash allowed\nis linked to the disease for which treatment is being taken. A detailed list of\ntreatments and duration of stay for each is stipulated which limits the daily\ncash benefit allowed for each type of procedure/ illness.**c)** **Standalone cover or add-on cover**\nThe hospital daily cash policy is available as a standalone policy as offered by\nsome insurers while, in other cases, it is an add-on cover to a regular\nindemnity policy. These policies help the insured to cover incidental expenses\nas the pay-out is a fixed sum and not related to the actual cost of treatment.\nThis also allows the pay out under the policy to be provided in addition to any\ncover received under an indemnity based health insurance plan.**d)** **Supplementary cover**\nThese policies could supplement a regular hospital expenses policy as it is cost\neffective and provides compensation for incidental expenses and also\nexpenses not payable under the indemnity policy such as exclusions, co-pay\netc.**e)** **Other advantages of the cover**From the insurer’s point of view, this plan has several advantages as it is easy\nto explain to a customer and hence can be sold more easily. It beats medical\ninflation as a fixed sum per day is paid for the duration of hospitalization\nwhatever may be the actual expense. Also, acceptance of such insurance\ncovers and claims settlements are really simplified.**2.** **CRITICAL ILLNESS POLICY**With advancement in medical science, people are surviving some of the major\ndiseases like cancer, strokes and heart attack etc., which in earlier times would\nhave resulted in death. However surviving a major illness entails huge expense\nfor treatment as well as for living expenses post treatment. Onset of critical\nillness threatens the financial security of a person. A basic health insurance policy\nmay not be sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of largeexpenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated\nCI benefit plan and standalone CI benefit plan. To avoid confusion, the definitions\nof 22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.235The critical illnesses covered vary across insurers and products. Generally 100%\nof the sum insured is paid on diagnosis of a critical illness. In some cases\ncompensation could vary from 25% to 100% of sum insured depending on the policy\nterms and conditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "F.", "chunk_id": "Final IC 38 -IMF_Composite -English_119", "metadata": {"file_size": 20962, "chunk_index": 119, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Per day amount limit", "CRITICAL ILLNESS POLICY", "HOSPITAL DAILY CASH POLICY", "Standalone cover or add-on cover", "Supplementary cover"]}}
{"chunk": "have resulted in death. However surviving a major illness entails huge expense\nfor treatment as well as for living expenses post treatment. Onset of critical\nillness threatens the financial security of a person. A basic health insurance policy\nmay not be sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of largeexpenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated\nCI benefit plan and standalone CI benefit plan. To avoid confusion, the definitions\nof 22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.235The critical illnesses covered vary across insurers and products. Generally 100%\nof the sum insured is paid on diagnosis of a critical illness. In some cases\ncompensation could vary from 25% to 100% of sum insured depending on the policy\nterms and conditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to\nbecome payable under the policy and the survival clause of 30 days after diagnosis\nof the illness. Rigorous medical examinations are to be undergone for persons\nespecially over 45 years of age.The policy terminates, once compensation is paid under the policy in respect of\nany of the insured person. This policy is also offered to groups especially\ncorporates who take policies for their employees.**Disease Specific Products** - **Corona Kavach**In June 2020, when the country was facing many cases of Corona Virus infection\n(Covid-19), the market saw the introduction of many benefit based products\nproviding lump sum payment on the diagnosis of Covid-19 positive. Later some\ncompanies introduced indemnity based products too. However, there were many\nconsumables like PPE kits, Oximeter etc. and quarantine expenses that were not\ntaken care of in these products.IRDAI came up with two standard Health Insurance Policies called _Corona Kavach_\nand _Corona Rakshak (discussed separately under Life insurance section)_ . While it\nis mandatory for general and health insurers to provide _Corona Kavach_ as an\nindemnity-based standard COVID-19 product, _Corona Rakshak,_ offering the\nbenefit-based product, is optional for all insurers. Both products have a waiting\nperiod of 15 days._Corona Rakshak_ is a standard benefit based health insurance designed for\nproviding lump sum benefit to insured individuals affected by COVID-19 and\nrequire hospitalisation for a minimum continuous period of 72 hours. The plan\noffers coverage on individual basis for people between the age of 18 years and 65\nyears, with different policy terms of 3.5months, 6.5 months and 9.5 months as a\none-time benefit policy and terminates upon the payment of benefit. _Corona_\n_Rakshak_ offers sum insured options ranging from Rs. 50,000 to Rs. 2.5 lakh, in\nmultiples of 50,000.The policy provides (i) complete sum insured benefit, (ii)\neconomical premium, (iii) lump-sum amount of claim, (iv) a short waiting period\nof 15 days and (v) tax benefits.**Corona Kavach** offers the following coverage vide Guidelines issued by IRDAI in\nJune 2020:1. Hospitalization Expenses incurred for the treatment of Covid-19 on Positivediagnosis of Covid-19 in a government authorized diagnostic centre covering236the following: (Expenses on Hospitalization for a minimum period of 24 hours\nare admissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgicalappliances, ventilator charges, medicines and drugs, costs towards\ndiagnostics, diagnostic imaging modalities, PPE Kit, gloves, mask and such\nother similar expenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up tomaximum 14 days per incident subject to the conditions (not exhaustive)\nmentioned below:\na. The Medical practitioner advices the Insured person to undergo treatmentat home.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d-19", "section": "Disease Specific Products", "chunk_id": "Final IC 38 -IMF_Composite -English_120", "metadata": {"file_size": 20962, "chunk_index": 120, "chunk_tokens": 976, "has_examples": false, "has_tables": false, "key_concepts": ["Corona Kavach", "Disease Specific Products"]}}
{"chunk": "June 2020:1. Hospitalization Expenses incurred for the treatment of Covid-19 on Positivediagnosis of Covid-19 in a government authorized diagnostic centre covering236the following: (Expenses on Hospitalization for a minimum period of 24 hours\nare admissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgicalappliances, ventilator charges, medicines and drugs, costs towards\ndiagnostics, diagnostic imaging modalities, PPE Kit, gloves, mask and such\nother similar expenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up tomaximum 14 days per incident subject to the conditions (not exhaustive)\nmentioned below:\na. The Medical practitioner advices the Insured person to undergo treatmentat home.\nb. There is a continuous monitoring of the health status by a medicalpractitioner for each day, including records of treatment administered.3. Other Expenses covered if prescribed by the treating medical practitioner andrelated to treatment of COVID,\na. Diagnostic tests undergone at home or at diagnostics centre\nb. Medicines prescribed in writing\nc. Consultation charges of the medical practitioner\nd. Nursing charges related to medical staff\ne. Medical procedures limited to parenteral administration of medicines\nf. Cost of Pulse oximeter, Oxygen cylinder and NebulizerAdditional Cover - Hospital Daily Cash: The Insurer will pay 0.5% of sum insured\nper day for each 24 hours of continuous hospitalization for treatment of Covid\nfollowing an admissible hospitalization claim under this policy.**Standard Vector Borne Disease Health Policy:**IRDAI vide its Guidelines dated 3 February 2021 decided that Standard Products\nfor vector borne diseases shall offer the following coverage:\n1. **Hospitalization Benefit:** Lump sum benefit equal to 100% of the Sum Insuredshall be payable on positive diagnosis of any of the following vector borne\ndisease (s) requiring hospitalization for a minimum continuous period of 72\nhours.\na) Dengue fever\nb) Malaria\nc) Filaria (Lymphatic Filariasis)\nd) Kala-azar237e) Chikungunya\nf) Japanese Encephalitis\ng) Zika Virus2. **Diagnosis Cover:** 2% of the sum insured shall be payable on positive diagnosis(through laboratory examination and confirmed by the medical practitioner)\nof every covered vector borne disease on the first diagnosis during the Cover\nPeriod, subject to policy terms and conditions. The Policyholder is entitled\nfor payments under “diagnosis cover” payment for each disease only once in\nthe policy year.**G.** **Combo-products****Health plus Life Combo Products** offer the combination of a life insurance cover\nof a Life Insurance Company and a health insurance cover offered by Non-Life\nand/ or Standalone Health Insurance Company.The product may be offered both as individual insurance policy and on group\ninsurance basis. However in respect of health insurance floater policies, the pure\nterm life insurance coverage is allowed on the life of one of the earning members\nof the family who is also the proposer on health insurance policy subject to\ninsurable interest and other applicable underwriting norms of respective insurers.**Package policies**Package or umbrella covers give, under a single document, a combination ofcovers.Examples of package policy in health insurance include combining Critical illness\ncover benefits with indemnity policies and even life insurance policies and\nhospital daily cash benefits with indemnity policies.**Travel Insurance:**Travel insurance policy is also offered as a package policy covering not only health\ninsurance but also accidental death/ disability benefits along with Medical\nexpenses due to illness/ accident and the coverages like Loss of or delay in arrival\nof checked in baggage, Loss of passport and documents, Third party liability for\nproperty/ personal damages, Cancellation of trips and even Hijack cover\ntraditionally provided under travel policies. (Details of Travel Insurance are\nprovided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of\nlow income people from rural and informal sectors. It is a low value product, with\nan affordable premium and benefit package. Micro insurance is governed by the\nIRDA Micro Insurance Regulations, 2005.238Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d-19", "section": "Standard Vector Borne Disease Health Policy:", "chunk_id": "Final IC 38 -IMF_Composite -English_121", "metadata": {"file_size": 20962, "chunk_index": 121, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Hospitalization Benefit:", "Diagnosis Cover:", "Travel Insurance:", "Health plus Life Combo Products", "Combo-products"]}}
{"chunk": "cover benefits with indemnity policies and even life insurance policies and\nhospital daily cash benefits with indemnity policies.**Travel Insurance:**Travel insurance policy is also offered as a package policy covering not only health\ninsurance but also accidental death/ disability benefits along with Medical\nexpenses due to illness/ accident and the coverages like Loss of or delay in arrival\nof checked in baggage, Loss of passport and documents, Third party liability for\nproperty/ personal damages, Cancellation of trips and even Hijack cover\ntraditionally provided under travel policies. (Details of Travel Insurance are\nprovided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of\nlow income people from rural and informal sectors. It is a low value product, with\nan affordable premium and benefit package. Micro insurance is governed by the\nIRDA Micro Insurance Regulations, 2005.238Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of\nsociety are Jan Arogya Bima Policy and Universal Health Scheme. The private\nsector insurance companies have also come out with many innovative micro\ninsurance health products to cater to this target segment like Bima Kavach\nYojana, Grameena Jeevan Raksha Plan, Bhaghya Laxmi - the entire list can be\nfound on IRDAI website.**I.** **Rashtriya Swasthya Bima Yojana**The government has also launched various health schemes, some of them\napplicable to particular states. It had implemented the Rashtriya Swasthya Bima\nYojana (RSBY) in association with insurance companies to provide health\ninsurance coverage for the below poverty line (BPL) families. However RSBY\nprovided a Sum Insured of only Rs 30,000 which was not considered enough to\ncover major surgeries/ hospitalisation expenses.**J.** **Pradhan Mantri Jan Arogya Yojana**To address the shortcomings of RSBY, as recommended by the National Health\nPolicy 2017, the Government of India launched ‘Ayushman Bharat Scheme’ in\n2017, a flagship scheme of to achieve the vision of Universal Health Coverage\n(UHC). Also known as Pradhan Mantri Jan Arogya Yojana (PMJAY) Ayushman\nBharat came with a Sum Insured of Rs. 5,00,000.It subsumed the then existing Rashtriya Swasthya Bima Yojana (RSBY). PM-JAY is\nfully funded by the Government and cost of implementation is shared between\nthe Central and State Governments.**K.** **Pradhan Mantri Suraksha Bima Yojana**Features of the recently announced PMSBY covering personal accident death and\ndisability cover are as follows:\n**Scope of coverage:** All savings bank account holders in the age 18 to 70 years in\nparticipating banks are entitled to join through one savings bank account only\nand if he enrols in more than one bank, he gets no extra benefit and the extra\npremium paid will stand forfeited. Aadhaar would be the primary KYC for the\nbank account.**Enrolment Modality/ Period** : The cover shall be for the one year period from 1 [st]\nJune to 31 [st] May for which option to join/ pay by auto-debit from the designated\nsavings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:239|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Travel Insurance:", "chunk_id": "Final IC 38 -IMF_Composite -English_122", "metadata": {"file_size": 20962, "chunk_index": 122, "chunk_tokens": 985, "has_examples": true, "has_tables": true, "key_concepts": ["Scope of coverage:", "Rashtriya Swasthya Bima Yojana", "Pradhan Mantri Jan Arogya Yojana", "Travel Insurance:", "Enrolment Modality/ Period"]}}
{"chunk": "savings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:239|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from\nthe account holder’s savings bank account through ‘auto debit’ facility**Termination of cover** : The accident cover for the member shall terminate:1. On member attaining the age of 70 years (age nearest birth day) or2. Closure of account with the Bank or insufficiency of balance to keep theinsurance in force orIf the insurance cover is ceased due to any technical reasons such as insufficient\nbalance on due date or due to any administrative issues, the same can be\nreinstated on receipt of full annual premium, subject to conditions that may be\nlaid down.**L.** **Personal Accident and Disability cover**A **Personal Accident (PA) Cover** provides compensation due to death and\ndisability in the event of unforeseen accident.In a PA policy,a) The death benefit is payment of 100% of the sum insured,b) In the event of disability, compensation varies from a fixed percentage of\nthe sum insured in the case of permanent disabilityc) Weekly compensation for temporary disablement.Weekly compensation means payment of a fixed sum per week of disablement\nsubject to a maximum limit in terms of number of weeks for which the\ncompensation would be payable.**1.** **Types of disability covered**Types of disability which are normally covered under the policy are:**i.** **Permanent total disability (PTD):** means becoming totally disabled forlifetime viz. paralysis of all four limbs, comatose condition, loss of both\neyes/ both hands/ both limbs or one hand and one eye or one eye and one\nleg or one hand and one leg,**ii.** **Permanent partial disability (PPD):** means becoming partially disabledfor lifetime viz. loss of fingers, toes, phalanges etc.**iii.** **Temporary total disability (TTD):** means becoming totally disabled for atemporary period of time. This section of cover is intended to cover the\nloss of income during the disability period.240The client has choice to select only death cover or death plus permanent\ndisablement of Or Death plus permanent disablement and also temporary total\ndisablement.**2.** **Sum insured**Sums insured for PA policies are usually decided on the basis of gross monthly\nincome. Typically, it is 60 times of the gross monthly income. However, some\ninsurers also offer on fixed plan basis without considering the income level. In\nsuch policies sum insured for each section of cover varies as per the plan opted.**3.** **Personal Accident Insurance – a Benefit plan**Being a benefit plan, PA policies are not subject to the principle of ‘contribution’\nat the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on\nthe basis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out\nof disability existing prior to the inception of policy, death or disability due to\nmental disorders or any sickness, injury due to war, invasion, culpable homicide\nor murder, intentional self-injury, suicide, intake of drugs/ alcohol, injury while\nengaging in defined extra hazardous activity like aviation or ballooning . This is", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "r2", "section": "Premium", "chunk_id": "Final IC 38 -IMF_Composite -English_123", "metadata": {"file_size": 20962, "chunk_index": 123, "chunk_tokens": 995, "has_examples": true, "has_tables": true, "key_concepts": ["Personal Accident and Disability cover", "Scope of cover", "Exclusions:", "Sum insured", "Permanent partial disability (PPD):"]}}
{"chunk": "at the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on\nthe basis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out\nof disability existing prior to the inception of policy, death or disability due to\nmental disorders or any sickness, injury due to war, invasion, culpable homicide\nor murder, intentional self-injury, suicide, intake of drugs/ alcohol, injury while\nengaging in defined extra hazardous activity like aviation or ballooning . This is\nan indicative list and can vary from company to company.PA policies are offered to individuals, family and also to groups.**Group Personal Accident Policies**Group Personal Accident Policies are usually annual policies with renewals being\nallowed on the anniversary. However, non-life and standalone health insurers may\noffer group personal accident products with term less than one year also to\nprovide coverage to specific events.**Broken bone policy and compensation for loss of daily activities**This is a specialised PA policy. This policy is designed to provide cover against\nlisted fractures. Fixed benefit or percentage of sum insured mentioned against\neach fracture is paid at the time of claim. Quantum of benefit depends on the\ntype of bone covered and nature of fracture sustained.**M.** **Overseas Travel insurance****Need for the policy:** To cover expenses of accidental injury or hospitalisation\nwhilst travelling outside India for business, holidays or studies., The cost of241medical care, especially in countries such as USA and Canada, is very high and\ncould cause major financial problems.**Scope of coverage**Such policies are primarily meant for accident and sickness benefits, but most\nproducts available in the market package a range of covers within one product.The usual covers offered are:**a) Medical and sickness section:**i. Accidental death/ disability\nii. Medical expenses due to illness/ accident\n**b) Repatriation and evacuation**\n**c) Personal accident cover**\n**d) Personal liability**\n**e) Other non-medical covers:**i. Trip Cancellation\nii. Trip Delay\niii. Trip interruption\niv. Missed Connection\nv. Delay of Checked Baggage\nvi. Loss of Checked Baggage\nvii. Loss of Passport\nviii. Emergency Cash Advance\nix. Hijack Allowance\nx. Bail Bond insurance\nxi. Hijack cover\nxii. Sponsor Protection\nxiii. Compassionate Visit\nxiv. Study Interruption\nxv. Home burglary**1.** **Types of plans**The popular policies are the Business and Holiday Plans, the Study Plans and the\nEmployment Plans.**2.** **Who can take the policy**An Indian citizen travelling abroad on business, holiday or for studies can avail\nthis policy. Employees of Indian employers sent on contracts abroad can also be\ncovered.**3.** **Sum insured and premiums**The cover is granted in US Dollars and generally varies from USD 100,000 to USD\n500,000 for the section covering medical expenses, evacuation and repatriation.\nFor other sections the Sum Insured is lower, except for the liability cover.\nPremiums can be paid in Indian rupees except in the case of the employment plan\nwhere premium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada World-wide including USA/ Canada242Some products provide cover for a group of countries. Examples are travel to\nAsian countries only, European countries only or travel to a particular country\nonly.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies\nfor its executives who frequently make trips outside India. This cover can also be\ntaken by individuals who fly overseas many times during a year. An advance\npremium is paid based on the estimated man days of travel in a year by a\ncompany’s employees. The above policies are granted only for business and\nholiday travels. Pre-existing diseases are usually excluded for Overseas Medical/\nTravel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "f241", "section": "Scope of cover", "chunk_id": "Final IC 38 -IMF_Composite -English_124", "metadata": {"file_size": 20962, "chunk_index": 124, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Scope of cover", "Exclusions:", "Overseas Travel insurance", "Need for the policy:", "Group Health cover"]}}
{"chunk": "where premium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada World-wide including USA/ Canada242Some products provide cover for a group of countries. Examples are travel to\nAsian countries only, European countries only or travel to a particular country\nonly.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies\nfor its executives who frequently make trips outside India. This cover can also be\ntaken by individuals who fly overseas many times during a year. An advance\npremium is paid based on the estimated man days of travel in a year by a\ncompany’s employees. The above policies are granted only for business and\nholiday travels. Pre-existing diseases are usually excluded for Overseas Medical/\nTravel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year\nrenewable contracts.**Features of group policies - Hospitalisation benefit covers.****1.** **Scope of coverage**The most common form of group health insurance is the policy taken by\nemployers covering employees and their families including dependent\nspouse, children and parents/ parents in law.**2.** **Tailor-made cover**Group policies are often tailor-made covers to suit the requirements of the\ngroup. Thus, in group policies, one will find several standard exclusions of\nthe individual policy being covered under the group policy.**3.** **Maternity cover**One of the most common extensions in a group policy is the maternity\ncover. Maternity cover would provide for the expenses incurred in\nhospitalization for delivery of child and includes C- section delivery. This\ncover is generally restricted to a certain amount within the overall sum\ninsured of the family.**4.** **Child cover**Coverage is given to babies from day one, sometimes restricted to the\nmaternity cover limit and sometimes extended to include the full sum\ninsured of the family.**5.** **Pre-existing diseases covered, waiting period waived off**Several of the usual exclusions, such as the pre-existing disease exclusion,\nthirty days waiting period, two years waiting period, congenital diseases\nmay be waived off, in tailor-made group policies.243**6.** **Premium calculation**The premium charged for a group policy is based on the age profile of the\ngroup members, the size of the group and most importantly the claims\nexperience of the group.**7.** **Non-employer employee groups**In India, regulatory provisions strictly prohibit formation of groups\nprimarily for the purpose of taking out a group insurance cover. When group\npolicies are given to other than employers, it is important to determine the\nrelation of the group owner to its members.**Example**A bank taking a policy for its saving bank account holders or credit card\nholders constitutes a homogenous group, whereby a large group is able to\nbenefit by a tailor-made policy designed to suit their requirements.**8.** **Pricing**In group policies, there is provision for discount on premium based on size\nof the group as also the claims experience of the group**2.** **CORPORATE BUFFER OR FLOATER COVER**In most group policies, each family is covered for a defined sum insured, varying\nfrom Rs. One lac to five lacs and sometimes more. There arise situations where\nthe sum insured of the family is exhausted, especially in the case of major illness\nof a family member. In such situations, if the buffer cover is opted for it brings\nrelief, whereby the excess expenses over and above the family sum insured are\nmet from this buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health checkup paid for by the insurer. There is incentive for better control of factors like\nblood glucose, blood pressure etc. in the form of reduced premiums from second\nyear of policy onwards. On the other hand, a higher premium would be chargeable\nfor poor control.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "a242", "section": "Corporate Frequent Flyer plans", "chunk_id": "Final IC 38 -IMF_Composite -English_125", "metadata": {"file_size": 20962, "chunk_index": 125, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Non-employer employee groups", "CORPORATE BUFFER OR FLOATER COVER", "Disease covers", "Child cover", "Tailor-made cover"]}}
{"chunk": "of a family member. In such situations, if the buffer cover is opted for it brings\nrelief, whereby the excess expenses over and above the family sum insured are\nmet from this buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health checkup paid for by the insurer. There is incentive for better control of factors like\nblood glucose, blood pressure etc. in the form of reduced premiums from second\nyear of policy onwards. On the other hand, a higher premium would be chargeable\nfor poor control.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up\nto 70 years. Sum Insured ranges from Rs. 50,000 to Rs. 5,00,000. Capping on Room\nrent is applicable. Product is aimed to cover hospitalization complications of\ndiabetes like diabetic retinopathy (eye), kidney, diabetic foot, kidney transplant\nincluding donor expenses.244**Test Yourself 1**Though the duration of cover for pre-hospitalization expenses would vary from\ninsurer to insurer and is defined in the policy, the most common cover is for\n________ pre-hospitalization.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty daysKey terms in health policies **(All the terms are as defined in IRDAI Master**\n**Circular on Standardization of Health Insurance Products dated 22.07.2020)****1.** **Network Provider**Network provider refers to a hospital/ nursing home/ day care centre which is\nunder tie-up with an insurer/ TPA for providing cashless treatment to insured\npatients. Patients are free to go to out-of-network providers but there they are\ngenerally charged much higher fees.**2.** **Preferred provider network (PPN)**An insurer has the option to create a preferred network of hospitals to ensure\nquality treatment and at best rates. When this group is limited to only a select\nfew by the insurer based on experience, utilization and cost of providing care,\npreferred provider networks get formed.**3.** **Cashless service**A cashless service enables the insured to avail of the treatment up to the limit of\ncover without any payment to the hospitals. All that the insured has to do is\napproach a network hospital and present his medical card as proof of insurance.\nThe insurer facilitates a cashless access to the health service and directly makes\npayment to the network provider for the admissible amount. However, the\ninsured has to make payment for amounts beyond the policy limits and for\nexpenses not payable as per policy conditions.**4.** **Third Party Administrator (TPA)**A major development in the field of health insurance is the introduction of the\nthird party administrator or TPA. Several insurers across the world utilize the\nservices of independent organizations for managing health insurance claims.\nThese agencies are known as the TPAs. In India, a TPA is engaged by an insurer\nfor provision of health services which includes among other things:i. Providing an identity card to the policyholder which is proof of hisinsurance policy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards\nfor hospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals245or health service providers and ensure that any person who undergoes treatment\nin the network hospitals is given a cashless service. They are the intermediaries\nbetween the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d-19", "section": "O.", "chunk_id": "Final IC 38 -IMF_Composite -English_126", "metadata": {"file_size": 20962, "chunk_index": 126, "chunk_tokens": 938, "has_examples": false, "has_tables": false, "key_concepts": ["Hospital", "Network Provider", "Disease covers", "Test Yourself 1", "Special Products"]}}
{"chunk": "services of independent organizations for managing health insurance claims.\nThese agencies are known as the TPAs. In India, a TPA is engaged by an insurer\nfor provision of health services which includes among other things:i. Providing an identity card to the policyholder which is proof of hisinsurance policy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards\nfor hospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals245or health service providers and ensure that any person who undergoes treatment\nin the network hospitals is given a cashless service. They are the intermediaries\nbetween the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum\ncriteria as under:a) Has at least 10 inpatient beds in those towns having a population of lessthan 10,00,000 and 15 inpatient beds in all other places;b) Has qualified nursing staff under its employment round the clock;c) Has qualified medical practitioner(s) in charge round the clock;d) Has a fully equipped operation theatre of its own where surgicalprocedures are carried out;e) Maintains daily records of patients and will make these accessible to theInsurance Company’s authorized personnel.**6.** **Medical practitioner**A Medical practitioner is a person who holds a valid registration from the medical\ncouncil of any state of India or for homeopathy and is thereby entitled to practice\nmedicine within its jurisdiction; and is acting within the scope and jurisdiction of\nhis license. However, insurance companies are free to make a restriction that the\nregistered practitioner should not be the insured or any close family member.\nThis is to ensure fraudulent claims are not lodged by taking treatment from\nrelatives or by self or by hospitals owned by either.**Qualified nurse:** Qualified nurse means a person who holds a valid registration\nfrom the Nursing Council of India or the Nursing Council of any state in India.**7.** **Reasonable and necessary expenses**A health insurance policy always contains this clause as the policy provides for\ncompensation of expenses that would be deemed to be reasonable for treatment\nof a particular ailment and in a particular geographical area.**8.** **Notice of claim**Every insurance policy provides for immediate intimation of claim and specified\ntime limits for document submission. In health insurance policies, wherever\ncashless facility is desired by the customer, intimations are given well before the\nhospitalization. However in cases of reimbursement claims the time limit for\nsubmission of claim documents is normally fixed at 15 days from the date of\ndischarge.246**9.** **Free health check**In individual health policies, a provision is generally available to give some form\nof incentive to a claim free policyholder. Many policies provide for reimbursement\nof the cost of health check-up at the end of four continuous, claim free policy\nperiods.**10.** **Cumulative bonus**A cumulative bonus is given on the sum insured for every claim free year. This\nmeans that the sum insured gets increased on renewal by a fixed percentage say\n5% annually and is allowed up to a maximum of 50% for ten claim-free renewals.\nMoreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second\nyear, in case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs\n(5% more than the previous year) at the same premium of Rs. 5,000. This could\ngo up to Rs. 4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or\nloading of premium is collected at renewal. However, in case of group policies,\nthe malus is charged by way of loading the overall premium suitably to keep the\nclaim ratio within reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s245", "section": "Hospital", "chunk_id": "Final IC 38 -IMF_Composite -English_127", "metadata": {"file_size": 20962, "chunk_index": 127, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Medical practitioner", "Reasonable and necessary expenses", "Hospital", "Notice of claim", "Cumulative bonus"]}}
{"chunk": "Moreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second\nyear, in case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs\n(5% more than the previous year) at the same premium of Rs. 5,000. This could\ngo up to Rs. 4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or\nloading of premium is collected at renewal. However, in case of group policies,\nthe malus is charged by way of loading the overall premium suitably to keep the\nclaim ratio within reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year\ninstead of a bonus on sum insured.**13.** **Room rent restrictions**Some health plans place a restriction on the category of room that an insured\nchooses by linking it to the sum insured. Hence a person with a sum insured of\none lac would be entitled to a room of Rs 1,000 per day if the policy has a room\nrent restriction of 1% of sum insured per day.**14.** **Renewability clause**The IRDAI guidelines on renewability of health insurance policies makes lifetime\nguaranteed renewal of the health policies compulsory, except on grounds of fraud\nand misrepresentation. In accordance to the provisions of IRDAI Health Insurance\nRegulation 2016, once a proposal is accepted in respect of a health insurance\npolicy (except Personal Accident and Travel Policies) and a policy is issued which\nis thereafter renewed periodically without any break, further renewal shall not\nbe denied on the grounds of age of the Insured. Thus, health insurance policies\nare renewable lifelong.247**15.** **Cancellation clause**An insurance company may at any time cancel the policy only on grounds of\nmisrepresentation, fraud, and non-disclosure of material fact or non-cooperation\nby the insured.When policies are cancelled by the insurer, a proportion of the premium\ncorresponding to the unexpired period of insurance, is returned to the insured\nprovided no claim has been paid under the policy. This is usually on pro-rata basis.When annual policies are cancelled by the insured, insurers usually charge\npremiums at Short period scales, instead of pro-rata premiums. This would\nprevent anti-selection against the insurers and take care of the initial expenses\nof the insurer.**16.** **Grace period for renewal**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during\nthe grace period.Most of above key clauses, definitions, exclusions relating to grace period have\nbeen standardized under Health Regulations and Health Insurance\nStandardization Guidelines issued by IRDAI and updated from time to time.**Test Yourself 2**As per IRDA guidelines, a ________ grace period is allowed for renewal of\nindividual health policies.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty days**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.248## CHAPTER H-04## HEALTH INSURANCE UNDERWRITING**Chapter Introduction**This chapter aims to provide you detailed knowledge about underwriting in health\ninsurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get\nan understanding about basic principles, tools, methods and process of\nunderwriting. It will also provide you the knowledge about group health insurance\nunderwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten249**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "H-04", "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_128", "metadata": {"file_size": 20962, "chunk_index": 128, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Room rent restrictions", "Example", "Chapter Introduction"]}}
{"chunk": "insurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get\nan understanding about basic principles, tools, methods and process of\nunderwriting. It will also provide you the knowledge about group health insurance\nunderwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten249**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his\nfamily health history, habits and so on.On receipt of his proposal form, he was also required to submit many documents\nsuch as identity and age proof, proof of address and previous medical records.\nThen they told him to undergo a health check-up and some medical tests which\nfrustrated him.Manish, who considered himself a healthy person and with a good income level,\nstarted wondering why such a lengthy process was being followed by the\ninsurance company in his case. Even after going through all this, the insurance\ncompany told him that high cholesterol and high BP had been diagnosed in his\nmedical tests, which increased the chances of heart diseases later. Though they\noffered him a policy, the premium was much higher than what his friend had paid\nand so he refused to take the policy.Here, the insurance company was following all these steps as part of their\nunderwriting process. While providing risk coverage, an insurer needs to evaluate\nrisks properly and also to make reasonable profit. If the risk is not assessed\nproperly and there is a claim, it will result in a loss. Moreover, insurers collect\npremiums on behalf of all insuring persons and have to handle these moneys like\na trust.**A.** **What is underwriting?****1.** **Underwriting**\nInsurance companies try to insure people who are expected to pay adequate\npremium in proportion to the risk they bring to the insurance pool. This process\nof collecting and analysing information from a proposer is known as underwriting.\nOn the basis of information collected through this process, they decide whether\nthey want to insure a proposer. If they decide to do so, then at what premium,\nterms and conditions so as to make a reasonable profit from taking such risk.**Definition****Underwriting** is the process of assessing the risk appropriately and deciding the\nterms on which the insurance cover is to be granted. Thus, it is a process of risk\nassessment and risk pricing.**2.** **Need for Underwriting**250Underwriting is the backbone of an insurance company as acceptance of the risk\ncarelessly or for insufficient premiums will lead to insurer’s insolvency. On the\nother hand, being too selective or careful will prevent the insurance company\nfrom creating a big pool so as to spread the risk uniformly. It is therefore critical\nto strike the correct balance between risk and business, thereby being\ncompetitive and yet profitable for the organization.This process of balancing is done by the underwriter, in accordance with the\nphilosophy, policies and risk hunger of the insurance company concerned.\nAlthough age affects the chance of sickness as well as death, it must be\nremembered that sickness usually comes much before death and could be\nfrequent. Hence, it is quite logical that the underwriting norms and guidelines\nare much tighter for health coverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored\nas there has to be an insurable interest and financial underwriting is important\nto rule out any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A\nlife insurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered\ncarefully while assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n249", "section": "Learning Outcomes", "chunk_id": "Final IC 38 -IMF_Composite -English_129", "metadata": {"file_size": 20962, "chunk_index": 129, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["What is underwriting?", "Example", "Factors which affect chance of illness", "Learning Outcomes", "Look at this Scenario"]}}
{"chunk": "frequent. Hence, it is quite logical that the underwriting norms and guidelines\nare much tighter for health coverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored\nas there has to be an insurable interest and financial underwriting is important\nto rule out any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A\nlife insurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered\ncarefully while assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young\nadults due to increased risk of infections and accidents. Similarly, for\nadults beyond the age of 45 years, the premiums are higher, as the\nprobability of an individual suffering from a chronic ailment like diabetes,\na sudden heart ailment or other such morbidity is much higher.\n**b)** **Gender:** Women are exposed to additional risk of illness during childbearing period. However, men are more likely to get affected by heart\nattacks than women or suffer job related accidents than women as they\nmay be more involved in hazardous employment.\n**c)** **Habits:** Consumption of tobacco, alcohol or narcotics in any form has adirect bearing on the morbidity risk.251**d)** **Occupation:** Extra risk to accidents is possible in certain occupations, e.g.driver, blaster, aviator etc. Likewise, certain occupations may have higher\nhealth risks, like an X-Ray machine operator, asbestos industry workers,\nminers etc.\n**e)** **Family history:** This has greater relevance, as genetic factors influencediseases like asthma, diabetes and certain cancers. This does impact the\nmorbidity and should be taken into consideration while accepting risk.\n**f)** **Build:** Stout, thin or average build may also be linked to morbidity incertain groups.\n**g)** **Past illness or surgery:** It has to be ascertained whether the past illnesshas any possibility of causing increased physical weakness or even recur\nand accordingly the policy terms should be decided. For e.g. kidney stones\nare known to recur and similarly, cataract in one eye increases possibility\nof cataract in the other eye.\n**h)** **Current health status and other factors or complaints:** This is importantto ascertain the degree of risk and insurability and can be established by\nproper disclosure and medical examination.\n**i)** **Environment and residence:** These also have a bearing on morbidityrates.**Understanding Moral Hazard in Health Insurance**While factors like age, gender, habits etc. refer to the physical hazard of a health\nrisk, there is something else that needs to be closely watched. This is the moral\nhazard of the client which can prove very costly to the insurance company.An extreme example of bad moral hazard is that of an insured taking health\ninsurance knowing that he will undergo a surgical operation within a short time\nbut not disclosing this to the insurer. There is thus a deliberate intention of taking\ninsurance just to collect a claim.**Test Yourself 1**Underwriting is the process of ___________.\nI. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks252**Definition**The term **assessment of risks** refers to the process of evaluating each proposal\nfor health insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance\neagerly and to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there\nis a chance that people with serious ailments like diabetes, high BP, heart\nproblems or cancer, who knew that they would soon require hospitalization,\nwould seek to buy health insurance, create losses for the insurer. In other words,", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s252", "section": "Underwriting – Risk Assessment", "chunk_id": "Final IC 38 -IMF_Composite -English_130", "metadata": {"file_size": 20962, "chunk_index": 130, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Purposes of Underwriting", "Understanding Moral Hazard in Health Insurance", "Gender:", "Test Yourself 1", "Example"]}}
{"chunk": "I. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks252**Definition**The term **assessment of risks** refers to the process of evaluating each proposal\nfor health insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance\neagerly and to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there\nis a chance that people with serious ailments like diabetes, high BP, heart\nproblems or cancer, who knew that they would soon require hospitalization,\nwould seek to buy health insurance, create losses for the insurer. In other words,\nif an insurer does not assess risk properly, it would be selected against and suffer\nlosses in the process.**2.** **Equity among risks**\nLet us now consider equity among risks. “Equity” means that applicants who are\nexposed to similar types and degrees of risk be placed in the same premium class.\nInsurers would like to have some type of standardization to determine the\npremiums to be charged. The proposals that come to the underwriter are\nclassified into following risk types:**i.** **Standard risks**\nThese are the people whose expected morbidity (chance of falling ill) isaverage.**ii.** **Preferred risks**\nIn some cases, the expected morbidity is significantly lower than average and\nhence are preferred risks. These could be charged a lower premium.**iii.** **Substandard risks**\nIn some other cases, the expected morbidity may be higher than the average.\nThough these risks also may be insurable, insurers may charge higher\npremiums and/or accept them subject to certain conditions and restrictions.**iv.** **Declined risks**There are some persons who have certain medical or other conditions, which\nmake them highly prone to sicknesses and making claims. It is highly probable\nthat such persons fall sick and cause a disproportionate degree of liability on\nthe common pool. In other words, while others in the pool have a more or less\naverage chance of falling sick, these persons have a very high chance of falling\nsick making it difficult to insure them even at higher rates of premium.253[Sometimes, such persons may be posing a Moral Hazard when they do not\nreveal their high probability of falling sick and try to get insured like other\nnormal people.] Most insurers decline such risks and create a database of such\npeople for future use.Being a ‘Declined Risk’ means only that a particular insurer does not wish to\ninsure a person for that type of insurance product, at that particular point in\ntime. However, it is possible that another insurer might insure him/ her at a\ndifferent premium and/or with different conditions. The same insurer might\nalso consider him/ her for another type of policy or even for the same policy\nat a later date, when the conditions change.**3.** **Underwriting process**The underwriting process takes place at two levels: At the primary or field level or\n At the underwriting department level**a)** **Primary Underwriting**Primary underwriting (or Field level underwriting) includes information\ngathering by an agent or company representative to decide whether an\napplicant is suitable for granting insurance coverage. The agent plays this\ncritical role of **primary underwriting** . He is in the best position to know\nwhether prospective client is insurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may\nalso be sought from an official of the insurance company. These reports\ntypically cover the occupation, income and financial standing and reputation\nof the person proposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts\ndisclosed by the proposer in the Proposal Form. It would be difficult for an\nunderwriter sitting in the office to know whether these facts are true or have\nbeen fraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the\nagent has direct personal contact with the proposer, he or she is in the best", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s252", "section": "B.", "chunk_id": "Final IC 38 -IMF_Composite -English_131", "metadata": {"file_size": 20962, "chunk_index": 131, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Equity among risks", "Purposes of Underwriting", "Substandard risks", "Moral Hazard report", "Example"]}}
{"chunk": "gathering by an agent or company representative to decide whether an\napplicant is suitable for granting insurance coverage. The agent plays this\ncritical role of **primary underwriting** . He is in the best position to know\nwhether prospective client is insurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may\nalso be sought from an official of the insurance company. These reports\ntypically cover the occupation, income and financial standing and reputation\nof the person proposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts\ndisclosed by the proposer in the Proposal Form. It would be difficult for an\nunderwriter sitting in the office to know whether these facts are true or have\nbeen fraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the\nagent has direct personal contact with the proposer, he or she is in the best\nposition to find out whether the information submitted is true and whether\nany wilful non-disclosure or misrepresentation has been made.254**a)** **Role of the Underwriting department**The Underwriting department in the insurer’s office does the major part of the\nunderwriting. Here, specialists who are proficient in such work, consider and\nanalyse all the relevant data on the particular risk and even some\ndemographical data. They finally decide whether to accept the proposal for\ninsurance, decide the terms, and charge the appropriate premiums.**C.** **Other Health Insurance regulations of IRDAI**\nThe regulator has also brought in some changes for benefit of the Insured as given\nbelow.a. The insured is to be informed of any underwriting loading charged over andabove the premium and the specific consent of the policyholder for such\nloadings shall be obtained before issuance of a policy.\nb. If an insurance company requires any further information, such as change ofoccupation, at any subsequent stage of a policy or at the time of its renewal,\nit has prescribed standard forms to be filled up by the insured which forms\npart of the policy document.\nc. Insurers have come out with various mechanisms to reward policyholders forearly entry, continued renewals, favourable claims experience etc. with the\nsame insurer and disclose upfront such mechanism or incentives in the\nprospectus and the policy document.**D.** **Portability of Health Insurance**Portability is defined by IRDAI as **the right** accorded to individual health insurance\npolicyholders (including all members under family cover), **to transfer** the credit\ngained for pre-existing conditions and time bound exclusions, **from one insurer**\n**to another insurer or from one plan to another plan of the same insurer**,\nprovided the previous policy has been maintained without any break.Portability is the provision by which an Insured can move from one insurer to\nanother carrying with him/ her all the benefits earned over a period of time.\nStudents may please read IRDAI’s Consolidated Guidelines on Product filing in\nHealth Insurance Business dated 22 July 2020 lays down norms for standardising\nmany of the practices including Portability.IRDAI mandates that Portability shall be allowed under all individual indemnity\nhealth insurance policies issued by General Insurers and Health Insurers including\nfamily floater policies.However, porting can be done only at the time of renewal. Apart from the waiting\nperiod credit, other terms of the new policy including the premium would be\ndecided by the new insurance company. Procedurally, the request for porting\nshould be made by the insured to the old insurer at least 45 days before the\nrenewal, specifying the company to which the policy has to be ported. The policy\nhas to be renewed without a break (there is a 30 day grace period if porting is255under process). IRDA has created a web-based facility that maintains data about\nall health insurance policies issued by insurance companies to individuals, to\nenable the new insurer to access and obtain data on the porting policyholder’s\nhealth insurance history in a smooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance\npolicyholders (including all members under family cover and members of group\nhealth insurance policy), **to transfer** the credit gained for pre-existing conditions\nand time bound exclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business\ndated 22 July 2020 revised the guidelines on Migration of health insurance\npolicies. It provides that every individual policyholder (including members under", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s255", "section": "Moral Hazard report", "chunk_id": "Final IC 38 -IMF_Composite -English_132", "metadata": {"file_size": 20962, "chunk_index": 132, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Other Health Insurance regulations of IRDAI", "Role of the Underwriting department", "Fraud monitoring role of Agent", "Migration of Health Insurance"]}}
{"chunk": "decided by the new insurance company. Procedurally, the request for porting\nshould be made by the insured to the old insurer at least 45 days before the\nrenewal, specifying the company to which the policy has to be ported. The policy\nhas to be renewed without a break (there is a 30 day grace period if porting is255under process). IRDA has created a web-based facility that maintains data about\nall health insurance policies issued by insurance companies to individuals, to\nenable the new insurer to access and obtain data on the porting policyholder’s\nhealth insurance history in a smooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance\npolicyholders (including all members under family cover and members of group\nhealth insurance policy), **to transfer** the credit gained for pre-existing conditions\nand time bound exclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business\ndated 22 July 2020 revised the guidelines on Migration of health insurance\npolicies. It provides that every individual policyholder (including members under\nfamily floater policy) covered under an indemnity based individual health\ninsurance policy shall be provided an option of migration at the explicit option\nexercised by the policyholder. Migration from group policies to individual policy\nwill be subject to underwriting.A policyholder desirous of migrating his/ her policy shall be allowed to apply to\nthe insurance company to migrate the policy along with all members of the\nfamily, if any, at least 30 days before the premium renewal date of his/her\nexisting policy. However, if the insurer is willing to consider even less than 30\ndays period, then the insurer may do so. Insurers shall not levy any charges\nexclusively for migration.**F.** **Basic principles of insurance and tools for underwriting****1.** **Basic principles relevant to underwriting**In any form of insurance, whether it is life insurance or general insurance, there\nare certain legal principles which operate along with acceptance of risks. Health\ninsurance is equally governed by these principles and any violation of the\nprinciples may result in the insurer deciding to avoid the liability. (These\nprinciples have been discussed in the common chapters.)**2.** **Tools for underwriting**These are the sources of information for the underwriter and the basis on which\nthe risk classification is done and premiums finally decided. The following are the\nkey tools for underwriting:**a)** **Proposal form**This document is the base of the contract where all the critical information\npertaining to the health and personal details of the proposer (i.e. age,256occupation, build, habits, health status, income, premium payment details\netc.) are collected. Any breach or concealment of information by the insured\nshall render the policy void. (This has been discussed in the common\nchapters.)**b)** **Age proof**Premiums are determined on the basis of the age of the insured. Hence it is\nimperative that the age disclosed at the time of enrolment is verified through\nsubmission of an age proof.**Example**\nIn India, there are many documents which can be considered as age proof but all\nof them are not legally acceptable. Mostly valid documents are divided into two\nbroad categories. They are as follows:a) Standard age proof: Some of these include school certificate, passport,domicile certificate, PAN card etc.\nb) Non-standard age proof: Some of these include ration card, voter ID,elder’s declaration, gram panchayat certificate etc.**Financial documents**\nKnowing the financial status of the proposer is particularly relevant for\nbenefit products and to reduce the moral hazard. However, normally the\nfinancial documents are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and\nusually depends upon the age of the insured and sometimes on the amount of\ncover opted. Some replies in the proposal form may also contain some\ninformation that leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive\nto generate more business, there is a conflict of interest which has to be\nwatched out for.257**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s255", "section": "E.", "chunk_id": "Final IC 38 -IMF_Composite -English_133", "metadata": {"file_size": 20962, "chunk_index": 133, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Basic principles relevant to underwriting", "Financial documents", "Reports of sales personnel", "Example", "Migration of Health Insurance"]}}
{"chunk": "Knowing the financial status of the proposer is particularly relevant for\nbenefit products and to reduce the moral hazard. However, normally the\nfinancial documents are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and\nusually depends upon the age of the insured and sometimes on the amount of\ncover opted. Some replies in the proposal form may also contain some\ninformation that leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive\nto generate more business, there is a conflict of interest which has to be\nwatched out for.257**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.\nI. The insurerII. The insuredIII. Both the insurer and the insuredIV. The medical examiners**Test Yourself 3**Insurable interest refers to ____________.\nI. Financial interest of the person in the asset to be insured\nII. The asset which is already insured\nIII. Each insurer’s share of loss when more than one company covers the samelossIV. The amount of the loss that can be recovered from the insurer**G.** **Underwriting** **process**Once the required information is received, the underwriter decides the terms of\nthe policy. The common forms used for underwriting health insurance business\nare as below:**1.** **Medical underwriting**Medical underwriting is a process in which medical reports are called for from the\nproposer to determine the health status of an individual applying for health\ninsurance policy. The health information collected is then evaluated by the\ninsurers to determine whether to offer coverage, up to what limit and on what\nconditions and exclusions. Thus medical underwriting can determine the\nacceptance or declining of a risk and also the terms of cover.**Example**Medical conditions like hypertension, overweight/ obesity and raised sugar levels\nhave a high probability of future hospitalization for diseases of the heart, kidney\nand the nervous system. So, these conditions should be carefully considered while\nassessing the risk for medical underwriting.Medical underwriting guidelines may also require a signed declaration of the\nproposer’s health status by his/ her family physician.Persons above the age of 45-50 years, enrolling for the first time are normally\nrequired to undergo specified pathological investigations to assess health risk258profile and to obtain information on their current health status. Such\ninvestigations also provide an indication of prevalence of any pre-existing medical\nconditions or diseases.**2.** **Non-medical underwriting**Most of the proposers which apply for health insurance do not need medical\nexamination.Even, if the proposer were to disclose all material facts completely and truthfully\nand the same were checked by agent carefully, then also the need for medical\nexamination could be much less.**Example**\nIf an individual has to take health insurance coverage quickly without going\nthrough a long process of medical examinations, waiting periods and processing\ndelays, then he can opt for a non-medical underwriting policy. In a non-medical\nunderwriting policy, premium rates and sum assured are usually decided on the\nbasis of answers to a few health questions mostly based on age, gender, smoking\nclass, build etc. The process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practicedin all companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate.\nThis becomes an additional exclusion apart from the standard policy exclusion", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "k258", "section": "Medical reports", "chunk_id": "Final IC 38 -IMF_Composite -English_134", "metadata": {"file_size": 20962, "chunk_index": 134, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Reports of sales personnel", "Non-medical underwriting", "Example", "Test Yourself 3", "Numerical rating method"]}}
{"chunk": "class, build etc. The process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practicedin all companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate.\nThis becomes an additional exclusion apart from the standard policy exclusion\nand shall form the part of the contract.259**5.** **Use of general or standard exclusions**The majority of policies impose exclusions that apply to all their members. These\nare known as standard exclusions or sometimes referred to as general exclusions.\nInsurers limit their exposure by the implementation of standard exclusions. These\nhave been discussed in an earlier chapter.**6.** **Zone wise premium**Normally, the premium would depend on the age of the insured person and the\nsum insured selected. Premium differential has been introduced in certain zones\nwith higher claims cost e.g. Delhi and Mumbai form part of highest premium zone\nfor certain products by some insurers. For e.g. Individual Policy for age group of\n55-65 years would be rated higher in Metros and ‘A Class’ cities than a similar\npolicy for the same age bracket in a city like Indore or Jammu.**Test Yourself 4**Which of the following statements about medical underwriting is incorrect?I. It involves high cost in collecting and assessing medical reports.\nII. Current health status and age are the key factors in medical underwriting forhealth insurance.\nIII. Proposers have to undergo medical and pathological investigations to assesstheir health risk profile.\nIV. Percentage assessment is made on each component of the risk.**H.** **Health Insurance at Group Level**While accepting a group for health insurance, the insurers take into consideration\nthe possibility of existence of a few members in the group who may have severe\nand frequent health problems.**1.** **Group Health Insurance**Underwriting of group health insurance requires analysing the characteristics of\nthe group to evaluate whether it falls within the insurance company’s\nunderwriting guidelines as well as the guidelines laid down for group insurance\nby the insurance regulators.Standard underwriting process for group health insurance requires evaluating the\nproposed group on the following factors:a) Type of group\nb) Group size\nc) Type of industry\nd) Eligible persons for coverage260e) Whether entire group is being covered or there is an option for membersto opt out\nf) Level of coverage – whether uniform for all or differently\ng) Composition of the group in terms of sex, age, single or multiple locations,income levels of group members, employee turnover rate, whether\npremium paid entirely by the group holder or members are required to\nparticipate in premium payment\nh) Difference in healthcare costs across regions in case of multiple locationsspread in different geographical locations\ni) Preference of the group holder for administration of the group insuranceby a third party administrator (of his choice or one selected by the insurer)\nor by the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore,\nthe insurer will price the group health insurance policy accordingly in both thecases.Similarly to avoid adverse selection in case of groups with high turnover such as\nIT companies, insurers can introduce precautionary criteria requiring employees\nto serve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered\ngroup health insurance, the character of the group composition is one of the\nimportant consideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e260", "section": "Numerical rating method", "chunk_id": "Final IC 38 -IMF_Composite -English_135", "metadata": {"file_size": 20962, "chunk_index": 135, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Underwriting other than employer- employee groups", "Use of general or standard exclusions", "Test Yourself 4", "Health Insurance at Group Level", "Example"]}}
{"chunk": "h) Difference in healthcare costs across regions in case of multiple locationsspread in different geographical locations\ni) Preference of the group holder for administration of the group insuranceby a third party administrator (of his choice or one selected by the insurer)\nor by the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore,\nthe insurer will price the group health insurance policy accordingly in both thecases.Similarly to avoid adverse selection in case of groups with high turnover such as\nIT companies, insurers can introduce precautionary criteria requiring employees\nto serve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered\ngroup health insurance, the character of the group composition is one of the\nimportant consideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be\nadopted by insurers in dealing with various groups. Such non-employer groups\ninclude:a) Employer welfare associations\nb) Holders of credit cards issued by a specific company\nc) Customers of a particular business where insurance is offered as an add-onbenefit\nd) Borrowers of a bank and professional associations or societies**I.** **Underwriting of Overseas Travel Insurance**Since the main cover under Overseas Travel Insurance policies is the health cover,\nthe underwriting would follow the pattern for health insurance in general.The premium rating and acceptance would as per individual company guidelines\nbut a few important considerations are given below:2611. Premium rate would depend on the age of the proposer and the durationof foreign travel.\n2. As medical treatment is costly overseas, the premium rates are normallymuch higher compared to domestic health insurance policies.\n3. Even among the foreign countries, USA and Canada premium is thehighest.\n4. Care should be taken to rule out the possibility of a Proposer using thepolicy to take medical treatment abroad and hence the existence of any\npre-existing disease must be carefully considered at the proposal stage.**J.** **Underwriting of Personal Accident Insurance**The underwriting considerations for Personal Accident Policies are discussed\nbelow:**Rating**In personal accident insurance, the main factor considered is the occupation of\nthe insured. The risks associated with profession or occupation varies in\naccordance with the nature of work performed. For example, an office manager\nis less exposed to risk at work than a civil engineer working at a site where a\nbuilding is being constructed. To fix a rate, occupations are classified into groups,\neach group reflecting, more or less, similar risk exposure.**Classification of Risk**On the basis of occupation, the risks associated with the insured person may be\nclassified into three groups:**Risk group I**\nAccountants, Doctors, Lawyers, Architects and persons engaged in\nadministration functions, persons primarily engaged in occupations of similar\nhazards.**Risk group II**\nBuilders, Contractors and Engineers engaged in superintending functions and\npersons engaged in occupation of similar hazards. All persons engaged in\nmanual labour (except those falling under Group III),**Risk group III**\nPersons working in underground mines or engaged in activities like racing on\nwheels and persons engaged in occupations/ activities of similar hazard.\nRisk groups are also known in the form of ‘Normal’, ‘Medium’ and ‘High’\nrespectively.**Age Limits**General age limits for the working population (employer employee) is 1870.However for students Minimum age could be 5 years too.\nThe minimum and maximum age for being covered and renewed varies from\ncompany to company.262**Family Package Cover**The Personal accident policy also has a family package cover wherein Children\nand Non-earning spouse are covered for to death and permanent disablement\n(total or partial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the\npurpose of availing of group discount and other benefits, the proposed “Group”\nshould fall clearly under one of the following categories, given below:Employer – employee relationship including dependents of the\nemployeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_136", "metadata": {"file_size": 20962, "chunk_index": 136, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Underwriting other than employer- employee groups", "Risk group II", "Group discount criteria", "Example"]}}
{"chunk": "respectively.**Age Limits**General age limits for the working population (employer employee) is 1870.However for students Minimum age could be 5 years too.\nThe minimum and maximum age for being covered and renewed varies from\ncompany to company.262**Family Package Cover**The Personal accident policy also has a family package cover wherein Children\nand Non-earning spouse are covered for to death and permanent disablement\n(total or partial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the\npurpose of availing of group discount and other benefits, the proposed “Group”\nshould fall clearly under one of the following categories, given below:Employer – employee relationship including dependents of the\nemployeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above\ncategories, they may be deliberated and decided upon by the technical\ndepartment of the respective insurers.**Premium**Varying rates of premium are applicable to named employees as per the\nclassification of risks and the benefits selected.**On-duty cover**PA policies may have a cover for both on-duty and off-duty period or for either\nseparately. The premium is dependent on the Sum Assured, the number of hours\nof duty etc. Some employers may like to restrict themselves to cover the duty\nperiod only.**Exclusion of death cover**It is possible to issue group P.A. policies excluding the death benefit, subject to\nindividual company guidelines.**Group discount and Bonus/ Malus**Rating under renewal of group policies is determined with reference to the claims\nexperience.Favourable experience is rewarded with a discount in the renewal premium\n(bonus)263Adverse experience is penalised by loading of renewal premium (malus),\naccording to a scaleNormal rates will apply for renewal if the claims experience is, say, 70 percent**Test Yourself 5**1) In a group health insurance, any of the individual constituting the group couldanti-select against the insurer.\n2) Group health insurance provides coverage only to employer-employee groups.\nI. Statement 1 is true and statement 2 is falseII. Statement 2 is true and statement 1 is falseIII. Statement 1 and statement 2 are trueIV. Statement 1 and statement 2 are false**Answers to Test Yourself****Answer 1** **-** The correct option is III.\n**Answer 2** **-** The correct option is III.\n**Answer 3** **-** The correct option is I.\n**Answer 4** **-** The correct option is IV.\n**Answer 5** **-** The correct option is IV.264## CHAPTER H-05## HEALTH INSURANCE CLAIMS**Chapter Introduction**In this chapter we will discuss about claim management process in Health\nInsurance, claims related procedures and documentation. Apart from this, we will\nalso look into claims management under Personal Accident Insurance and\nunderstand the role of TPAs.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various stakeholders in insurance claims\nb) Describe how health insurance claims are managed\nc) Discuss the various documents required for settlement of health insuranceclaims\nd) Explain how reserves for claims are provided for by insurers.\ne) Discuss personal accident claims\nf) Understand the concept and role of TPAs265**A.** **Claims Management in Insurance**It is very well understood that insurance is a ‘ **promise’** and the policy is a\n‘ **witness’** to that promise. The occurrence of an insured event leading to a claim\nunder the policy is the true test of that promise. How well an insurer performs is\nevaluated by how well it keeps its claims promises. One of the key rating factors\nin insurance is the claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before\nlooking at how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the<br>‘payers of the claims’. Even if the claims are met from the<br>policy holders’ funds, in most cases, it is they who are liable<br>to keep the promise.|", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "H-05", "section": "Age Limits", "chunk_id": "Final IC 38 -IMF_Composite -English_137", "metadata": {"file_size": 20962, "chunk_index": 137, "chunk_tokens": 1001, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Exclusion of death cover", "Group discount criteria", "Age Limits", "Answer 5"]}}
{"chunk": "e) Discuss personal accident claims\nf) Understand the concept and role of TPAs265**A.** **Claims Management in Insurance**It is very well understood that insurance is a ‘ **promise’** and the policy is a\n‘ **witness’** to that promise. The occurrence of an insured event leading to a claim\nunder the policy is the true test of that promise. How well an insurer performs is\nevaluated by how well it keeps its claims promises. One of the key rating factors\nin insurance is the claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before\nlooking at how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the<br>‘payers of the claims’. Even if the claims are met from the<br>policy holders’ funds, in most cases, it is they who are liable<br>to keep the promise.|\n|**Underwriters**|Underwriters within an insurance company and across all<br>insurers have the responsibility to understand the claims and<br>design the products, decide policy terms, conditions and<br>pricing etc.|266|Regulator|The regulator (Insurance Regulatory and Development<br>Authority of India) is a key stakeholder in its objective to:<br> Maintain order in the insurance environment<br> Protect policy holders’ interest<br> Ensure long term financial health of insurers.|\n|---|---|\n|**Third Party**<br>**Administrators**|Service intermediaries known as Third Party Administrators,<br>who process health insurance claims.|\n|**Insurance**<br>**agents/**<br>**brokers**|Insurance agents/ brokers not only sell policies but are also<br>expected to service the customers in the event of a claim.<br>|\n|**Providers/**<br>**Hospitals**|~~They ensure that the customer gets a smooth claim~~<br>experience, especially when the hospital is on the panel of<br>the TPA the Insurer to provide cashless hospitalization.|Thus managing claims well means managing the objectives of the each of these\nstakeholders related to the claims. Of course, it may happen that some of these\nobjectives can conflict with each other.**Reserving:** In many cases, insurance companies may not be able to settle claims\ninstantly and may have to wait for information or the results of disputes, litigation\netc. So, they have to hold the claim amounts in reserve till the payments are due.\nReserves are usually are actuarial estimates of the amounts that will be paid on\noutstanding claims.Reserving refers to the amount of provision made for all claims in the books of\nthe insurer based on the status of the claims.**Test Yourself 1**Who among the following is not a stakeholder in Health insurance claim process?I. Customers\nII. Police Department\nIII. Regulator\nIV. TPA**B.** **Management of Health Insurance Claims****1.** **Claim process in health insurance**A claim may be serviced either by the insurance company itself or through the\nservices of a Third Party Administrator (TPA) authorized by the insurancecompany.From the time a claim is made known to the insurer/ TPA to the time the payment\nis made as per the policy terms, the health claim passes through a set of welldefined steps, each having its own relevance.267The processes detailed below are in specific reference to health insurance\n(hospitalization) indemnity products which form the major part of health\ninsurance business.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)268**a)** **Intimation**Claim intimation is the first instance of contact between the customer andthe claims team. The customer could inform the company that he is planning\nto avail a hospitalization or the intimation would be made after the\nhospitalization has taken place, especially in case of emergency admission to\na hospital.Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s265", "section": "A.", "chunk_id": "Final IC 38 -IMF_Composite -English_138", "metadata": {"file_size": 20962, "chunk_index": 138, "chunk_tokens": 1005, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Reserving:", "Claims Management in Insurance", "Owners", "Diagram 1:"]}}
{"chunk": "(hospitalization) indemnity products which form the major part of health\ninsurance business.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)268**a)** **Intimation**Claim intimation is the first instance of contact between the customer andthe claims team. The customer could inform the company that he is planning\nto avail a hospitalization or the intimation would be made after the\nhospitalization has taken place, especially in case of emergency admission to\na hospital.Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned\nadmission, and within 24 hours of hospitalization in case of an emergency.\nIntimation is now possible through Mobile Apps/ call centres run by insurers/\nTPAs open 24 hours as well as through the internet and e-mail.**b)** **Registration**Once the intimation is received by the company directly or through the TPA,\nthe details thereof are matched for accuracy and a reference number or claim\ncontrol number generated and intimated to the claimant. The documents are\nthen scrutinized for prima facie coverage and pre-authorisation of likely\nexpenditure is given to the Hospital in case the intimation is of a planned\nsurgery under the Cash-less scheme (detailed in subsequent section).The claims that come for the final settlement on the reimbursement basis arescrutinized in detail about admissibility, sum assured, deductibles, sub-limits\netc. In case of deficiency in documents the same has to be communicated\ntogether, not in piecemeal. It is worth knowing that the claim processing\ninvolves not only ensuring that the terms of the contract have to be fulfilled,\nbut also in ensuring that the Hospitals do not indulge in overcharging, doublecharging etc.**Example**Hospitalization is typically associated with Allopathic method of treatment.\nHowever, the patient could undergo other modes of treatment such as: Unani\n Siddha\n Homeopathy\n Ayurveda\n Naturopathy etc.Most policies now include these treatments, however there could be sub-limits.**Telemedicine:** IRDAI has asked insurers to allow telemedicine wherever regular\nmedical consultation is allowed, in the terms and conditions of medical insurance\npolicies.269This will help policy holders who may prefer to consult medical practitioners\nonline or telephonically to avoid going out of their homes or if they are in\nquarantine themselves due to the coronavirus infection.**Arriving at the final claim payable:** The factors that decide the claim amount\npayable are:a) Sum insured available for the member under the policyb) Balance sum insured available under the policy for the member aftertaking into account any claim made already:c) Sub-Limitsd) Check for any limits specific to illnesse) Check whether entitled or not to cumulative bonusf) Other expenses covered with limitation:What are finally paid are the Reasonable and Customary Charges meaning the\ncharges for services or supplies, which are the standard charges for the\nspecific provider and consistent with the prevailing charges in the\ngeographical area for identical or similar services, taking into account the\nnature of the illness/ injury involved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance StandardizationGuidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by\ncheque or by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety\nof reasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "Final IC 38 -IMF_Composite -English_139", "metadata": {"file_size": 20962, "chunk_index": 139, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Denial of claims", "Arriving at the final claim payable:", "Claim process broadly comprises following steps", "Diagram 2:", "Example"]}}
{"chunk": "nature of the illness/ injury involved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance StandardizationGuidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by\ncheque or by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety\nof reasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs\nviii. Hospitalization is less than 24 hours.Denial or repudiation of a claim (due to whatever reason) has to be informed\nto the customer in writing by the insurance company. Usually, such denial270letter clearly states the reason for denial, narrating the policy term/ condition\non which the claim was denied.Apart from the representation to the insurer, the customer has the option to\napproach the following in case of denial of claim: Insurance Ombudsman or The Consumer Commissions or IRDAI or Law courts.**e)** **Suspect claims require more detailed investigation by the companies/****TPAs**\nWherever the insurance company suspects foul-play it can get claims\ninvestigated. A few examples of frauds committed in health insurance are:i. Impersonation, the person insured is different from person treated.\nii. Fabrication of documents to make a claim where there is nohospitalization.\niii. Inflation of expenses, either with the help of the hospital or by additionof external bills fraudulently created.\niv. Outpatient treatment converted to in-patient/ hospitalization to covercost of diagnosis, which could be high in some conditions.It is to be noted that in respect of claims that need to be investigated,\ninvestigations shall be initiated and completed at the earliest, in any case not\nlater than 90 days from the date of receipt of claim intimation. The claim\nshould be settled within 30 days of completing the investigation. (Pl refer to\nIRDAI (Protection of policyholder’s), 2017 Regulations and updated\naccordingly)**f)** **Cashless settlement process by TPA**How does the cashless facility work? At the heart of this is an agreement that\nthe TPA insurer enters into, with the hospital. There are agreements possible\nwith other medical service providers as well. The process used for providing\ncashless facility are discussed in this section:**Table 3.1**271|Step 2| The hospital compiles the necessary information such as:<br>i. Diagnosis of illness<br>ii. Treatment,<br>iii. Name of treating doctor,<br>iv. Number of days of proposed hospitalization and<br>v. The estimated cost<br> This is presented in a format, called the cashless authorization form.|\n|---|---|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could<br>be provided and if so, for how much amount it should be authorized<br>and it is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized<br>by the TPA as credit in the patient’s account. The member may be<br>called on to make a deposit payment to cover the non-treatment<br>expenses and any co-pay required under the policy.<br>|\n|**Step 5**|~~~~ When the patient is ready for discharge, the hospital checks the<br>amount of credit in the account of the patient approved by the TPA<br>against the actual treatment charges covered by insurance.<br> If the credit is less, the hospital requests for additional approval of<br>credit for the cashless treatment.<br> TPA analyses the same and approves the additional amount.<br>|", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "l270", "section": "Payment of claim", "chunk_id": "Final IC 38 -IMF_Composite -English_140", "metadata": {"file_size": 20962, "chunk_index": 140, "chunk_tokens": 970, "has_examples": true, "has_tables": true, "key_concepts": ["Denial of claims", "Step 5", "Step 3", "Table 3.1", "Payment of claim"]}}
{"chunk": "|---|---|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could<br>be provided and if so, for how much amount it should be authorized<br>and it is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized<br>by the TPA as credit in the patient’s account. The member may be<br>called on to make a deposit payment to cover the non-treatment<br>expenses and any co-pay required under the policy.<br>|\n|**Step 5**|~~~~ When the patient is ready for discharge, the hospital checks the<br>amount of credit in the account of the patient approved by the TPA<br>against the actual treatment charges covered by insurance.<br> If the credit is less, the hospital requests for additional approval of<br>credit for the cashless treatment.<br> TPA analyses the same and approves the additional amount.<br>|\n|**Step 6**|~~~~ Patient pays the non-admissible charges and gets discharged. He will<br>be asked to sign the claim form and the bill, to complete the<br>documentation.<br>|\n|**Step 7**|~~~~ Hospital consolidates all the documents and presents to the TPA the<br>documents for processing of the bill<br>|\n|**Step 8**|~~~~ TPA will process the claim and recommend for payment to the hospital<br>after verifying details.|**g)** **Customer must make sure that he/ she has his/ her insurance details****with him/ her.**This includes his TPA card, Policy copy, Terms and conditions of cover etc.When these are not available, he can contact the TPA (through a 24 hour\nhelpline) and seek the details.i. Customer must check if the hospital suggested by his/ her consultingdoctor is in the network of the TPA. If not, he needs to check with the\nTPA the options available where cashless facility for such treatment is\navailable.ii. He/ she needs to make sure that the correct details are entered into thepre-authorization form. This form has been standardized by IRDAI as per\nGuidelines on Standardization in Health Insurance issued in 2013. If the\ncase is not clear, the TPA could deny the cashless facility or raise query.iii. He/ she needs to ensure that the hospital charges are consistent with thelimits such as room rent or caps on specified treatments such as cataract.iv. The customer must inform the TPA in advance of the discharge andrequest the hospital to send to the TPA any additional approval that may272be required before discharge. This will ensure the patient does not wait\nunnecessarily at the hospital.It is also possible that the customer requests and takes an approval for\ncashless treatment at a hospital but decides to admit the patient elsewhere.\nIn such cases, the customer must inform and ask the hospital to communicate\nto the TPA that the cashless approval is not being used.If this is not done, the amount approved could get blocked in the customer’s\npolicy and could prejudice the approval of the subsequent request.**C.** **Documentation in Health Insurance Claims**This section explains the need for and content of each of the documents required\nto be submitted by the customers:**1.** **Discharge summary**Discharge summary can be termed as the most important document that is\nrequired to process a health insurance claim. It details the complete information\nabout the condition of the patient and the line of treatment and helps the claim\nprocessing person immensely to understand the illness/ injury and the line of\ntreatment. Where the patient unfortunately does not survive, the discharge\nsummary is termed **Death Summary** in many hospitals. The discharge summary is\nalways sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that\nprompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the\nX-ray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance\npolicy. While the consolidated bill presents the overall picture, the detailed bill\nwill provide the break up, with reference codes. The bills have to be received in\noriginal.**4.** **Receipt for payment**The reimbursement of a health insurance claim will also require the formal\nreceipt from the hospital of the amount paid which must correspond to the total", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y272", "section": "Step 3", "chunk_id": "Final IC 38 -IMF_Composite -English_141", "metadata": {"file_size": 20962, "chunk_index": 141, "chunk_tokens": 1012, "has_examples": false, "has_tables": true, "key_concepts": ["Discharge summary", "Step 6", "Documentation in Health Insurance Claims", "Step 5", "Step 3"]}}
{"chunk": "about the condition of the patient and the line of treatment and helps the claim\nprocessing person immensely to understand the illness/ injury and the line of\ntreatment. Where the patient unfortunately does not survive, the discharge\nsummary is termed **Death Summary** in many hospitals. The discharge summary is\nalways sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that\nprompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the\nX-ray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance\npolicy. While the consolidated bill presents the overall picture, the detailed bill\nwill provide the break up, with reference codes. The bills have to be received in\noriginal.**4.** **Receipt for payment**The reimbursement of a health insurance claim will also require the formal\nreceipt from the hospital of the amount paid which must correspond to the total\nof the bill.The receipt should be numbered and or stamped and be presented in original.**5.** **Claim form**Claim form is the formal and legal request for processing the claim and is\nsubmitted in original signed by the customer. The claim form has now been\nstandardized by IRDAI.273Besides information on disease, treatment etc., the declaration the insured\nperson makes in the claim form is the most important document in the legalsense.**6.** **Identity proof**With the increasing use of identity proof across various activities in our life, the\ngeneral Proof of identity helps in verifying whether the person covered and the\nperson treated are one and the same. Usually identification document which is\nsought could be voters’ identity card, driving license, PAN card, Aadhaar card\netc.**7.** **Documents contingent to specific claims**There are certain types of claims that require additional documents apart from\nwhat has been stated above. These are:a) Accident claims, where FIR or Medico-legal certificate issued by thehospital to the registered police station, may be required.b) Case indoor papers in case of complicated or high value claims.c) Dialysis/ Chemotherapy/ Physiotherapy charts where applicable.d) Hospital registration certificate, where the compliance with the definitionof hospital needs to be checked**Test Yourself 2**Which of the following document is maintained at the hospital detailing all\ntreatment done to an in-patient?I. Investigation reportII. Discharge summaryIII. Case paperIV. Hospital registration certificate**Test Yourself 3**The amount of provision made for all claims in the books of the insurer based on\nthe status of the claims is known as ________.I. Pooling\nII. Accounting\nIII. Reserving\nIV. Investing274**D.** **Role of Third Party Administrators (TPA)**The Role of TPA has been discussed in earlier chapters too. It is important to\nknow the services offered by TPA so that the customer can be provided suitable\nservices by the salesperson.The scope of TPA services starts after the sale and issue of the insurance policy.\nIn case of insurers not using TPAs, the services are performed by in-house team.**1.** **Post sale service of health insurance**a) Once the proposal (and the premium) is accepted, the coveragecommences.\nb) If a TPA is to be used for servicing the policy, the insurer passes on theinformation about the customer and the policy to the TPA.\nc) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as wellas processing of claims when the member requires the support of the\npolicy for a hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the serviceswithin the time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospitalbased on the information provided for requesting the cashless facility.\nh) Where the information is not clear or not available, the TPA may rejectthe cashless request. In such cases the claim could be examined on\nreimbursement basis.**2.** **Customer relationship and contact management**Since TPAs are involved in claims servicing, they usually have a grievance", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "g274", "section": "Death Summary", "chunk_id": "Final IC 38 -IMF_Composite -English_142", "metadata": {"file_size": 20962, "chunk_index": 142, "chunk_tokens": 991, "has_examples": false, "has_tables": false, "key_concepts": ["Investigation reports", "Customer relationship and contact management", "Claim form", "Role of Third Party Administrators (TPA)", "Death Summary"]}}
{"chunk": "c) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as wellas processing of claims when the member requires the support of the\npolicy for a hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the serviceswithin the time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospitalbased on the information provided for requesting the cashless facility.\nh) Where the information is not clear or not available, the TPA may rejectthe cashless request. In such cases the claim could be examined on\nreimbursement basis.**2.** **Customer relationship and contact management**Since TPAs are involved in claims servicing, they usually have a grievance\nredressal mechanism themselves.**E.** **Claims Management – Personal Accident**On receipt of the notification of the claim the following aspects should be looked\ninto:a) Person in respect of whom the claim is made is covered under the policy\nb) Policy is valid as on date of accident and premium has been received\nc) Loss is within the policy period\nd) Loss has arisen out of “Accident” and not sickness\ne) Check for any fraud triggers and assign investigation if need be\nf) Register the claim and create reserve for the same\ng) Maintain the turnaround time (claim servicing time) and keep thecustomer informed of the development of the claim.**1.** **Claims Investigation**275Claims Investigation is about determining the validity of the claim and finding out\nthe real cause and extent of the loss. On receipt of the claim documents, if a\nclaim appears suspicious, the claim may be assigned to an internal/ professional\ninvestigator for verification.**Example**Example of case guideline:\n**Road traffic accident**i. When did the incident take place – exact time and date place? Date andtime\nii. Was the insured a pedestrian, traveling as passenger/ pillion rider ordriving the vehicle involved in accident?**Some examples of possible fraud and leakage in personal accident claims:**i. Exaggeration in TTD period.\nii. Illness presented as accident e.g. backache due to pathological reasonsconverted into a PA claim after reported ‘fall/ slip’ at home\nDischarge voucher is an important document for settlement of personal accident\nclaim, especially those involving death claims. It is also important to obtain\nnominee details at the time of proposal and the same should form part of policy\ndocument.\n**2.** **Claim documentation- Each company gives a list**a) Duly completed Personal Accident claim form signed by the claimant’s\nnominee/ family member\nb) Original or Attested copy of First Information Report.\nc) Original or Attested copy of Death certificate.\nd) Attested copy of Post Mortem Report if conducted.\ne) Attested copy of AML documents (Anti-money laundering) - for name\nverification (passport/ PAN card/ Voter's ID/ Driving license) for address\nverification (Telephone bill/ Bank account statement, Electricity bill/\nRation card).\nf) Legal heir certificate containing affidavit and indemnity bond both dulysigned by all legal heirs and notarized\ng) Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nh) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of\nexact leave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of\nthe case, especially the cases with suspected fraud angle to be investigated.**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?\nI. Duly completed Personal Accident claim form signed by the claimant.276II. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nIV. Fitness certificate from the treating doctor certifying that the insured is fitto perform his normal duties.**F.** **Claims Management- Overseas Travel Insurance**The coverage under this policy has already been discussed under the product\nchapter. This section tries to explain how the claims arising during overseas travel\nare handled.\n**Claims services essentially include:**a) Taking down the claim notification 24*7 basis;\nb) Sending the claim form and procedure;", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Customer relationship and contact management", "chunk_id": "Final IC 38 -IMF_Composite -English_143", "metadata": {"file_size": 20962, "chunk_index": 143, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Customer relationship and contact management", "Claims services essentially include:", "Test Yourself 4", "Example", "Claims Investigation"]}}
{"chunk": "h) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of\nexact leave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of\nthe case, especially the cases with suspected fraud angle to be investigated.**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?\nI. Duly completed Personal Accident claim form signed by the claimant.276II. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nIV. Fitness certificate from the treating doctor certifying that the insured is fitto perform his normal duties.**F.** **Claims Management- Overseas Travel Insurance**The coverage under this policy has already been discussed under the product\nchapter. This section tries to explain how the claims arising during overseas travel\nare handled.\n**Claims services essentially include:**a) Taking down the claim notification 24*7 basis;\nb) Sending the claim form and procedure;\nc) Guiding customer on what to do immediately after loss;\nd) Extending cashless services for medical and sickness claims;\ne) Arranging for repatriation and evacuation, emergency cash advance.\n**Assistance companies – Role in overseas claims**\nAssistance companies have their own offices and tie up arrangements with other\nsimilar service providers world over. These companies offer assistance to the\ncustomers of insurance companies in case of contingencies covered under the\npolicy.\nThese companies operate a 24*7 call centre including international toll free\nnumbers for claim registration and information. They also offer the following\nservices and charges for the services vary depending on agreement with the\nparticular insurance company, benefits covered etc.a) Medical assistance services:\ni. Medical service provider referrals\nii. Arrangement of hospital admission\niii. Arrangement of Emergency Medical Evacuation\niv. Arrangement of Emergency Medical Repatriation\nv. Mortal remains repatriation\nvi. Compassionate visit arrangements\nvii. Minor children assistance/ escort\nb) Monitoring of Medical Condition during and after hospitalisation\nc) Delivery of Essential Medicines\nd) Guarantee of Medical Expenses Incurred during hospitalization subject to\nterms and condition of the policy and approval of insurance company.\ne) Pre-trip information services and other services:\ni. Visas and inoculation requirements\nii. Embassy referral services\niii. Lost passport and lost luggage assistance services\niv. Emergency message transmission services\nv. Bail bond arrangement\nvi. Financial Emergency Assistance\nf) Interpreter Referral\ng) Legal Referral\nh) Appointment with lawyer277**a)** **Hospitalization Procedures**i. Most hospitals accept Guarantee of Payments from all internationalinsurance companies once the insured provides them with a valid health or\noverseas travel insurance policy.ii. Hospitals start the treatment immediately. If there is insurance cover theinsurance policy pays or the patient person has to pay. The hospitals tend\nto inflate charges since payments are delayed.iii. Information regarding network hospitals and the procedures is available tothe insured on the toll free numbers provided by the assistance companies.iv. In event of the necessity of a hospitalization the insured needs to intimatethe same at the call centre and proceed to a specified hospital with the\nvalid travel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officerin India: Past history, current treatment and further planned course inhospital and request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee\n(INR), unlike in cashless claims where payment is made in foreigncurrency.While processing the reimbursement claims, currency conversion rate is\napplied as on date of loss to arrive at quantum of liability in INR. Then the", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "r277", "section": "Test Yourself 4", "chunk_id": "Final IC 38 -IMF_Composite -English_144", "metadata": {"file_size": 20962, "chunk_index": 144, "chunk_tokens": 958, "has_examples": false, "has_tables": false, "key_concepts": ["Assistance companies – Role in overseas claims", "Claims services essentially include:", "Test Yourself 4", "Hospitalization Procedures", "Claims Management- Overseas Travel Insurance"]}}
{"chunk": "valid travel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officerin India: Past history, current treatment and further planned course inhospital and request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee\n(INR), unlike in cashless claims where payment is made in foreigncurrency.While processing the reimbursement claims, currency conversion rate is\napplied as on date of loss to arrive at quantum of liability in INR. Then the\npayment is made though cheque or electronic transfer.**c)** **Claim documentation for Medical Accident and Sickness Expenses**i. Claim formii. Doctor’s reportiii. Original Admission/ discharge card278iv. Original Bills/ Receipts/ Prescriptionv. Original X-ray reports/ Pathological/ Investigative reportsvi. Copy of passport/ Visa with Entry and exit stampThe above list is only indicative. Additional information/ documents may be\nrequired depending on specific case details or depending upon claim\nsettlement policy/ procedure followed by particular insurer.**Test Yourself 5**Most hospitals accept Guarantee of Payments from all international insurance\ncompanies once the insured provides them with a valid __________ Insurance\npolicy.I. Legal Liability\nII. Corona RakshakIII. Overseas TravelIV. Endowment**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.\n**Answer 4** - The correct option is IV.\n**Answer 5** - The correct option is III.**Summary**a) Insurance is a ‘promise’ and the policy is a ‘witness’ to that promise. Theoccurrence of insured event leading to a claim under the policy is the true\ntest of that promise.b) One of the key rating parameter in insurance is the claims paying ability ofthe insurance company.c) Customers, who buys insurance is the primary stakeholder as well as thereceiver of the claim.d) In Cashless claim a network hospital provides the medical services based on apre-approval from the insurer/ TPA and later submits the documents for\nsettlement of the claim.e) In reimbursement claim, the customer pays the hospital from his ownresources and then files claim with Insurer/ TPA for payment.f) Claim intimation is the first instance of contact between the customer andthe claims team.g) If a fraud is suspected by insurance company in case of insurance claim, it issent for investigation. Investigation of a claim could be done in-house by an\ninsurer/ TPA or be entrusted to a professional investigation agency.279h) Reserving refers to the amount of provision made for all claims in the booksof the insurer based on the status of the claims.i) In case of a denial, the customer has the option, apart from therepresentation to the insurer, to approach the Insurance Ombudsman or the\nconsumer Commissions or even the legal authorities.j) Frauds occur mostly in hospitalization indemnity policies but Personalaccident policies also are used to make fraud claims.k) The TPA provides many important services to the insurer and getsremunerated in the form of fees.280## SECTION **GENERAL INSURANCE**281## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful\nfor the insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.282**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "t2", "section": "Reimbursement of medical expenses and other non-medical claims:", "chunk_id": "Final IC 38 -IMF_Composite -English_145", "metadata": {"file_size": 20962, "chunk_index": 145, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Proposal forms", "Answer 3", "Test Yourself 5"]}}
{"chunk": "consumer Commissions or even the legal authorities.j) Frauds occur mostly in hospitalization indemnity policies but Personalaccident policies also are used to make fraud claims.k) The TPA provides many important services to the insurer and getsremunerated in the form of fees.280## SECTION **GENERAL INSURANCE**281## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful\nfor the insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.282**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance\ncompany to accept the risk offered for insurance. The principle of utmost good\nfaith and the duty of disclosure of material information begin with the proposalform for insurance.**Example**If the insured was required to maintain an alarm or had stated that he has an\nautomatic alarm system in his gold jewellery showroom, then not only is he\nrequired to disclose it, he has to ensure the same remains in a working condition\nthroughout the policy period. The existence of the alarm is a material fact for\nthe insurer who will be accepting the proposal based on these facts and pricing\nthe risk accordingly.**1.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the classof insurance concerned.**i.** **Fire insurance** proposal forms are usually used for relatively simple/ standardrisks like houses, shops etc. For large industrial risks, inspection of the risk is\narranged by insurer before acceptance of the risk. Special questionnaire are\nsometimes used in addition to the proposal form to gather specificinformation.Fire insurance proposal form seeks, among other things, the description of\nthe property which would include the following information: Construction of external walls and roof, number of story\n Occupation of each portion of the building\n Presence of hazardous goods\n Process of manufacture including raw material and finished goods\n The sums proposed for insurance\n The period of insurance, etc.**ii.** **For motor insurance,** questions are asked about the vehicle, its operations,make and carrying capacity, how it is managed by the owner and related\ninsurance history.**iii.** **In personal lines** like health, personal accident and travel insurance, proposalforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits,\npast insurance experience etc.283**iv.** **In other miscellaneous insurances,** proposal forms are compulsory and theyincorporate a declaration which extends the common law duty of good faith.**2.** **Elements of a proposal****i.** **Proposer’s name in full**The proposer should be able to identify himself/ herself unambiguously. It is\nimportant for the insurer to know with whom the contract has been entered,\nso that the benefits under the policy would be received only by the insured.**ii.** **Proposer’s address and contact details**The reasons stated above are applicable for collecting the proposer’s addressand contact details as well.**iii.** **Proposer’s profession, occupation or business**In some cases like health and personal accident insurance, the proposer’s\nprofession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposedfor insurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose]or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "G-01", "section": "GENERAL INSURANCE", "chunk_id": "Final IC 38 -IMF_Composite -English_146", "metadata": {"file_size": 20962, "chunk_index": 146, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Proposal forms", "Sum insured", "Elements of a proposal", "Example", "Nature of questions in a proposal form"]}}
{"chunk": "profession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposedfor insurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose]or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to\nthe insurer.In property insurance, there is a chance that insured may take policies from\ndifferent insurers and when a loss happens, claim from more than one\ninsurer. This information is required to ensure that the principle of284contribution is applied so that the insured is indemnified and does not gain/\nprofit due to multiple insurance policies for the same risk.Further, in personal accident insurance an insurer would like to restrict the\namount of coverage (sum insured) depending on the sum insured under\nother PA policies taken by the same insured.**vii.** **Loss experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about\nthe subject matter of insurance and how the insured has managed the risk in\nthe past. Underwriters can understand the risk better from such answers and\ndecide on conducting risk inspections or collecting further details.**viii.** **Declaration by insured**As the purpose of the proposal form is to provide all material information to\nthe insurers, the form **includes a declaration by the insured that the answers**\n**are true and accurate and he agrees that the form shall be the basis of the**\n**insurance contract.** Any wrong answer will give the right to insurers to avoid\nthe contract. Other sections common to all proposal forms relate to **signature,**\n**date and in some cases agent’s recommendation.****B.** **Acceptance of the Proposal (underwriting)**As seen earlier, a completed proposal form broadly gives the followinginformation: Details of the insured Details of the subject matter Type of cover required Details of the physical features both positive and negative - including typeand quality of construction, age, presence of fire-fighting equipment, the\ntype of security etc., Previous history of insurance and lossIn the case of property, motor or cargo insurance, the insurer may also arrange\nfor pre-inspection survey of the risk before acceptance, depending on the natureand value of the risk. Insurers take their decision based on the informationavailable in the proposal, the risk inspection report, answers to the additional\nquestionnaire and other documents (as may be called for by the insurer). The\ninsurer then decides about the rate to be applied to the risk factor and calculates\nthe premium based on various parameters, which is then conveyed to the insured.\nProposals are processed by the insurer with speed and efficiency and all decisions\nthereof are communicated by it in writing within a reasonable period.285**Definition****Underwriting:** As per Protection of Policyholders’ Interests) Regulations, 2017,\nthe company has to process the proposal within 15 days’ time. The agent is\nexpected to keep track of these timelines, follow up internally and communicate\nwith the prospect/ insured as and when required by way of customer service. This\nentire process of scrutinizing the proposal and deciding about acceptance is\nknown as underwriting.**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As\ndiscussed in Chapter 4, the Agent should be always mindful that the **premium is**\n**to be paid in advance, before the inception date of the insurance contract** as\nper Section 64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "f284", "section": "Details and identity of the subject matter of insurance", "chunk_id": "Final IC 38 -IMF_Composite -English_147", "metadata": {"file_size": 20962, "chunk_index": 147, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Premium Receipt", "Declaration by insured", "Test Yourself 1", "Sum insured", "Example"]}}
{"chunk": "the company has to process the proposal within 15 days’ time. The agent is\nexpected to keep track of these timelines, follow up internally and communicate\nwith the prospect/ insured as and when required by way of customer service. This\nentire process of scrutinizing the proposal and deciding about acceptance is\nknown as underwriting.**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As\ndiscussed in Chapter 4, the Agent should be always mindful that the **premium is**\n**to be paid in advance, before the inception date of the insurance contract** as\nper Section 64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed\nto be paid or a deposit is made in advance in the prescribed manner. Insurance\nRules 58 and 59 provide certain exceptions to this condition of advance\npayment of premium in some situations.b) Where an insurance agent collects a premium on a policy of insurance onbehalf of an insurer, he shall deposit with or dispatch by post to the insurer\nthe premium so collected in full without deduction of his commission within\ntwenty-four hours of the collection excluding bank and postal holidays.c) It is also provided that the risk may be assumed only from the date on whichthe premium has been paid in cash or by cheque.d) Where the premium is tendered by postal or money order or cheque sent bypost, the risk may be assumed on the date on which the money order is booked\nor the cheque is posted as the case may be.e) Any refund of premium which may become due to an insured on account ofthe cancellation of policy or alteration in its terms and conditions or\notherwise, shall be paid by the insurer directly to the insured by a crossed or\norder cheque or by postal/ money order or by Electronic Mode and a proper286receipt shall be obtained by the insurer from the insured, and such refund\nshall in no case be credited to the account of the agent.**D.** **Cover Notes/ Certificate of Insurance/ Policy Document**After underwriting is completed it may take some time before the policy is issued.\n**Pending the preparation of the policy or when the negotiations for insurance are**\n**in progress and it is necessary to provide cover on a provisional basis or when**\n**the premises are being inspected for determining the actual rate applicable,** a\ncover note is issued to confirm protection under the policy. It gives description\nof cover. Sometimes, insurers issue a letter confirming the provisional insurance cover\ninstead of a cover note.Although the cover note is not stamped, the wording of the cover note makes it clear\nthat it is subject to the usual terms and conditions of the insurers' policy for the class\nof insurance concerned. If the risk is governed by any warranties, then the cover note\nwould state that the insurance is subject to such warranties. The cover note is also\nmade subject to special clauses, if applicable e.g. Agreed Bank Clause, Declaration\nClause etc.**A cover note would incorporate the following:**a) Name and address of insuredb) Sum insuredc) Period of insuranced) Risk coverede) Rate and premium: if rate is not known, the provisional premiumf) **Description of the risk covered** : for example a fire cover note wouldindicate identification particulars of the building, its construction andoccupancy.g) Serial number of the cover noteh) Date of issuei) **Validity of cover note** is usually for a period of a fortnight and rarely upto 60 days**Cover notes are used predominantly in marine and motor classes of business.****1.** **Marine Cover Notes**These are normally issued when details required for the issue of policy such as\nname of the steamer, number of packages, or exact value etc. are not known.\nEven in respect of exports, a cover note may be issued e.g. a certain quantity of\ncargo meant for shipment is sent by the exporter to the docks. It may happen\nthat, owing to difficulty of securing adequate shipping space, shipment of the\ncargo by the intended vessel does not take place. The quantity therefore, that\nmay be sent by a particular vessel cannot be known. In the circumstances, a cover\nnote may be required which is to be followed subsequently by the issue of regular", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "t-1938", "section": "Test Yourself 1", "chunk_id": "Final IC 38 -IMF_Composite -English_148", "metadata": {"file_size": 20962, "chunk_index": 148, "chunk_tokens": 984, "has_examples": true, "has_tables": false, "key_concepts": ["A cover note would incorporate the following:", "Premium Receipt", "Description of the risk covered", "Test Yourself 1", "Important"]}}
{"chunk": "name of the steamer, number of packages, or exact value etc. are not known.\nEven in respect of exports, a cover note may be issued e.g. a certain quantity of\ncargo meant for shipment is sent by the exporter to the docks. It may happen\nthat, owing to difficulty of securing adequate shipping space, shipment of the\ncargo by the intended vessel does not take place. The quantity therefore, that\nmay be sent by a particular vessel cannot be known. In the circumstances, a cover\nnote may be required which is to be followed subsequently by the issue of regular\npolicy when full details are available and made known to the insurance company.Marine cover note may be worded along the following lines:287i. Marine Cover Note Numberii. Date of issueiii. Name of the insurediv. Valid up to“As requested, you are hereby held covered subject to usual conditions of the\ncompany's policy to the extent of Rs. _____________.”**a)** **Clauses:** Institute Cargo Clauses A, B or C including War SRCC risks as perInstitute Clauses, but subject to 7 days’ notice of cancellation.**b)** **Conditions:** Details of shipment to be supplied on receipt of shipping documentsfor issue of policy. In the event of loss or damage prior to declaration and/ or\nshipment on board the steamer, it is hereby agreed that the basis of valuation\nshall be prime cost of the goods plus charges actually incurred and for which the\nassured is liable.With regard to inland transit normally all relevant data required for issue of policy\nare available and therefore a cover note is rarely required. There may however,\nbe some occasions when cover notes are issued and substituted later on by policies\ncontaining full description of the cargo, transit etc.**2.** **Motor Cover Notes**These are to be issued in the form prescribed by the respective companies the\noperative clause of a motor cover note may read as follows:“The insured described in the form, referred to below, having proposed for\ninsurance in respect of the Motor Vehicle(s) described therein and having paid\nthe sum of Rs….as premium the risk is hereby held covered under the terms of\nthe company’s usual form of……Policy applicable thereto (subject to any Special\nConditions mentioned below) unless the cover be terminated by the Company by\nnotice in writing in which case the insurance will thereupon cease and a\nproportionate part of the premium otherwise payable for such insurance will be\ncharged for the time the company had been on risk.”**The Motor Cover Note generally contains the following particulars:**a) Registration mark and number, or description of the vehicles insured/ cubiccapacity/ carrying capacity/ make/ year of manufacture, engine number,\nchassis number\nb) Name and address of the insured\nc) Effective date and time of commencement of insurance for the purpose of theAct. Time……, Date……\nd) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if any288The Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act,\n1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days\nat a time, but in, but in no case the total period of validity of a Cover Note shall\nexceed sixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day\ntechnology facilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof\nmay be required. For instance in motor insurance, in addition to the policy, a\ncertificate of insurance is issued as required by the Motor Vehicles Act. **This**\n**certificate provides evidence of insurance to the Police and Registration**\n**Authorities.** A specimen certificate for private cars is reproduced below, showing", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y288", "section": "Clauses:", "chunk_id": "Final IC 38 -IMF_Composite -English_149", "metadata": {"file_size": 20962, "chunk_index": 149, "chunk_tokens": 842, "has_examples": true, "has_tables": false, "key_concepts": ["Authorities.", "Certificate of Insurance – Motor Insurance", "Note:", "Important", "Clauses:"]}}
{"chunk": "d) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if any288The Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act,\n1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days\nat a time, but in, but in no case the total period of validity of a Cover Note shall\nexceed sixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day\ntechnology facilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof\nmay be required. For instance in motor insurance, in addition to the policy, a\ncertificate of insurance is issued as required by the Motor Vehicles Act. **This**\n**certificate provides evidence of insurance to the Police and Registration**\n**Authorities.** A specimen certificate for private cars is reproduced below, showing\nsalient features.**MOTOR VEHICLES ACT, 1988****CERTIFICATE OF INSURANCE**Certificate No. Policy No.1. Registration mark and Number, Place of registration, Engine No./Chassis No./ Make/Year of manufacture.2. Type of Body/ C.C/ Seating capacity/ Net Premium/ Name of Registration Authority,3. Geographical area – India. `4. Insured declared value (IDV)5. Name and address of the Insured, Business or profession.6. Effective date of commencement of Insurance for the purpose of the Act. From……….'O' clock on ………7. Date of expiry of insurance: midnight on ……………8. Persons or classes of persons entitled to drive.Any of the following:(a) The insured:(b) Any other person who is driving on the insured's order or with his permissionProvided that the person driving holds an effective driving license at the time of the\naccident and is not disqualified from holding or obtaining such a license. Provided also\nthat the person holding an effective learner's license may also drive the vehicle and such\na person satisfies the requirement of Rule 3 of Central Motor Vehicles Rules 1989.**LIMITATIONS AS TO USE**The policy covers use for any purpose other than:(a) Hire or reward;289(b) Carriage of goods (other than personal luggage)(c) Organised racing,(d) Race making,(e) Speed testing(f) Reliability Trials(g) Any purpose in connection with Motor Trade.I/ we hereby certify that the Policy to which this Certificate relates as well as this Certificate of\nInsurance are issued in accordance with the provisions of Chapter X and Chapter XI of the Motor\nVehicles Act, 1988.Examined .........(Authorized Insurer)**Motor certificate of Insurance is required to be carried in the vehicle at all times for**\n**the scrutiny of the relevant authorities.****4.** **Policy Document****The policy is a formal document which provides an evidence of the contract of**\n**insurance.** This document has to be stamped in accordance with the provisions of the\nIndian Stamp Act, 1899.A general insurance policy usually contains:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter;\nb) Full description of the property or interest insured;\nc) The location/ s of the property or interest insured under the policy andwhere appropriate, with respective insured values;\nd) Period of insurance;\ne) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likelyto give rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter ofinsurance upon occurrence of an event giving rise to a claim and the rights\nof the insurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman290**Test Yourself 2**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y288", "section": "Important", "chunk_id": "Final IC 38 -IMF_Composite -English_150", "metadata": {"file_size": 20962, "chunk_index": 150, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Authorities.", "Certificate of Insurance – Motor Insurance", "Note:", "CERTIFICATE OF INSURANCE", "This"]}}
{"chunk": "e) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likelyto give rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter ofinsurance upon occurrence of an event giving rise to a claim and the rights\nof the insurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman290**Test Yourself 2**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance\nII. Cover notes are predominantly used in all classes of general insurance\nIII. Cover notes are predominantly used in health insurance\nIV. Cover notes are predominantly used in marine and motor classes of generalinsurance**E.** **Warranties****A warranty is a condition expressly stated in the policy which has to be**\n**literally complied with for validity of the contract. Warranty is not a separate**\n**document. It is part of both cover notes and policy document.** It is a condition\nprecedent to the contract. It must be observed and complied with strictly and\nliterally, irrespective of the fact whether it is material to the risk or not. If a\nwarranty is breached, the policy becomes voidable at the option of the insurers\neven when it is clearly established that the breach has not caused or contributed\nto a particular loss. However, in practice, if the breach of warranty is of a purely\ntechnical nature and does not, in any way, contribute to or aggravate the loss,\ninsurers at their discretion may process the claims according to norms and\nguidelines as per company policy.**1.** **Fire Insurances warranties (some examples) are as given below**Warranted, that no hazards goods shall be stored in the insured premises during\nthe currency of policy.**Silent Risk:** Warranted that no manufacturing activity is carried out in the insured\npremises for consecutive period of 30 days or more.**Cigarette Filter Manufacturing:** Warranted that no solvents having flash point\nbelow 30 [0] C are used/ stored in the premises**2.** In **Marine Insurance, a warranty** is defined as follows: “a promissorywarranty, that is to say, a warranty by which the assured undertake that some\nparticular thing shall or shall not be done, or that some condition will be\nfulfilled, or whereby he affirms or negates the existence of a particular state\nof facts”In **Marine Cargo Insurance, a warranty** is inserted to the effect that goods (e.g.\ntea) are packed in tin-lined cases. In **Marine Hull insurance by inserting a**\n**warranty** that the insured vessel will not navigate in a certain area, gives an idea\nto the insurer about the extent of risk he has agreed to provide cover for. If the\nwarranty is breached, the risk agreed to initially is altered and the insurer is\nallowed to discharge himself from further liability from the date of breach**3.** In **Burglary Insurance**, it is warranted that the property is guarded by awatchman for twenty four hours. The rates, terms and conditions of the policy291continue to be the same only if the warranties attached to the policy are\ncomplied with.**Test Yourself 3**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot bepart of the policy document\nIV. Claims will be payable even if a warranty is breached.**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain\nperils and excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through\na document called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement\ntogether constitute the evidence of the contract. Endorsements may also be issued", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n290", "section": "Test Yourself 2", "chunk_id": "Final IC 38 -IMF_Composite -English_151", "metadata": {"file_size": 20962, "chunk_index": 151, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Marine Cargo Insurance, a warranty", "Warranties", "Burglary Insurance", "Marine Hull insurance by inserting a", "Endorsements"]}}
{"chunk": "complied with.**Test Yourself 3**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot bepart of the policy document\nIV. Claims will be payable even if a warranty is breached.**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain\nperils and excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through\na document called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement\ntogether constitute the evidence of the contract. Endorsements may also be issued\nduring the currency of the policy to record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy related to:a) Variations/ changes in sum insured\nb) Change of insurable interest by way of sale, mortgage, etc.\nc) Extension of insurance to cover additional perils/ extension of policy period\nd) Change in risk, e.g. change of construction, or occupancy of the building infire insurance\ne) Transfer of property to another location\nf) Cancellation of insurance\ng) Change in name or address etc.**Specimen**For the purpose of illustration, specimen wordings of some endorsements are\nreproduced below:292**Cancellation**At the request of the insured the insurance by this Policy is hereby declared to\nbe cancelled as from ………. The insurance having been in force for a period over\n…………. Months, no refund is due to the Insured.**Test Yourself 4**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**G.** **Interpretation of policies**Contracts of insurance are expressed in writing and the insurance policy wordings\nare drafted by insurers. These policies have to be interpreted according to certain\nwell-defined rules of construction or interpretation which have been established\nby various courts. **The most important rule of construction is that the intention**293**of the parties must prevail and this intention is to be looked for in the policy**\n**itself.** If the policy is issued in an ambiguous manner, it will be interpreted by\nthe courts in favour of the insured and against the insurer on the general principle\nthat the policy was drafted by the latter.**Policy wordings** are understood and interpreted as per the following rules:a) An express condition overrides an implied condition except where there isinconsistency in doing so.\nb) In the event of a contradiction in terms between the standard printedpolicy form and the typed or handwritten parts, the typed or handwritten\npart is deemed to express the intention of the parties in the particular\ncontract, and their meaning will overrule those of the original printedwords.c) If an endorsement contradicts other parts of the contract the meaning ofthe endorsement will prevail as it is the later document.\nd) Clauses in italics over-ride the ordinary printed wording where they areinconsistent.e) Clauses printed or typed in the margin of the policy are to be given moreimportance than the wording within the body of the policy.\nf) Clauses attached or pasted to the policy override both marginal clausesand the clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wordingimpressed by an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts\nas in the case of other contracts.The principal rule of construction is that the intention of the parties of the\ncontract must prevail, that intention must be gathered from the policy document\nitself and the proposal form, clauses, endorsements, warranties etc. attached to\nit and forming a part of the contract.294**2.** **Meaning of wordings**\nThe words used are to be construed in their ordinary and popular sense. **The**\n**meaning to be used for words is the meaning that the ordinary man in the**", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Test Yourself 3", "chunk_id": "Final IC 38 -IMF_Composite -English_152", "metadata": {"file_size": 20962, "chunk_index": 152, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Meaning of wordings", "The", "Construction of policies", "Specimen", "Endorsements"]}}
{"chunk": "f) Clauses attached or pasted to the policy override both marginal clausesand the clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wordingimpressed by an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts\nas in the case of other contracts.The principal rule of construction is that the intention of the parties of the\ncontract must prevail, that intention must be gathered from the policy document\nitself and the proposal form, clauses, endorsements, warranties etc. attached to\nit and forming a part of the contract.294**2.** **Meaning of wordings**\nThe words used are to be construed in their ordinary and popular sense. **The**\n**meaning to be used for words is the meaning that the ordinary man in the**\n**street would construe. Thus, “fire” means flame or actual burning.**On the other hand, **words which have a common business or trade meaning will**\n**be construed with that meaning unless the context of the sentence indicates**\n**otherwise** . Where words are defined by statute, the meaning of that definition\nwill be used, such as “theft” as in the Indian Penal Code.Many words used in insurance policies have been the subject of previous legal\ndecisions and those decisions of a higher court will be binding on a lower court\ndecision. Technical terms must always be given their technical meaning, unless\nthere is an indication to the contrary.**H.** **Renewal Notice****Most of the non-life insurance policies are insured on annual basis.**Although there is no legal obligation on the part of insurers to advise the insured\nthat his policy is due to expire on a particular date, yet as a matter of courtesy\nand healthy business practice, insurers issue a renewal notice in advance of the\ndate of expiry, inviting renewal of the policy. The notice incorporates all the\nrelevant particulars of the policy such as sum insured, the annual premium, etc.\nIt is also the practice to include a note advising the insured that he should\nintimate any material alterations in the risk.**In motor renewal notice, for example, the insured’s attention is to be drawn**\n**to revise the sum insured (i.e. the Insured’s Declared Value of the vehicle) in**\n**the light of current requirements.**The insured’s attention is also to be invited to the statutory provision that no risk\ncan be assumed unless the premium is paid in advance.**Test Yourself 5**Which of the following statements is correct with regards to renewal notice?I. As per regulations there is a legal obligation on insurers to send a renewalnotice to insured, 30 days before the expiry of the policy\nII. As per regulations there is a legal obligation on insurers to send a renewalnotice to insured, 15 days before the expiry of the policy\nIII. As per regulations there is a legal obligation on insurers to send a renewalnotice to insured, 7 days before the expiry of the policy\nIV. As per regulations there is no legal obligation on insurers to send a renewalnotice to insured before the expiry of the policy295**Summary**a) The first stage of documentation is essentially the proposal forms throughwhich the insured informs about himself/ herself\nb) The duty of disclosure of material information arises prior to the inception ofthe policy, and continues even after the conclusion of the contract\nc) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance isknown as underwriting.\ng) Premium is the consideration or amount paid by the insured to the insurer forinsuring the subject matter of insurance, under a contract of insurance.\nh) Payment of premium can be made by cash, any recognised banking negotiableinstrument, postal money order, credit or debit card, internet, e-transfer,\ndirect credit or any other method approved by IRDAI from time to time.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y295", "section": "Important", "chunk_id": "Final IC 38 -IMF_Composite -English_153", "metadata": {"file_size": 20962, "chunk_index": 153, "chunk_tokens": 985, "has_examples": true, "has_tables": false, "key_concepts": ["On the other hand,", "The", "Meaning of wordings", "Construction of policies", "Renewal Notice"]}}
{"chunk": "c) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance isknown as underwriting.\ng) Premium is the consideration or amount paid by the insured to the insurer forinsuring the subject matter of insurance, under a contract of insurance.\nh) Payment of premium can be made by cash, any recognised banking negotiableinstrument, postal money order, credit or debit card, internet, e-transfer,\ndirect credit or any other method approved by IRDAI from time to time.\ni) A cover note is issued when preparation of policy is pending or whennegotiations for insurance are in progress and it is necessary to provide\ninsurance cover on provisional basis.\nj) Cover notes are used predominantly in marine and motor classes of business.\nk) A certificate of insurance provides existence of insurance in cases where proofmay be required\nl) The policy is a formal document which provides an evidence of the contractof insurance.\nm) A warranty is a condition expressly stated in the policy which has to beliterally complied with for validity of the contract.\nn) If certain terms and conditions of the policy need to be modified at the timeof issuance or during the policy tenure, it is done by setting out the\namendments/ changes through a document called endorsement.\no) The most important rule of construction is that the intention of the partiesmust prevail and this intention is to be looked for in the policy itself.296**Key Terms**a) Policy form\nb) Advance payment of premium\nc) Cover note\nd) Certificate of Insurance\ne) Renewal notice\nf) Warranty**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is IV.297## CHAPTER G-02## UNDERWRITING AND RATE MAKING**Chapter Introduction**We have learnt various concepts and principles related to general insurance.\nUnderwriting is the process by which the Insurer decides whether to accept a risk\nor not. For this, the underwriters analyse the risk. They understand how risky the\nrisk is. Also, how much of money should be collected as premium. Again,\nsometimes the risks can be accepted only subject to conditions to improve the\nrisk. All these angles are discussed in this chapter.**Learning Outcomes**After studying this chapter, you should be able to:1. Understand Physical hazards\n2. Appreciate Underwriting as a function\n3. Methods used by underwriters to reduce the risk\n4. Understand how the Sum Insured is fixed.298**A.** **Physical Hazards**A thorough knowledge of various hazards to which property and persons are\nexposed is most essential for underwriting.Physical hazard can be ascertained from the information given in a proposal form.\nIt can be better ascertained by a survey or inspection of the risk. The following\nare some examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in wallsand roof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors\ninvolve risk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower\nfloors through falling machinery or goods from upper floors.**iv.** **Occupancy:** The occupancy of a building, and the purpose for which it isused. Various types of hazards arise from occupancy.**v.** **Ignition hazard:** Buildings in which chemicals are produced or used in largequantity involve a considerable **ignition hazard** . A timber yard presents a\n**high combustibility hazard** because once a fire starts, timber burns quickly.\nThe contents may be highly susceptible to damage in the event of fire.For example, paper, clothing etc. are susceptible not only to fire damage", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "G-02", "section": "Key Terms", "chunk_id": "Final IC 38 -IMF_Composite -English_154", "metadata": {"file_size": 20962, "chunk_index": 154, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Ignition hazard:", "Answer 3", "Physical Hazards"]}}
{"chunk": "are some examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in wallsand roof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors\ninvolve risk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower\nfloors through falling machinery or goods from upper floors.**iv.** **Occupancy:** The occupancy of a building, and the purpose for which it isused. Various types of hazards arise from occupancy.**v.** **Ignition hazard:** Buildings in which chemicals are produced or used in largequantity involve a considerable **ignition hazard** . A timber yard presents a\n**high combustibility hazard** because once a fire starts, timber burns quickly.\nThe contents may be highly susceptible to damage in the event of fire.For example, paper, clothing etc. are susceptible not only to fire damage\nbut also to damage by water, heat etc.**vi.** **The process of manufacture:** If work is carried during the night, the hazardis increased due to the use of artificial lights, continuous use of machinery\nleading to friction and the likely carelessness of workers due to fatigue.**vii.** **Situation/ location of risk:** Location in a congested area, exposure tohazardous adjacent premises and distance from the fire brigade is an\nexample of physical hazard.**b)** **Marine****i.** **The age and condition of vessel: Older vessels are inferior risks.****ii.** **The voyage to be undertaken: The route of the voyage, loading and****unloading conditions and warehousing facilities at the ports are factors.****iii.** **The nature of the stocks: Articles of high value are exposed to theft;****machinery is liable to breakage in transit.****iv.** **The method of packing: Cargo packed in bales is considered to be better****than cargo in bags. Again, double bags are safer than single bags. Liquid**\n**cargo in second-hand drums constitute bad physical hazard.**299**c)** **Motor****i.** **The age and condition of the vehicle:** Older vehicles are more prone toaccidents.**ii.** **The type of vehicle:** Sports cars involve greater physical hazard etc.**d)** **Burglary****i.** **The nature of the stocks:** Articles of high value in small bulk (e.g.Jewellery) and easily disposable are considered to be bad risks.**ii.** **Situation:** Ground floor risks are inferior to upper floor risks: privatedwellings situated in isolated areas are hazardous.**iii.** **Constructional hazard** : Too many doors and windows constitute badphysical hazard.**e)** **Personal accident****i.** **The age of the person:** Very old persons are accident prone; besides theywill take longer to recover in the event of an accident.**ii.** **Nature of occupation:** Jockeys, mining engineers, manual workers areexamples of bad physical hazard.**iii.** **Health and physical condition:** A person suffering from Diabetes may notrespond to surgical treatment in the event of accidental bodily injury.**B.** **Physical Hazards – Importance of Risk Management, Clauses and Rating**Underwriters use the following methods to deal with physical hazards: Loading of premium Applying warranties on the policy Applying certain clauses Imposition of excess/ deductibles Restricting the cover granted Declinature of cover**a)** **Loading of premium**There may be some adverse features in a risk exposure for which the underwriters\nmay decide to charge an extra premium before acceptance of the same. By\nloading the premium the higher probability of claims or occurrence of large claims\nis taken into consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.300In personal accident insurance if the insured is engaged in hazardous pursuits like\nmountaineering, racing on wheels, big game hunting etc. extra premium is\ncharged.Sometimes loading of premium is also done for adverse claims ratio, as in case of\nmotor insurance or health insurance policies.**b)** **Imposition of warranties**Insurers incorporate appropriate warranties to reduce the physical hazard. Some", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Fire", "chunk_id": "Final IC 38 -IMF_Composite -English_155", "metadata": {"file_size": 20962, "chunk_index": 155, "chunk_tokens": 982, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "The type of vehicle:", "Situation:", "Nature of flooring:", "The age of the person:"]}}
{"chunk": "may decide to charge an extra premium before acceptance of the same. By\nloading the premium the higher probability of claims or occurrence of large claims\nis taken into consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.300In personal accident insurance if the insured is engaged in hazardous pursuits like\nmountaineering, racing on wheels, big game hunting etc. extra premium is\ncharged.Sometimes loading of premium is also done for adverse claims ratio, as in case of\nmotor insurance or health insurance policies.**b)** **Imposition of warranties**Insurers incorporate appropriate warranties to reduce the physical hazard. Some\nexamples are provided below.**Example****i.** **Marine cargo:** A warranty is inserted to the effect that goods (e.g. Tea) arepacked in tin lined cases.**ii.** **Burglary:** It is warranted that the property is guarded by a watchman fortwenty four hours.**iii.** **Fire:** In fire insurance, it is warranted the premises would not be used beyondnormal working hours.**iv.** **Motor:** It is warranted that the vehicle will not be used for speed testing orracing.**Example****Marine cargo:** Small damage to parts may cause costly machinery to be a\nconstructive total loss. Such machinery are subject to the Replacement Clause,\nwhich limits underwriter’s liability only to the cost of replacing, forwarding and\nrefitting any broken part.Cast pipes, hard board sometimes get damaged only at the edges. Marine policies\non cast pipes, hardboard etc., are subject to the cutting clause warranting that\nthe damaged portion should be cut off and the balance utilised.**c)** **Deciding on Excess/ Deductibles and Restricting the Cover**When the loss amount exceeds the deductible/ excess mentioned the balance is\npaid under 'excess' clause. Loss below the limit is not payable.The object of these clauses is to eliminate small claims. As the insured is made\nto pay part of a loss, he is encouraged to exercise more care and to practice loss\nprevention.**Example****i.** **Motor** : A proposal for an old motor vehicle will not be accepted oncomprehensive terms but insurers will offer a restricted cover i.e. against\nthird party risks only.301**ii.** **Personal accident** : A personal accident proposer who has crossed themaximum acceptance age limit may be covered for death risk only instead\nof on comprehensive terms i.e. including disablement benefits.**d)** **Discounts**Lower rates are charged or a discount is given in the normal premium if the risk\nis favourable. The following features are considered to contribute to\nimprovement of risk in fire insurance.i. Installation of sprinkler system within the premisesii. Installation of hydrant system in the compoundiii. Installation of hand appliances consisting of buckets, portableextinguishers and manual fire pumpsiv. Installation of automatic fire alarm**Example**Under **motor insurance** a discount in the premium is provided if the motor cycle\nis always used with a side-car attached, as this feature contributes to improved\nrisk because of the greater stability of the vehicle.In **marine insurance**, the insurer may consider giving discounts on premium for\n“Full Load” container as this reduces the incidence of theft and shortage.Under a **group personal accident** cover, discounts would be given for coverage\nof a large group, which reduces the administrative work and expenses of the\ninsurer.**e)** **No claim bonus (NCB)**A certain percentage is given as bonus for every claim free renewal year with a\nlimit to the maximum bonus that can be availed. It is allowed by way of deduction\non the total premium at renewal only, depending upon the incurred claim ratio\nfor the entire group or to Motor vehicle Own damage policy holders for claim freeyears.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of\nmoral hazard in the insured. It rewards the insured for not lodging claims either\nby adopting better driving skills as in motor insurance or taking better care of his\nhealth in Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.**C.** **Moral hazard**302Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC 38 -IMF_Composite -English_156", "metadata": {"file_size": 20962, "chunk_index": 156, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "Discounts", "Moral hazard", "Imposition of warranties", "Fire:"]}}
{"chunk": "limit to the maximum bonus that can be availed. It is allowed by way of deduction\non the total premium at renewal only, depending upon the incurred claim ratio\nfor the entire group or to Motor vehicle Own damage policy holders for claim freeyears.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of\nmoral hazard in the insured. It rewards the insured for not lodging claims either\nby adopting better driving skills as in motor insurance or taking better care of his\nhealth in Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.**C.** **Moral hazard**302Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,\nan honest insured may be tempted to stage a loss, if he happens to be in\nfinancial difficulties.**b)** **Carelessness**Indifference towards loss is an example of carelessness. Because of the\nexistence of insurance, the insured may tend to adopt a careless attitude\ntowards the insured property.If the insured does not take the same care of the property as a prudent and\nreasonable man would if he were uninsured the moral hazard is\nunsatisfactory.**c)** **Industrial relations**Employer-employee relationship may involve an element of bad moral hazard.**d)** **Wrong claims**This kind of moral hazard arises when claims occur. An insured may not\ndeliberately bring about a loss but once a loss occurs, he would attempt to\ndemand unreasonably high amount of compensation, in total disregard of the\nprinciple of indemnity.**Information****Sub-limits:** The insurer may impose a limit on the total pay-out separately each\nfor room expenses, surgical procedures or doctor fees to check the inflated bills.**Where the moral hazard of the insured is suspected, the agent should not**\n**entertain or bring such proposals to the insurance company. S/ he should also**\n**bring such issues before the insurance company officials.****1.** **Short period scales**Normally, premium rates are quoted for a period of twelve months. If a policy is\ntaken for a shorter period, the premium is charged according to a special scale,\nknown as short period scale. The premium chargeable for short period insurance\nis not on proportionate basis.**Need for short period scales**a) These rates are applied because the expenses involved in the issue of thepolicy whether for a 12 months period or a shorter period, are almost thesame.b) Further, an annual policy requires renewal procedure only once during a yearwhereas short period insurances involve more frequent renewals. If a\nproportionate premium is allowed, there would be a tendency on the part of303the insured to go on taking short period policies and thereby, in effect, pay\npremiums in instalments.c) Besides, some insurance are seasonal in character and the risk is greaterduring that season. Insurances are sometimes taken during such period when\nthe risk is greatest and thereby selection takes place against the insurers.\nShort period scales are evolved to prevent such selection against the insurers.\nThey are also applicable when annual insurance is cancelled by the insured.\nIn that case refund is made keeping the premium on short period scale for the\nperiod Insurer was in risk.**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "f303", "section": "No claim bonus is a powerful strategy to improve underwriting experience and", "chunk_id": "Final IC 38 -IMF_Composite -English_157", "metadata": {"file_size": 20962, "chunk_index": 157, "chunk_tokens": 992, "has_examples": true, "has_tables": false, "key_concepts": ["Carelessness", "Sub-limits:", "Information", "Moral hazard", "Need for short period scales"]}}
{"chunk": "In that case refund is made keeping the premium on short period scale for the\nperiod Insurer was in risk.**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points\nwhich have to be borne in mind while deciding the sum insured:**a)** **Personal accident insurance** : The sum insured offered by a company can be afixed amount or it can also be based on the insured’s income. Some insurance\ncompanies may give a benefit equal to 60 times or 100 times of the insured’s\nmonthly income for a particular disability. There could be an upper limit or\n‘cap’ on the maximum amount. Compensations can vary from company to\ncompany. In group personal accident policies the sum insured may be fixed\nseparately for each insured person or may be linked to emoluments payable to\nthe insured person.304**b)** **Motor insurance** : In case of motor insurance the sum insured is the insured'sdeclared value [IDV]. It is the value of the vehicle, which is arrived at by\nadjusting the current manufacture's listed selling price of the vehicle with\ndepreciation percentage as prescribed in the erstwhile India Motor Tariff.\nManufacturer's listed selling price will include local duties/ taxes excluding\nregistration and insurance.IDV = (Manufacturer’s listed selling price – depreciation) + (Accessories that\nare not included in listed selling price-depreciation) and excludes registration\nand insurance costs.The IDV of vehicles that are obsolete or aged over 5 years is calculated by\nmutual agreement between insurer and the insured. Instead of depreciation,\nIDV of old cars is arrived at by assessment of vehicle’s condition done by\nsurveyors, car dealers etc.IDV is the amount of compensation given in case a vehicle is stolen or suffers\ntotal loss. It is highly recommended to get IDV which is near the market value\nof the car. Insurers provide a range of 5% to 10% to decrease IDV to the insured.\nLess IDV would mean lesser premium.**c)** **Fire insurance:** In fire insurance the sum insured may be fixed on the basis ofindemnity or reinstatement value for buildings/ plant and machinery and\nfixtures. Contents are covered on the basis of their market value which is cost\nof the item less depreciation. (Reinstatement value is explained in detail in\nChapter 28 - Commercial Insurance)**d)** **Stocks insurance:** In case of stocks, sum insured is their market value. Theinsured will be reimbursed at the cost at which these stocks can be purchased\nin the market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured isas per the agreement between insurer and insured at the time of contract.\nNormally it would consist of the sum of cost of the commodity plus Insurance\n+ freight i.e. CIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Minimum premium", "chunk_id": "Final IC 38 -IMF_Composite -English_158", "metadata": {"file_size": 20962, "chunk_index": 158, "chunk_tokens": 964, "has_examples": false, "has_tables": false, "key_concepts": ["Fire insurance:", "Marine cargo insurance:", "Test Yourself 1", "Motor insurance", "Minimum premium"]}}
{"chunk": "in the market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured isas per the agreement between insurer and insured at the time of contract.\nNormally it would consist of the sum of cost of the commodity plus Insurance\n+ freight i.e. CIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of\nnegligence against him.305I. Personal accident insuranceII. Professional Liability insuranceIII. Marine hull insuranceIV. Health insurance**Summary**a) Process of classifying risks and deciding into which category they fall isimportant for rate making.b) Underwriting is the process of determining whether a risk offered forinsurance is acceptable, and if so, at what rate, terms and conditions the\ninsurance cover will be accepted.c) A rate is the price of a given unit of insurance.d) The basic objective of rate making is to ensure that price of insurance shouldbe adequate and reasonable.e) ‘Pure premium’ is suitably loaded or increased by adding percentages toprovide for expenses, reserves and profits.f) The term hazard in insurance language refers to those conditions or featuresor characteristics which create or increase the chance of loss arising from a\ngiven peril.g) The objective of imposing deductible/ excess clauses is to eliminate smallclaims.h) No claim bonus is a powerful strategy to improve underwriting experience andforms an integral part of rating systems.i) Sum insured is the maximum amount that an insurance company willindemnify as per policy condition.**Key terms**a) Underwritingb) Rate makingc) Physical hazardsd) Moral hazardse) Indemnityf) Loading of premiumg) Warrantiesh) Deductibles306i) Excess**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.307## CHAPTER G-03## PERSONAL AND RETAIL INSURANCE**Chapter Introduction**In the previous chapters we have learnt various concepts and principles related\nto general insurance. General insurance products are classified differently in\ndifferent markets. Some classify them as property, casualty and liability.\nElsewhere, they are grouped as fire, marine, motor and miscellaneous. In this\nchapter, common products such as personal accident, travel, home and shop\nkeepers and motor insurance that are bought by such retail customers are\ndiscussed.**Learning Outcomes**After studying this chapter, you should be able to:1. Explain householder’s insurance\n2. Prepare shop insurance cover\n3. Discuss motor insurance308**A.** **Retail Insurance Products**There are some insurance products that are purchased for individuals for covering\ncertain interests. Though small commercial or business interests could be there\nfor such insurances, these are generally sold to individuals. In some markets these\nare called ‘small ticket’ policies or ‘retail policies’ or ‘retail products’. Insurances\nof the home, motor cars, two-wheelers, small businesses like shops etc. fall under\nthis category. These products are usually sold by the same agents/ distribution\nchannels that deal with personal lines of insurance as the buyers also are\nessentially from the same consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’sPolicy, Office Package Policy etc. that, under one policy, seek to cover various\nphysical assets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s306", "section": "Marine cargo insurance:", "chunk_id": "Final IC 38 -IMF_Composite -English_159", "metadata": {"file_size": 20962, "chunk_index": 159, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Retail Insurance Products", "Marine cargo insurance:"]}}
{"chunk": "channels that deal with personal lines of insurance as the buyers also are\nessentially from the same consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’sPolicy, Office Package Policy etc. that, under one policy, seek to cover various\nphysical assets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.\niv. Package covers could have common terms and conditions for all sections asalso specific terms for specific sections of the policy.I.**D.** **Shopkeeper’s Insurance**A shop owner is not a corporate house that has large reserves of money to restart\nbusiness. A single mishap may lead to closure of her/ his shop and could probably\nruin her/ his family. There may be bank loans also to repay. There is always the\npossibility that a member of the public suffers a personal injury or damage to\nher/ his property, caused by the shop owner’s operations and a court holds the\nshop owner liable to pay the damages. Such situations can also ruin a shopkeeper.\nTherefore, it's very essential to secure this means of livelihood.309**Shopkeeper’s Insurance policies are devised to cover many of such aspects of**\n**commercial shop/ retail business.** There are policies that are customised to\ncover specific interests of many types of shops such as antique shop, barbershop,\nbeauty parlour, bookstore, department store, dry cleaners, gift shop, pharmacy,\nstationery shop, toy shop, apparel store etc.**1.** **What does shopkeeper’s insurance cover?**The policy can be tailored to provide cover to protect the specific areas of retail\nbusiness. It usually covers damage to the shop structure and contents due to fire,\nearthquake, flooding or malicious damage; and burglary. Shop insurance can also\ninclude business interruption protection. This will cover any loss of income or\nadditional expenditure in the event of operation of unexpected peril causing\ninterruption of business operation. The coverage can be selected by the insured\ndepending on her/ his range of activities.The additional covers the insured can opt may vary from insurer to insurer and\ncan be verified from the respective websites of the non-life insurance companies.\nThese could be:**i.** **Burglary and Housebreaking:** Cover for housebreaking, theft, and larceny\nof office content\n**ii.** **Machinery Breakdown:** Cover for breakdown of electrical/ mechanicalappliances\n**iii.** **Electronic Equipment and Appliances:** Provides all-risk cover for electronic appliances\n Cover for loss of electronic installations\n**iv.** **Money Insurance** : Provides coverage against loss of money due to anaccident while it is in: Transit from the business premises to bank and vice versa\n A safe at the business premises\n A till (box/ drawer/ counter) at the business premises\n**v.** **Baggage** : Compensates for loss of baggage while on travel for officialpurposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage****to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course ofemployment\n Provides cover for legal liability to third parties310Fire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be\ntaken separately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s310", "section": "B.", "chunk_id": "Final IC 38 -IMF_Composite -English_160", "metadata": {"file_size": 20962, "chunk_index": 160, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Machinery Breakdown:", "Personal Accident", "Shopkeeper’s Insurance", "Baggage", "What does shopkeeper’s insurance cover?"]}}
{"chunk": " A till (box/ drawer/ counter) at the business premises\n**v.** **Baggage** : Compensates for loss of baggage while on travel for officialpurposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage****to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course ofemployment\n Provides cover for legal liability to third parties310Fire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be\ntaken separately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is\nusually a package of all the needs of a Householder.Losses normally covered include fire, lightning, explosion and aircraft fall/\nimpact damage (commonly known as FLEXA); storm, tempest, flood and\ninundation (commonly known as STFI); and burglary. Coverage differs from\ncompany to company and from policy to policy.Apart from the structure, it covers the contents of the house against burglary,\nhousebreaking, larceny and theft. Jewellery whilst being worn or kept in locked\nsafe can also be insured under Householder’s Insurance. Cover is also given for\nelectrical and mechanical failure of domestic and electronic appliances.Similarly, Householder’s insurance Package also provides coverage for loss of\npersonal baggage, lost during travel, or liabilities to neighbours/ visitors may also\nbe part of Householders’ insurance package. Some insurers also provide coverage\nfor pedal cycle, personal accident and workmen’s compensation.IRDAI has introduced a standard product with effect from 1st April, 2021 – Bharat\nGriha Raksha policy with a tenure of upto 10 years, which shall be mandatorily\noffered by all general insurers carrying on Fire and allied perils insurance\nbusiness.**Bharat Griha Raksha (meant for Home Building and Home Contents) policy**\noffers cover against a wide range of perils, namely Fire, Natural Catastrophe,\nForest, Jungle and Bush fires, Impact Damage of any kind, Riot, Strike, Malicious\nDamages, Acts of terrorism, Bursting and overflowing of water tanks, apparatus\nand pipes, Leakage from automatic sprinkler installations and Theft within 7 days\nfrom the occurrence of any of the aforesaid events. This policy can be for a period\nof 1 to 10 years.In addition to the Home Building, the policy covers General Home Contents\nautomatically (without any need for declaration of details) for 20% of the Sum\nInsured of the Building subject to a maximum of Rs.10 lakhs. One can also opt for\na higher Sum Insured for general contents by declaring the details.The policy offers two optional covers, namely (i) Insurance for Valuable Contents\nlike jewellery and curios; and (ii) Personal Accident of the insured and spouse due\nto an insured peril under the policy.311The policy gives complete waiver of underinsurance. That is, if the Sum Insured\ndeclared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value\nof assets, therefore, it may not be difficult to arrive at the sum insured. In the\ncase of shop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two\nmethods of fixing the sum insured, viz. market value and reinstatement/\nreplacement value.For additional coverage like money, baggage, personal accident the premium\nwould depend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the\ncase of M.V., in the event of a loss, depreciation is levied on the asset\ndepending on its age. Under this method, the insured is not paid amount", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s310", "section": "Baggage", "chunk_id": "Final IC 38 -IMF_Composite -English_161", "metadata": {"file_size": 20962, "chunk_index": 161, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Personal Accident", "Baggage", "Householder’s Insurance", "Legal Liability:", "Sum Insured and Premium"]}}
{"chunk": "declared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value\nof assets, therefore, it may not be difficult to arrive at the sum insured. In the\ncase of shop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two\nmethods of fixing the sum insured, viz. market value and reinstatement/\nreplacement value.For additional coverage like money, baggage, personal accident the premium\nwould depend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the\ncase of M.V., in the event of a loss, depreciation is levied on the asset\ndepending on its age. Under this method, the insured is not paid amount\nsufficient to replace the property.ii. In the RIV method, the insurance company will pay the cost of replacementsubject to ceiling of sum insured. Under this method, no depreciation is\nlevied. One condition is that the damaged asset should be repaired/ replaced\nin order to get the claim. It may be noted that RIV method is allowed only for\nfixed assets and not for other assets like stocks and stocks in process.Most policies insure the structure of the home for its reconstruction, which is\ncalled ‘reinstatement value’ (and not on ‘market value’). Reinstatement value is\nthe cost incurred to reconstruct the home if it is damaged. On the other hand,\nmarket value depends on factors like age of the property, depreciation, etc.Sum insured is generally calculated by multiplying the built up area of insured's\nhome with the construction rate per square foot. The contents of the home furniture, durables, clothes, utensils, etc. - are valued on market value basis i.e.\nthe current market value of similar items after depreciation.Premium would depend on the value insured and the coverage taken.312**Test Yourself 1**Which of the below statements is correct with regards to a package policy?I. Package Policy provide a combination of covers under a single document\nII. Package Policy can cover only physical assets like buildings\nIII. A named peril policy or package policy comes at the same price.\nIV. Only named peril policies can be bought and package policies are notavailable.V.\n**Definition****Some important definitions****a)** **Burglary** means the unforeseen and unauthorised entry to or exit from theinsured premises by aggressive and detectable means with the intent to steal\ncontents there from.**b)** **Housebreaking** is said to have taken place when a house trespass has beencommitted by entering it for the purpose of committing an offence.**c)** **Robbery** means the theft of contents at the insured’s premises usingaggressive and violent means against the Insured and/ or insured’s employees.**d)** **Safe** means a strong cabinet within the insured’s premises designed for thesafe and secure storage of valuable items, and access to which is restricted.**e)** **Theft** is a generic term for all crimes in which a person intentionally andfraudulently takes the property of another without permission or consent and\nwith the intent to convert it to the taker’s use or potential sale. Theft is\nsynonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed\nplate glass and sanitary fittings’ cover. This will cover accidental loss of damage to\nwhich of the following?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and\ntaken it for a drive. Out of nowhere, a dog comes in the way and to avoid hitting313it, Revathi swerves sharply, breaks and goes over the divider, hits another car\nand injures a person walking on the road. The outcome of a single incident has\nresulted in damage to Revathi’s own car, public property, another car and also\ncaused injury to another person.In this scenario, if Revathi does not have a car insurance, she may end up paying\nfar more than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "g313", "section": "F.", "chunk_id": "Final IC 38 -IMF_Composite -English_162", "metadata": {"file_size": 20962, "chunk_index": 162, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Housebreaking", "Burglary", "Motor Insurance", "Theft"]}}
{"chunk": "synonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed\nplate glass and sanitary fittings’ cover. This will cover accidental loss of damage to\nwhich of the following?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and\ntaken it for a drive. Out of nowhere, a dog comes in the way and to avoid hitting313it, Revathi swerves sharply, breaks and goes over the divider, hits another car\nand injures a person walking on the road. The outcome of a single incident has\nresulted in damage to Revathi’s own car, public property, another car and also\ncaused injury to another person.In this scenario, if Revathi does not have a car insurance, she may end up paying\nfar more than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?\n What if they don't have insurance?That is why the laws of the land make it mandatory to have third-party liability\ninsurance. While motor insurance does not prevent these things from happening,\nit provides a financial security blanket for the owner.Apart from an accident, the car can also be stolen, damaged by an accident or\ndestroyed by fire and the owner would suffer financially.Motor insurance must be taken by a vehicle owner (i.e. the person in whose name\nthe vehicle is registered with the Regional Transport Authority in India.)**Important****Mandatory Third Party Insurance**As per the Motor Vehicles Act, 1988, it is mandatory for every owner of a vehicle\nplying on public roads, to take an insurance policy, to cover the amount, which\nthe owner becomes legally liable to pay as damages to third parties as a result of\naccidental death, bodily injury or damage to property. A Certificate of Insurance\nmust be carried in the vehicle as a proof of such insurance.**1.** **Motor insurance coverage**The country has a large vehicle population. A number of new vehicles keep\ncoming on to the road every day. Many of them are very costly as well. People\nsay that in India, vehicles do not get junked, but only keep changing hands. This\nmeans that old vehicles continue to be on the road and new vehicles get added.\nThe area of the roads (the space for driving) is not growing correspondingly with\nthe number of vehicles. The number of people walking on the road is also\nincreasing. Police and hospital statistics say that the number of road accidents in\nthe country is increasing. The amount of compensations awarded to accident\nvictims by Courts of Law are increasing. Even vehicle repair costs are going up.\n**All these show the importance of motor insurance in the country.**Motor insurance covers the loss of vehicles and the damages to them due to\naccidents and some other reasons. Motor insurance also covers the legal liability314of vehicle owners to compensate the victims of the accidents caused by their\nvehicles.Despite, the government mandate, all the vehicles in the country are not insured.**Motor Insurance covers all types of vehicles plying on public roads such as:** Two wheelers\n Private cars\n All types of commercial vehicles: Goods carrying and passenger carrying\n Miscellaneous type of vehicles e.g. cranes,\n Motor Trade (Vehicles in Showrooms and Garages)**‘Third-Party Insurance’**An insurance policy purchased for protection against the legal actions of another\nparty. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any\nvehicle plying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury\ncaused by a motor accident are to be filed by the complainant in Motor Accident\nClaim Tribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "g313", "section": "Test Yourself 2", "chunk_id": "Final IC 38 -IMF_Composite -English_163", "metadata": {"file_size": 20962, "chunk_index": 163, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Motor insurance coverage", "Motor Insurance", "Important", "Mandatory Third Party Insurance", "Test Yourself 2"]}}
{"chunk": "party. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any\nvehicle plying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury\ncaused by a motor accident are to be filed by the complainant in Motor Accident\nClaim Tribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident\ncover for Owner-Driver effective 1st January, 2019. The Cover is provided to the\nOwner-Driver whilst driving the vehicle including mounting into/ dismounting\nfrom or traveling in the insured vehicle as a co-driver. However, the policyholder\ncan choose to opt for the CPA cover as part of the Liability Only policy or the\nPackage policy. In the event the policyholder chooses to take a stand-alone CPA\npolicy, the CPA cover offered as part of Liability only or Package policy shall be\ndeleted.315**Package/ Comprehensive Policy: (Own Damage + Third Party Liability)**In addition to the above, the loss or damage to the vehicle insured by specified\nperils (known as own damage to motor vehicles) is also covered subject to the\nvalue declared (called IDV – discussed above) other terms and conditions in the\npolicy. Some of these perils are fire, theft, riot and strike, earthquake, flood,\naccident etc.Some insurers may also pay for towing charges from the place of accident to the\nworkshop. A restricted cover is also available covering the risk of fire and/ or\ntheft only, in addition to the compulsory cover granted under Act (Liability) Only\nPolicy.The policy can also cover loss or damage to accessories fitted in the vehicle,\npersonal accident cover under private car policies for passengers, paid driver;\nlegal liability to employees and non-fare paying passengers in commercial\nvehicles. Insurers also provide free emergency services or use of alternative car\nin case of breakdown.**2.** **Exclusions**Some of the important exclusions under the policies are wear and tear,\nbreakdowns, consequential loss, and loss due to driving with invalid driving\nlicense or under the influence of alcohol. Use of vehicle not in accordance with\n`limitations as to use ' (e.g. private car being used as a taxi) is not covered.**3.** **Sum Insured and Premium**The sum insured of a vehicle in a Motor Policy is referred to as Insured's Declared\nValue (IDV).In case of theft of vehicle or total damage beyond repairs in an accident, the\nclaim amount will be determined on the basis of the IDV.Rating/ premium calculation depends on factors like the Insured's Declared Value,\ncubic capacity, geographical zone, age of the vehicle etc.**Test Yourself 3**Motor insurance should be taken in whose name?I. In the name of the vehicle owner whose name is registered with RegionalTransport Authority\nII. If the person who will be driving the vehicle is different from the owner, thenin the name of the person who will be driving the vehicle, subject to approval\nfrom Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primarypolicy should be in the name of the vehicle owner and additional policies316should be purchased in the names of all the people who will be driving the\nvehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred toan insured property from hazards or events named in the policy. The perils\ncovered will be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire,riots, bursting of pipes, earthquakes etc. Apart from the structure, it covers\nthe contents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s316", "section": "Two important types of covers that are popular in the market are discussed", "chunk_id": "Final IC 38 -IMF_Composite -English_164", "metadata": {"file_size": 20962, "chunk_index": 164, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Exclusions", "Test Yourself 3", "Sum Insured and Premium", "Summary", "Act [Liability] Only Policy:"]}}
{"chunk": "from Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primarypolicy should be in the name of the vehicle owner and additional policies316should be purchased in the names of all the people who will be driving the\nvehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred toan insured property from hazards or events named in the policy. The perils\ncovered will be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire,riots, bursting of pipes, earthquakes etc. Apart from the structure, it covers\nthe contents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).\ne) Shopkeeper’s insurance usually covers damage to the shop structure andcontents due to fire, earthquake, flooding or malicious damage; and burglary.\nShop insurance can also include business interruption protection.\nf) Motor insurance covers the loss of vehicles and the damages to them due toaccidents and some other reasons. Motor insurance also covers the legal\nliability of vehicle owners to compensate the victims of the accidents caused\nby their vehicles. Compulsory Personal Accident cover for Owner-Driver is\nprovided to whilst driving the vehicle including mounting into/ dismounting\nfrom or traveling in the insured vehicle as a co-driver.**Key terms**a) Householder’s insurance\nb) Shopkeeper’s insurance\nc) Motor insurance**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is I.317## CHAPTER G-04## COMMERCIAL INSURANCE**Chapter Introduction**In the previous chapter we considered various kinds of insurance products that\ncover the risks faced by individuals and households. There is another set of\ncustomers who have other needs for protection. These are the commercial or\nbusiness enterprises or firms, who are engaged in or deal with of various kinds of\ngoods and services. In this chapter we shall consider the insurance products\navailable to cover the risks faced by this segment.**Learning Outcomes**After studying this chapter, you should be able to understand the importance and\nbasic purposes of the 11 types of insurances discussed.318**A.** **Property/ Fire Insurance**Commercial enterprises are broadly divided into two types: Small and Medium Enterprises [SMEs]Bharat Sookshma PolicyBharat Laghu Policy Large Business Enterprises-Standard fire and Special Perils Policy (SFSP), IAR etc.Historically, general insurance sector has largely developed by catering to the\nneeds of these customers.Selling general insurance products to commercial enterprises calls for a careful\nmatching of insurance products with their needs. Agents must have a proper\nunderstanding of the products available. Let us briefly consider some of these\ngeneral insurance products.**1. Standard Fire and Special Perils Policy (SFSP)**Fire insurance policy is suitable for commercial establishments as well as for the\nowner of property, one who holds property in trust or in commission and for,\nindividuals/ financial institutions who have financial interest in the property.All immovable and movable property located at a particular premises such as\nbuildings, plant and machinery, furniture, fixtures, fittings and other contents,\nstocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild\nand renew the property damaged to bring back the business to its normal course.\nIt is here that fire insurance plays its role.**2.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile\nAll India Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood andinundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation319 Bush fireThere are two important features which differentiate commercial insurance from", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s316", "section": "Summary", "chunk_id": "Final IC 38 -IMF_Composite -English_165", "metadata": {"file_size": 20962, "chunk_index": 165, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Answer 1"]}}
{"chunk": "stocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild\nand renew the property damaged to bring back the business to its normal course.\nIt is here that fire insurance plays its role.**2.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile\nAll India Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood andinundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation319 Bush fireThere are two important features which differentiate commercial insurance from\nindividual and retail lines.a) The insurance needs of firms or business enterprises are much larger than thatof individuals. The reason is that the value of the assets of a commercial\nenterprise is much larger than that of an individual’s assets. Their loss or\ndamage could adversely impact the very survival and future of the company.b) The demand for insurance of commercial enterprise is often mandated ormade necessary by legal or other requirements. For instance, when plants and\nassets are set up through a bank loan, their insurance may be a condition of\nthe loan. Many corporate enterprises in India are professionally run companies\nand a number of them are multinationals.They are required to maintain global quality standards, including the adoption\nof appropriate risk management strategies and insurance for protecting their\nassets.Any loss arising out of the above perils is covered by the policy subject to some\nexclusion.**2.2.** **Revised Standard Fire and Special Perils (SFSP) Policies:**IRDAI has issued guidelines with effect from 1st April, 2021 whereby the Standard\nFire and Special Perils (SFSP) Policy will be replaced by the following two standard\nproducts **for the risks** given **below** that shall be mandatorily offered by all general\ninsurers carrying on Fire and allied perils insurance business.**i.** **Bharat Sookshma Udyam Suraksha (meant for enterprises where the total****value at risk is upto Rs. 5 Crore)** - designed for financial protection of MSMEsThis policy provides cover for the Building/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value at risk across all insurable\nasset classes at one location is up to Rs. 5 Crore. This policy also offers cover\nagainst a wide range of perils, quite similar to the policy meant for Dwellings.The policy has many in-built covers in addition to the basic coverage — Cover for\nalterations, additions or extensions, Cover for stocks on a floater basis, Cover for\ntemporary removal of stocks, Cover for Specific Contents, Cover for start-up\nexpenses (following a loss), Cover for payment of professional fees for Architects,\nSurveyors and Consulting Engineers, Cost for removal of debris and Costs\ncompelled by Municipal Regulations.The policy can be taken by micro level enterprises such as offices, hotels,\nindustries, storage risks and so on. The policy underinsurance to the extent of32015% is waived. Bharat Sookshma Udyam Policies allow increase in Sum Insurer\nduring the policy tenure by endorsement.**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total****value at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for\nfinancial protection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery,\nStock and other assets of enterprises where the total value of risk across all\ninsurable asset classes at one location exceeds Rs.5 Crore but does not exceed\nRs. 50 Crore at the policy commencement date. This policy also has all the inbuilt covers offered by the policy for micro level enterprises mentioned above.\nThe perils against which insurance is offered are also similar to the policy meant\nfor micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "n319", "section": "What does the Standard Fire policy cover?", "chunk_id": "Final IC 38 -IMF_Composite -English_166", "metadata": {"file_size": 20962, "chunk_index": 166, "chunk_tokens": 978, "has_examples": true, "has_tables": false, "key_concepts": ["What does the Standard Fire policy cover?"]}}
{"chunk": "industries, storage risks and so on. The policy underinsurance to the extent of32015% is waived. Bharat Sookshma Udyam Policies allow increase in Sum Insurer\nduring the policy tenure by endorsement.**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total****value at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for\nfinancial protection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery,\nStock and other assets of enterprises where the total value of risk across all\ninsurable asset classes at one location exceeds Rs.5 Crore but does not exceed\nRs. 50 Crore at the policy commencement date. This policy also has all the inbuilt covers offered by the policy for micro level enterprises mentioned above.\nThe perils against which insurance is offered are also similar to the policy meant\nfor micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in\nSum Insurer during the policy tenure by endorsement.**iii.** **Exclusions under Fire Policies**Insurers traditionally exclude the following from the scope of Fire policies.**Losses due to excepted perils like**i. War and war like activities.\nii. Nuclear perils\niii. Ionisation and radiationiv. Pollution and contamination losses**Perils that are covered by other policies in General Insurance**i. Machinery Breakdown,\nii. Business Interruptioniv. **Add-on Covers**However some perils can be covered by payment of additional premium like earth\nquake, fire and shock; deterioration of stock in the cold storages following power\nfailure as a result of insured peril, additional expenditure involved in removal of\ndebris, architect, consulting engineers’ fee over and above the amount covered\nby the policy, forest fire, spontaneous combustion and impact damage due to\nown vehicles; terrorism.v. **Variants of Fire policy**Fire policies are generally issued for a period of 12 months. Only for dwellings,\ninsurance companies offer long term policies, i.e. for a period over 12 months. In\nsome cases short period policies are also issued, to which the short period scales\nare applicable.321a. **Market Value and Reinstatement Value Policies:** In the event of a loss, theinsurer would normally pay the market value [which is the depreciated\nvalue]. Under Reinstatement Value Policy, however, the insurers would pay\ncost of replacement of the damaged property, by new property of the same\nkind.Reinstatement value policies are issued for covering buildings, plant,\nmachinery and furniture, fixture, fittings. Reinstatement value policies are\nnot issued to cover stocks, which are usually covered on market value basis.b. **Declaration Policy:** To take care of frequent fluctuations in stocks values inwarehouse, Declaration Policy is granted subject to certain conditions. The\nsum insured should be the highest value that is expected to be stored in the\ngodown during the period of policy. On this value a provisional premium is\ncharged. The insured has to declare the value of his stocks at agreed\nintervals, during the currency of policy. This is adjustable along with the\npremium at the end of the policy period.c. **Floater Policies:** Floater policies may be issued for stocks of goods which arestored at various specified locations under one sum insured. Unspecified\nlocations are not covered. The premium rate is the highest rate applicable\nto insured’s stocks at any one location with a loading of 10%. These are also\ncalled fire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on thenature of occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and floodgroup perils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire322**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "f32015", "section": "Bharat Laghu Udyam Suraksha(meant for enterprises where the total", "chunk_id": "Final IC 38 -IMF_Composite -English_167", "metadata": {"file_size": 20962, "chunk_index": 167, "chunk_tokens": 1005, "has_examples": false, "has_tables": false, "key_concepts": ["Market Value and Reinstatement Value Policies:", "Premium rating depends on:", "Test Yourself 1", "Losses due to excepted perils like", "Declaration Policy:"]}}
{"chunk": "called fire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on thenature of occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and floodgroup perils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire322**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or\nLoss of Profit Insurance.Fire insurance provides indemnity against material or property damage or loss\nsuffered to building, plant, machinery fixtures, fittings, merchandise goods, etc.\nby insured perils. **This may result in total or partial interruption of the**\n**insured’s business**, resulting in various economic losses, during the period of\ninterruption.**Coverage under Business Interruption Policy**Consequential Loss (CL) Policy [Business Interruption (BI)] provides indemnity for\nloss of what is termed as gross profit – which includes Net Profit plus Standing\nCharges along with the increased cost of working incurred by the insured to get\nthe business back to normalcy, as soon as possible to reduce the final loss. The\nperils covered and conditions are the same as those covered under the fire policy.**Example**If a Fire results in damage to the car manufacturer's plant, the production loss\nwill result in loss of income to the manufacturer. This loss of income along with\nextra expenses incurred can be insured provided it has resulted from a peril\ninsured.This policy can be taken only in conjunction with standard fire and special perils\npolicy as claims under this policy are admissible only if there is a claim under\nstandard fire and special perils policy.**Test Yourself 2**A business interruption insurance policy can be taken only in conjunction with____________.I. Standard fire and special perils insurance policy\nII. Standard marine insurance policy\nIII. Standard motor insurance policy\nIV. Standard health insurance policy**C.** **Burglary Insurance**The policy is meant for business premises like factories, shops, offices,\nwarehouses and godowns which may contain stocks, goods, furniture fixtures and\ncash in a locked safe which can be stolen. The scope of cover is clearly expressed\nin the policy.**Risks covered under burglary insurance**a) Loss of property following actual forcible and violent entry into the premisesor loss followed by actual, forcible and violent exit from the premises or holdup.323b) Damage to insured property or premises by burglars. Property insured iscovered only when it is lost from the insured premises and not from any other\npremises.**Cash cover:** An important part of burglary cover is cash cover. It operates only\nwhen the cash is secured in a safe, which is burglar proof and is of an approved\nmake and design. The common conditions applicable for granting cash cover are\ngiven below:a) Cash lost from the safe following the use of the original key to open, it iscovered only where such key has been obtained by violence or threats of\nviolence or through means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some placeother than the safe. The liability of the insurer is limited to the amount\nactually shown by such records.**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales,\ngrain, sugar etc.) the risk of losing the entire stock on a single occasion is\nconsidered remote. The value that can be burgled is ascertained as probable\nmaximum loss (PML) and the full premium is charged for this maximum\nprobable loss and certain percentage of full premium is charged on rest\namount of stock as PML floats over the entire stock. It is assumed that a\nsecond burglary may not follow immediately or the insured may take", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e322", "section": "Premium rating depends on:", "chunk_id": "Final IC 38 -IMF_Composite -English_168", "metadata": {"file_size": 20962, "chunk_index": 168, "chunk_tokens": 963, "has_examples": true, "has_tables": false, "key_concepts": ["Premium rating depends on:", "Burglary Insurance", "Test Yourself 1", "Example", "First Loss Insurance"]}}
{"chunk": "when the cash is secured in a safe, which is burglar proof and is of an approved\nmake and design. The common conditions applicable for granting cash cover are\ngiven below:a) Cash lost from the safe following the use of the original key to open, it iscovered only where such key has been obtained by violence or threats of\nviolence or through means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some placeother than the safe. The liability of the insurer is limited to the amount\nactually shown by such records.**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales,\ngrain, sugar etc.) the risk of losing the entire stock on a single occasion is\nconsidered remote. The value that can be burgled is ascertained as probable\nmaximum loss (PML) and the full premium is charged for this maximum\nprobable loss and certain percentage of full premium is charged on rest\namount of stock as PML floats over the entire stock. It is assumed that a\nsecond burglary may not follow immediately or the insured may take\nadditional security measures from its recurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other\npersons who are lawfully on the premises, nor does it cover larceny or ordinary\ntheft. It also excludes losses that are covered by a fire or plate glass policy.**4.** **Extensions**The policy can be extended to cover riot, strikes and terrorism risks at extra\npremium.**5.** **Premium**Rates of premium for burglary policy depend upon the nature of insured\nproperty, the moral hazard of the insured himself, construction and location\nof premises, safety measures ( _e.g. watchmen, burglar alarm)_, previous claims\nexperience etc.In addition to details given in the proposal form, a pre-acceptance inspection\nis done by insurers where high values are involved.**Test Yourself 3**The premium for burglary policy depends on ______________.I. Nature of insured property324II. Moral hazard of the insured himself\nIII. Construction and location of the premises\nIV. All of the above**D.** **Money Insurance**Handling of cash is an integral part of any business. The Money Insurance policy\nis intended to protect banks and industrial business establishments against loss of\nmoney. Money is at risk in the premises as well as outside. It can be unlawfully\ntaken away while withdrawing, depositing, making payments or collections.**1.** **Coverage of Money Insurance**Money insurance policy is designed to cover the losses that may occur while cash,\ncheques/ postal orders/ postal stamps are being handled. The policy normally\nprovides cover under two sections**a)** **Transit section:** It covers loss of money as a result of robbery or theft or otherfortuitous cause whilst it is carried outside by the insured or her authorised\nemployees.The transit section specifies two amounts:**i.** **Limit per carrying** : This is the maximum amount that insurers may berequired to pay in respect of each loss.**ii.** **Estimated amount in transit during the policy period:** It represents theamount to which the rate of premium is to be applied to arrive at the\namount of premium.Policies can be issued on “ **declaration basis”**, similar to the practice in fire\ninsurance. Insurers thus charge a provisional premium on the estimated\namount in transit and adjust this premium at the time of expiry of the policy,\nbased on actual amount in transit during the policy period, as declared by the\ninsured.**b)** **Premises section:** This section covers loss of cash from one’s premises/locked safe due to burglary, housebreaking, hold up etc. Other features of\nthe policy are normally the same as of burglary insurance (of business\npremises) that this was discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized personandc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risks325c) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y324", "section": "First Loss Insurance", "chunk_id": "Final IC 38 -IMF_Composite -English_169", "metadata": {"file_size": 20962, "chunk_index": 169, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Exclusions", "Extensions", "First Loss Insurance", "Test Yourself 3", "Premium"]}}
{"chunk": "amount in transit and adjust this premium at the time of expiry of the policy,\nbased on actual amount in transit during the policy period, as declared by the\ninsured.**b)** **Premises section:** This section covers loss of cash from one’s premises/locked safe due to burglary, housebreaking, hold up etc. Other features of\nthe policy are normally the same as of burglary insurance (of business\npremises) that this was discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized personandc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risks325c) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried\nthroughout the year based on declaration made within 30 days of expiry of the\npolicy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission\nII. Loss of cash from one’s premises due to burglary\nIII. Loss of money that has been entrusted to other than authorized person\nIV. Riot, strike and terrorism**E.** **Fidelity Guarantee Insurance**Companies suffer financial loss due to what are termed as white collar crimes like\nfraud or dishonesty of their employees. Fidelity guarantee insurance indemnifies\nemployers against the financial loss suffered by them due to fraud or dishonesty\nof their employees by forgery, embezzlement, larceny, misappropriation and\ndefault.**1.** **Coverage under Fidelity Guarantee Insurance**Cover is granted against a direct pecuniary loss and does not include\nconsequential losses.a) The loss should be in respect of moneys, securities or goodsb) The act should be committed in the course of the duties specified;c) The loss has be discovered within 12 months of expiry of the policy or deathretirement resignation or dismissal of the employee, whichever is earlierd) No cover is provided in respect of a dishonest employee who has been re\nemployed**2.** **Types of Fidelity Guarantee Policy**There are various types of fidelity guarantee policies, as discussed below:**a)** **Individual policy:** This type of policy is used where only one individual is tobe guaranteed. Name, designation of the employee and amount of\nguarantee has to be specified.**b)** **Collective policy:** This policy comprises a schedule listing out the names ofthose employees to whom the guarantee applies, along with a note on the\nduties of each employee and separate individual sums insured.**c)** **Floating policy or floater:** In this policy, the names and duties of theindividuals to be covered are inserted in a schedule, but instead of\nindividual amounts of guarantee, a specified amount of guarantee is326“floated” over the whole group. A claim in respect of any one employee\nwill, therefore, reduce the floated guarantee, unless the original sum is\nreinstated by payment of an extra premium.**d)** **Positions policy:** This is similar to a collective policy with the differencethat only the schedule lists out \"positions’ (say, Cashier, Account Officer\nEtc.) that are to be guaranteed for a specified amount and the name are\nnot mentioned.**e)** **Blanket policy:** This policy covers the entire staff without showing namesor positions. No enquiries about the employees are made by the insurers.\nSuch policies are only suitable for an employer with a large staff and the\norganization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers\nin the event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud ordishonesty of their employees\nII. Employees against the financial loss suffered by them due to fraud ordishonesty of their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s325", "section": "Premises section:", "chunk_id": "Final IC 38 -IMF_Composite -English_170", "metadata": {"file_size": 20962, "chunk_index": 170, "chunk_tokens": 975, "has_examples": false, "has_tables": false, "key_concepts": ["Extensions", "Types of Fidelity Guarantee Policy", "Test Yourself 4", "Coverage under Fidelity Guarantee Insurance", "Test Yourself 5"]}}
{"chunk": "Etc.) that are to be guaranteed for a specified amount and the name are\nnot mentioned.**e)** **Blanket policy:** This policy covers the entire staff without showing namesor positions. No enquiries about the employees are made by the insurers.\nSuch policies are only suitable for an employer with a large staff and the\norganization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers\nin the event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud ordishonesty of their employees\nII. Employees against the financial loss suffered by them due to fraud ordishonesty of their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate\nIV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions\nwho deal with operations involving money, considering the special risks faced by\nthem regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**\nThere are different variations to this policy based on the requirement of banker.a) Money securities lost or damaged whilst within the premises due to fire,burglary, riot and strike.b) Loss suffered due to any cause whatsoever including negligence of theemployees, when the property is carried outside the premises in the hands\nof authorized employees.327c) Forgery or alteration of cheques, drafts, fixed deposit receipts etc.d) Dishonesty of employees with reference to money/ securities or in respectof goods pledged.e) Dispatches by registered post parcels.f) Dishonesty of appraisers.g) Money lost while in the hands of agents of the bank like ‘Janata Agents’,‘Chhoti Bachat Yojana Agents’.The cover is issued on discovery basis, this means the policy will respond to a\nperiod during which a loss is discovered and not necessarily the period when it\noccurred. But a cover should have been in existence when the loss actually\noccurred.Conventionally losses within a period of 2 years prior to date of discovery only\nare payable, subject to the cover having been continuous, from a date earlier\nthan that when the loss has occurred.**2.** **Important exclusions**\nMajor exclusions are Trading losses, Negligence, Software crimes and dishonesty\nof the partners/ directors**3.** **Scope**\nThe policy comprises of 7 sections viz.:1. On Premises2. In Transit\n3. Forgery or Alteration\n4. Dishonesty\n5. Hypothecated Goods\n6. Registered Postal Service\n7. Appraisers\n8. Janata Agents**4.** **Sum insured**The bank has to fix the **sum insured** which would usually float over the first 5\nsections. This is termed as ‘basic sum insured’. Additional sum insured can be\npurchased for section (1) and (2) if the basic sum insured is not sufficient. The\npolicy also allows one compulsory and automatic reinstatement of sum insured by\npayment of an extra premium**5.** **Rating**The premium calculation is based on:a) Basic sum insured\nb) Additional sum insured328c) Number of staff\nd) Number of branches.**Test Yourself 6**Which of the below can be covered under a bankers indemnity insurance policy?I. Money securities lost or damaged whilst within the premises due to fire\nII. Forgery or alteration of cheques\nIII. Dishonesty of employees with reference to money\nIV. All of the above**G.** **Jewelers’ Block Policy**In recent years India has emerged as a leading centre in world trade for jewellery,\nespecially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in\nlarge quantity and moving them between different premises.**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are\nallowed to avail of other sections at their option. It is also the market practice to\ninclude some more sections to cover other assets like Electronic equipment, Plate", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s2", "section": "Blanket policy:", "chunk_id": "Final IC 38 -IMF_Composite -English_171", "metadata": {"file_size": 20962, "chunk_index": 171, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Jewelers’ Block Policy", "Bankers Indemnity Insurance", "Sum insured", "Test Yourself 5"]}}
{"chunk": "d) Number of branches.**Test Yourself 6**Which of the below can be covered under a bankers indemnity insurance policy?I. Money securities lost or damaged whilst within the premises due to fire\nII. Forgery or alteration of cheques\nIII. Dishonesty of employees with reference to money\nIV. All of the above**G.** **Jewelers’ Block Policy**In recent years India has emerged as a leading centre in world trade for jewellery,\nespecially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in\nlarge quantity and moving them between different premises.**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are\nallowed to avail of other sections at their option. It is also the market practice to\ninclude some more sections to cover other assets like Electronic equipment, Plate\nglass, Signage etc. and liabilities like Employees Compensation, Infidelity of\nemployees.Fidelity guarantee cover should also be taken by the insured for full protection if\nthere is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for\neach section with discounts for exclusive round the clock watchman, close circuit\nTV/ alarm system, exclusive strong room and for any other safety expedient etc.**Test Yourself 7**In case of a Jeweller’s Block Policy, there are traditionally multiple sections, of\nwhich one is usually compulsory while the remaining sections are ____________.I. Mandatory\nII. Retrospective\nIII. Optional\nIV. Compensatory329**H.** **Engineering Insurance**Engineering insurance is a branch of general insurance that developed parallel\nwith the growth of fire insurance. Its origins can be traced to the development of\nindustrialization, which highlighted the need for a separate cover for plant and\nmachinery. Concept of **All Risks** cover was also developed with regard to\nengineering projects - covering damage due to any cause except those specifically\nexcluded. The products covered various stages – from construction to testing till\nthe plant became operational. The customers for this insurance are both large\nand small industrial units. This also includes units having electronic equipment\nand contractors doing big projects. There are two types of engineering insurance\npolicies:1) Annual Policies-Generally of one year duration\na. Machinery Breakdown Policy\nb. Boiler Pressure Plant policy\nc. Electronic Equipment Policy\nd. Contractor’s Plant & Machinery Policy\ne. Deterioration of Stock Policy\nf. Civil Engineering Completed Risk\n2) Project Policies with variable duration based on project period\na) Contractors All Risk Policy\nb) Erection All Risk PolicyThere are two “Consequential Loss” policies associated with Engineering Policies:a) Machinery Breakdown Loss of Profit Policy (MBLOP) taken with\nMachinery Breakdown Policy or with Boiler and Pressure Plant policy andb) Advance loss of Profit (ALOP) or Delay in Startup (DSU) Policy taken\nwith project policy.Let us briefly consider the policies:\n**A.** **Annual Policies****1.** **Machinery Breakdown Policy (MB):** This policy is suitable for every industrywhich operates on machines and for whom breakdown of plant and machinery\nis of serious consequence. This policy covers machines like generators,\ntransformer and other electrical, mechanical and lifting equipment.The policy covers unforeseen and sudden physical damage by mechanical or\nelectrical breakdown by any cause (subject to excepted risks) to the insured\nproperty:a) While it is at work or at rest.\nb) While being dismantled for cleaning or overhauling\nc) During cleaning or overhauling operations and during reassemblythereafter.\nd) When being shifted within the premise.330Premium is charged on the reinstatement/ replacement value of individual\nmachinery. The machine as a whole should be insured. Rates depend on the type\nof machine; the industry in which it is used and its value. Discounts are offered\nbased on factors such as stand-by facilities, spares available and claims\nexperience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plantand to surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for**\n**adequate**", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "y329", "section": "Test Yourself 6", "chunk_id": "Final IC 38 -IMF_Composite -English_172", "metadata": {"file_size": 20962, "chunk_index": 172, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 7", "Jewelers’ Block Policy", "Boiler and Pressure Plant Policy:", "All Risks", "Engineering Insurance"]}}
{"chunk": "electrical breakdown by any cause (subject to excepted risks) to the insured\nproperty:a) While it is at work or at rest.\nb) While being dismantled for cleaning or overhauling\nc) During cleaning or overhauling operations and during reassemblythereafter.\nd) When being shifted within the premise.330Premium is charged on the reinstatement/ replacement value of individual\nmachinery. The machine as a whole should be insured. Rates depend on the type\nof machine; the industry in which it is used and its value. Discounts are offered\nbased on factors such as stand-by facilities, spares available and claims\nexperience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plantand to surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for**\n**adequate**\n**cover, both the policies need to be taken. Sum insured under all Engineering**\n**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronicequipment, which includes the entire computer system consisting of CPU,\nkeyboards, monitors, printers, UPS, system software etc. Auxiliary equipment\nsuch as air-conditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and\nburglary policy. The policy covers the contingencies such as defective design (not\ncovered under a warranty), effects of natural phenomena; defective functioning\ndue to voltage fluctuations, impact shock etc., burglary, housebreaking & theft\nare also covered.The policy is available to the owner, lessor or hirer, depending upon the\nresponsibility or liability in each case. It has usually three sections that cover\nvarious types of losses:**a)** **Section 1:** Loss and damage to equipment\n**b)** **Section 2:** Loss and damage to external data media like computer externalhard disks\n**c)** **Section 3:** Increased cost of working - to ensure continued data processingon substitute equipment up to 12, 26, 40 or 52 weeks.**4.** **Contractors Plant & Machinery (CPM) Policy:** Suitable for contractorsinvolved in construction business for covering all kinds of machinery like\ncranes, excavators from unforeseen and sudden physical loss or damage from\nany cause including:a) Burglary, Theft, Riot, Storm, Malicious Damage, Tempest331b) Fire and lightning, external explosion, earthquake and other Acts of Godperils\nc) Accidental damage while at work due to faulty manhandling, dropping orfalling, collapse, collision and impact; can be extended for third party\ndamage.The Premium to be charged depends on the type of equipment and the\nlocation at which it operates.**The cover is operative whilst the equipment is at work or at rest or being**\n**dismantled for cleaning or overhauling or re-assembling thereafter. The**\n**cover also applies while the same are lying at contractors own premises.**\n**However floater policy covering the equipment “Anywhere in India basis”**\n**is also available by charging 10% extra premium and with certain**\n**conditions.****5.** **Deterioration of Stock Policy:** This policy is suitable for the owner of the coldstorage (individual or a cooperative society) or those who take the cold\nstorage on lease or hire for storage of perishable commodities. The cover is\nagainst the risk of deterioration and contamination following breakdown of\nthe refrigeration plant and machinery and also due to rise in temperature and\nsudden and unforeseen escape of refrigerants into the cold storage rooms.**6.** **Civil Engineering Completed Risk:** It is generally taken by contractors whohas to maintain the civil projects after completion. The civil projects like –\nBridges, Dry docks, Harbours, Jetties Railway lines, Rock Filled dams,\nConcrete dams, Earthen dams, Canals, Irrigation system are considered under\nthis policy. Risks covered are –\n1. Fire\n2. Lightning\n3. Explosion/ Implosion\n4. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "t331", "section": "Boiler and Pressure Plant Policy:", "chunk_id": "Final IC 38 -IMF_Composite -English_173", "metadata": {"file_size": 20962, "chunk_index": 173, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Boiler and Pressure Plant Policy:", "Section 1:", "Civil Engineering Completed Risk:", "Contractors Plant & Machinery (CPM) Policy:", "Section 3:"]}}
{"chunk": "storage on lease or hire for storage of perishable commodities. The cover is\nagainst the risk of deterioration and contamination following breakdown of\nthe refrigeration plant and machinery and also due to rise in temperature and\nsudden and unforeseen escape of refrigerants into the cold storage rooms.**6.** **Civil Engineering Completed Risk:** It is generally taken by contractors whohas to maintain the civil projects after completion. The civil projects like –\nBridges, Dry docks, Harbours, Jetties Railway lines, Rock Filled dams,\nConcrete dams, Earthen dams, Canals, Irrigation system are considered under\nthis policy. Risks covered are –\n1. Fire\n2. Lightning\n3. Explosion/ Implosion\n4. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami\n9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be\non an annual basis.\n**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small\nbuildings to massive dams, buildings, bridges, tunnels, etc. The policy\nprovides an “All Risk” cover – thus providing indemnity against any sudden and332unforeseen loss or damage that occurs to property insured at the construction\nsite. This can be extended to cover third party liability and other exposures.\nPremium chargeable depends on the nature of the project, the project cost,\nthe project period, geographic location and the period of testing.**2.** **Erection All Risks (EAR) Policy:** This policy is also known as Storage-cum\nErection (SCE) policy. It is suitable for the principal or contractors of a project\nwhereas plant and machinery is being erected as it is exposed to various\nexternal risks. This is a comprehensive insurance policy that covers any sort\nof contingency right from the moment the materials are unloaded at the\nproject site and continues during the entire project period until the project\nis tested, commissioned and handed over.Premium chargeable depends on the nature of the project, the cost, the\nproject period, geographic location, and the period of testing.**If required a marine cover can be issued along with the erection policy for**\n**providing coverage to the equipment and materials during the transit**\n**phase till delivered at the project site.****C.** **Consequential Loss Policies**These type of policies are issued to cover losses consequential to other losses.\nThese are also called ‘Business Interruption’ policies or ‘Loss of Profits’ policies.\n**3.** **Machinery Loss of Profits (MLOP) Policy**This policy is suitable for industries where interruptions or delays as a result of\nmachinery breakdown or boiler explosion result in huge consequential losses.Where the time lag between the breakdown or loss and the restoration is large,\nthis policy compensates for the loss of profits during the intervening period due\nto reduction in turnover and increase in cost of working. The terms and conditions\nand coverage of business interruption policy is the same as the business\ninterruption policy following a fire policy loss, which has been discussed earlier\nin this chapter.**4.** **Advance Loss of Profit Cover (ALOP) or Delay in Start-up Policy (D.S.U.)**This covers financial consequences of a project being delayed because of\naccidental damages during the project. It is suitable for the insured who is\ndeprived of the anticipated earning and for the financial institutions to the extent\nof their interest in the project. It is issued as an extension to the MCE/ EAR/ CAR\nPolicy before the actual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated333net profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are\nalso critical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d332", "section": "Civil Engineering Completed Risk:", "chunk_id": "Final IC 38 -IMF_Composite -English_174", "metadata": {"file_size": 20962, "chunk_index": 174, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Project Policies", "Test Yourself 8", "Erection All Risks (EAR) Policy:", "Civil Engineering Completed Risk:", "Contractors All Risks (C.A.R.) Policy:"]}}
{"chunk": "accidental damages during the project. It is suitable for the insured who is\ndeprived of the anticipated earning and for the financial institutions to the extent\nof their interest in the project. It is issued as an extension to the MCE/ EAR/ CAR\nPolicy before the actual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated333net profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are\nalso critical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both\nmanufacturing and storage facilities, anywhere in India under one policy. It\nprovides indemnification against material damage and business interruption.\nUsually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,\nii. Burglary (except larceny)\niii. Machinery breakdown/ boiler explosion/ electronic equipment\niv. Business interruption following operation of perils mentioned above(Note: Business interruption following perils under (iii) above is usually not\nincluded in the package cover but available as optional cover) The policy offers widest range of cover compared to that provided byindividual operational policies.\n Premium rates for the policy depend on the cover opted, claimsexperience, and deductibles opted, risk assessment report for MLOP etc.**Test Yourself 9**Which of the following is not covered under Industrial All Risks insurance?I. Fire and special perils as per fire insurance practice\nII. Larceny\nIII. Machinery breakdown\nIV. Electronic equipment334**J.** **Marine Insurance**Marine insurance is classified into two types: marine cargo and marine hull**1.** **Marine Cargo Insurance**Though the term ‘marine’ may indicate only losses due to sea (marine)\nmisadventures, **marine cargo insurance** covers much more. It provides indemnity\nin respect of loss of or damage to goods during transit by rail, road, sea, air or\nregistered post, within the country as well as abroad. Type of goods may range\nfrom diamonds to household goods, bulk items like cement, grains, over\ndimensional cargoes for projects etc.Cargo insurance plays an important role in domestic trade as well as in\ninternational trade. Most contracts of sale require that the goods must be\ncovered, either by the seller or the buyer, against loss or damage.**Who effects the insurance:** The seller or the buyer of the goods [consignment]\nmay insure the cargo depending upon the contract of sale.Marine insurance contract needs to have provisions that apply internationally.\nThis is because it covers goods that are in transit beyond any country’s borders.\nThe covers are accordingly governed by international conventions and certain\nclauses attached to the policy.While the basic policy document contains general conditions, the scope of cover\nand exceptions and special exclusions are attached by separate clauses known as\nInstitute cargo Clauses (ICC). These are drafted by the Institute of London\nUnderwriters.**a)** **Coverage under Marine Cargo Insurance**\nCargo policies are essentially voyage policies, i.e. they cover the subject matter\nwhilst in transit from one place to another. However, the insured is required to\nalways act with reasonable care in all circumstances within his control. The main\nfeature of this policy is that it's an Agreed Value Policy. The valuation is agreed\nbetween the insurer and insured and is not subject to revaluation later unless\nfraud is suspected. The convention for the Sum Insured is CIF + 10% (Cost\nInsurance & Freight + 10%). Another unique feature is that the policy is freely\nassignable.The cover normally commences from the time the goods leave the warehouse at\nthe place named in the policy and terminates at the destination named in the\npolicy, depending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit335ii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due\nto accident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "d333", "section": "Test Yourself 8", "chunk_id": "Final IC 38 -IMF_Composite -English_175", "metadata": {"file_size": 20962, "chunk_index": 175, "chunk_tokens": 1009, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 8", "Coverage under Marine Cargo Insurance", "Marine Insurance", "Test Yourself 9", "Industrial All Risks Insurance"]}}
{"chunk": "whilst in transit from one place to another. However, the insured is required to\nalways act with reasonable care in all circumstances within his control. The main\nfeature of this policy is that it's an Agreed Value Policy. The valuation is agreed\nbetween the insurer and insured and is not subject to revaluation later unless\nfraud is suspected. The convention for the Sum Insured is CIF + 10% (Cost\nInsurance & Freight + 10%). Another unique feature is that the policy is freely\nassignable.The cover normally commences from the time the goods leave the warehouse at\nthe place named in the policy and terminates at the destination named in the\npolicy, depending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit335ii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due\nto accident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle\niii. Stranding, grounding or sinking of the vessel (in case of ship)\niv. Collision with an external object\nv. Discharge of cargo at a port of distress\nvi. General average sacrifice\nvii. Jettison.Institute Cargo Clause B is wider than C. Apart from the perils covered in C it also\ncovers loss or damage due to:i. Act of God (AOG) perils like earthquake, volcanic eruption and lightning\nii. Collapse of bridges in Inland transit\niii. Washing overboard and sling loss in case of ocean transit\niv. Entry of water into the vessel.Institute Cargo Clause A is the widest cover as it covers all perils of B and C and\nloss or damage due to any other risk except some exclusion specified such as:i. Loss or damage due to wilful conduct of the insured\nii. Ordinary leakage, breakage, wear and tear or ordinary loss in weight/volume\niii. Insufficiency in packing\niv. Inherent vice\nv. Delays\nvi. Loss due to insolvency of owners\nvii. Nuclear perilsThese exclusions are common to all clauses of inland, air and sea. There are\nseparate clauses also for trading of specific commodities like coal, bulk oil and\ntea etc. Marine cover can be extended by paying additional premium to cover\nWar, Strikes, Riots, Civil Commotion and Terrorism. Marine and Aviation policies\nare the only branches of insurance that offer cover against War perils.**Important**Risks covered under a marine policy, under the standard policy form and under\nthe various clauses attached to the policy broadly fall into three categories:i. Marine perils,\nii. Extraneous perils and\niii. War, strike riot, civil commotion and terrorism risks.336**b)** **Different types of marine policies****i.** **Specific Policy**This policy covers a single shipment. It is valid for the particular voyage\nor transit. Merchants who are engaged in regular import and export trade\nor who are sending consignments regularly by inland transit would find it\nconvenient to arrange insurances under special arrangements like the\nopen policy.**ii.** **Open Policy**The carriage of goods within the country can be covered under an open\npolicy. The policy is valid for one year and all consignments during this\nperiod have to be declared by the insured to the insurer as agreed between\nthem on a fortnightly, monthly or quarterly basis.**iii.** **Open Cover**The open cover is a contract for a year giving the Insured continuous\nprotection to cover a large number of shipments/ despatches. The\npremium on the consignments would be adjusted from the respective cash\ndeposit account maintained by the Insured. Open covers are issued to\nlarge exporters and importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for\ntransactions of marine dispatches for one-year. The open cover is not a\npolicy and it is not stamped. A certificate of insurance is issued for each\ndeclaration duly stamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is\nincreased due to payment of customs duty or increase in the market value\nof the goods at the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "t335", "section": "Important", "chunk_id": "Final IC 38 -IMF_Composite -English_176", "metadata": {"file_size": 20962, "chunk_index": 176, "chunk_tokens": 990, "has_examples": false, "has_tables": false, "key_concepts": ["Duty and increased value insurance", "Specific Policy", "Open Policy", "Different types of marine policies", "Important"]}}
{"chunk": "period have to be declared by the insured to the insurer as agreed between\nthem on a fortnightly, monthly or quarterly basis.**iii.** **Open Cover**The open cover is a contract for a year giving the Insured continuous\nprotection to cover a large number of shipments/ despatches. The\npremium on the consignments would be adjusted from the respective cash\ndeposit account maintained by the Insured. Open covers are issued to\nlarge exporters and importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for\ntransactions of marine dispatches for one-year. The open cover is not a\npolicy and it is not stamped. A certificate of insurance is issued for each\ndeclaration duly stamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is\nincreased due to payment of customs duty or increase in the market value\nof the goods at the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across\ndifferent countries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**\n**b)** **Covering a period of time: Usually one year. The set of clauses used****here are called Institute (Time) Clauses**\n**c)** War risks are governed by special regulations and the premiums collectedwill be credited to the Central Government.**Information**Hull insurance also includes the following insurances:i. Inland vessels such as barges, launches, passenger vessels etc.\nii. Dredgers (Mechanized or non-mechanized)\niii. Fishing Vessels (Mechanized or non-mechanized)\niv. Sailing Vessels (Mechanized or non-mechanized)337v. Jetties and Wharvesvi. Vessels in the course of construction**The ship owner has insurable interest not only in the ship, but also in the**\n**freight to** be earned during the period of insurance. In addition to freight the ship\nowner has insurable interest in the amount spent by him in fitting out the vessel,\nincluding provisions and stores. **These expenses are termed disbursements and**\n**are insured concurrently with the hull policy for a period of time.****Important****Aviation insurance:** A comprehensive policy is also available for aircraft which\ncovers loss or damage to the aircraft as also the legal liability to third parties and\nto passengers arising out of the operation of the aircraft.**Test Yourself 10**Which branch of insurance offers cover against war perils?I. Marine policies\nII. Aviation policies\nIII. Both of the aboveIV. None of the above**K.** **Liability Policies**Accidents cannot be avoided altogether, however careful a person is. This could\nresult in injury to oneself and damage to one’s property and also may\nsimultaneously cause injury to third parties and damage to their property. The\npersons thus affected would claim compensation for such loss.A liability could also arise from a defect in a product manufactured and sold, say\nchocolates or medicines, causing harm to the consumer. Similarly, liability could\narise from wrong diagnosis/ treatment of a patient or from a case improperly\nhandled by a lawyer for his client.In all such cases, where a third party, consumer or the patient would demand\ncompensation for the alleged wrong doing, it would raise a need for payment of\ncompensation or meeting expenses involved in defending the suits filed by the\nclaimants. In other words there is a financial loss arising from a liability to pay.\nThe existence of such a liability and the amount of compensation to be paid would\nbe decided by a civil court which would go into the aspect of alleged negligence/\nfraud. Liability insurance policies provide coverage of such liabilities. Let us look\nat some of the liability policies.**Statutory liability**There are certain laws or statutes which provide for the payment of\ncompensation. The laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010\nInsurance policies are available for protection in respect of such liabilities. Let\nus look at some of them.3381. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Open Cover", "chunk_id": "Final IC 38 -IMF_Composite -English_177", "metadata": {"file_size": 20962, "chunk_index": 177, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Duty and increased value insurance", "Test Yourself 10", "Information", "Institute Voyage Clauses", "Important"]}}
{"chunk": "compensation or meeting expenses involved in defending the suits filed by the\nclaimants. In other words there is a financial loss arising from a liability to pay.\nThe existence of such a liability and the amount of compensation to be paid would\nbe decided by a civil court which would go into the aspect of alleged negligence/\nfraud. Liability insurance policies provide coverage of such liabilities. Let us look\nat some of the liability policies.**Statutory liability**There are certain laws or statutes which provide for the payment of\ncompensation. The laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010\nInsurance policies are available for protection in respect of such liabilities. Let\nus look at some of them.3381. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation\npayable per person is fixed as shown below.|Compensation payable|Col2|\n|---|---|\n|Fatal Accident|Rs. 25,000|\n|Permanent Total Disability|Rs. 25,000|\n|Permanent Partial Disability|% of Rs. 25,000 based on % of disability|\n|Temporary Partial Disablement|Rs. 1000 per month, maximum 3 months|\n|Actual Medical Expenses|Up to a maximum of Rs. 12,500|\n|Actual damage to property up to|Rs. 6,000|The premium is based on the AOA (Any One Accident) limit and the turnover of\nthe client. A special feature of this policy is that the insured has to pay\ncompulsorily an amount equal to the premium as contribution to Environment\nRelief Fund. If large numbers of third parties are affected and the total amount\nof relief payable exceeds A.O.A. limit, the balance amount will be paid by the\nfund.**2.** **Public Liability Policy (Industrial/ Non-industrial Risks)**This type of policy covers liability arising out of fault/ negligence of the insured\ncausing third party personal injury or property destruction [TPPI OR TPPD].There are separate policies covering industrial risks as well as non-industrial risks\nlike those affecting hotels, cinema halls, auditoriums, residential premises,\noffices, stadiums, godowns and shops. It covers the legal liability to pay\ncompensation including claimant’s costs, fees and expense according to Indian\nLaw, in respect of TPPI/ TPPD **.**The policy does not cover:a) Products liabilityb) Pollution liabilityc) Transportation andd) Injuries to workmen/ employees**3.** **Products Liability Policy**The demand for products liability insurance has arisen because of the wide variety\nof products (e.g. canned food stuff, aerated waters, medicines and injections,\nelectrical appliances, mechanical equipment, chemicals etc.) that are today\nmanufactured and sold to the public. If a defect in the product causes death,\nbodily injury or illness or even damage to the property of third parties, it could\ncause a claim to arise. Product liability policies cover this liability of the insured.339Cover is available for exports as well as domestic sales.4. **Lift (Third Party) Liability Insurance**The policy provides indemnity to owners of buildings in respect of liabilities\narising out of the use and operation of lifts. It covers legal liabilities for:a) Death/ bodily injury of any person (excluding employees of the insured)b) Damage to property (excluding insured’s own or employee’s property)The premium rates depend upon the limit of indemnity, any one person, any one\naccident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are\navailable for doctors hospitals; engineers, architects; chartered accountants,\nfinancial consultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility.\nThey may become liable to pay damages to shareholders, employees, creditors\nand other stakeholders of the company, for wrongful acts committed by them in\nthe supervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to\npay compensation to his employees who sustain personal injury by accident or", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "l2", "section": "Statutory liability", "chunk_id": "Final IC 38 -IMF_Composite -English_178", "metadata": {"file_size": 20962, "chunk_index": 178, "chunk_tokens": 1001, "has_examples": false, "has_tables": true, "key_concepts": ["Directors' and Officers' Liability Policy", "Lift (Third Party) Liability Insurance", "Statutory liability", "Employee’s Compensation Insurance", "Products Liability Policy"]}}
{"chunk": "accident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are\navailable for doctors hospitals; engineers, architects; chartered accountants,\nfinancial consultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility.\nThey may become liable to pay damages to shareholders, employees, creditors\nand other stakeholders of the company, for wrongful acts committed by them in\nthe supervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to\npay compensation to his employees who sustain personal injury by accident or\ndisease arising out of and in the course of his employment. This is also called\n**Workman’s Compensation Insurance.**Two forms of insurance are prevalent in the market:**a)** **Table A:** Indemnity against legal liability for accidents to employees underthe Employees Compensation Act, 1923, (Workman’s Compensation Act,\n1923), Fatal Accident Act, 1855 & Common Law.**b)** **Table B** : Indemnity against legal liability under Fatal Accidents Act, 1855and Common law.The premium rate is applied on the estimated wages of employees as declared in\nthe proposal form.The policy may be extended to cover:i. Medical and hospital expenses incurred by the insured for treatment ofemployee injuries, up to specific amountsii. Liability for occupational diseases listed in the Actiii. Liability towards employees of contractors340**Test Yourself 11**Under the Public Liability Insurance Act, 1991, how much is the compensation\npayable for actual medical expenses for non-fatal accidents?I. Rs. 6,250\nII. Rs, 12,500\nIII. Rs. 25,000\nIV. Rs. 50,000**Answers to Test Yourself****Answer 1** - The correct option is III.\n**Answer 2** - The correct option is I.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is I.\n**Answer 6** - The correct option is IV.\n**Answer 7** - The correct option is III.\n**Answer 8** - The correct option is II.\n**Answer 9** - The correct option is II.\n**Answer 10** - The correct option is III.\n**Answer 11** - The correct option is II.341## CHAPTER G-05 **GENERAL INSURANCE CLAIMS****Chapter Introduction**At the core of any insurance contract is the promise made at the beginning i.e.\nto indemnify the insured in the event of a loss. This chapter talks about the\nprocedures and documents involved, from the time loss takes place, making it\neasier to comprehend the entire process of claims settlement. It also explains the\nmethod of dealing with disputed claims either by insured or insurer.After studying this chapter, you should be able to:1. Argue the importance of claim settlement functions2. Describe the procedures for intimation of loss3. Appraise claim investigation and assessment4. Explain the importance of surveyors and loss assessors5. Illustrate the contents of claim forms6. Define claims adjustment and settlement342**A.** **Claims settlement process****1.** **Importance of settling claims**The most important function of an insurance company is to settle claims of\npolicyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble businessof insurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon\nas the possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early\nas possible after the loss.b) **Professionalism**The insurance officials consider each and every claim on its merits and do not", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "s340", "section": "Professional Liability", "chunk_id": "Final IC 38 -IMF_Composite -English_179", "metadata": {"file_size": 20962, "chunk_index": 179, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 11", "Answer 10", "Answer 6", "Answer 5", "Answer 7"]}}
{"chunk": "policyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble businessof insurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon\nas the possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early\nas possible after the loss.b) **Professionalism**The insurance officials consider each and every claim on its merits and do not\napply prejudicial or pre-conceived notions to reject the claim without\nexamining all the documents that would answer the following questions.i. Did the loss really happen?ii. If so, did the loss making event really cause the damage?iii. The extent of damage out of this event.iv. What was the reason for the loss?v. Was the loss covered under the policy?vi. Is the claim payable as per the contract/ policy conditions?vii. If so, how much is payable?The answers to all these questions need to be found out by the insurancecompany.Processing claims is an important activity. All claims forms, procedures and\nprocesses have been carefully designed by the company to ensure that all claims\n‘payable’ under the policy are promptly paid and those that are not payable are\nnot paid.343The agent, being the representative of the company known to the insured, has to\nensure that all the relevant forms are properly filled up with correct information,\nall documents evidencing the loss are attached and all prescribed procedures are\nfollowed in a timely manner and duly submitted to the company. The role of the\nagent at the time of loss has already been discussed earlier.2. **Intimation or Notice of Loss**Policy conditions provide that the loss be intimated to the insurer immediately.\nThe purpose of an immediate notice is to allow the insurer to investigate a loss\nat its early stages. Delays may result in loss of valuable information relating to\nthe loss. It would also enable the insurer to suggest measures to minimise the loss\nand to take steps to protect salvage. The notice of loss is to be given as soon as\nreasonably possible.After this initial check/ scrutiny, the claim is allotted a number and entered in\nthe claims register, with details like policy number, name of insured, estimate of\namount of loss, date of loss, the claim is now ready to be processed.**Under certain types of policies (e.g. Burglary) notice is also to be given to**\n**police authorities. Under cargo rail transit policies, notice has to be served on**\n**the Railways.**3. **Investigation and assessment****a)** **Overview**On receipt of the claim form, from the insured, the insurers decide about\ninvestigation and assessment of the loss. If the claim amount is small, the\ninvestigation to determine the cause and extent of loss is done, by an officer ofthe insurers.**The investigation** of other claims is entrusted to independent licensed\nprofessional surveyors who are specialists in loss assessment. The assessment of\nloss by independent surveyors is based on the principle that since both the\ninsurers and insured are interested parties, the unbiased opinion of an\nindependent professional person should be acceptable to both the parties as well\nas to a court of law in the event of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with\nsupporting documents. Where necessary Police report/ fire Brigade report,\nInvestigator’s report are also obtained. For personal accident claims, the insured\nis required to submit a report from the attending doctor specifying the cause of\naccident or the nature of illness as the case may be, and the duration ofdisablement.344Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": null, "section": "Settling claims professionally is regarded the biggest advertisement for an", "chunk_id": "Final IC 38 -IMF_Composite -English_180", "metadata": {"file_size": 20962, "chunk_index": 180, "chunk_tokens": 946, "has_examples": true, "has_tables": false, "key_concepts": ["Professionalism", "Overview", "Investigation and assessment", "Promptness", "Intimation or Notice of Loss"]}}
{"chunk": "investigation to determine the cause and extent of loss is done, by an officer ofthe insurers.**The investigation** of other claims is entrusted to independent licensed\nprofessional surveyors who are specialists in loss assessment. The assessment of\nloss by independent surveyors is based on the principle that since both the\ninsurers and insured are interested parties, the unbiased opinion of an\nindependent professional person should be acceptable to both the parties as well\nas to a court of law in the event of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with\nsupporting documents. Where necessary Police report/ fire Brigade report,\nInvestigator’s report are also obtained. For personal accident claims, the insured\nis required to submit a report from the attending doctor specifying the cause of\naccident or the nature of illness as the case may be, and the duration ofdisablement.344Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of\nthe report of a veterinary doctor.**Information**On receipt of intimation of loss or damage insurers check whether:1. The insurance policy is in force on the date of occurrence of the loss ordamage2. The loss or damage is caused by an insured peril3. The property (subject matter of insurance) affected by the loss is the sameas insured under the policy4. Notice of loss has been received without delay.Motor third party claims involving death and personal injuries are assessed on the\nbasis of doctor’s report. These claims are dealt by Motor Accident Claims Tribunal\nand the amount to be paid is decided by factors like the age and income of theclaimant.Claims involving third party property damage are assessed on the basis of a surveyreport. Motor own damage claim is assessed on the basis of surveyors report. It may require police report if third party damage is involved.**Information**Investigation is different from the assessment of loss. Investigation is done to\nensure that a valid claim has been made and verify the important details and\ndoubts like absence of insurable interest, suppression or misrepresentation of\nmaterial facts, deliberately creating the loss, etc. are ruled out.Insurance surveyors undertake the work of investigation also. It helps if a surveyor\ngets on to the job as early as possible. Therefore, the practice is to appoint the\nsurveyor, as soon as possible after the intimation of the claim is received.**B.** **Role of Surveyors and Loss Assessors****a)** **Surveyors**Surveyors are professionals licensed by IRDAI. They are experts in inspecting and\nevaluating losses in specific areas. Surveyors are generally paid fees by the\ninsurance company, engaging them. Surveyors and loss assessors are hired by\ngeneral insurance companies normally, at the time of a claim. They inspect the\nproperty in question, examine and verify the causes and circumstances of the\nloss. They also estimate the quantum of the loss and submit reports to the\ninsurance company.345They also advise insurers, regarding appropriate measures to prevent further\nlosses. Surveyors are governed by provisions of the Insurance Act, 1938,\nInsurance Rules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open\nCover’ for exports, are assessed by the claims settling agents abroad named in\nthe policy. These agents may assess the loss and make payment, which is\nreimbursed by the insurers along with their settling fees. Alternatively, all the\nclaims papers are collected by the insurance claim settling agents and submitted\nto the insurers, along with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons\n(not being a person disqualified for the time being for being employed as a\nsurveyor or loss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e2", "section": "The investigation", "chunk_id": "Final IC 38 -IMF_Composite -English_181", "metadata": {"file_size": 20962, "chunk_index": 181, "chunk_tokens": 937, "has_examples": false, "has_tables": false, "key_concepts": ["Surveyors", "Information", "Section 64 UM of Insurance Act", "Important", "Role of Surveyors and Loss Assessors"]}}
{"chunk": "Insurance Rules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open\nCover’ for exports, are assessed by the claims settling agents abroad named in\nthe policy. These agents may assess the loss and make payment, which is\nreimbursed by the insurers along with their settling fees. Alternatively, all the\nclaims papers are collected by the insurance claim settling agents and submitted\nto the insurers, along with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons\n(not being a person disqualified for the time being for being employed as a\nsurveyor or loss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other\nquestions vary from one class of insurance to another.**Example**An example of information sought in a fire claim form is given here under:i. Name of the insured, policy number and addressii. Date, time, cause and circumstances of the fireiii. Details of damaged propertyiv. Sound value of the property at the time of fire. Where the insurance consistsof several items under which the claim is made. [The claim must be based on\nactual value of property at the place and time of occurrence after allowance\nfor depreciation, wear and tear (unless the policy in respect of building, plant\nand machinery is on “reinstatement value” basis). It shall not include profit]v. Amount claimed after deduction of salvage valuevi. Situation and occupancy of the premises in which the fire occurredvii. Capacity in which the insured claims, whether as owner, mortgage or the likeviii. If any other person is interested in the property damagedix. If any other insurance is in force upon such property if so, details thereof346This is followed by the declaration as to the truth and accuracy of the statement\nof in the form and signature of the insured and the date.The issuance of claim form by the insurance company does not imply or mean\nthat liability for the claim is admitted by insurers. Claim forms are issued with\nthe remark ‘without prejudice’.**Supporting documents**In addition to the claim form, certain documents are required to be submitted by\nthe claimant or secured by the insurers to substantiate the claim.i. For fire claims, a report from the Fire Brigade would be necessary.ii. For cyclone damage, a report from the Meteorological office may be calledforiii. In burglary claims, a report from the Police may be necessary.iv. For fatal accident claims, reports may be necessary from the Coroner and thePolice.v. For motor claims, the insurer may like to examine driving license, registrationbook, police report etc.vi. In marine cargo claims, the nature of documents varies according to the typeof loss i.e. total loss, particular average, inland or overseas transit claims etc.**Test Yourself 1**Which of the following activities is not considered as professional in settlementof claims?I. Seeking information relating to the cause of the lossII. Approaching the claim with a prejudiceIII. Ascertaining whether the loss was a result of an insured perilIV. Quantifying the amount payable under the claim**Test Yourself 2**Raj is involved in a car accident. His car is insured under a motor insurance\ncomprehensive policy. Which among the following is most appropriate for Raj todo?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage347**Test Yourself 3**Which of the following statements about claims investigation and claimsassessment is correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether\nthere was any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the lossIV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "f346", "section": "Important", "chunk_id": "Final IC 38 -IMF_Composite -English_182", "metadata": {"file_size": 20962, "chunk_index": 182, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Test Yourself 4", "Example", "Section 64 UM of Insurance Act", "Test Yourself 5"]}}
{"chunk": "comprehensive policy. Which among the following is most appropriate for Raj todo?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage347**Test Yourself 3**Which of the following statements about claims investigation and claimsassessment is correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether\nthere was any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the lossIV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while\nexamining a cyclone damage claim?I. Coroner’s reportII. Report from Fire BrigadeIII. Police reportIV. Report from Meteorological Department**Test Yourself 6**Under which principle can the insurer assume the rights of the insured in order to\nrecover from a third party the loss paid under a policy?I. ContributionII. DischargeIII. SubrogationIV. Indemnity348**Test Yourself 7**If the insurer decides that a certain loss is not payable because it is not covered\nunder the policy then who decides on such matters?I. Insurer’s decision is finalII. UmpireIII. ArbitratorIV. Court of Law**Summary**a) Settling claims professionally is regarded as the biggest advertisement for aninsurance company.b) Policy conditions provide that the loss be intimated to the insurerimmediately.c) If the claim amount is small, the investigation to determine the cause andextent of loss is done by an officer of the insurer. But for other claims it is\nentrusted to independent licensed professional surveyors who are specialistsin loss assessment.d) In general the claim form is designed to get full information regarding thecircumstances of the loss, such as date of loss, time, cause of loss, extent of\nloss, etc.e) Claims assessment is the process of determining whether the cause of the losssuffered by the insured was caused by an insured peril and whether there was\nany breach of warranty. The quantum of loss suffered by the insured and the\ninsurer’s liability under the policy are assessed. This is done before paymentof the claim.f) Settlement of the claim is made only after obtaining a discharge under thepolicy.**Key terms**a) Intimation of lossb) Investigation and Assessmentc) Surveyors and Loss Assessorsd) Claim formse) Adjustment and Settlement349**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is I.**Answer 3** - The correct option is II.**Answer 4** - The correct option is III.**Answer 5** - The correct option is IV.**Answer 6** - The correct option is III.**Answer 7** - The correct option is IV.350## SECTION## ANNEXURES351## CHAPTER A-01## ANNEXURESThese annexures are provided so that the students get a better idea of proposal\nforms used in general insurance.352353**Proposal Forms of Bharat Griha Raksha, Bharat Sookshma & Bharat Laghu**\n**Udyam**For a better understanding of standard products and their respective proposal\nforms, i.e. Bharat Griha Raksha, Bharat Sookshma and Bharat Laghu Udyam,\nplease check the following link to the IRDAI website.https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/StandardProducts/Ann\nexure-I-BharatGrihaRaksha.pdf354", "source_file": "Final IC 38 -IMF_Composite -English.md", "chapter": "e347", "section": "ANNEXURESThese annexures are provided so that the students get a better idea of proposal", "chunk_id": "Final IC 38 -IMF_Composite -English_183", "metadata": {"file_size": 20962, "chunk_index": 183, "chunk_tokens": 858, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 7", "Answer 2", "Answer 7", "Udyam"]}}
{"chunk": "## IC - 38 **CORPORATE AGENTS** **SECTION-COMMON****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## CORPORATE AGENTS **SECTION-COMMON** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nCorporate Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**COMMON CHAPTERS **|**COMMON CHAPTERS **|\n|C-01|Introduction to Insurance|2|\n|C-02|Core Elements of Insurance|18|\n|C-03|Principles of Insurance|27|\n|C-04|Features of Insurance Contracts|40|\n|C-05|Underwriting and Rating|48|\n|C-06|Claims Processing|56|\n|C-07|Documentation|63|\n|C-08|Customer Service|72|\n|C-09|Grievance Redressal Mechanism|87|\n|C-10|Regulatory Aspects for Corporate Agents<br>|95|iv## SECTION **AN OVERVIEW**1## CHAPTER C-01## INTRODUCTION TO INSURANCE**Chapter Introduction**This chapter aims to introduce the basics of insurance, trace its evolution and how\nit works. It intends to teach how insurance provides protection against economic", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "C-46", "section": "CORPORATE AGENTS", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_000", "metadata": {"file_size": 7099, "chunk_index": 0, "chunk_tokens": 874, "has_examples": false, "has_tables": true, "key_concepts": ["IC - 38", "SECTION-COMMON", "Chapter Introduction", "India, Mumbai.", "COMMON CHAPTERS"]}}
{"chunk": "wishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**COMMON CHAPTERS **|**COMMON CHAPTERS **|\n|C-01|Introduction to Insurance|2|\n|C-02|Core Elements of Insurance|18|\n|C-03|Principles of Insurance|27|\n|C-04|Features of Insurance Contracts|40|\n|C-05|Underwriting and Rating|48|\n|C-06|Claims Processing|56|\n|C-07|Documentation|63|\n|C-08|Customer Service|72|\n|C-09|Grievance Redressal Mechanism|87|\n|C-10|Regulatory Aspects for Corporate Agents<br>|95|iv## SECTION **AN OVERVIEW**1## CHAPTER C-01## INTRODUCTION TO INSURANCE**Chapter Introduction**This chapter aims to introduce the basics of insurance, trace its evolution and how\nit works. It intends to teach how insurance provides protection against economic\nlosses arising as a result of unforeseen events and serves as an instrument of risktransfer.2**A.** **Insurance – History and Evolution**We live in a world of uncertainty. We hear about: Trains colliding Floods destroying entire communities Earthquakes destroying buildings Young people dying unexpectedly**Diagram 1:** **Events happening around us**Why do these events make people anxious and afraid?The reason is simple.**i.** Firstly these **events are unpredictable.** If one can anticipate and predict anevent, one can prepare for it.**ii.** Secondly, such unpredictable and untoward events are often a **cause of****economic loss and grief** .The people around can come to the aid of individuals who are affected by such\nevents, by having a system of sharing and mutual support. The idea of insurance is\nthousands of years old. Yet, the present form of insurance, is only two or threecenturies old.**1.** **History of insurance**Insurance has existed in some form or other since 3000 BC. Many civilisations, have\npracticed the concept of pooling and sharing among themselves, all the losses\nsuffered by some members of the community. Let us take a look at some of the\nways in which this concept was applied.3**2.** **Insurance through the ages – Some instances**|Bottomry Loans|Traders of Babylon paid extra money to their lenders to write off<br>their loans if shipment was lost or stolen.<br>Traders of Bharuch and Surat also had similar practices.|\n|---|---|\n|**Benevolent**<br>**Societies/**<br>**Friendly**<br>**Societies**|Greeks of 7th Cy. AD, used to pay in advance to take care of the<br>family of members who died and also the funeral expenses of the<br>member.<br>Similar practices were followed in England as well.|\n|**Rhodes**|Traders of Rhodes who were sending goods by sea, were sharing<br>losses if any of them lost their goods due to jettison1.|\n|**Chinese Traders**|**Chinese traders**in ancient days used to send their goods in<br>different ships, so that even if some boats sank, their loss would be<br>partial.|**3.** **Modern concepts of insurance**In India the principle of life insurance was reflected in the joint-family system.\nLosses arising from the demise of a member were shared by various family\nmembers so that each member of the family continued to feel secure.The break-up of the joint family system and emergence of the nuclear family in\nthe modern era, coupled with the stress of daily life has made it necessary to\nevolve alternative systems for security. This highlights the importance of lifeinsurance to an individual.**i.** **Lloyds** : The origins of modern commercial insurance started at Lloyd’sCoffee House in London, where traders agreed to share losses they suffered\ndue to various perils at sea.**ii.** **Amicable Society for a Perpetual Assurance** founded in 1706 in London isconsidered to be the first life insurance company in the world.**4.** **History of insurance in India****a)** **India** : Modern insurance in India began in early 1800 or thereabouts, with\nagencies of foreign insurers starting marine insurance business.|The Oriental Life<br>Insurance Co. Ltd|The first life insurance company to be set up in India<br>was an English company|\n|---|---|", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "C-01", "section": "CONTENTS|Chapter no.|Title|Page no.|", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_001", "metadata": {"file_size": 7099, "chunk_index": 1, "chunk_tokens": 993, "has_examples": true, "has_tables": true, "key_concepts": ["Rhodes", "AN OVERVIEW", "COMMON CHAPTERS", "Modern concepts of insurance", "Societies/"]}}
{"chunk": "Losses arising from the demise of a member were shared by various family\nmembers so that each member of the family continued to feel secure.The break-up of the joint family system and emergence of the nuclear family in\nthe modern era, coupled with the stress of daily life has made it necessary to\nevolve alternative systems for security. This highlights the importance of lifeinsurance to an individual.**i.** **Lloyds** : The origins of modern commercial insurance started at Lloyd’sCoffee House in London, where traders agreed to share losses they suffered\ndue to various perils at sea.**ii.** **Amicable Society for a Perpetual Assurance** founded in 1706 in London isconsidered to be the first life insurance company in the world.**4.** **History of insurance in India****a)** **India** : Modern insurance in India began in early 1800 or thereabouts, with\nagencies of foreign insurers starting marine insurance business.|The Oriental Life<br>Insurance Co. Ltd|The first life insurance company to be set up in India<br>was an English company|\n|---|---|\n|**Triton Insurance Co. Ltd.**|The first non-life insurer to be established in India|\n|**Bombay Mutual**<br>**Assurance Society Ltd.**|The first Indian insurance company. It was formed<br>in 1870 in Mumbai|1 Jettison/ Jettisoning’ refers to throwing away some of the cargo to reduce the weight of the ship while at sea.4Many other Indian companies were set up subsequently as a result of the Swadeshi\nmovement at the turn of the century.**Important**a) The **Insurance Act 1938** was the first legislation to regulate the conduct ofinsurance companies in India. This Act, as amended from time to time continuesto be in force.b) Life insurance business was nationalised on 1st September 1956 and the **Life****Insurance Corporation of India (LIC)** was formed. From 1956 to 1999, the LIC\nheld exclusive rights to do life insurance business in India.c) In 1972, the non-life insurance business was also nationalised and the **General****Insurance Corporation of India (GIC) and its four subsidiaries** were set up.d) **The Malhotra Committee, in its report submitted in 1994, recommended**opening of the market for competitione) The Insurance market was liberalised in 2000, with the passing of the InsuranceRegulatory & Development Act, 1999 (IRDAI), which also established the\nInsurance Regulatory and Development Authority of India (IRDAI) in April 2000 as\na statutory regulatory body for the insurance industry.f) An amendment of the Insurance Act in 2021, has allowed Foreign investors, tohold up to 74% of the paid up equity capital in an Indian Insurance company.\nForeign insurers can now establish branches in India to do reinsurance.**a.** **Insurance industry today (As on 30** **[th]** **September 2021)**a) There are 24 Life insurance companies operating in India. Of these, LifeInsurance Corporation (LIC) of India is a public sector company (PSU) and the\nremaining 23 life insurance companies are in the private sector.b) There are 34 General Insurance companies of which 4 - National InsuranceCo. Ltd, The New India Assurance Co. Ltd., The Oriental Insurance Co. Ltd\nand United India Insurance Co. Ltd. are PSU Companies dealing with all lines\nof general insurance. 26 Private Companies also deal with all lines of general\ninsurance. 6General Insurers deal only in Health insurance. 2 are specialised\ninsurers - Agricultural Insurance Company [AIC] and Export Credit and\nGuarantees Corporation [ECGC], both set up as Public sector entities.c) There is one Reinsurance Company – The General Insurance Corporation ofIndia [GIC Re] and 11 foreign Reinsurers that operate through branch offices.5d) The Department of Posts (called as India Post) of the Government of India,also transacts life insurance known as Postal Life Insurance. India post is\nexempt from the purview of the Insurance Regulator.**Test Yourself 1**Which among the following is the regulatory body for the insurance industry in India?I. Insurance Authority of IndiaII. Insurance Regulatory and Development Authority of IndiaIII. Life Insurance Corporation of IndiaIV. General Insurance Corporation of India**How insurance works**Modern commerce was founded on the principle of ownership of property. When an\nasset loses value (by loss or destruction), the owner of the asset suffers an economic\nloss. This loss can be compensated from a common fund made up of small\ncontributions from many similar asset owners. This process of transferring the", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Lloyds", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_002", "metadata": {"file_size": 7099, "chunk_index": 2, "chunk_tokens": 1002, "has_examples": true, "has_tables": true, "key_concepts": ["Triton Insurance Co. Ltd.", "India", "Amicable Society for a Perpetual Assurance", "Assurance Society Ltd.", "Test Yourself 1"]}}
{"chunk": "insurance. 6General Insurers deal only in Health insurance. 2 are specialised\ninsurers - Agricultural Insurance Company [AIC] and Export Credit and\nGuarantees Corporation [ECGC], both set up as Public sector entities.c) There is one Reinsurance Company – The General Insurance Corporation ofIndia [GIC Re] and 11 foreign Reinsurers that operate through branch offices.5d) The Department of Posts (called as India Post) of the Government of India,also transacts life insurance known as Postal Life Insurance. India post is\nexempt from the purview of the Insurance Regulator.**Test Yourself 1**Which among the following is the regulatory body for the insurance industry in India?I. Insurance Authority of IndiaII. Insurance Regulatory and Development Authority of IndiaIII. Life Insurance Corporation of IndiaIV. General Insurance Corporation of India**How insurance works**Modern commerce was founded on the principle of ownership of property. When an\nasset loses value (by loss or destruction), the owner of the asset suffers an economic\nloss. This loss can be compensated from a common fund made up of small\ncontributions from many similar asset owners. This process of transferring the\nchance and consequence of a loss making event is insurance.This mechanism of pooling risks works differently in the case of death and disabilityas there is no loss/ destruction of a commercial asset.**Definition**Insurance may thus be considered as a process by which the losses of a few are\nshared amongst many of those exposed to similar uncertain events/ situations.**Diagram 2:** **How insurance works**There are however some questions that need to be answered.i. Would people agree to part with their hard earned money, to create such acommon fund?ii. How could they trust that their contributions are actually being used for thedesired purpose?6iii. How would they know if they are paying too much or too little?iv. Who would take the responsibility of managing these funds and paying thosewho suffer the loss?The need for an Insurer comes as an answer to all these questions. The Insurer\nassesses the risk, decides and collects the individual contributions (called premium),\npools the risks and premiums, and arranges to pay to those who suffer the loss. The\ninsurer must also win the trust of the individuals and the community.**1.** **Insurance is about value**a) Firstly, there must be an asset which has an economic value. The **Asset** may be:i. P **hysical** (like a car or a building) orii. N **on-physical** (like reputation, goodwill, liability to pay to someone) oriii. P **ersonal** (like one’s eyes, limbs, body and physical capabilities).b) The asset may lose its value if a certain event happens. This chance of loss iscalled as **risk** . The cause of the risk event is known as **peril** .c) There is a principle known as **pooling** . This consists of collecting numerousindividual contributions (known as premiums) from various persons. These\npersons have similar assets which are exposed to similar risks. Their assets are\nalso referred to as ‘risks’ in many contexts.d) This pool of funds is used to compensate the few who might suffer the lossescaused by a **peril** .e) This process of pooling funds and compensating the unfortunate few is carriedout through an institution known as the **insurer** (Insurance Company).f) The insurer enters into an insurance **contract** with each person who seeks toparticipate in this mechanism of pooling. The persons who participate are known\nas **insured.****2.** **Insurance reduces Risk Burden**The burden of risk refers to the costs, losses and disabilities one has to bear as a\nresult of being exposed to a given loss situation/ event.**Diagram 3:** **Risk burdens that one carries**There are two types of risk burdens that one carries – **primary and secondary** .7**a)** **Primary burden of risk**The **primary burden of risk** consists of losses that are actually suffered by\nhouseholds (and business units), as a result of pure risk events. These losses are\noften direct and measurable; and can be easily compensated for by insurance.**Example**When a factory gets destroyed by fire, the actual value of goods damaged or\ndestroyed can be estimated and the compensation can be paid to the owner of\nthe factory who has suffered the loss.Similarly, if an individual undergoes a heart surgery, the medical cost of the\nsame is known and compensated. In addition there may be some indirect losses.**Example**A fire may interrupt business operations and lead to loss of profits which also\ncan be estimated and the compensation can be paid to the one who suffers sucha loss.Someone whose scooter hits a pedestrian is liable to pay the victim the", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Test Yourself 1", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_003", "metadata": {"file_size": 7099, "chunk_index": 3, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Example", "Primary burden of risk", "Asset", "Insurance is about value"]}}
{"chunk": "result of being exposed to a given loss situation/ event.**Diagram 3:** **Risk burdens that one carries**There are two types of risk burdens that one carries – **primary and secondary** .7**a)** **Primary burden of risk**The **primary burden of risk** consists of losses that are actually suffered by\nhouseholds (and business units), as a result of pure risk events. These losses are\noften direct and measurable; and can be easily compensated for by insurance.**Example**When a factory gets destroyed by fire, the actual value of goods damaged or\ndestroyed can be estimated and the compensation can be paid to the owner of\nthe factory who has suffered the loss.Similarly, if an individual undergoes a heart surgery, the medical cost of the\nsame is known and compensated. In addition there may be some indirect losses.**Example**A fire may interrupt business operations and lead to loss of profits which also\ncan be estimated and the compensation can be paid to the one who suffers sucha loss.Someone whose scooter hits a pedestrian is liable to pay the victim the\ncompensation that the Court decides.**b)** **Secondary burden of risk**Even when no such event occurs and there is no loss, the people who are exposed\nto the peril carry some burden. That is, apart from the primary burden, one also\ncarries a secondary burden of risk.The **secondary burden of risk** consists of costs and strains that one has to bear,\neven if the said event does not occur, from the mere fact that one is exposedto a loss situation.Let us understand some of these burdens:i. Firstly there is **physical and mental strain caused by fear and anxiety** . This\ncan cause stress and affect a person’s wellbeing.ii. Secondly when one is **uncertain about whether a loss would occur or not**,it would be prudent to keep a reserve fund to meet such an eventuality.\nSuch funds may be held in liquid form and yield low returns.By transferring the risk to an insurer, it becomes possible to enjoy peace of mind\nand also invest one’s funds more effectively. It is precisely for these reasons thatinsurance is needed.In India, one must purchase third party insurance if he/ she owns a vehicle because\nit is mandatory if one wants to drive on a public road. At the same time it would be\nprudent to cover the possibility of loss of own damage to the car though it is not8mandatory. It is also compulsory to have a Personal Accident cover for the Owner\nDriver.**Test Yourself 2**Which among the following is a secondary burden of risk?\nI. Business interruption cost\nII. Goods damaged cost\nIII. Setting aside reserves as a provision for meeting potential losses in the future\nIV. Hospitalisation costs as a result of heart attack**B.** **The Principle of Risk Pooling**Insurance companies enter into contracts with different entities – policyholders,\nwho can be individuals or corporates. The benefits they pay to policyholders are\ncontractual obligations. Insurance contracts are meaningful only if the Insurers are\nfinancially capable of taking over the risks and compensating for the losses, if and\nwhen they occur. The structure arises from application of the mutuality or the\npooling principle.**Mutuality** and Diversification are two important ways to reduce risk in financial\nmarkets. They are fundamentally different.|Diversification|Mutuality|\n|---|---|\n|Here the funds are spread out among<br>various assets (eggs are placed in different<br>baskets).|Under mutuality or pooling, the funds of<br>various individuals are combined (all eggs<br>are placed in one basket).|\n|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured immediately\ncreates a large quantity of funds ( corpus)that is available to him/ her in the event\nof a loss arising due to the insured risk. This potential corpus of money is what\nmakes insurance unique and without any substitutes among all financial products.9**C.** **Risk Management Techniques**One may also ask whether insurance is the right solution to all kinds of risksituations. The answer is ‘No’.Insurance is only one of the methods by which individuals may seek to manage their\nrisks. Here they transfer the risks they face to an insurance company. However there\nare other methods of dealing with risks, which are explained below:**1.** **Risk avoidance**Reducing risk by avoiding a loss situation is known as risk avoidance. Thus one may\ntry to avoid activities or situations, or avoid dealing with property or persons due", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "t8", "section": "Diagram 3:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_004", "metadata": {"file_size": 7099, "chunk_index": 4, "chunk_tokens": 1007, "has_examples": true, "has_tables": true, "key_concepts": ["Mutuality", "Example", "Secondary burden of risk", "Primary burden of risk", "Mutuality -"]}}
{"chunk": "|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured immediately\ncreates a large quantity of funds ( corpus)that is available to him/ her in the event\nof a loss arising due to the insured risk. This potential corpus of money is what\nmakes insurance unique and without any substitutes among all financial products.9**C.** **Risk Management Techniques**One may also ask whether insurance is the right solution to all kinds of risksituations. The answer is ‘No’.Insurance is only one of the methods by which individuals may seek to manage their\nrisks. Here they transfer the risks they face to an insurance company. However there\nare other methods of dealing with risks, which are explained below:**1.** **Risk avoidance**Reducing risk by avoiding a loss situation is known as risk avoidance. Thus one may\ntry to avoid activities or situations, or avoid dealing with property or persons due\nto which there can be an exposure.**Example**i. One may avoid certain manufacturing risks by contracting out the manufacturingto someone else.ii. One may not venture outside the house for fear of meeting with an accident ormay not travel at all for fear of falling ill when abroad.Risk avoidance is considered a negative way to handle risk. Individuals and societies\nneed to take some risks for doing activities for their progress. Avoiding such risk\ntaking activities would lead to losing the benefits from such activity.**2.** **Risk retention**One tries to manage the impact of risk and decides to bear the risk and its effects\nby oneself. This is known as self-insurance.**Example**A business house may decide, based on experience about its capacity to bear small\nlosses upto a certain limit, to retain the risk with itself.**3.** **Risk reduction and control**This is a more practical and relevant approach than risk avoidance. It means taking\nsteps to lower the chance of occurrence of a loss and/ or to reduce severity of its\nimpact if such loss should occur.**Important**Measures to reduce the chance of occurrence of loss causing events are known as\n‘ **Loss Prevention** ’. The measures to reduce the degree of loss, in case a loss\nhappens, are called ‘ **Loss Reduction** ’/ Loss Minimisation.Risk reduction involves reducing the frequency and/ or sizes of losses through:10**a)** **Education and training of various types of employees in proper risk****practices – e.g.** (i) participating in ‘fire drills’; (ii)wearing of seatbeltshelmets on cars.**b)** **Making Environmental changes –** like improving physical conditions - e.g. (i)installing fire alarms; (ii) spraying chemicals to kill mosquitoes to reduce\nspread of Malaria.**c)** **Changes made in dangerous or hazardous operations,** while usingmachinery and equipment or in the performance of other task - e.g. (i)\nwearing helmets inside construction sites; (ii) wearing gloves and face shields\nwhile handling chemicals.**d)** **Leading a healthy lifestyle** - helps in reduce the incidence of falling ill - e.g.(i) undergoing regular medical check-ups; (ii) practicing yoga regularly.**e)** **Separation**, or spreading out various items of property into varied locationsrather than concentrating them, to reduce impact of mishap in any one\nlocation - e.g. (i) storing large quantities of flammable substances at separate\nlocations; (ii) fixing fire proof doors in hazardous areas of factories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself as theyoccur. The firm assumes and finances its own risk, either through its own or\nborrowed funds, this is known as **self-insurance** .**b)** **Risk retention within a bigger group:** If the risk is part of a bigger group,like a parent company, the risk can be retained within the larger group which\nwould finance the losses. This can be a group formed by mutual consent aswell.**c)** **Risk transfer** is an alternative to risk retention. It involves transferring theresponsibility for losses to another party.**Insurance is one of the major forms of risk transfer. Instead of facing the**\n**uncertainty of many of the other forms, people prefer Insurance as it**\n**provides certainty and peace of mind.****5.** **Insurance vs Assurance**Insurance is used for most General insurance contracts which provide protection\nagainst an event that may or may not happen, and where the loss amount can", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Diagram 4:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_005", "metadata": {"file_size": 7099, "chunk_index": 5, "chunk_tokens": 1017, "has_examples": true, "has_tables": true, "key_concepts": ["Risk reduction and control", "Risk retention through self-financing", "Risk retention within a bigger group:", "Making Environmental changes –", "Risk financing"]}}
{"chunk": "locations; (ii) fixing fire proof doors in hazardous areas of factories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself as theyoccur. The firm assumes and finances its own risk, either through its own or\nborrowed funds, this is known as **self-insurance** .**b)** **Risk retention within a bigger group:** If the risk is part of a bigger group,like a parent company, the risk can be retained within the larger group which\nwould finance the losses. This can be a group formed by mutual consent aswell.**c)** **Risk transfer** is an alternative to risk retention. It involves transferring theresponsibility for losses to another party.**Insurance is one of the major forms of risk transfer. Instead of facing the**\n**uncertainty of many of the other forms, people prefer Insurance as it**\n**provides certainty and peace of mind.****5.** **Insurance vs Assurance**Insurance is used for most General insurance contracts which provide protection\nagainst an event that may or may not happen, and where the loss amount can\nbe assessed only after the event.Assurance refers to financial coverage for extended periods or until death. In\nthe case of life, the happening of death (the loss making event), is certain. Only\nthe timing is uncertain. Further, it is not possible to estimate the amount of\neconomic loss suffered when a person dies. The loss amount that is to be paid,11must be fixed in advance. This is why people use the term ‘Assurance’ in caseof Life insurance.**Though there are such subtle technical differences, the terms ‘Insurance’**\n**and ‘Assurance’ are used interchangeably in most markets, including India.**_[One of the biggest general insurers in India carries the name – New India_\n_**Assurance**_ _Company Ltd. and no life company in India is using the word_\n_**‘Assurance’**_ _in its name!]_**Diagram 5:** **How insurance indemnifies the insured****Test Yourself 3**Which among the following is a method of risk transfer?\nI. Bank Fixed DepositII. InsuranceIII. Equity sharesIV. Real Estate**D.** **Insurance as a tool for managing risk**The term ‘Risk’ refers not to a loss that has actually been suffered but a loss that is\nlikely to occur. It is thus an expected loss. The cost of this expected loss is the\nproduct of two factors:i. The **probability** that the peril being insured against may happen, leading tothe lossii. The **severity (impact)** or the amount of loss that may be suffered as a result.12The cost of risk would increase in direct proportion with both the **probability** and\nthe **severity** (amount of loss). This works in different ways – (a) If the amount of\nloss is very high, and the probability of its occurrence is small, the cost of the risk\nwould be low as such instances may be very few. (b) Even if the amount of loss is\nsmall, if the probability of its occurrence is very high, the cost of the risk would be\nhigh, as there would be many such occurrences. Insurance can be seen as a powerful\ntool for managing one’s risk. It protects one from the financial impact of losingone’s assets/ wealth due to an insured loss.**Diagram 6:** **Considerations before opting for insurance****E.** **Considerations before opting for Insurance**When deciding whether to insure or not, one needs to evaluate the cost of\ntransferring the risk [the insurance premium] against the cost of bearing it oneself.\nInsurance would be most required where the loss impact could be very high, but the\nprobability (and hence the premium), is very low. E.g. (i) the chance of an\nearthquake; (ii) the chance of a ship sinking.**a)** **Do not risk a lot for a little** : A reasonable relationship must be there betweenthe cost of transferring the risk and the value derived.Would it make sense to insure an ordinary ball pen?**b)** **Do not risk more than one can afford to lose:** If the loss that can arise as aresult of an event is large enough to cause bankruptcy, retention of the risk\nwould not be appropriate.If a large oil refinery gets destroyed, the owners cannot afford to bear the loss.**c)** **Consider the likely outcomes of the risk carefully:** It is best to insure thoseassets for which the probability of occurrence (frequency) of a loss is low but", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Risk financing", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_006", "metadata": {"file_size": 7099, "chunk_index": 6, "chunk_tokens": 970, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance vs Assurance", "Considerations before opting for insurance", "Risk financing", "Considerations before opting for Insurance", "Risk retention through self-financing"]}}
{"chunk": "transferring the risk [the insurance premium] against the cost of bearing it oneself.\nInsurance would be most required where the loss impact could be very high, but the\nprobability (and hence the premium), is very low. E.g. (i) the chance of an\nearthquake; (ii) the chance of a ship sinking.**a)** **Do not risk a lot for a little** : A reasonable relationship must be there betweenthe cost of transferring the risk and the value derived.Would it make sense to insure an ordinary ball pen?**b)** **Do not risk more than one can afford to lose:** If the loss that can arise as aresult of an event is large enough to cause bankruptcy, retention of the risk\nwould not be appropriate.If a large oil refinery gets destroyed, the owners cannot afford to bear the loss.**c)** **Consider the likely outcomes of the risk carefully:** It is best to insure thoseassets for which the probability of occurrence (frequency) of a loss is low but\nthe possible impact (severity), is high.The loss of a space satellite can be so costly that it has to be insured.13**Test Yourself 4**Which among the following scenarios needs insurance?I. The sole bread winner of a family might die untimely\nII. A person may lose his wallet\nIII. Stock prices may fall drastically\nIV. A house may lose value due to natural wear and tear**F.** **Insurance Market Players**The Insurance Companies (Insurers) are the major players in the insurance industry.\nIn addition to insurers, there are multiple parties who are part of the Insurance\nvalue chain. There is the Insurance Regulator, which regulates the entire market.Intermediaries like Agents, Brokers, Banks (through Bancassurance) Insurance\nMarketing Firms and Point of Sales Persons are in the field of interacting with the\nprospects/ insured finding out their needs, giving them information about the\npolicies available for covering their needs.Surveyors and Loss Assessors/ Adjusters go into assessing claims and ancillary work.\nThird Party Administrators deal with Health and Travel Insurance Claims.\nRegulations provides that all intermediaries have a responsibility towards thecustomer.Agents, being intermediaries between the insurance company and the insured have\nthe responsibility to ensure all material information about the risk is provided bythe insured to insurer.**Important****Duty of an Insurance Agent/ Intermediary towards the Prospect (Customer)**IRDAI regulations provides that intermediaries have certain responsibilities towards\nthe prospect. The intermediary has a responsibility towards the insurer as well.The regulation states that where the prospect depends upon the advice of the\ninsurer or his agent or an insurance intermediary, such a person must advise the\nprospect in a fair manner. It also says that “An insurer or its agent or other\nintermediary shall provide all material information in respect of a proposed cover\nto the prospect to enable the prospect to decide on the best cover that would be inhis or her interest”.If the proposal and other connected papers are not filled by the customer, a\ncertificate may be incorporated at the end of proposal form from the customer that\nthe contents of the form and documents have been fully explained to him and that\nhe has fully understood the importance of the proposed contract.When the customer pays the insurer towards premium, the insurer is bound to issue\na receipt. That is, even if the premium is paid in advance.14**G.** **Role of Insurance in the Society**Insurance companies play an important role in a country’s economic development.\nThey ensure that the wealth of the country is protected and preserved. Some of\ntheir contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunate fewmembers who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly\ninvested in speculative ventures.c) Insurance provides the benefit of protection to numerous insured - bothindividuals and enterprises –against losses caused by accidents or fortuitous\nevents. It preserves capital and releases it for development of business and\nindustry, which helps the country’s growth.d) Insurance enables investment of capital leading to commercial and industrialdevelopment. It also helps in removing the fear, worry and anxiety\nassociated with entrepreneurship.e) Many Banks and Financial institutions do not advance loans on propertyunless it is insured against loss or damage. Many of them insist on assigning\nthe policy as collateral security.f) Before accepting large complicated risks, general insurers arrange forinspection of the property by qualified engineers/ other experts. They assess\nthe risk and suggest risk management measures to reduce the risk and help", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Do not risk a lot for a little", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_007", "metadata": {"file_size": 7099, "chunk_index": 7, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 4", "Do not risk more than one can afford to lose:", "Important", "Insurance Market Players", "Do not risk a lot for a little"]}}
{"chunk": "their contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunate fewmembers who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly\ninvested in speculative ventures.c) Insurance provides the benefit of protection to numerous insured - bothindividuals and enterprises –against losses caused by accidents or fortuitous\nevents. It preserves capital and releases it for development of business and\nindustry, which helps the country’s growth.d) Insurance enables investment of capital leading to commercial and industrialdevelopment. It also helps in removing the fear, worry and anxiety\nassociated with entrepreneurship.e) Many Banks and Financial institutions do not advance loans on propertyunless it is insured against loss or damage. Many of them insist on assigning\nthe policy as collateral security.f) Before accepting large complicated risks, general insurers arrange forinspection of the property by qualified engineers/ other experts. They assess\nthe risk and suggest risk management measures to reduce the risk and help\nin rating.g) Insurance earns foreign exchange for the country like trade, shipping andbanking services.h) Insurers are associated with institutions engaged in fire loss prevention,cargo loss prevention, industrial safety and road safety.i) Entrepreneurs get the confidence to invest in new or relatively unknownfields with the protection offered by Insurance.**Information****Insurance and Social Security**a) Social security is an obligation of the State. Social security schemes of theState involve the use of compulsory or voluntary insurance, as a tool of social\nsecurity. The Employees State Insurance Act, 1948 provides for **Employees**\n**State Insurance Corporation** to pay for the expenses of sickness,15disablement, maternity and death for industrial employees and their families,who are covered.b) Insurers play an important role in social security schemes sponsored by theGovernment such as1. PMJJBY –Pradhan Mantri Jeevan Jyoti Bima Yojana\n2. PMSBY – Pradhan Mantri Suraksha Bima Yojana\n3. PMFBY- Pradhan Mantri Fasal Bima Yojana\n4. PMJAY – Pradhan Mantri Jan Arogya Yojana (Ayushmaan Bharat)\n5. PMVVY - Pradhan Mantri Vaya Vandana Yojana – a Pension plan\n6. APY - Atal Pension YojanaThese, and other Government schemes have been benefiting the Indian\nsociety/ community.c) In addition to supporting Government schemes, the insurance industry offersinsurance covers on a commercial basis which have the ultimate objective of\nproviding social security. The **rural insurance schemes**, operated on a\ncommercial basis, are designed to provide social security to the rural families.**Test Yourself 5**Which of the following insurance schemes are sponsored by the Government of\nIndia?I. PM Jan Arogya Yojana - Ayushmaan Bharat\nII. PM Fasal Bima Yojana\nIII. PM Suraksha Bima Yojana\nIV. All of the above**Summary**Insurance is risk transfer through risk pooling.Commercial insurance business as practiced today started at the Lloyd’s CoffeeHouse in London.An insurance arrangement involves the following: Asset,\n Risk,\n Peril,\n Contract,\n Insurer and\n InsuredWhen persons having similar assets, exposed to similar risks, contribute into a\ncommon pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,16 Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and\n Do not risk a lot for a little**Key Terms**1. Risk2. Pooling3. Asset4. Burden of risk5. Risk avoidance6. Risk control7. Risk retention8. Risk financing9. Risk transfer**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is I.\n**Answer 5** - The correct option is IV.17## CHAPTER C-02## CORE ELEMENTS OF INSURANCE**Chapter Introduction**In this chapter, we shall learn about the various key elements and principles of", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "s1", "section": "Information", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_008", "metadata": {"file_size": 7099, "chunk_index": 8, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Insurance and Social Security", "Answer 2", "Information", "Answer 3"]}}
{"chunk": "common pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,16 Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and\n Do not risk a lot for a little**Key Terms**1. Risk2. Pooling3. Asset4. Burden of risk5. Risk avoidance6. Risk control7. Risk retention8. Risk financing9. Risk transfer**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is I.\n**Answer 5** - The correct option is IV.17## CHAPTER C-02## CORE ELEMENTS OF INSURANCE**Chapter Introduction**In this chapter, we shall learn about the various key elements and principles of\ninsurance that govern the working of insurance.**Learning Outcomes**After studying this chapter, one should be able to:1. Understand Assets are2. Understand Risk, Hazards and Perils3. Appreciate Risk Management4. Understand Risk Pooling in insurance18**A.** **Elements of insurance**We have seen that the process of insurance has four elements Asset Risk Risk poolingLet us now look at the various elements of the insurance process in some detail.**1.** **Asset****Definition**An asset may be defined as ‘anything that confers some benefits and has aneconomic value to its owner’.An asset must have the following features: **Economic value:** An asset must have economic value. Value can arise in twoways.**a)** **Income generation** : Asset may be productive and generate income.**Example**A machine used to manufacture biscuits, or a cow that yields milk, both generate\nincome for their owner. A healthy worker is an asset to an organization.**b)** **Serving needs** : An asset could also add value by satisfying one or a group ofneeds.**Example**A refrigerator cools and preserves food while a car provides comfort and\nconvenience in transportation, similarly a body free of illness adds value to oneself\nand family also. **Scarcity and Ownership**What about air and sunlight? Are they not assets? - **The answer is ‘No’.**Few things are as valuable as air and sunlight. We cannot live without them. Yet\nthey are not considered as assets in the economic sense of the term.There are two reasons for this: Their supply is abundant and not scarce.\n They are not owned by any one individual but are freely available to all.This implies that an asset must satisfy two more conditions to qualify as such - its\nscarcity and its ownership or possession by someone.19 **Insurance of assets**Insurance provides protection only against financial losses arising from unexpected\nevents and not natural wear and tear, of assets due to usage over time.We must note that **insurance cannot protect an asset from loss or damage** . An\nearthquake will destroy a house whether it is insured or not. The insurer can only\npay a sum of money, which would reduce the economic impact of the loss.Losses can arise in the event of breach of an agreement.**Example**An exporter would lose a great deal if the importer on the other side refused to\naccept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives and\nthose of our loved ones. Our lives can be seriously affected when subjected to anaccident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death or disability.These kinds of losses are covered by insurances of the person or personal lines of\ninsurance. Insurance is possible for anyone who has assets that have value [i.e.\nwhich generate income or meet some needs]; the loss of which [due to fortuitous\nor accidental events] cause financial loss that can be [measured in terms of money].Thus these assets are commonly referred to as subject matter of insurance in\ninsurance parlance.**2.** **Risk**The second element in the process of insurance is the concept of risk. Risk can be\ndefined as the **chance of a loss** . Risk thus refers to the likely loss or damage that\ncan arise on account of happening of an event. [Risk is sometimes used to refer the", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "k2", "section": "Key Terms", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_009", "metadata": {"file_size": 7099, "chunk_index": 9, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Income generation", "Key Terms", "Answer 5", "Life insurance", "Serving needs"]}}
{"chunk": "accept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives and\nthose of our loved ones. Our lives can be seriously affected when subjected to anaccident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death or disability.These kinds of losses are covered by insurances of the person or personal lines of\ninsurance. Insurance is possible for anyone who has assets that have value [i.e.\nwhich generate income or meet some needs]; the loss of which [due to fortuitous\nor accidental events] cause financial loss that can be [measured in terms of money].Thus these assets are commonly referred to as subject matter of insurance in\ninsurance parlance.**2.** **Risk**The second element in the process of insurance is the concept of risk. Risk can be\ndefined as the **chance of a loss** . Risk thus refers to the likely loss or damage that\ncan arise on account of happening of an event. [Risk is sometimes used to refer the\nsubject matter of insurance, as well.] One do not usually expect one’s house to burn\nor one’s car to have an accident. Yet it can happen.Examples of risks are the possibility of economic loss arising from the burning of a\nhouse or a burglary or an accident which results in the loss of a limb.This has two implications.**i.** **Firstly,** it means that that the loss may or may not happen.**ii.** **Secondly,** the event, the occurrence of which actually leads to the loss, isknown as a **peril** . It is the cause of the loss.20**Example**Examples of perils are fire, earthquakes, floods, lightning, burglary, heart attacketc.**Natural wear and tear**It is true that nothing lasts forever. Every asset has a finite lifetime during which it\nis functional and yields benefits. This is a natural process and one discards or\nchanges one’s mobiles, washing machines and clothes when they are worn out.\nTherefore losses arising out of normal wear and tear are not covered in insurance.**Exposure to risk** : Occurrence of a peril need not necessarily lead to a loss. A person\nstaying in Mumbai does not suffer any loss due to a flood in coastal Andhra. For loss\nto happen the asset must be exposed to the peril. Exposure to risk alone is not\nenough ground for insurance compensation.ExampleA fire may break out in factory premises without causing actual damage. Insurance\ncomes into play only if there is an actual economic (financial) loss as a result of a\nperil.**Degree of Risk Exposure:**Two assets may be exposed to the same peril but the likelihood of loss or the amount\nof loss may vary greatly. A vehicle carrying explosives can yield far greater loss from\nfire than tanker carrying water.**3.** **Risk Management** **Extent of damage likely to be suffered**This is given by the degree of loss and its impact on an individual or business.\nOn this basis one may identify three types of risk events or situations: **Critical**Where losses are of such a magnitude; that may result in total loss or\nbankruptcy. Losses can be critical when the accident results in significant and\nsevere impact, disability, damage to equipment and the environment, which\nmay be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.21 A torpedo from a pirate ship sinks an entire passenger ship but most passengersare saved. A major accident resulting in a kidney damage necessitating a kidney transplantoperation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of people,\nwidespread loss of assets, having significant environmental impact which are\npractically irreversible. Catastrophic losses usually signify disasters that are\nsudden, widespread and unstoppable.**Example: Catastrophic** An earthquake or flood that completely destroys a few villages\n A major fire that completely destroys a multi crore installation over a largeterritory\n The terrorist attack of 9/ 11 on World Trade Centre which caused injuries to alarge number of people", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Life insurance", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_010", "metadata": {"file_size": 7099, "chunk_index": 10, "chunk_tokens": 977, "has_examples": true, "has_tables": false, "key_concepts": ["Secondly,", "Example: Critical", "Risk Management", "Critical", "Example"]}}
{"chunk": "may be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.21 A torpedo from a pirate ship sinks an entire passenger ship but most passengersare saved. A major accident resulting in a kidney damage necessitating a kidney transplantoperation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of people,\nwidespread loss of assets, having significant environmental impact which are\npractically irreversible. Catastrophic losses usually signify disasters that are\nsudden, widespread and unstoppable.**Example: Catastrophic** An earthquake or flood that completely destroys a few villages\n A major fire that completely destroys a multi crore installation over a largeterritory\n The terrorist attack of 9/ 11 on World Trade Centre which caused injuries to alarge number of people\n A pandemic like Covid – 19 causing disease to people across the globe. **Marginal/ Insignificant**Where the possible losses are insignificant and can be easily met from an\nindividual or a firm’s existing assets or current income without imposing anyundue financial strain.**Example** A minor car accident results in the side being slightly grazed due to which someof the paint is damaged and a fender is slightly bent.\n An individual suffering from common cold and cough..**4.** **Hazards and Perils**The condition or conditions which increase the probability of a loss or its severity,\nand thus impact(s) the risk is known as hazard. When insurers make an assessment\nof the risk, it is generally with reference to the hazards to which the asset is subject.The term hazard in insurance language refers to those conditions or features or\ncharacteristics which create or increase the chance of loss arising from a given peril.\nA thorough knowledge of various hazards to which a risk is exposed to is most\nessential for underwriting. Examples of the link between assets, peril and hazards\nare given below.22|Asset|Peril|Hazard|\n|---|---|---|\n|**Life**|Cancer|Excessive Smoking|\n|**Factory**|Fire|Explosive material left Unattended|\n|**Car**|Car Accident|Careless driving by driver|\n|**Cargo**|Storm|Water seeping in cargo and spoiling; Cargo not packaged in<br>waterproof containers|**Important** **Types of hazards****a)** **Physical hazard** is a physical condition that increases the chance of loss.**Example**i. Defective wiring in a building\nii. Indulging in water sports\niii. Leading a sedentary lifestyle**b)** **Moral hazard** refers to dishonesty or character defects in an individual thatinfluence the frequency or severity of the loss. A dishonest individual may\nattempt to commit fraud and make money by misusing the facility of insurance.**Example**If one deliberately sets a fire to one’s property and collects claims against losses\nunder the policy, such claims are clearly fraudulent and could be justifiably rejectedA classic instance of moral hazard is purchasing insurance for a factory and then\nburning it down to collect the insurance amount or buying health insurance after\nonset of a major ailment.**c)** **Legal hazard** is more prevalent in cases involving a liability to pay for damages.It arises when certain features of the legal system or regulatory environment\ncan increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of accidents\ncan raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the price[premiums] charged for insurance coverage would increase if the susceptibility to\nloss, arising as a result of the presence of associated hazards, is high.23**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause an\naverage loss of Rs. 50000. If the chance of a house catching fire is 2 in 1000 [or 2/\n1000 = 0.002] it would mean that the total amount of loss suffered would be Rs", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Example: Critical", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_011", "metadata": {"file_size": 7099, "chunk_index": 11, "chunk_tokens": 987, "has_examples": true, "has_tables": true, "key_concepts": ["Example: Critical", "Moral hazard", "Factory", "Types of hazards", "Physical hazard"]}}
{"chunk": "onset of a major ailment.**c)** **Legal hazard** is more prevalent in cases involving a liability to pay for damages.It arises when certain features of the legal system or regulatory environment\ncan increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of accidents\ncan raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the price[premiums] charged for insurance coverage would increase if the susceptibility to\nloss, arising as a result of the presence of associated hazards, is high.23**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause an\naverage loss of Rs. 50000. If the chance of a house catching fire is 2 in 1000 [or 2/\n1000 = 0.002] it would mean that the total amount of loss suffered would be Rs\n10000000 [= 50000x 0.002 x 100000].If an insurer were to get the owners of each of the 100000 houses to contribute Rs\n100 and if these contributions (100000 x 100 = Rs.10000000) were to be pooled into\na single fund, it would be enough to pay for the loss of the unfortunate few whosuffered from the fire.To ensure that there is equity [fairness] among all those being insured, it is\nnecessary that the houses should all be similarly exposed to the risk. In the above\nexample risk exposure to mud houses will be different.**a)** **How exactly does the principle work in insurance?**It is by pooling number of risks of all the insured similarly placed and exposed\nto possibility of loss due to a peril that the insurer is able to assume that risk\nand its financial impact.|Large<br>number<br>of people|Paying<br>Premium|Premium|Paying Claims to a<br>few who suffered<br>loss|\n|---|---|---|---|\n|**Many**<br>**people**<br>**pay**|**Small**<br>**amounts of**<br>**money as**<br>**Premiums**|**These small amounts are pooled**<br>**together as a Common Pool, big**<br>**enough to pay a statistically**<br>**estimated number of claims**|**Big amounts are**<br>**paid to those who**<br>**suffer a loss**|**b)** **Risk pooling and the law of large numbers**The probability of damage [derived as 2 out of 1000 or 0.002 in the example\nabove] forms the basis on which the premium is determined. The insurer would\nface no risk of loss if the actual experience was as expected. In such a situation\nthe premiums of the numerous insured would be sufficient to completely\ncompensate for the losses of those who have been affected by the peril. The\ninsurer would however face a risk if the actual experience was more adverse\nthan expected and the premiums collected were not sufficient to pay the claims.How can the insurer be sure about its predictions? This becomes possible because\nof a principle known as the “Law of large numbers”. It states that the larger the\nsize of the pool of risks, the actual average of losses would be closer to the\nestimated or expected average loss.24**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have the\nsufficient money, they are considered solvent and if they do not have money to\nmeet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or solvency\nmargin) to meet unforeseen deviations between expected and actual claims\nsituations. Solvency Ratio assesses the extent to which assets are available to\ncover the insurers’ commitments towards future payments. Different countries\nuse different measures to assess Solvency Ratio. In India, IRDAI has mandated\nthat insurers are required to maintain a minimum solvency ratio of 1.5.**Example**To give a simple illustration, the probability of getting heads on a toss of the coin", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Legal hazard", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_012", "metadata": {"file_size": 7099, "chunk_index": 12, "chunk_tokens": 993, "has_examples": true, "has_tables": true, "key_concepts": ["How exactly does the principle work in insurance?", "Premiums", "These small amounts are pooled", "Example", "Legal hazard"]}}
{"chunk": "size of the pool of risks, the actual average of losses would be closer to the\nestimated or expected average loss.24**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have the\nsufficient money, they are considered solvent and if they do not have money to\nmeet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or solvency\nmargin) to meet unforeseen deviations between expected and actual claims\nsituations. Solvency Ratio assesses the extent to which assets are available to\ncover the insurers’ commitments towards future payments. Different countries\nuse different measures to assess Solvency Ratio. In India, IRDAI has mandated\nthat insurers are required to maintain a minimum solvency ratio of 1.5.**Example**To give a simple illustration, the probability of getting heads on a toss of the coin\nis 1 out of 2. But one cannot be sure to actually get 2 heads if a coin is tossed fourtimes.Only when the number of tosses gets very large and closer to infinity, the chance of\ngetting heads once for every two tosses will become closer to one.It follows that insurers can be sure of their ground only when they have been able\nto insure a large number of insured. An insurer who has insured only a few hundred\nhouses, likely would be worse affected than one who has insured several thousandhouses.**Important****Conditions for insuring a risk**When does it make sense to insure a risk from the insurer’s point of view?Six broad requirements for a risk to be considered insurable are given below.**i.** **A sufficiently large number of homogenously [similar] exposed units** to makethe losses reasonably predictable. This follows from the **law of large numbers** .\nWithout this it would be difficult to make predictions.**ii.** **Loss produced by the risk must be definite and measurable** . It is difficult todecide the compensation if one cannot say for sure that a loss has occurred andhow much it is.**iii.** **Loss must be fortuitous or accidental** . It must be the result of an event thatmay or may not happen. The event must be beyond the control of insured. No\ninsurer would cover a loss that is intentionally caused by the insured.25**iv.** **Sharing of losses of the few by many** can work only if a small percentage of theinsured group suffers loss at any given period of time.**v.** **Economic feasibility:** The cost of insurance must not be high in relation to thepossible loss; otherwise the insurance would be economically unviable.**vi.** **Public policy:** Finally the contract should not be contrary to public policy andmorality.**Test Yourself 1**Which one of the following does not represent an insurable risk?I. FireII. Stolen goods\nIII. Burglary\nIV. Loss of goods due to ship capsizing**Summary**a) The process of insurance has four elements (asset, risk, risk pooling and aninsurance contract).b) An asset may be anything that confers some benefit and is of economic value toits owner.c) A chance of loss represents risk.d) Condition or conditions that increase the probability or severity of the loss arereferred to as hazards.e) The mathematical principle, that makes insurance possible is known as principleof risk pooling.**Key terms**a) Asset\nb) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.26## CHAPTER C-03## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk being\nproposed, whether requested or not\". All insurance contracts are based on the\nprinciple of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss on\nthe occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to the\nsubject matter of insurance, from the insured to the insurer.e) The principle of contribution implies that if the same property is insured with", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "C-03", "section": "Insurance Companies to remain Solvent:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_013", "metadata": {"file_size": 7099, "chunk_index": 13, "chunk_tokens": 1021, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Sharing of losses of the few by many", "Conditions for insuring a risk", "Public policy:", "Test Yourself 1"]}}
{"chunk": "b) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.26## CHAPTER C-03## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk being\nproposed, whether requested or not\". All insurance contracts are based on the\nprinciple of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss on\nthe occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to the\nsubject matter of insurance, from the insured to the insurer.e) The principle of contribution implies that if the same property is insured with\nmore than one insurance company, the compensation paid by all the insurers\ntogether cannot exceed the actual loss suffered.f) Proximate cause is a key principle of insurance and is concerned with how the\nloss or damage actually occurred and whether it is indeed as a result of an\ninsured peril.27**A.** **Uberrima Fides**Insurance contracts have various special features that are discussed below:**1.** **Utmost Good Faith or** _**‘Uberrima Fides’**_Utmost Good Faith or \"Uberrima fides\", one of the fundamental principles of an\ninsurance contract, is defined as “a positive duty to voluntarily disclose, accurately\nand fully, all facts material to the risk being proposed, whether requested or not\".All commercial contracts are based on Good Faith in so much as there shall be nofraud or deceit when giving information or doing the transaction. The rule observed\nhere is that of **“Caveat Emptor”** which means **Buyer Beware** . The parties to the\ncontract are expected to examine the subject matter of the contract and so long as\none party does not mislead the other and the answers are given truthfully, there is\nno question of the other party avoiding the contract.Insurance contracts stand on a different footing as the subject matter of the\ncontract is intangible and cannot be easily known to the insurer. Again, there are\nmany facts, which may be known only to the proposer. The insurer has to rely\nentirely on the proposer for information. Hence the proposer has a legal duty to\ndisclose all material information about the subject matter of insurance to the\ninsurers. That is, the insured should not make any misrepresentation regarding any\nfact that is material for the insurance contract. This higher obligation of full\nrepresentation and full disclosure in respect of Insurance contracts makes themcontracts of Utmost Good Faith.**If Utmost Good Faith is not observed by either party, the contract may be**\n**avoided by the other.** This follows from the logic that no one should be allowed to\ntake advantage of his own wrong especially while entering into a contract ofinsurance.**a)** **Material fact** has been defined as a fact that would affect the judgment of aninsurance underwriter in deciding whether to accept the risk and if so, the rate\nof premium and the terms and conditions. The insured has an obligation to fully\nand accurately disclose all facts that are material to an insurance contract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk? If so, at what rate of premium and subject to what terms and conditions?This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to material28facts which he ought to know. There is a corresponding duty of the insurer not to\nwithhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer should\ndisclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age, hobbies,\nfinancial information like income details of proposer, pre-existing life", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "C-03", "section": "Answers to Test Yourself", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_014", "metadata": {"file_size": 7099, "chunk_index": 14, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Material fact", "Example", "Utmost Good Faith or", "Chapter Introduction"]}}
{"chunk": "of premium and the terms and conditions. The insured has an obligation to fully\nand accurately disclose all facts that are material to an insurance contract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk? If so, at what rate of premium and subject to what terms and conditions?This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to material28facts which he ought to know. There is a corresponding duty of the insurer not to\nwithhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer should\ndisclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age, hobbies,\nfinancial information like income details of proposer, pre-existing life\ninsurance policies, occupation etc.**ii.** **Fire Insurance:** Construction, location/ situation of risk and usage ofbuilding, age of the building, nature of goods in premises etc.**iii.** **Marine Insurance:** Description of goods, method of packing and mode oftransit etc.**iv.** **Motor Insurance:** Description of vehicle, date of purchase and RegionalRegistration authority etc.**v.** **Health Insurance:** Pre-existing disease, age etc.**b)** **When a Fact becomes ‘Material’: Some types of material facts that one** needsto disclose are those indicating that the particular risk represents a greater\nexposure than can be normally expected.**Example**Hazardous nature of cargo being sent by a ship, past history of illness, past history\nburglary of a house.i. Existence of policies taken from all insurers and their present statusii. All questions in the proposal form or application for insurance are consideredto be material, as these relate to various aspects of the subject matter of\ninsurance and its exposure to risk. They need to be answered truthfully and\nbe full in all respects.The following are some scenarios wherein material facts need not be disclosed.**Information**a. **Material Facts that need not be disclosed:** Unless there is a specific enquiry byunderwriters, the proposer has no obligation to disclose facts like:**i.** **Measures implemented to reduce the risk. E.g.:** The presence of a fireextinguisher**ii.** **Facts which the insured does not know or is unaware of. E.g.:** Anindividual, who had high blood pressure but was not aware about the same29at the time of taking the policy, cannot be charged with non-disclosure ofthis fact.**iii.** **Which could be discovered, by reasonable diligence.** It is not necessary todisclose every minute material fact. The underwriters must be conscious\nenough to ask for the same if they require further information. E.g.: When\ninsuring a textile shop one does not need to specifically say that some of the\nsynthetic clothes in the shop are highly combustible.**iv.** **Matters of law** : Everybody is supposed to know the law of the land. **E.g.:**Municipal laws about storing of explosives**v.** **About which insurer appears to be indifferent (or has waived the need****for further information)**In such cases, the insurer cannot later disclaim responsibility on grounds that the\nanswers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is accepted\nand a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose any\nmaterial facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo some\nsurgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to disclose_", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "l28", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_015", "metadata": {"file_size": 7099, "chunk_index": 15, "chunk_tokens": 961, "has_examples": true, "has_tables": false, "key_concepts": ["Information", "Motor Insurance:", "Health Insurance:", "Example", "Matters of law"]}}
{"chunk": "answers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is accepted\nand a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose any\nmaterial facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo some\nsurgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to disclose_\n_all facts that are material and relevant, as though it is a new policy.]_In the case he has Health Insurance, at the time of renewing the policy, Mr. Rajanhas to inform the insurer about this health issue.Similarly, in the case of General Insurance, at the time of renewing the Fire policy\nfor an enterprise/ factory, the insured has to inform the insurer if a change was\nmade in the occupancy of the building.At the time of renewing the Hull policy for a ship, the insured has to inform the\ninsurer if the ship was modified to carry a different type cargo; say, hazardous\nchemicals instead of pulses.c. **Situations of Non-Disclosure** may arise when the insured is silent about materialfacts because the insurer has not raised any specific enquiry. Such situations may\nalso arise through evasive answers to queries raised by the insurer.30Often non-disclosure may be inadvertent (meaning that it may be made without\none’s knowledge or intention) or because the proposer thought that a fact wasnot material. In such a case it is innocent.When a fact is intentionally suppressed it is treated as concealment. Here, thereis the intent to deceive.d. **Misrepresentation:** Any statement made during negotiation of a contract ofinsurance is called representation. A representation may be a definite statement\nof fact or a statement of belief, intention or expectation. It is expected that the\nstatement must be substantially correct. Representations that concern matters\nof belief or expectation must be made in good faith. Misrepresentation is of twokinds:**i.** **Innocent Misrepresentation** relates to inaccurate statements, which aremade without any fraudulent intention.**ii.** **Fraudulent Misrepresentation** on the other hand refers to false statementsthat are made with deliberate intent to deceive the insurer or are maderecklessly without due regard for truth.An insurance contract generally becomes void when there is a clear case of\nconcealment with intent to deceive, or when there is fraudulent\nmisrepresentation.Amendments (March, 2015) to Insurance Act, 1938 have provided certain\nguidelines about the conditions under which a policy can be called into question\nfor fraud. The new provisions are as followse. **Fraud:** The term “Fraud” has been specified under **Section 45 (2) of the****Insurance Act (amended in 2015).** Accordingly, a Life Insurance policy can be\ncalled in question on the ground of Fraud by the insurer only within a time period\nand not later. However, Insurers can do so only within three years from (a) the\ndate of issuance of the policy (b) the date of commencement of risk, (c) the date\nof revival of the policy or (d) the date of the rider to the policy, whichever islater.The insurer needs to communicate the reasons on which the policy is questioned\nin writing to the insured or his/ her legal representatives, nominees or assignees.The expression \"fraud\" means any act committed by the insured, with the intent\nto deceive the insurer or to induce the insurer to issue an insurance policy. It is\nalso provided that in case the policyholder is not alive, the onus of disproving\nfraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.31**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Duty to Disclose:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_016", "metadata": {"file_size": 7099, "chunk_index": 16, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Misrepresentation:", "Innocent Misrepresentation", "Section 45 (2) of the", "Fraud:", "Situations of Non-Disclosure"]}}
{"chunk": "of revival of the policy or (d) the date of the rider to the policy, whichever islater.The insurer needs to communicate the reasons on which the policy is questioned\nin writing to the insured or his/ her legal representatives, nominees or assignees.The expression \"fraud\" means any act committed by the insured, with the intent\nto deceive the insurer or to induce the insurer to issue an insurance policy. It is\nalso provided that in case the policyholder is not alive, the onus of disproving\nfraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.31**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom\nof liability. By the same token, he must stand to lose financially by any loss,\ndamage, injury or creation of liability.Let us see how insurance differs from a gambling or wager agreement.**a)** **Gambling and insurance:** Unlike a card game, where one could win or lose, afire can have only one consequence – loss to the owner of the house.The owner takes insurance to ensure that the loss suffered is compensated for\nin some way.In other words, Insurable Interest is the interest the insured has in the subjectmatter of insurance. Insurable interest makes an insurance contract valid andenforceable under the law.**Example**If Mr. Patel has brought a house with a mortgage loan of Rs 15 lakhs from a bank\nand he has repaid 12 lakhs of this amount, the bank’s interest would be only to the\ntune of the balance three lakhs which is outstanding.Thus the bank also has an insurable interest financially in the house for the balance\namount of loan that is unpaid and would ensure that it is made a co insured in the\npolicyMr. Patel owns a house for which he has taken a mortgage loan of Rs. 15 lakhs from\na bank. Ponder over the questions below: Does he have an insurable interest in the house? Does the bank have an insurable interest in the house? What about his neighbour?Mr. Dass has a family consisting of spouse, two kids and old parents. Ponder over\nthe below questions: Does he have an insurable interest in their well-being? Does he stand to financially lose if any of them are hospitalised? What about his neighbour’s kids? Would he have an insurable interest in them?32It would be relevant here to make a distinction between the subject matter of\ninsurance and the subject matter of an insurance contract.**The subject matter of insurance** relates to property being insured against, whichhas an intrinsic value of its own.**The subject matter of an insurance contract** on the other hand is the insured’s\nfinancial interest in that property. It is only when the insured has such an interest\nin the property that he/ she has the legal right to insure. The insurance policy in\nthe strictest sense covers not the property per se, but the insured’s financial\ninterest in the property.**Diagram 1:** **Insurable interest according to common law****b)** **Time when insurable interest should be present:** In life insurance, insurableinterest should be present at the time of taking the policy. In general insurance,\ninsurable interest should be present both at the time of taking the policy and at\nthe time of claim with some exceptions like marine policies in which case itmust exist at the time of claim.In case of fire and accident insurance, insurable interest should be present both\nat the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses if\nthe family meets with an accident or undergoes hospitalisation. However, in\nmarine cargo insurance, insurable interest is required only at the time of loss as\nthe ownership of the goods would change hands when the cost is paid, which\ncan happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the loss\nor damage actually occurred and whether it is as a result of an insured peril. If the\nloss has been caused by the insured peril, the insurer is liable. If the immediate", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_017", "metadata": {"file_size": 7099, "chunk_index": 17, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["The subject matter of an insurance contract", "Time when insurable interest should be present:", "Diagram 1:", "Example", "Insurable interest according to common law"]}}
{"chunk": "insurable interest should be present both at the time of taking the policy and at\nthe time of claim with some exceptions like marine policies in which case itmust exist at the time of claim.In case of fire and accident insurance, insurable interest should be present both\nat the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses if\nthe family meets with an accident or undergoes hospitalisation. However, in\nmarine cargo insurance, insurable interest is required only at the time of loss as\nthe ownership of the goods would change hands when the cost is paid, which\ncan happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the loss\nor damage actually occurred and whether it is as a result of an insured peril. If the\nloss has been caused by the insured peril, the insurer is liable. If the immediate\ncause is an insured peril, the insurer is bound to make good the loss, otherwise he\nis not. This application of principle is practically more in respect of non-lifeinsurance claims.33When a loss occurs, there can often be a series of events leading up to the incident\nand so it is sometimes difficult to determine the nearest or proximate cause. Under\nthis rule, the insurer looks for the predominant cause which sets into motion the\nchain of events producing the loss. This may not necessarily be the last event that\nimmediately preceded the loss i.e. it is not necessarily an event which is closest to,\nor immediately responsible for causing the loss. For example, a fire might cause a\nwater pipe to burst. Despite the resultant loss being water damage, the fire would\nstill be considered the proximate cause of the incident. Other causes may be\nclassified as remote causes, which are separate from proximate causes. Remote\ncauses may be present but are not effectual in causing an event.**Definition**Proximate cause is defined as the active and efficient cause that sets in motion achain of events which brings about a result, without the intervention of any force\nstarted and working actively from a new and independent source.How does the principle of proximate cause apply to insurance contracts? Since\ninsurance provides for payment of a death benefit, regardless of the cause of death,\nthe principle of proximate cause would not usually apply. However many insurance\ncontracts may also have an accident benefit add-on wherein an additional sum\nassured is payable in the event of accidental death. In such a situation, it becomes\nnecessary to ascertain the cause - whether the death occurred as a result of an\naccident. The principle of proximate cause would become applicable in suchinstances.To understand the principle of proximate cause, consider the following situation:**Example****Scenario 1:** Mr. Ajay had parked his car in the garage and gone on a long vacation.\nSix months later, when he came back and started the car, he noticed that the airconditioning of the car was not working. Mr. Ajay filed a claim with the insurance\ncompany for the cost of repairing the air-conditioning and the insurance company\nrejected the claim. The reason given by the insurance company was that the damage\nwas due to the ‘normal wear and tear’ of the car and the air-conditioning system,\nwhich was an excluded peril in the insurance policy. Mr Ajay approached the Court\nand after examining the survey report which said that the car was 12 years old and\nneither the car nor the air-conditioning had been serviced/ repaired during the\nprevious 6 years, the damage was due to the ‘normal wear and tear’ and the\ninsurance company was not liable to pay the claim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the34immediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e34", "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_018", "metadata": {"file_size": 7099, "chunk_index": 18, "chunk_tokens": 935, "has_examples": true, "has_tables": false, "key_concepts": ["Scenario 1:", "Example", "Scenario 2:", "Definition", "Proximate Cause"]}}
{"chunk": "was due to the ‘normal wear and tear’ of the car and the air-conditioning system,\nwhich was an excluded peril in the insurance policy. Mr Ajay approached the Court\nand after examining the survey report which said that the car was 12 years old and\nneither the car nor the air-conditioning had been serviced/ repaired during the\nprevious 6 years, the damage was due to the ‘normal wear and tear’ and the\ninsurance company was not liable to pay the claim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the34immediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these\nlosses are customarily paid by business under fire insurance policies.Example of such losses can be – Damage to property caused by water used to extinguish fire Damage to property caused by fire brigade in execution of their duty Damage to property during its removal from a burning building to a safe place**Test Yourself 1**Mr. Pinto contracted pneumonia as a result of lying on wet ground after a horse\nriding accident. The pneumonia resulted in death of Mr. Pinto. What is the\nproximate cause of the death?I. PneumoniaII. HorseIII. Horse riding accidentIV. Bad luck**D.** **Indemnity**The Principle of Indemnity is applicable to Non-life insurance policies. **It means that**\n**the policyholder, who suffers a loss, is compensated so as to put him or her in**\n**the same financial position as he or she was before the occurrence of the loss**\n**event** . The insurance contract guarantees that the insured would be indemnified or\ncompensated up to the amount of loss and no more.The philosophy is that one should not make a profit through insuring one’s assets\nand recovering more than the loss. The insurer would assess the economic value of\nthe loss suffered and compensate accordingly.**Example**Ram has insured his house, worth Rs. 10 lakhs, for the full amount. He suffers loss\non account of fire estimated at Rs. 70,000. The insurance company would pay him\nan amount of Rs. 70,000. The insured can claim no further amount.The indemnity to be paid would depend on the type of insurance one\ntakes.Indemnity might take one or more of the following modes of settlement: Cash payment\n Repair of a damaged item\n Replacement of the lost or damaged item\n Reinstatement (Restoration). E.g. Rebuilding a house destroyed by fire35**Diagram 2:** **Indemnity****a)** **Agreed Value:** However, there is some subject matter whose value cannot beeasily estimated or ascertained at the time of loss. For instance, it may be\ndifficult to put a price in the case of family heirlooms or rare artefacts. Similarly\nin marine insurance policies it may be difficult to estimate the extent of loss\nsuffered in a ship accident half way around the world.In such instances, a principle known as the ‘Agreed Value’ is adopted. The\ninsurer and insured agree on the value of the property to be insured, at the\nbeginning of the insurance contract. In the event of total loss, the insurer agrees\nto pay the agreed amount of the policy. This type of policy is known as “ **Agreed**\n**Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss only\nin the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs. 5\nlakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this entire\namount. It is deemed that the house owner has insured only to the tune of half\nits value and he is thus entitled to claim just 50% [Rs. 30,000] of the amount ofloss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e34", "section": "Scenario 2:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_019", "metadata": {"file_size": 7099, "chunk_index": 19, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Indemnity", "It means that", "Test Yourself 1", "Agreed Value:", "Agreed"]}}
{"chunk": "insurer and insured agree on the value of the property to be insured, at the\nbeginning of the insurance contract. In the event of total loss, the insurer agrees\nto pay the agreed amount of the policy. This type of policy is known as “ **Agreed**\n**Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss only\nin the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs. 5\nlakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this entire\namount. It is deemed that the house owner has insured only to the tune of half\nits value and he is thus entitled to claim just 50% [Rs. 30,000] of the amount ofloss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual\namount of loss i.e. the amount of money needed to replace lost or damaged\nproperty at current market prices less depreciation.**E.** **Subrogation**Subrogation means the transfer of all rights and remedies with respect to the\nsubject matter of insurance, from the insured to the insurer. Subrogation follows\nfrom the principle of Indemnity. Hence, it is often called a ‘corollary’ of Indemnity.In other words, if an insured suffers a loss and the loss has been indemnified by the\ninsurer, the insured’s right to get compensated by any third party for that loss,36would get shifted to the insurer. Note that the amount of damage that can be\ncollected by the insurance company is only to the extent of the amount paid by the\ninsurance company.**Important****Subrogation:** It is the process an insurance company uses to recover claim amounts\npaid to a policy holder from a negligent third party.Subrogation can also be defined as surrender of rights by the insured to an insurance\ncompany that has paid a claim against the third party.**Example**Mr. Kishore’s household goods were being carried in Sylvain Transport service. They\ngot damaged due to driver’s negligence, to the extent of Rs. 45,000 and the insurer\npaid an amount of Rs. 30,000 to Mr. Kishore. The insurer stands subrogated to the\nextent of only Rs. 30,000 and collect that amount from Sylvain Transports.In case the matter went into litigation and the Court directed Sylvain Transports to\npay Rs.35,000 as compensation to Mr. Kishore, he is liable to pay the insurer the\nclaim amount of Rs 30,000 under the subrogation clause, and to keep the balance\namount of Rs 5,000 with himself.The Subrogation Clause prevents the insured from collecting more than the loss from the insurance company and from any third party. Subrogation arises only in\ncase of contracts of indemnity and not against benefit policies like Life Insurance\nPolicy or Personal Accident Policy.**Example**Mr. Suresh dies in an air crash. His family is entitled to collect the full Sum Assured\nof Rs 50 lakhs from the insurer who has issued a Personal Accident Policy plus the\ncompensation paid by the airline, say, Rs 15 lakhs.**F.** **Contribution:**Like Subrogation, ‘Contribution’ also follows from the Principle of Indemnity.\nHence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be met when\nthe insured has taken insurance from more than one insurer. Contribution implies\nthat if the same property is insured with more than one insurance company, the\ncompensation paid by all the insurers together cannot exceed the actual loss\nsuffered. The policy holder can claim from each of the insurers only a portion of the\nloss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs. Suppose37a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he can claim anamount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise in", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e37", "section": "Agreed", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_020", "metadata": {"file_size": 7099, "chunk_index": 20, "chunk_tokens": 978, "has_examples": true, "has_tables": false, "key_concepts": ["Subrogation:", "Agreed", "Example", "Important", "Underinsurance:"]}}
{"chunk": "Hence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be met when\nthe insured has taken insurance from more than one insurer. Contribution implies\nthat if the same property is insured with more than one insurance company, the\ncompensation paid by all the insurers together cannot exceed the actual loss\nsuffered. The policy holder can claim from each of the insurers only a portion of the\nloss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs. Suppose37a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he can claim anamount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise in\nthe case of Life Insurance, because there is no upper limit that can be placed onthe losses suffered when there is a loss of life.**Test Yourself 2**Which among the following is an example of coercion?I. Ramesh signs a contract without having knowledge of the fine print\nII. Ramesh threatens to kill Mahesh if he does not sign the contract\nIII. Ramesh uses his professional standing to get Mahesh to sign a contract\nIV. Ramesh provides false information to get Mahesh to sign a contract**Test Yourself 3**Which among the following options cannot be insured by Ramesh?I. Ramesh’s houseII. Ramesh’s spouseIII. Ramesh’s friendIV. Ramesh’s parents**Test Yourself 4**What is the significance of the principle of contribution?I. It ensures that the insured also contributes a certain portion of the claim alongwith the insurerII. It ensures that all the insured who are a part of the pool, contribute to the claimmade by a participant of the pool, in the proportion of the premium paid bythemIII. It ensures that multiple insurers covering the same subject matter; cometogether and contribute the claim amount in proportion to their exposure to the\nsubject matter\nIV. It ensures that the premium is contributed by the insured in equal instalmentsover the year.**Summary**The special features of insurance policies include:i. Uberrima fides,\nii. Insurable interest,\niii. Proximate cause,\niv. Indemnity\nv. Subrogation38vi. Contribution**Key Terms**1. Non-Disclosure2. Misrepresentation3. Material facts4. Agreed Value5. Under Insurance**Answers to Test Yourself****Answer 1** - The correct option is III\n**Answer 2** - The correct option is II\n**Answer 3** - The correct option is III\n**Answer 4** - The correct option is III39## CHAPTER C-04 **FEATURES OF INSURANCE CONTRACTS****Chapter Introduction**In this chapter, we discuss the elements that govern the working and specialfeatures of an insurance contract.40**A.** **Insurance contracts – Legal aspects and special features.**The chapter also deals with the legal aspects and special features of an insurancecontract.**1.** **The Insurance Contract**Insurance involves a contractual agreement in which the insurer agrees to\nprovide financial protection against certain specified risks for a price or\nconsideration known as the premium. The contractual agreement takes the form\nof an insurance policy.**2.** **Legal aspects of an insurance contract**This section looks at some features of an insurance contract and considers thelegal principles that govern insurance contracts in general.**Important**A contract is an agreement between parties, enforceable at law. The provisions of\nthe Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**41**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said to\nmake an offer or proposal. Usually, the offer is made by the proposer, and\nacceptance made by the insurer.When a person to whom the offer is made signifies his assent thereto, this is deemed", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e37", "section": "Test Yourself 2", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_021", "metadata": {"file_size": 7099, "chunk_index": 21, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Insurance contract", "Test Yourself 4", "Chapter Introduction", "Diagram 2:"]}}
{"chunk": "the Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**41**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said to\nmake an offer or proposal. Usually, the offer is made by the proposer, and\nacceptance made by the insurer.When a person to whom the offer is made signifies his assent thereto, this is deemed\nto be an acceptance. Hence, when a proposal is accepted, it becomes a promise.\nThe acceptance needs to be communicated to the proposer which results in theformation of a contract.When a proposer accepts the terms of the insurance plan and signifies his/ her\nassent by paying the deposit amount, which, on acceptance of the proposal, gets\nconverted to the first premium, the proposal becomes a policy. If any condition is\nput, it becomes a counter offer. The policy bond becomes the evidence of thecontract.**2.** **Consideration**This means that the contract must contain some mutual benefit for the parties. The\npremium is the consideration from the insured, and the promise to indemnify, is theconsideration from the insurers.**3.** **Agreement between the parties (Consensus Ad-Idem)**Both the parties, the insurer and the policyholder, should agree to the same thing\nin the same sense. In other words, there should be “ **consensus ad-idem** ” between\nboth parties.42**4.** **Free consent**There should be free consent while entering into a contract. Consent is said to\nbe free when it is not caused by Coercion/ By Force\n Undue influence Fraud Misrepresentation\n MistakeWhen consent to an agreement is caused by coercion, fraud or\nmisrepresentation, the agreement is voidable.**5.** **Capacity of the parties**Both the parties to the contract must be legally competent to enter into the\ncontract. The policyholder must be legally an adult at the time of signing the\nproposal and should be of sound mind and not disqualified under law. For\nexample, minors cannot enter into insurance contracts.**6.** **Legality**The object of the contract must be legal, for example, no insurance can be had\nfor illegal acts. Every agreement of which the object or consideration is unlawful\nis void. The object of an insurance contract is a lawful object.Also one’s entering into an insurance contract should be done out of one’s free\nwill, without any kind of force, fear or mistake.**C.** **Paying Premium in Advance**As per Indian laws, Insurers are not allowed to assume risk unless they receive the\npremium in advance. In other words, insurance protection cannot be sold on creditbasis in India.Section 64 VB of the Insurance Act 1938 states, “No risk to be assumed unless\npremium is received in advance”. No insurer shall assume any risk unless and until\nthe premium is received in advance or is guaranteed to be paid or a deposit is made\nin advance in the prescribed manner. This is an important feature of the insurance\nindustry in India.The Insurance Rules, 1939, provide certain exceptions to this condition of advance\npayment of premium, in respect of particular categories of insurances. Section 59\nof the Insurance Rules allows accepting premiums in instalments in respect of\nSickness Insurance, Group Personal Accident Insurance Medical Benefits Insurance\nand Hospitalisation Insurance Schemes, subject to certain conditions. Section 59 of\nthe Insurance Rules allows relaxations for policies issued to Government and semiGovernment bodies, Fidelity Guarantee Insurance policies covering Government and43semi-Government employees, Workmen's Compensation policies, Cash in Transit\npolicies, and some other categories of insurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a proper\nunderstanding the product and not just bought/ sold. Hence, insurance is to be\n‘solicited’ or asked for by the customer. Traditionally, insurers declare that\n“Insurance is the subject matter of solicitation”. To elucidate, insurance is not\na ready-made product like a packet of biscuits or a bar of chocolate to be\nbought/ sold outright. Customers have to discuss their insurance needs with a", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "d43", "section": "Diagram 1:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_022", "metadata": {"file_size": 7099, "chunk_index": 22, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Legality", "Capacity of the parties", "Agreement between the parties (Consensus Ad-Idem)", "Paying Premium in Advance", "Diagram 1:"]}}
{"chunk": "in advance in the prescribed manner. This is an important feature of the insurance\nindustry in India.The Insurance Rules, 1939, provide certain exceptions to this condition of advance\npayment of premium, in respect of particular categories of insurances. Section 59\nof the Insurance Rules allows accepting premiums in instalments in respect of\nSickness Insurance, Group Personal Accident Insurance Medical Benefits Insurance\nand Hospitalisation Insurance Schemes, subject to certain conditions. Section 59 of\nthe Insurance Rules allows relaxations for policies issued to Government and semiGovernment bodies, Fidelity Guarantee Insurance policies covering Government and43semi-Government employees, Workmen's Compensation policies, Cash in Transit\npolicies, and some other categories of insurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a proper\nunderstanding the product and not just bought/ sold. Hence, insurance is to be\n‘solicited’ or asked for by the customer. Traditionally, insurers declare that\n“Insurance is the subject matter of solicitation”. To elucidate, insurance is not\na ready-made product like a packet of biscuits or a bar of chocolate to be\nbought/ sold outright. Customers have to discuss their insurance needs with a\nperson qualified for the same and based on professional advice, the right\ninsurance product is to be purchased. The Insurance product has to be\nunderstood and the offering most suited to the specific needs and requirements\nof the customer in terms of the policy coverage, exclusions, terms and\nconditions, is to be considered.‘Solicitation’ is usually initiated when an insurer or an authorised intermediary\napproaches a prospect with a view to understand his/ her insurance needs and\nprovides professional advice in selecting appropriate insurance products. The\nprospect solicits the proper solution and provides all requisite details to the\nadvisor. As per regulations of IRDAI, **Insurance Agents** are appointed by an\ninsurer for the purpose of engaging in the solicitation process and procuring\ninsurance business, including business relating to the continuance, renewal or\nrevival of policies of insurance. Only authorised employees of insurance\ncompanies, and specified persons of licensed intermediaries, who are trained\nand authorised for the purpose can be part of the process of solicitation andsales of insurance.**D.** **Enabling Provisions****1.** **Grace Period**Grace period is the specified period of time immediately following the premium\ndue date during which a payment can be made to renew or continue a policy in\nforce without loss of continuity benefits such as waiting periods and coverage of\npre-existing diseases. Coverage is not available for the period for which no\npremium is received. The days of grace are computed from the next day after the\ndue date fixed for payment of the premium.For **Life insurance**, if there is no grace period, a single delay in payment can\nlead to a policy lapse. This would be detrimental for the policyholder, the\ninsurer and the insurance industry in general. IRDAI Regulations allow a grace\nperiod of 15 days is applicable in case of Monthly mode of Premium collection and\n30 days in other modes.44In respect of **Health insurance** also, certain number of days as grace period is\nallowed for renewal of individual health policies. This period depends on the policy\nof the company and the product offered. All continuity benefits are maintained if\nthe policy is renewed within the grace period. However Claims, if any, during the\nbreak period will not be considered. As per IRDAI Regulations, the grace period is\n15 days in case of Monthly mode of Premium collection and 30 days in other modes.**Motor Policies** are usually valid for a period of one year and have to be renewed\nbefore the due date. Grace period for paying the premium do not apply. In case\na comprehensive policy lapses for more than 90 days, the accrued No Claim\nBonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condone delaysin renewal up to 30 days without deeming such condonation as a break in\npolicy. Insurers were requested to contact the policyholders well in\nadvance to avoid discontinuance in coverage.iii. As regards Motor Vehicle Third Party Insurance policies that fell due forrenewal and premiums could not be paid due to the Covid-19 situation,\nIRDAI allowed a grace period till 15th May, 2020.**2.** **Free-Look Period introduced by “IRDAI”**Insurance contracts are drafted by the insurer, and the other party has to adhere to", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "d43", "section": "Solicitation", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_023", "metadata": {"file_size": 7099, "chunk_index": 23, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance Agents", "Health insurance", "Grace Period", "Motor Policies", "Solicitation"]}}
{"chunk": "before the due date. Grace period for paying the premium do not apply. In case\na comprehensive policy lapses for more than 90 days, the accrued No Claim\nBonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condone delaysin renewal up to 30 days without deeming such condonation as a break in\npolicy. Insurers were requested to contact the policyholders well in\nadvance to avoid discontinuance in coverage.iii. As regards Motor Vehicle Third Party Insurance policies that fell due forrenewal and premiums could not be paid due to the Covid-19 situation,\nIRDAI allowed a grace period till 15th May, 2020.**2.** **Free-Look Period introduced by “IRDAI”**Insurance contracts are drafted by the insurer, and the other party has to adhere to\nit if he/ she wants the insurance. Such contracts where someone has to accept the\ncontract as it is and cannot make any change to it are legally called Contracts of\nAdhesion. Because of this one-sided situation, the Courts always make insurers\nliable for any ambiguity or confusion that may arise in interpreting these terms andconditions.To reduce this one-sidedness and make insurance transactions more customerfriendly, IRDAI has built into its regulations a consumer-friendly provision called\n‘Free-Look Period’ whereby, if the customer is not satisfied with any term and\nconditions of the policy, he/ she can return it and get a refund. This provision\nwhereby policyholders are given the option of cancelling the policy within 15 days\n(30 days, in case of electronic policies and policies sourced through distance mode)\nafter receiving the policy document, in case they are not satisfied with the policy,\nhas been introduced for Life Insurance and Health Insurance policies (having a\ntenure of at least one year). The company has to be intimated in writing and the\npremium is refunded less, proportionate risk premium for the period of cover,\nexpenses and charges.45**Cancellation of Policies:** When policies are cancelled by the insurer, the proportion\nof the premium corresponding to the expired period of insurance is charged/\nretained by the insurer and the proportion corresponding to the unexpired period\nof insurance is returned to the insured, provided no claim has been paid under the\npolicy. Such proportionate calculation of premium is called Pro-rata premium.When annual policies are cancelled by the insured, insurers usually charge/ retain\npremiums at a higher rate and refund premiums at higher rates, instead of\ncalculating pro-rata premiums. This would prevent anti-selection against the\ninsurers and take care of the initial expenses of the insurer. Such rates are disclosed\nas part of the terms and conditions of the insurance contract and referred to as\nShort period scales.**Important****i.** **Coercion** - Involves pressure applied through criminal means.**ii.** **Undue influence** – using one’s position to dominate the will of another person,to obtain an undue advantage over that person.**iii.** **Fraud** – inducing another to act on a false belief that is caused by arepresentation one does not believe to be true. It can arise either from\ndeliberate concealment of facts or through misrepresenting them.**iv.** **Mistake** - Error in one’s knowledge or belief or interpretation of a thing or event.This can lead to an error in understanding and agreement about the subjectmatter of the contract.**Test Yourself 1**Which among the following cannot be an element in a valid insurance contract?I. Offer and AcceptanceII. CoercionIII. ConsiderationIV. Legality**Summary**i. Insurance involves a contractual agreement in which the insurer agrees toprovide financial protection against specified risks for a price or consideration\nknown as the premium.\nii. A contract is an agreement between parties, enforceable at law.iii. The elements of a valid contract include:Offer and acceptanceConsideration,Consensus ad-idem,- Free consentCapacity of the parties and46Legality of the object**Key Terms**1. Offer and Acceptance2. Lawful consideration3. Consensus ad idem**Test Yourself 2**During the Free-look period, if the policyholder, who has bought a policy through\nan Agent, disagrees to any of its terms and conditions, he/ she can return it and get\na refund subject to the following conditions:I. He/ she can exercise this option within 15 days of receiving the policy document\nII. He/ she has to communicate to the company in writing", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "d-19", "section": "Free-Look Period introduced by “IRDAI”", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_024", "metadata": {"file_size": 7099, "chunk_index": 24, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Cancellation of Policies:", "Mistake", "Free-Look Period introduced by “IRDAI”", "Important"]}}
{"chunk": "known as the premium.\nii. A contract is an agreement between parties, enforceable at law.iii. The elements of a valid contract include:Offer and acceptanceConsideration,Consensus ad-idem,- Free consentCapacity of the parties and46Legality of the object**Key Terms**1. Offer and Acceptance2. Lawful consideration3. Consensus ad idem**Test Yourself 2**During the Free-look period, if the policyholder, who has bought a policy through\nan Agent, disagrees to any of its terms and conditions, he/ she can return it and get\na refund subject to the following conditions:I. He/ she can exercise this option within 15 days of receiving the policy document\nII. He/ she has to communicate to the company in writing\nIII. The premium refund will be adjusted for proportionate risk premium for theperiod on cover, expenses incurred by the insurer on medical examination and\nstamp duty chargesIV. All the above**Test Yourself 3**If the policyholder has bought a policy and does not want it, he/ she can return it\nduring the _________ period, and get a refund.I. Free evaluationII. Free-lookIII. CancellationIV. Free trial**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.47## CHAPTER C-05## UNDERWRITING AND RATING**Chapter Introduction**In this chapter you will learn the basics of underwriting and rating. You will learn\nabout the different methods of dealing with hazards in the process of rating of risks.\nYou will be able to appreciate the common aspects of underwriting, product\napproval and rating.**Learning Outcomes**After studying this chapter, you should be able to:1. Define the basics of underwriting2. Understand the basics of product approvals in India3. Appreciate rating factors and the importance of ratemaking48**A.** **Basics of Underwriting**In the previous chapters, we have seen that the concept of insurance involves\nmanaging risk through pooling. Insurers create a pool consisting of premiums that\nare made by several individuals/ commercial/ industrial firms/ organizations.This process of understanding risks, classifying risks, identifying which category they\nfall into, **deciding whether to accept the risk or not** and if so, how much premium\nthe insurer would require to accept the risk and whether any extra conditions are\nto be imposed on the risk - all these are part of **underwriting** .It is also important to know what rate is to be charged and how the rates are made.**Definition**Underwriting is the process of determining whether a risk offered for insurance is\nacceptable, and if so, at what rates, terms and conditions.Underwriting comprises the following steps:i. Assessment and evaluation of hazard and risk in terms of frequency andseverity of lossii. Formulation of policy coverage and terms and conditionsiii. Fixing of rates of premiumThe underwriter decides on whether or not to accept the riskThe next step would be to decide the **rates, terms and conditions** under which the\nrisk is to be accepted.Underwriting skills are acquired through a continuous learning process involving\nadequate training, field exposure and deep insights. To be a fire insurance\nunderwriter one needs to have a good knowledge of the likely causes of fire, impact\nof fire on various physical goods and property, the process involved in an industry,\ngeography, climatic conditions etc.Similarly a marine insurance underwriter must be aware about port/ road\nconditions, problems encountered by cargo/ goods in transit or storage, ships andtheir seaworthiness and so on.A health underwriter needs to understand the risk profile of the insured, age,\nmedical aspects, fitness levels and family history and measure the effect of each\nfactor affecting the risk.**Sources of information for underwriting**The first stage in any numerical (or statistical) analysis is the collection of data.\nWhen pricing a risk, an underwriter should gather as much information as possibleto aid accurate assessment.49**Sources of information are:**i. **Proposal form or underwriting presentation**ii. **Risk surveys**iii. **Historic claims experience data:** For some classes of business, such aspersonal and motor lines, underwriters often utilise historic claims\nexperience data to provide an indication of the likely future claims\nexperience, and to arrive at a suitable premium **.****Underwriting, equity and business sustainability**The need for careful underwriting and risk classification in insurance arises from the\nsimple fact that **all risks are not equal** . Each risk thus needs to be appropriately\nassessed and priced in accordance with the likelihood of loss occurrence and\nseverity.Since all risks are not equal, it would not be proper to ask all those who are to be", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "d46", "section": "Key Terms", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_025", "metadata": {"file_size": 7099, "chunk_index": 25, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Sources of information for underwriting", "Answer 3", "Underwriting, equity and business sustainability"]}}
{"chunk": "medical aspects, fitness levels and family history and measure the effect of each\nfactor affecting the risk.**Sources of information for underwriting**The first stage in any numerical (or statistical) analysis is the collection of data.\nWhen pricing a risk, an underwriter should gather as much information as possibleto aid accurate assessment.49**Sources of information are:**i. **Proposal form or underwriting presentation**ii. **Risk surveys**iii. **Historic claims experience data:** For some classes of business, such aspersonal and motor lines, underwriters often utilise historic claims\nexperience data to provide an indication of the likely future claims\nexperience, and to arrive at a suitable premium **.****Underwriting, equity and business sustainability**The need for careful underwriting and risk classification in insurance arises from the\nsimple fact that **all risks are not equal** . Each risk thus needs to be appropriately\nassessed and priced in accordance with the likelihood of loss occurrence and\nseverity.Since all risks are not equal, it would not be proper to ask all those who are to be\ninsured, to pay equal premium. **The purpose of underwriting is to classify risks so**\n**that, depending on their characteristics and degree of risk posed, an appropriate**\n**rate of premium may be charged.** It is important for the underwriter to ensure\nthat the risk evaluation is done properly and the premium charged is neither too\nlow to cover the risk nor too high to make it non-competitive.The main features of underwriting are as followsi. To **identify risk** based upon the characteristicsii. To **determine the level** of risk presented by the proposerThe objectives of underwriting are achieved, in short, by deciding the level of\nacceptability, adequacy of premium and other terms.**B.** **Product Filing with IRDAI**Every Insurance product needs to be filed with IRDAI for approval before it is offered\nfor sale. IRDAI allots a Unique Identification number (UIN) for every insurance\nproduct. Once products are introduced in the market, there are guidelines to be\nfollowed for withdrawing the product as well.**1.** The Regulator asks for a clear commitment by the Board of the insurer that it iswilling to accept the risks in the policy and agrees to pay the claims. It also asks\nthe insurer to commit that the policy wordings are fair to the customer and that\nthe prices are decided on a scientific basis.**2.** The insurer should plan for the possibility of withdrawal of the products in thefuture and the options that would be available to the policyholder on such\nwithdrawal of the product.**3.** The withdrawn product shall not be offered to the prospective customers.50**C.** **Basics of Ratemaking**Insurance is based on transfer of risk to the insurer. By purchasing an insurance\npolicy, the insured is able to reduce the impact of financial losses arising from the\nperil against which the property is insured. The Insurer needs to adopt a process of\ncalculating a price to cover the future cost of insurance claims and expenses,\nincluding a margin for profit. This is known as **ratemaking.****A rate is the price of a given unit of insurance.** For example, a rate may be\nexpressed as Rs.1.00 per mile (per thousand) sum assured for earthquake coverage.\nEach rate is established after looking at past trends and changes in the current\nenvironment that may affect potential losses in the future.**Note that rates are not the same as premiums.****Premium = (Sum Insured) x (rate)****Example**Taking an example of health insurance, numerical or percentage assessments are\nmade on each component of the risk. Factors like age, race, occupation, habits etc.\nare examined and scored numerically based on predetermined criteria.The amount of premium to be paid by each depends on a rate, which is determined\nby two factors; The probability of loss due to a loss event (caused by an insured peril) and The estimated amount of loss that may arise due to the loss event**Example**Assume the average amount of a house being destroyed by fire is Rs 1,00,000.The probability of the loss of a house being destroyed by fire 1 out of 100 [or 0.01].\nThat is, the experience is that out of a 100 insured houses, one house gets destroyed\nby fire.The expected average loss would be Rs.1,00,000 x 0.01 = Rs. 1000.So, Insurers would need to charge a minimum of Rs.1000 to insure a house of\nRs.1,00,000 value.How can the insurer ensure that the pool is sufficient to compensate for the losses\nthat are actually incurred?As seen earlier, the whole mechanism of insurance involves pooling of many similar", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Sources of information for underwriting", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_026", "metadata": {"file_size": 7099, "chunk_index": 26, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Product Filing with IRDAI", "Premium = (Sum Insured) x (rate)", "Sources of information for underwriting", "Underwriting, equity and business sustainability", "Example"]}}
{"chunk": "made on each component of the risk. Factors like age, race, occupation, habits etc.\nare examined and scored numerically based on predetermined criteria.The amount of premium to be paid by each depends on a rate, which is determined\nby two factors; The probability of loss due to a loss event (caused by an insured peril) and The estimated amount of loss that may arise due to the loss event**Example**Assume the average amount of a house being destroyed by fire is Rs 1,00,000.The probability of the loss of a house being destroyed by fire 1 out of 100 [or 0.01].\nThat is, the experience is that out of a 100 insured houses, one house gets destroyed\nby fire.The expected average loss would be Rs.1,00,000 x 0.01 = Rs. 1000.So, Insurers would need to charge a minimum of Rs.1000 to insure a house of\nRs.1,00,000 value.How can the insurer ensure that the pool is sufficient to compensate for the losses\nthat are actually incurred?As seen earlier, the whole mechanism of insurance involves pooling of many similar\nrisks so that the probability of the number of losses (frequency) as well as the extent\nof loss (severity) becomes predictable. This principle, referred to as ‘the law of\nlarge numbers’ states that as the sample size grows, the results come closer to the\nexpected value. Insurance companies need to sell more policies to more and more\npeople to make their expectations/ predictions work.51An example is that if a coin is tossed, the chances of getting ‘heads’ or ‘tails’ is\n50:50. However, if the coin is tossed only once, the result can be 100% heads and\n0% ‘tails’ or 0% ‘heads’ and or 100% tails. However, if one tosses a coin many times,\nthe chance of the average count of ‘heads’ and ‘tails’ being 100% and 0% reduces\nand will get closer to 50:50.**Example**In the field of property insurance, the chances of a wooden structure catching fire\nare more than stone structures; hence, a higher premium is required to insure thewooden structure.The same concept applies to Life and Health Insurance also. An individual suffering\nfrom high blood pressure or diabetes has higher chances of suffering a heart attack.**Test Yourself 1**Identify the two factors that affect insurance ratemaking.I. Probability and severity of riskII. Source and nature of riskIII. Source and timing of risk\nIV. Nature and impact of risk**1.** **Determining the rate of premium**The pure rate of premium is arrived at on the basis of past loss experience.\nTherefore, statistical data regarding past losses is most essential for purposes of\ncalculating rates. To fix the rates, it is necessary to give a ‘mathematical value’ tothe risks.**Example**If loss experience of a large number of motor cycles is collected for a period of say\n10 years, we will get the sum total of the losses resulting from damage to the\nvehicles. By expressing this amount of loss as percentage of the total value of motor\ncycles we can fix the ‘mathematical value’ of the risk. This may be expressed in the\nformula given below:Let us suppose that: The Value of a motor cycle: Rs. 50,000/  Loss experience: Out of 1000 motor cycles, 50 motor cycles get stolen over10 years\n On an average, 5 motor cycles become total losses due to theft every yearApplying the formula, the result will be:52Losses per year (Rs. 50,000 X 5) = Rs. 2,50,000**Total Values of 1000 motor vehicles (Rs.** 50,000 X 1000) **= Rs. 5,00,00,000**This means that average loss percentage per vehicle (L/ V) x 100= [2,50,000/\n5,00,00,000] x 100 = 0.5%Therefore the rate of premium that a motor cycle owner pays is half a percent of\nRs. 50,000/ - i.e. Rs. 250/ - per year. This is called the **‘Pure’ premium,** also known\nas ‘Burning Cost’.At the rate of Rs. 250 per motor cycle, Rs. 2.5 lakhs is collected which is paid outin claims on total losses of 5 vehicles.If the pure premium, which is arrived above, is collected it would constitute a fund\nwhich will be sufficient only to pay for losses.In the example above we can see that there is no surplus. But insurance operations", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "r10", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_027", "metadata": {"file_size": 7099, "chunk_index": 27, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Example", "Determining the rate of premium", "Total Values of 1000 motor vehicles (Rs."]}}
{"chunk": "5,00,00,000] x 100 = 0.5%Therefore the rate of premium that a motor cycle owner pays is half a percent of\nRs. 50,000/ - i.e. Rs. 250/ - per year. This is called the **‘Pure’ premium,** also known\nas ‘Burning Cost’.At the rate of Rs. 250 per motor cycle, Rs. 2.5 lakhs is collected which is paid outin claims on total losses of 5 vehicles.If the pure premium, which is arrived above, is collected it would constitute a fund\nwhich will be sufficient only to pay for losses.In the example above we can see that there is no surplus. But insurance operations\nalso involve costs of administration (expenses of management) and costs of\nprocurement of business (agency commission). It is also necessary to provide a\nmargin for unexpected heavy losses.Finally, since insurance is transacted on a commercial basis, like any other business,\nit is necessary to provide for a margin of profit which is a return on the capitalinvested in the business.**Therefore, the ‘pure premium’ is suitably loaded or increased by adding**\n**percentages to provide for expenses, reserves and profits.****The final rate of premium will consist of the following components:** Loss payments\n Loss expenses (e.g. survey fees)\n Agency commission\n Expenses of management\n Margin for reserves for unexpected heavy losses e.g. 7 total losses against 5expected\n Margin for profitsBy taking all the relevant rating factors into consideration, one can ensure the rates\nare adequate, excessive or unfairly discriminatory as between risks of similar type\nand quality.**Test Yourself 2**What is pure premium?I. Premium sufficiently big enough to pay for losses only\nII. Premium applicable to marginal members of the society\nIII. Premium after loading for administrative costs\nIV. Premium derived from the most recent loss experience period53**2.** **Deductible**‘Deductible’ or ‘excess’ is a cost-sharing provision between an insurer and insured.\nDeductibles provide that only the claims in excess of a particular threshold are\npayable by the insurer. In other words, the insurer will not be liable for claims below\na specified level. The level or the threshold would be set as a fixed amount, or a\npercentage or even as a specified period of time (when it is called time-excess.) In\ncase of health policies, there could be a condition that claims would be payable\nonly if the hospitalization is beyond a specified number of days/ hours. Deductibles\nare not used in life policies.In products such as property, motor and home insurances, deductibles are\npredetermined amounts that the insured must bear towards an indemnity claim.\nDeductibles can be compulsory for some policies or voluntary. Insurers generally\ncharge lower premiums when the insured voluntarily opt for higher deductibles. An\nagent must examine how specific deductibles work and inform the insured whether\nthe deductible is applicable on a ‘per year’ or ‘per event’ basis.There are various reasons for having deductibles. Corporate customers covering\nfactories, multiple cargo consignments, large groups of employee, public liability\nexposures etc. and having huge amounts of Sum Insured, may prefer to bear small\nclaims themselves and avoid the documentation to prove claims. For example, a\nlarge factory owner paying lakhs or rupees as premium may not be bothered about\na minor repair cost of a machine amounting to around Rs.2,000.Some type of policies may need the insured also to bear some part of the loss to\nensure that he/ she takes due care. For instance, health insurers may insist on a\ndeductible so that insured would not overspend on costly hospital rooms just\nbecause insurance is there. Some Insurers also may not prefer spending time on\nprocessing small claims. Also, in certain situations, insurers may not want to get\nexposed to the financial stress caused by accumulation of a large number of small\nlosses at one location. For example, a small flood in an industrial estate area can\ncause many low value claims from all the warehouses in the area.**Franchise:** Franchise refers to a threshold set, usually as a percentage of the sum\ninsured, below which no claim is admissible, as in the case of deductibles. However,\nwhen the claim amount is beyond the franchise limit, the entire claim is admissible\nby the insurer. In other words, franchise determines the minimum threshold of the\ninsurance companies' financial responsibility. Franchise will apply to the policy in\nthe same way and for the same reasons as a deductible in case of claims below the\nthreshold, but in the event of a claim exceeding the franchise, the full amount of", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "d53", "section": "Therefore, the ‘pure premium’ is suitably loaded or increased by adding", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_028", "metadata": {"file_size": 7099, "chunk_index": 28, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Deductible", "Franchise:", "Test Yourself 2"]}}
{"chunk": "ensure that he/ she takes due care. For instance, health insurers may insist on a\ndeductible so that insured would not overspend on costly hospital rooms just\nbecause insurance is there. Some Insurers also may not prefer spending time on\nprocessing small claims. Also, in certain situations, insurers may not want to get\nexposed to the financial stress caused by accumulation of a large number of small\nlosses at one location. For example, a small flood in an industrial estate area can\ncause many low value claims from all the warehouses in the area.**Franchise:** Franchise refers to a threshold set, usually as a percentage of the sum\ninsured, below which no claim is admissible, as in the case of deductibles. However,\nwhen the claim amount is beyond the franchise limit, the entire claim is admissible\nby the insurer. In other words, franchise determines the minimum threshold of the\ninsurance companies' financial responsibility. Franchise will apply to the policy in\nthe same way and for the same reasons as a deductible in case of claims below the\nthreshold, but in the event of a claim exceeding the franchise, the full amount of\nthe loss will be paid.54**D.** **Rating factors**The relevant elements that are used to add up the rates and make the rating plan\nare referred to as **rating factors** . Insurers use ‘rating factors’ to determine the risk\nand to decide the price they will charge. The Insurer uses his assessments to establish a base rate. The Insurer then adjusts this rate with discounts applied for positive featuressuch as superior fire protection on property risk and loadings applied for\nadverse features such as presence of inflammable materials in the premises. In Life Insurance the usual practice is to apply loading for adverse health,habits, heredity or occupational factors.**Key Terms**- Deductibles- Franchise**Answers to Test Yourself****Answer 1** - The correct option is I.**Answer 2** - The correct option is I.55## CHAPTER C-06## CLAIMS PROCESSING**Chapter Introduction**The insured get to taste the benefit of insurance only when they are affected by\nlosses. The entire insurance industry is sensitive to the losses faced by insured and\ntry to settle the claims that arise as amicably as possible and as fast as possible.After studying this chapter, you should be able to understand:1. Claims settlement2. Importance of claim procedures56**A.** **Loss Assessment and Claim settlement**Claims Assessment (Loss Assessment) is the process of determining whether the loss\nsuffered by the insured is covered by the insurance policy, i.e. the loss does not fall\nunder any exclusion and there is no breach of warranty.Settlement of claims has to be based on considerations of fairness. For an Insurancecompany, expeditious settlement of claim is the benchmark of efficiency for its\nservices. Each company has internal guidelines about time taken in claims\nprocessing, which its employees follow.This is generally known by the term “Turnaround time” (TAT). Some insurers have\nalso put in place, facility for the insured to check claim status online from time to\ntime. Some insurance companies have also set up claims hub for speedy processingof claims.**Important aspects in an insurance claim**Although most companies are bound by their TAT it is important for an agent to\nknow the aspects that are looked into for settling a claim. Six of the most important\naspects for Non-life claims are given below.i. Whether the loss causing event is within the scope of the policyii. Whether the insured has complied with his part of the policy conditionsiii. Compliance with warranties. The survey report would indicate whether or notwarranties have been complied with.iv. Observance of utmost good faith by the proposer, during the currency of thepolicy.v. On the occurrence of a loss, the insured is expected to act as if he is uninsured.In other words, he has a duty to take measures to minimise the loss.vi. Determination of the amount payable. The amount of loss payable is subject tothe sum insured. However, the amount payable will also depend upon the\nfollowing: The extent of the insured’s insurable interest in the property affected\n The value of salvage\n Application of underinsurance\n Application of contribution and subrogation conditionsIn the matter of claims relating to life insurance, the insurer checks whether1) Conditions of policy have not been breached\n2) Utmost good faith has been followed and\n3) No material facts have been concealed fraudulently.57**B.** **Categories of claim**Insurance Claims fall into the following categories:**i.** **Standard claims**These are claims which are clearly within the terms and conditions of the policy.\nThe assessment of claim is done keeping in view scope and the sum insured opted", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "C-06", "section": "Franchise:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_029", "metadata": {"file_size": 7099, "chunk_index": 29, "chunk_tokens": 1020, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Categories of claim", "Rating factors", "Chapter Introduction"]}}
{"chunk": "following: The extent of the insured’s insurable interest in the property affected\n The value of salvage\n Application of underinsurance\n Application of contribution and subrogation conditionsIn the matter of claims relating to life insurance, the insurer checks whether1) Conditions of policy have not been breached\n2) Utmost good faith has been followed and\n3) No material facts have been concealed fraudulently.57**B.** **Categories of claim**Insurance Claims fall into the following categories:**i.** **Standard claims**These are claims which are clearly within the terms and conditions of the policy.\nThe assessment of claim is done keeping in view scope and the sum insured opted\nfor and other methods of indemnity laid down for various classes of insurance.**ii.** **Condition of average or average clause**This is a condition in some policies which penalises the insured for insuring his\nproperty at a sum insured less than its actual value known as underinsurance. In the\nevent of a claim the insured gets an amount that is proportionately reduced fromhis actual loss in accordance to the amount underinsured. Such situations occurmore in the case of non-life insurance.**iii.** **Act of God perils - Catastrophic losses**Natural perils like storm, cyclone, flood, inundation, and earthquake are termed as\n“Act of God” perils. These perils may result in losses to many policies of insurer in\nthe affected region. Surveyors are appointed for assessment of certain categoriesof non-life insurance claims.In such major and catastrophic losses, the surveyor is asked to proceed to the loss\nsite immediately for an early assessment and loss minimisation efforts.\nSimultaneously, insurers’ officials also visit the scene of loss particularly when the\namount involved is large. The purpose of the visit is to obtain an immediate, on the\nspot idea of the nature and extent of loss.Preliminary reports are also submitted if the surveyors face some problems in\nregards to the assessment and may desire guidance and instructions from insurers\nwho are thus given an opportunity to discuss the issues with the insured, ifnecessary.**iv.** **On account payment**In Non-life insurance claims, apart from preliminary reports, interim reports may be\nsubmitted from time to time where repairs and/ or replacements are made over a\nlong period. Interim reports also give the insurer an idea of the development of\nassessment of loss. It also helps in recommendation of \"On account payment\" of the\nclaim if desired by the insured. This usually happens if the loss is large and the\ncompletion of assessment may take some time.If the claim is found to be in order, payment is made to the claimant and entries\nmade in the company records. Appropriate recoveries are made from the co-insurers\nand reinsurers, if any. In some cases, the insured may not be the person to whom\nthe money is to be paid.58**v.** **Discharge vouchers**Settlement of the claim is made only after obtaining a discharge under the policy.\nA sample of discharge receipt for claims (under personal accident insurance) for\ninjuries is worded along the following lines: (may vary from company to company)Name of the InsuredClaim No. Policy No.Received from the Company Ltd.The sum of Rs. ___________ in full and final settlement of compensation due\nto me/ us on account of injuries sustained by me/ us due to accident which\noccurred on or about the___________ I/ we give this discharge receipt to the\nCompany in full and final settlement of all my/ our claim present or future\narising directly or indirectly in respect of the said claim.Date (Signature)vi. **Post settlement action**The action taken after settlement of the non-life claim in relation to underwritingvaries from one class of business to another.**Example**Sum insured under a fire policy stands reduced to the extent of the amount of\nclaim paid. However, it can be reinstated on payment of pro-rata premium, which\nis deducted from the amount of claim paid.On payment of the capital sum insured under a personal accident policy, the policy\nstands cancelled.Similarly, payment of a claim under individual fidelity guarantee policy\nautomatically terminates the policy.**vii.** **Salvage**Salvage generally refers to damaged property. On payment of loss, the salvage\nbelongs to insurers.**Example**When motor claims are settled on total loss basis, the damaged vehicle is taken over\nby insurers. Salvage can also arise in other non-life insurances like fire claims,\nmarine cargo claims etc.Salvage is disposed of according to the procedure laid down by the companies for\nthe purpose. Surveyors, who have assessed the loss, will also recommend methods", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "r1", "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_030", "metadata": {"file_size": 7099, "chunk_index": 30, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Discharge vouchers", "On account payment", "Condition of average or average clause", "Example", "Act of God perils - Catastrophic losses"]}}
{"chunk": "arising directly or indirectly in respect of the said claim.Date (Signature)vi. **Post settlement action**The action taken after settlement of the non-life claim in relation to underwritingvaries from one class of business to another.**Example**Sum insured under a fire policy stands reduced to the extent of the amount of\nclaim paid. However, it can be reinstated on payment of pro-rata premium, which\nis deducted from the amount of claim paid.On payment of the capital sum insured under a personal accident policy, the policy\nstands cancelled.Similarly, payment of a claim under individual fidelity guarantee policy\nautomatically terminates the policy.**vii.** **Salvage**Salvage generally refers to damaged property. On payment of loss, the salvage\nbelongs to insurers.**Example**When motor claims are settled on total loss basis, the damaged vehicle is taken over\nby insurers. Salvage can also arise in other non-life insurances like fire claims,\nmarine cargo claims etc.Salvage is disposed of according to the procedure laid down by the companies for\nthe purpose. Surveyors, who have assessed the loss, will also recommend methods\nof disposal.**viii.** **Recoveries**After settlement of claims, the insurers under subrogation rights applicable to\ninsurance contracts, are entitled to the rights and remedies of the insured and to59recover the loss paid from a third party who may be responsible for the loss under\nrespective laws applicable. Thus, insurers can recover the loss from shipping\ncompanies, railways, road carriers, airlines, port trust authorities etc.**Example**In the case of non-delivery of consignment, the carriers are responsible for the loss.\nSimilarly, the port trust is liable for goods which are safely landed but subsequently\nmissing. For this purpose, a letter of subrogation duly stamped is obtained from theinsured before the settlement of the claim.**ix.** **Disputes related to claims**Despite best efforts, there could be delay in payment, non-payment (repudiation)\nof the claim, or the claim being admitted for a lesser amount, which might lead to\ndissatisfaction and dispute between Insurer and the insured.Apart from these, the most common reasons, to name a few are: Non-disclosure of material facts Lack of coverage Loss caused by excluded perils Lack of adequate sum insured Breach of warranty Issues regarding quantum due to underinsurance, depreciation, etc.All this could cause considerable grief to the insured at a time when he is already\nsuffering from financial constraints arising due to losses. In order to reduce his\nsufferings, grievance redressal and dispute handling procedures are well laid out in\nthe policy itself. Policies of fire or property have the condition of “Arbitration” in\nthe policy itself.**C.** **Arbitration**Arbitration is a method of settling disputes arising out of contracts. Arbitration is\ndone in accordance with the provisions of the Arbitration and Conciliation Act, 1996.\nThe normal method of enforcing a contract or settling a dispute there under would\nbe to go to a court of law. Such litigation, however, involves considerable delay and\nexpense. The Arbitration Act allows the parties to submit disputes under a contract\nto the more informal, less costly and private process of arbitration.Arbitration may be done by a single arbitrator or by more than one, chosen by the\nparties to the dispute themselves. In the event of a single arbitrator, the parties\nhave to agree about that person. Many commercial insurance policies contain an\n**arbitration clause** stating that disputes will be subject to arbitration. Fire and most\nmiscellaneous policies also contain an arbitration clause which provides that if the\nliability under the policy is admitted by the company, and there is a difference\nconcerning the quantum to be paid, such a difference must be referred to60arbitration. Normally the arbitrator’s decision is considered final and binding on\nboth the parties.The wording of the condition varies from policy to policy. Generally, it provides asfollows:i. The dispute is submitted to the decision of a single arbitrator to be appointedby the parties, or in the event of any disagreement between them upon\nappointment of a single arbitrator, to the decision of two arbitrators each\nappointed by the parties.ii. These two arbitrators shall appoint an Umpire, who presides at the meetings.The procedure during these meetings resembles that of a court of law. Each", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "o59", "section": "Post settlement action", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_031", "metadata": {"file_size": 7099, "chunk_index": 31, "chunk_tokens": 954, "has_examples": true, "has_tables": false, "key_concepts": ["Disputes related to claims", "Arbitration", "Example", "Salvage", "Post settlement action"]}}
{"chunk": "parties to the dispute themselves. In the event of a single arbitrator, the parties\nhave to agree about that person. Many commercial insurance policies contain an\n**arbitration clause** stating that disputes will be subject to arbitration. Fire and most\nmiscellaneous policies also contain an arbitration clause which provides that if the\nliability under the policy is admitted by the company, and there is a difference\nconcerning the quantum to be paid, such a difference must be referred to60arbitration. Normally the arbitrator’s decision is considered final and binding on\nboth the parties.The wording of the condition varies from policy to policy. Generally, it provides asfollows:i. The dispute is submitted to the decision of a single arbitrator to be appointedby the parties, or in the event of any disagreement between them upon\nappointment of a single arbitrator, to the decision of two arbitrators each\nappointed by the parties.ii. These two arbitrators shall appoint an Umpire, who presides at the meetings.The procedure during these meetings resembles that of a court of law. Each\nparty states his case, if necessary, with the help of a counsel and witnesses areexamined.iii. If the two arbitrators do not agree on a decision, the matter is submitted beforethe Umpire, who makes his award.iv. Costs are awarded at the discretion of the arbitrator/ arbitrators or Umpiremaking the award.Disputes relating to question of liability are to be settled through litigation.**Example**If the insurers contend that the loss is not payable because it is not covered under\nthe policy, the matter has to be decided by a Court of Law. Again, if the insurers\nrefuse to pay the claim on the ground that the policy is void because it was obtained\nthrough fraudulent non-disclosure of material facts (breach of the legal duty of\n‘utmost good faith’), the issue has to be resolved through litigation.**D.** **Other dispute resolution mechanisms**As per IRDAI regulations, all policies have to mention about the grievance redressalmechanism available to the insured in the event the insured is dissatisfied with theservice of the insurer for any reason.In case of claims under personal lines of business, a dissatisfied insured can\napproach Insurance Ombudsman. The procedure is discussed in detail in Chapter 9.\nThe Office details of Insurance Ombudsman are given in the policy. Decision of\nOmbudsman is binding on Insurer but not on insured.Matters like the financial authority and the limitations of Ombudsmen are also\ndiscussed in detail in Chapter 9.61**Test Yourself 1**Which of the following activities would not be categorised under professionalsettlement of claims?I. Seeking information relating to the cause of the loss\nII. Approaching the claim with a prejudice\nIII. Ascertaining whether the loss was a result of an insured peril\nIV. Quantifying the amount payable under the claim**Answers to Test Yourself****Answer 1** - The correct option is II.**Key Terms**Turn Around TimeSalvageRecoveriesClaims Assessment62## CHAPTER C-07## DOCUMENTATION**Chapter Introduction**In the insurance industry we deal with a large number of forms and documents.\nThese are required for the purpose of bringing clarity in the relationship between\nthe insured and the insurer. In this chapter, we shall deal with the various\ndocuments that are involved at the proposal stage and their significance.**After learning this Chapter you will be able to:**Understand proposal stage documentation and its importanceFamiliarize with the purposes of the ProspectusUnderstand the importance of the Proposal formAppreciate Anti-Money Laundering (AML), Know Your Customer (KYC) norms\nand the important documents, commonly applicable for practically all\npoliciesImportance of Age Proof and acceptable documents.63**A.** **Prospectus**Prospectus is a proposal stage document. The prospectus is a formal legal document\nused by insurance companies that provides details about the product. It can mean\na document issued by the insurer in physical, electronic or any other format to sell\nor promote insurance products. For this purpose, Insurance products would also\ninclude the add-on covers/ riders offered, if any. The prospectus is like an\nintroductory document which helps the prospective policyholder to get familiar with\nthe company’s products.As per IRDAI’s (Protection of Policyholders’ Interests) Regulations, 2017 the\nprospectus should contain all facts that are necessary for a prospective policyholder\nto make an informed decision regarding purchase of a policy. It should contain the\nfollowing for each plan of insurance:The Unique Identification Number (UIN) allotted by the Authority for the", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "o60", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_032", "metadata": {"file_size": 7099, "chunk_index": 32, "chunk_tokens": 989, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus", "Test Yourself 1", "Example", "After learning this Chapter you will be able to:"]}}
{"chunk": "and the important documents, commonly applicable for practically all\npoliciesImportance of Age Proof and acceptable documents.63**A.** **Prospectus**Prospectus is a proposal stage document. The prospectus is a formal legal document\nused by insurance companies that provides details about the product. It can mean\na document issued by the insurer in physical, electronic or any other format to sell\nor promote insurance products. For this purpose, Insurance products would also\ninclude the add-on covers/ riders offered, if any. The prospectus is like an\nintroductory document which helps the prospective policyholder to get familiar with\nthe company’s products.As per IRDAI’s (Protection of Policyholders’ Interests) Regulations, 2017 the\nprospectus should contain all facts that are necessary for a prospective policyholder\nto make an informed decision regarding purchase of a policy. It should contain the\nfollowing for each plan of insurance:The Unique Identification Number (UIN) allotted by the Authority for the\nconcerned insurance product- The extent of insurance coverThe Scope of benefits/ entitlements – guaranteed and non-guaranteedWarranties, exclusions/ exceptions of the insurance cover with explanations- The terms and conditions of the insurance coverDescription of the contingency or contingencies to be covered by insuranceThe class or classes of lives or property eligible for insurance under the terms\nof such prospectusWhether the plan is participative or non-participativeThe allowable Add-on covers (also called Riders in Life insurance) on the productand their benefits are also stated.Other important information which a Prospectus includes:1. Any differences in covers and premium. E.g. for different age groups or fordifferent entry ages\n2. Renewal terms of the policy\n3. Terms of cancellation of policy under certain circumstances\n4. The details of any discounts or loading applicable under differentcircumstances5. The possibility of any revision or modification of the terms of the policyincluding the premium\n6. Any incentives to reward policyholders for early entry, continued renewals,favourable claims experience etc. with the same insurer.\n7. Prospectus shall necessarily contain the product UIN allotted by IRDAI648. IRDAI Regulations mandate that Prospectus shall contain a copy of Section 41.This section prohibits any direct or indirect inducement to any person for\nbuying a new insurance, continuing or renewing any kind of insurance relating\nto lives or property in India, including any rebate of the whole or part of the\ncommission payable on the policy.In particular the prospectus informs the proposer about the availability of facilityfor nomination.**Test Yourself 1**Which of the following it not usually part of the insurance prospectus?I. Name of OmbudsmanII. Date of Scope of benefitsIII. The EntitlementsIV. The Exceptions**B.** **Proposal Form**The insurance policy is a legal contract between the insurer and the policyholder.\nAs required for any contract, it has a proposal and its acceptance.The “Proposal form” is the application document that is used for making a proposal.\nIt is a form to be filled in by the proposer in written or electronic or any other\nformat approved by the Authority. It contains all information required by the insurer\nto decide whether to accept or reject to cover the risk. In case the risk is accepted,\nthe insurer can on the basis of this information, decide the rates, terms and\nconditions of the cover to be granted.The Principle of Utmost Good Faith and the Duty of Disclosure of material\ninformation begin with the Proposal Form for insurance. The proposer must provide\nall information correctly and completely as this document becomes the basis of\ngranting insurance and any wrong or concealed information could result in denial ofclaim.This duty to disclose continues beyond the proposal stage even after finalizing the\ninsurance contract. That is, any material change that happens anytime during the\nperiod of insurance needs to be disclosed in non-life policies.Information collected from the Proposal Form during the course of solicitation of an\ninsurance policy or issuance of an insurance policy are confidential and should not\nbe shared with any third party. Where a proposal deposit is refundable to a prospect\nfor any reason, the same shall be refunded within 15 days from the date of\nunderwriting decision on the proposal.65As per IRDAI guidelines, it is the duty of the insurer to furnish to the insured, free\nof charge, within 30 days of the acceptance of a proposal, a copy of the proposal\nsubmitted by the Insured. The agent is expected to keep track of these timelines,\nfollow up internally and communicate with the prospect/ insured as and when", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "s5", "section": "A.", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_033", "metadata": {"file_size": 7099, "chunk_index": 33, "chunk_tokens": 957, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 1", "Prospectus", "Proposal Form"]}}
{"chunk": "conditions of the cover to be granted.The Principle of Utmost Good Faith and the Duty of Disclosure of material\ninformation begin with the Proposal Form for insurance. The proposer must provide\nall information correctly and completely as this document becomes the basis of\ngranting insurance and any wrong or concealed information could result in denial ofclaim.This duty to disclose continues beyond the proposal stage even after finalizing the\ninsurance contract. That is, any material change that happens anytime during the\nperiod of insurance needs to be disclosed in non-life policies.Information collected from the Proposal Form during the course of solicitation of an\ninsurance policy or issuance of an insurance policy are confidential and should not\nbe shared with any third party. Where a proposal deposit is refundable to a prospect\nfor any reason, the same shall be refunded within 15 days from the date of\nunderwriting decision on the proposal.65As per IRDAI guidelines, it is the duty of the insurer to furnish to the insured, free\nof charge, within 30 days of the acceptance of a proposal, a copy of the proposal\nsubmitted by the Insured. The agent is expected to keep track of these timelines,\nfollow up internally and communicate with the prospect/ insured as and when\nrequired by way of customer service.**a)** **Proposal Form - Details**The proposal form is first stage of documentation through which the insured informsthe insurer: Who he/ she is What kind of insurance he/ she needs Details of what he/ she wants to insure and For what period of time Details of the risk (E.g., for Life and Health insurances – details of health orany ailments suffered are to be given) Details would include the monetary value proposed on the subject matter ofinsurance and all **material facts** connected with the proposed insurance.In other words, the Proposal form collects details on the proposer’s identity such as\nname, father’s name, address and other identifying inputs. To determine the true\nidentity of their customers, documents like address proof, PAN card, photographs\netc. are collected with the proposal.In respect of Life and Health insurances, details of the proposers’ family members\n(including parents) indicating their longevity, status of health and ailments suffered\nby any of them are collected. Depending on the product, the medical details of the\nlife proposed for insurance, personal characteristics and his/ her personal history\nof disease may also be asked for.Details of the monetary value proposed on the subject matter of insurance and the\nmaterial facts connected with the proposed insurance would be collected for manylines of insurance.The insurance advisor’s recommendations including the reasons for such\nrecommendation may also be part of the proposal form. There would be a\ndeclaration that the recommended policy’s details have been fully explained to the\nproposer and the latter has acknowledged the same.A Proposal form may have the following Sections starting with details of the Insurer,\nthe Agent, the details of the product, the Sum Assured, the mode of payment of\npremiums etc. The form would also contain the signature of the proposer, as proof\nof the fact that he/ she has filled up the form and has submitted the proposal.66Other details asked for are the Proposer’s name, date of birth, contact details,\nmarital status, nationality, names of parents and spouse, educational qualifications,\nhabits and ID Proof, family particulars, employment details, bank details, name of\nnominee/ appointee; details of existing insurance and reasons for opting for the\npolicy.Depending on the Product, medical details of the life proposed for insurance,\npersonal characteristics and his/ her personal history of disease may be asked for.Aspects related to the personal financial planning of the life being proposed\nincluding his/ her work span, projected income and expenses, as well as needs for\nsavings and investment, health, retirement and insurance may also be enquiredabout.The Agents recommendations including the reasons for such recommendation may\nalso be part of the proposal form. In compliance to the IRDAI regulations mentioned\nabove, the Agent would make a declaration that the recommended policy’s details\nhave been fully explained to the proposer and the latter has acknowledged thesame.Proposal forms are printed by insurers usually with the insurance company’s name,\nlogo, address and the class/ type of insurance/ product that it is used for. It is\ncustomary for insurance companies to add a printed note in the proposal form,\nthough there is no standard format or practice in this regard.**b)** **Declaration in the Proposal Form**Insurance companies usually add a declaration at the end of the proposal form to\nbe signed by the proposer. This ensures that the insured takes the pain to fill up the\nform accurately and has understood the facts given therein, so that at the time of\na claim there is no scope for disagreements on account of misrepresentation of", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Proposal Form - Details", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_034", "metadata": {"file_size": 7099, "chunk_index": 34, "chunk_tokens": 1009, "has_examples": false, "has_tables": false, "key_concepts": ["Proposal Form - Details", "Declaration in the Proposal Form"]}}
{"chunk": "including his/ her work span, projected income and expenses, as well as needs for\nsavings and investment, health, retirement and insurance may also be enquiredabout.The Agents recommendations including the reasons for such recommendation may\nalso be part of the proposal form. In compliance to the IRDAI regulations mentioned\nabove, the Agent would make a declaration that the recommended policy’s details\nhave been fully explained to the proposer and the latter has acknowledged thesame.Proposal forms are printed by insurers usually with the insurance company’s name,\nlogo, address and the class/ type of insurance/ product that it is used for. It is\ncustomary for insurance companies to add a printed note in the proposal form,\nthough there is no standard format or practice in this regard.**b)** **Declaration in the Proposal Form**Insurance companies usually add a declaration at the end of the proposal form to\nbe signed by the proposer. This ensures that the insured takes the pain to fill up the\nform accurately and has understood the facts given therein, so that at the time of\na claim there is no scope for disagreements on account of misrepresentation of\nfacts. Such declaration converts the common law principle of utmost good faith to\na contractual duty of utmost good faith.**Example**Examples of such declarations are:‘I/ We hereby declare and warrant that the above statements are true and complete\nin all respects and that there is no other information which is relevant to the\napplication for insurance that has not been disclosed to you.’‘I/ We agree that this proposal and the declarations shall be the basis of the contract\nbetween me/ us and (insurer’s name).’67**Test Yourself 2**Which of the following is not relevant in respect of a Proposal form?I. Utmost Good-faith\nII. Amount expected to be claimed\nIII. Duty to Disclose material facts\nIV. Confidentiality of details given**Some examples of such notes are:**‘Non-disclosure of facts material to the assessment of the risk, providing misleading\ninformation, fraud or non-co-operation by the insured will nullify the cover under\nthe policy issued’.‘The company will not be on risk until the proposal has been accepted by the\nCompany and full premium paid’.**C.** **Know Your Customer (KYC) Norms****Anti-Money Laundering and KYC Norms**Money Laundering is the process by which criminals transfer funds to conceal the\ntrue origin and ownership of the proceeds of criminal activities. Money laundering\nprocesses are used by criminals to make funds obtained through illegal activities\nappear legal money. In the process, they try to cover up the criminal origin of the\nmoney and make it appear valid.Criminals attempt to use financial services, including banks and insurance, to\nlaunder their money. They make transactions using false identities, for example, by\npurchasing some form of insurance and then managing to withdraw that money and\nthen disappearing once their purpose is served. Governments across the world,\nincluding India constantly try to prevent such money laundering attempts.**Definition**Money laundering is the process of bringing illegal money into an economy by hiding\nits illegal origin so that it appears to be legally acquired. The Government of India\nlaunched the PMLA, 2002 to rein in money-laundering activities.The Prevention of Money Laundering Act (PMLA), 2002 came into effect from 2005\nto control money laundering activities and to provide for confiscation of property\nderived from money-laundering.The Anti-Money Laundering guidelines issued by IRDAI soon after have indicated\nsuitable measures to determine the true identity of customers requesting for\ninsurance services, reporting of suspicious transactions and proper record keeping\nof cases involving or suspected of involving money laundering. It is necessary to be68vigilant and ensure, right at the beginning of the contract that it is not intended to\nbe a tool for money laundering of any sort.The Prevention of Money Laundering Act, 2002 (PMLA) was been brought into force\nby the Government of India with effect from 1st July 2005. As per the Act, every\nbanking company, financial institution (which includes Insurance companies) and\nintermediary shall have to maintain a record of all the transactions prescribed under\nthe PMLA. Accordingly, IRDAI issued the Guidelines on Anti-Money laundering/\nCounter Financing of Terrorism (AML/ CFT) 31st March 2006.Know your customer is the process used by a business to verify the identity of their\nclients. Banks and insurers are increasingly demanding their customers provide\ndetailed information to prevent identity theft, financial fraud and money\nlaundering. The objective of KYC guidelines is to prevent financial institutions from\nbeing used by criminal elements for money laundering activities.Insurers, hence, need to determine the true identity of their customers. Agents", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e68", "section": "Declaration in the Proposal Form", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_035", "metadata": {"file_size": 7099, "chunk_index": 35, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Example", "Some examples of such notes are:", "Definition", "Declaration in the Proposal Form", "Test Yourself 2"]}}
{"chunk": "of cases involving or suspected of involving money laundering. It is necessary to be68vigilant and ensure, right at the beginning of the contract that it is not intended to\nbe a tool for money laundering of any sort.The Prevention of Money Laundering Act, 2002 (PMLA) was been brought into force\nby the Government of India with effect from 1st July 2005. As per the Act, every\nbanking company, financial institution (which includes Insurance companies) and\nintermediary shall have to maintain a record of all the transactions prescribed under\nthe PMLA. Accordingly, IRDAI issued the Guidelines on Anti-Money laundering/\nCounter Financing of Terrorism (AML/ CFT) 31st March 2006.Know your customer is the process used by a business to verify the identity of their\nclients. Banks and insurers are increasingly demanding their customers provide\ndetailed information to prevent identity theft, financial fraud and money\nlaundering. The objective of KYC guidelines is to prevent financial institutions from\nbeing used by criminal elements for money laundering activities.Insurers, hence, need to determine the true identity of their customers. Agents\nshould ensure that proposers submit the proposal form along with the following as\npart of the KYC procedure:i. Proof of identity – driving license, passport, voter ID card, PAN card,Photographs etc.ii. Proof of address – driving license, passport, telephone bill, electricity bill,bank passbook etc. Different documentation are prescribed for individuals,\ncorporates, partnership firms, trusts and foundationsiii. Income proof documents and financial status, esp. in case of high-valuetransactionsiv. Purpose of insurance contract**a)** **Age Proof – for Personal Lines**While dealing with person related insurances like Life, Health, Personal Accident,\netc. Insurance companies use age as an important factor to determine the risk\nprofile of the insured. In life business, as age assumes great importance, life insurers\nused to follow more detailed norms of age related documentation. [However, the\nGovernment, the Reserve Bank of India and the IRDAI are becoming stricter on\nfollowing KYC norms.]An important part of the underwriting process is admission of\nage, after verifying the proof of age.**i.** **Standard Age Proofs**There are two types of age proofs that insurers come across as evidence of\nage. Valid age proofs may be standard or non-standard. Standard **age proofs** are normally issued by a public authority, like birthcertificate issued by a municipality or other government body, school\nleaving certificate, passport etc.69 Non-standard, when a standard age proof is not available (not to beaccepted readily)Some documents considered as standard age proofs are:i. School or college certificateii. Birth certificate extracted from municipal recordsiii. Passportiv. PAN cardv. Service registervi. Identity card in case of defence personnelvii. Marriage certificate issued by appropriate authority**ii.** **Non-standard age proofs**When standard age proofs like the above are not available, the life insurer\nmay allow submission of a non-standard age proof. Some documents\nconsidered as non-standard age proofs are:i. Horoscopeii. Ration cardiii. An affidavit by way of self-declarationiv. Certificate from village panchayat**Test Yourself 3**Which of the following is not acceptable as valid Age Proof?I. Birth certificate extracted from municipal recordsII. Birth Certificate issued by Member of Legislative AssemblyIII. PassportIV. PAN Card**Answers to Test Yourself****Answer 1** -The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** – The correct option is II.**Summary**Prospectus is a formal legal document used by insurance companies that\nprovides details about the product.The application document used for making the proposal is commonly known as\nthe ‘proposal form’.70Some documents considered as standard age proofs include school or college\ncertificate, birth certificate extracted from municipal records etc.Insurers need to determine the true identity of their customers. KYC documents\nlike address proof, PAN card and photographs etc. need to be collected as a part\nof the KYC procedure.**Key Terms**1. Prospectus\n2. Proposal form\n3. Moral hazard\n4. Know your Customer (KYC)\n5. Age Proof\n6. Standard and non-standard age proofs\n7. Free-look period71## CHAPTER C-08## CUSTOMER SERVICE**Chapter Introduction**In this chapter you will learn the importance of customer service. You will learn the", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e68", "section": "Age Proof – for Personal Lines", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_036", "metadata": {"file_size": 7099, "chunk_index": 36, "chunk_tokens": 958, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Test Yourself 3"]}}
{"chunk": "**Answer 2** - The correct option is II.\n**Answer 3** – The correct option is II.**Summary**Prospectus is a formal legal document used by insurance companies that\nprovides details about the product.The application document used for making the proposal is commonly known as\nthe ‘proposal form’.70Some documents considered as standard age proofs include school or college\ncertificate, birth certificate extracted from municipal records etc.Insurers need to determine the true identity of their customers. KYC documents\nlike address proof, PAN card and photographs etc. need to be collected as a part\nof the KYC procedure.**Key Terms**1. Prospectus\n2. Proposal form\n3. Moral hazard\n4. Know your Customer (KYC)\n5. Age Proof\n6. Standard and non-standard age proofs\n7. Free-look period71## CHAPTER C-08## CUSTOMER SERVICE**Chapter Introduction**In this chapter you will learn the importance of customer service. You will learn the\nrole of agents in providing service to customers. You will also learn how tocommunicate and relate with customers.After studying this chapter, you should be able to:Understand the importance of customer service1. Describe quality of service2. Examine the importance of service in the insurance industry3. Discuss the role of an insurance agent in providing good service4. Explain the process of communication5. Demonstrate the importance of non-verbal communication6. Recommend ethical behaviour72**A.** **Customer Service – General concepts****1.** **Why Customer Service?**Customers are the most important part of any industry and no enterprise can afford\nto treat them indifferently. The role of customer service and relationships is\nimportant in the service sector and more so for insurance.Every enterprise has a goal to delight its customers. This can be explained by\nexamining how buying insurance differs from buying a car.A car can be seen, touched, test driven and experienced, whereas the Insurance of\nthe car is just a promise to pay if there is loss or damage to the car due to an\naccident. This promise is intangible – it cannot be seen, touched or experienced.While the customer of the car will be able to understand and experience the car\neasily, the customer of insurance can evaluate and experience the insurance\nprotection that he buys only when a loss happens and the insurance company settles\nthe claim. All customers do not get the chance to experience this. In insurance,\nwhen such a situation arises, if the service exceeds expectations, the customer\nwould be delighted.**2.** **Quality of service**It is necessary for insurance companies and their personnel, which includes their\nagents, to render high quality service and delight the customer.**But what is high quality service? What are its attributes?**The well-known SERVQUAL approach to service quality of Zeithaml, Parasuraman\nand Berry highlights 5 major indicators of service quality:**a)** **Reliability** : The ability to perform the promised service dependably andaccurately is considered the most important indicator of good service. It isthe foundation on which trust is built.**b)** **Responsiveness** : Refers to the willingness and ability of service personnel tohelp customers and provide prompt response to the customer’s needs. It may\nbe measured by indicators like speed, accuracy, and attitude while givingthe service.**c)** **Assurance** : Refers to the knowledge, competence and courtesy displayed byan employee or agent in understanding and meeting the needs of a customer,\nthus conveying trust and confidence.**d)** **Empathy** : Empathy is described as the human touch. It is reflected in thecaring attitude and individualised attention provided to customers.**e)** **Tangibles** : Represent physical environmental factors like location, layoutand cleanliness as also the sense of professionalism that a customer feels\nwhen contacting a service provider. First impressions last long.73**3.** **Customer service and insurance**Leading sales producers in the insurance industry state that the secret of reaching\nthe top and staying there is in getting the patronage and support of a large number\nof existing clients with whose help the business gets built. These clients are a source\nof commissions from renewal of existing contracts. These can be a valuable source\nfor acquiring new customers.One great mantra of success in insurance selling is to be able to convert one’s\ncustomers into one’s clients. Customers are those who buy a product. Clients, on\nthe other hand are people with whom an agent relates for life, who continue to buy\nfrom him/ her as also help and possibly, support him/ her in reaching out to and\nselling to other customers.Clients are built by working with deep commitment to serving one’s customers. To\nunderstand how keeping a customer happy benefits the agent and the company, one", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "d71", "section": "Answer 2", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_037", "metadata": {"file_size": 7099, "chunk_index": 37, "chunk_tokens": 996, "has_examples": true, "has_tables": false, "key_concepts": ["Answer 2", "Customer service and insurance", "Answer 3", "Reliability", "Chapter Introduction"]}}
{"chunk": "when contacting a service provider. First impressions last long.73**3.** **Customer service and insurance**Leading sales producers in the insurance industry state that the secret of reaching\nthe top and staying there is in getting the patronage and support of a large number\nof existing clients with whose help the business gets built. These clients are a source\nof commissions from renewal of existing contracts. These can be a valuable source\nfor acquiring new customers.One great mantra of success in insurance selling is to be able to convert one’s\ncustomers into one’s clients. Customers are those who buy a product. Clients, on\nthe other hand are people with whom an agent relates for life, who continue to buy\nfrom him/ her as also help and possibly, support him/ her in reaching out to and\nselling to other customers.Clients are built by working with deep commitment to serving one’s customers. To\nunderstand how keeping a customer happy benefits the agent and the company, one\nshould understand the concept of Customer’s Lifetime Value.**Customer Lifetime Value** may be defined as the sum of economic benefits that can\nbe derived from building a sound relationship with a customer over a long period oftime.**Diagram 1:** **Customer Lifetime Value**An agent who renders service and builds close relationships with her customers,\nbuilds goodwill and brand value, which helps in expanding the business.**Test Yourself 1**What is meant by customer lifetime value?I. Sum of costs incurred while servicing the customer over his lifetime\nII. Rank given to customer based on business generated\nIII. Sum of economic benefits that can be achieved by building a long termrelationship with the customerIV. Maximum insurance that can be attributed to the customer74**4.** **Customer Relationships and Service**While customer service is a key element in creating satisfied and loyal customers,\nit is also necessary to build a strong relationship with them. A Customer’s views\nabout an insurer depends on the service and relationships experience the insureroffers.What goes to make a healthy relationship? At its heart, of course, there is trust. At\nthe same time, there are other elements, which reinforce and promote that trust.Let us illustrate some of the elements.**Diagram 2:** **Elements for Trust**i. Every relationship begins with **attraction** : Attraction means being liked and beingable to build a rapport with the customer, starting with creating a great first\nimpression. Attraction is regarded the key to unlocking every heart. Without it a\nrelationship is hardly possible. A sales person cannot make much headway if he/\nshe is not liked by the customer.ii. The second element of a relationship is one’s presence, being there when needediii. **Communication:** Even if one is not fully present and unable to do full justice toall the expectations of one’s customers, one can still **maintain a strong**\n**relationship by communicating in a manner that is assuring, full of empathy**\n**and conveying a sense of responsibility.**The above dimensions of communication call for discipline and skills. They\nultimately reflect how one thinks and sees.Companies emphasise on customer relationship management, as the cost of\nretaining a customer is far lower than acquiring a new customer. A customer relation\nopportunity arises at various touch points e.g. while understanding customers\ninsurance needs, explaining coverage’s, handing over forms etc.**B.** **Insurance agent’s role in providing customer service.**Let us now consider how an agent can render great service to the customer. It is\nimportant to realise that from the moment a customer gets contacted by a sales\nperson to the final point of settlement of a claim, the customer goes on a journey\nof experience that we shall call the ‘ **Customer Journey’** . The agent needs to\npartner with the customer through the entire duration of the contract, hand holding75him/ her in each step of the journey to create memorable experiences at everystep.Let us look at some milestones in the journey and the role played at each step.**1.** **The Sale**It is said that selling is both an art and a science. It is a science because it calls for\na set process which, if consistently and properly followed, is likely to lead to\nsuccess. It is also an art in the sense that each sales person brings his or her\ndistinctive beliefs, style and personality into the process and the results depend on\nwhat each person puts into the process.- **Prospecting:** The Sales Process begins with **Prospecting**, which literally means\n‘searching’ for a prospective customer. Searching is important as ‘ _**One cannot**_\n_**find till one searches’,**_ it is the most important step in the process. An agent\ntypically begins with his or her natural market, made up of known and easily\napproachable people. The challenge lies in getting across to more networks of", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "r74", "section": "Customer service and insurance", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_038", "metadata": {"file_size": 7099, "chunk_index": 38, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["One cannot", "Customer service and insurance", "Customer Journey’", "Prospecting:", "Diagram 1:"]}}
{"chunk": "of experience that we shall call the ‘ **Customer Journey’** . The agent needs to\npartner with the customer through the entire duration of the contract, hand holding75him/ her in each step of the journey to create memorable experiences at everystep.Let us look at some milestones in the journey and the role played at each step.**1.** **The Sale**It is said that selling is both an art and a science. It is a science because it calls for\na set process which, if consistently and properly followed, is likely to lead to\nsuccess. It is also an art in the sense that each sales person brings his or her\ndistinctive beliefs, style and personality into the process and the results depend on\nwhat each person puts into the process.- **Prospecting:** The Sales Process begins with **Prospecting**, which literally means\n‘searching’ for a prospective customer. Searching is important as ‘ _**One cannot**_\n_**find till one searches’,**_ it is the most important step in the process. An agent\ntypically begins with his or her natural market, made up of known and easily\napproachable people. The challenge lies in getting across to more networks of\npeople who are outside one’s immediate circle – getting to know them and be\nknown by them.All the people one knows and approaches may not be proper candidates for\ninsurance or they may not be interested in buying. It is thus necessary to **qualify**\nthem so that one targets only those who are likely to buy insurance. The\nprospecting process becomes successful only when an agent is able to build\nstrong relationships with the prospect. The first task of any sales person is thus\nto **sell trust and build confidence.**_**Invite for an Interview:**_ While personal relationships are the foundation on\nwhich insurance business is built, it is necessary to convert the goodwill one\nearns into a sale. This begins when the sales person sets up a formal appointment\nfor a detailed sales interview. This step is critical for establishing one’s\nprofessional credentials and also to separate business from casual discussions.- _**Determining the needs and recommending the Solution:**_ The heart of the Sales\nInterview is the steps wherein the sales agent determines and makes the\nprospective customer aware about the exact needs for which insurance is a\nsolution. A master sales person is distinguished by his/ her skill in guiding a\nprospect, through asking gentle questions, to understand the gaps in protection\nthat give rise to the needs for insurance.The Agent has the responsibility to provide _Best Advice_ to the Prospect about the\nright kind of insurance solutions to meet his/ her needs. Firstly one must determine\nand make the prospective customer aware about the exact needs for which\ninsurance is a solution. This also includes giving proper advice on the amount of\ninsurance to be purchased. For example the amount of life insurance to be76purchased by an individual needs to be linked to his/ her income and paying\ncapacity.It is also important to keep a basic percept in mind, especially when buying non-life\ninsurance: Do not recommend insuring where the risk can be managed otherwise.Whether insurance is needed or not, depends on the circumstances. If the premium\npayments are high compared to the loss involved, it may be advisable to just bear\nthe risk. On the other hand, if the loss consequences of a risk are likely to be severe,\nit is wise to insure against it.**Example**To a homeowner living in a flood prone area, purchasing an add-on cover against\nfloods would prove to be helpful. On the other hand, if the home owner owns a\nhome at a place where the risk of floods is negligible it may not be necessary toobtain such cover.Many customers may not be much concerned about getting maximum insurance per\nrupee spent, but would be interested in **reducing the cost of handling risk** . The\nconcern would be thus on identifying those risks which a customer cannot retainand hence must be insured.The agent becomes successful when he/ she renders best advice. The agent needs\nto constantly ask himself/ herself about his/ her role vis-à-vis the customer. He/\nshe should go to the customer not just to get a sale but to relate to the customer\nas a coach and partner who can help him/ her to manage his/ her risks more\neffectively?_**Handling Objections and Closing the Sale:**_ It may not be enough to give best\nadvice and recommendations to a customer about the right products to buy. One\nalso needs to persuade him/ her to take the decision to buy. Quite often the\ncustomer may have a number of questions and may raise objections that need\nto be addressed before he/ she decides to commit to the purchase. Whilst\nhandling these objections, it is vitally important to understand that the", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "g75", "section": "Customer Journey’", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_039", "metadata": {"file_size": 7099, "chunk_index": 39, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["One cannot", "Customer Journey’", "Prospecting:", "Example", "Prospecting"]}}
{"chunk": "home at a place where the risk of floods is negligible it may not be necessary toobtain such cover.Many customers may not be much concerned about getting maximum insurance per\nrupee spent, but would be interested in **reducing the cost of handling risk** . The\nconcern would be thus on identifying those risks which a customer cannot retainand hence must be insured.The agent becomes successful when he/ she renders best advice. The agent needs\nto constantly ask himself/ herself about his/ her role vis-à-vis the customer. He/\nshe should go to the customer not just to get a sale but to relate to the customer\nas a coach and partner who can help him/ her to manage his/ her risks more\neffectively?_**Handling Objections and Closing the Sale:**_ It may not be enough to give best\nadvice and recommendations to a customer about the right products to buy. One\nalso needs to persuade him/ her to take the decision to buy. Quite often the\ncustomer may have a number of questions and may raise objections that need\nto be addressed before he/ she decides to commit to the purchase. Whilst\nhandling these objections, it is vitally important to understand that the\nobjections being voiced may reflect underlying concerns that need to beidentified and resolved.In sum, the role of an insurance agent is more than that of a mere sales person. He/\nshe also **needs to be a risk assessor, underwriter, risk management counsellor,**\n**designer of customised solutions and a relationship builder** (who thrives on\nbuilding trust and long-term relationships), all rolled into one.**2.** **The Proposal stage**The agent has to support the customer in filling out the proposal for insurance. The\ninsured is required to take responsibility for the statements made therein. The\nsalient aspects of a proposal form have been discussed in a later chapter.77The agent should explain and clarify to the proposer the details to be filled as\nanswers to each of the questions in the proposal form. A failure to give proper and\ncomplete information can jeopardise the customer’s claim.Sometimes, if additional information is required to complete the policy, the\ncompany may inform the customer directly or through the agent/ advisor. The agent\nshould help the customer in completing such formalities, explaining why they arenecessary.IRDAI (Issuance of e-Insurance Policies) Regulations, 2016, provide for e – Proposal\nforms that are similar to the physical proposal form and having a provision to the\nProspect to give his consent to the proposal, which can be validated by one time\npassword (mobile phone OTP).**3.** **Acceptance stage****a)** **Cover notes/ Certificates of Insurance**After underwriting is completed it may take some time before the policy is issued.\nPending the preparation of the policy or when the negotiations for insurance are\nin progress and it is necessary to provide cover on a provisional basis or when the\npremises are being inspected for determining the actual rate applicable, a cover\nnote is issued to confirm protection under the policy.As Cover notes and Certificates of Insurance are used predominantly in marine\nand motor classes of business, cover note is discussed in detail under the GeneralInsurance Section.It is the agent’s responsibility to ensure that the cover note is issued by the\ncompany, where applicable, to the insured. Promptness in this regardcommunicates to the client that his/ her interests are safe in the hands of theagent and the company.**b)** **Policy Document**The policy is a formal document which provides an evidence of the contract of\ninsurance. This document has to be stamped in accordance with the provisions\nof the Indian Stamp Act, 1899. The insurer is duty bound to give the policydocument to the insured.**4.** **Premium Payment****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance.A good agent takes active interest in ensuring that the insured pays the premium\nfor taking or continuing or renewing his policy and the customer is made aware\nof various options available for payment of premium.78**5.** **Method of payment of premium**The premium to be paid by any person proposing to take an insurance policy or by", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Handling Objections and Closing the Sale:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_040", "metadata": {"file_size": 7099, "chunk_index": 40, "chunk_tokens": 891, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Document", "Handling Objections and Closing the Sale:", "Premium", "Acceptance stage", "Cover notes/ Certificates of Insurance"]}}
{"chunk": "and motor classes of business, cover note is discussed in detail under the GeneralInsurance Section.It is the agent’s responsibility to ensure that the cover note is issued by the\ncompany, where applicable, to the insured. Promptness in this regardcommunicates to the client that his/ her interests are safe in the hands of theagent and the company.**b)** **Policy Document**The policy is a formal document which provides an evidence of the contract of\ninsurance. This document has to be stamped in accordance with the provisions\nof the Indian Stamp Act, 1899. The insurer is duty bound to give the policydocument to the insured.**4.** **Premium Payment****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance.A good agent takes active interest in ensuring that the insured pays the premium\nfor taking or continuing or renewing his policy and the customer is made aware\nof various options available for payment of premium.78**5.** **Method of payment of premium**The premium to be paid by any person proposing to take an insurance policy or by\nthe policyholder to an insurer may be made in any one or more of the followingmethods:a) Cashb) Any recognised banking negotiable instrument such as cheques, demanddrafts, pay order, banker’s cheques drawn on any schedule bank in India;c) Postal money order;d) Credit or debit cards;e) Bank guarantee or cash deposit;f) Internet;g) E-transferh) Direct credits via standing instruction of proposer or the policyholder or thelife insured through bank transfers;i) Any other method or payment as may be approved by the Authority fromtime to time;As per IRDA Regulations, in case the proposer/ policyholder opts for premium\npayment through net banking or credit/ debit card, the payment must be made\nonly through net banking account or credit/ debit card issued on the name of\nsuch proposer/ policyholder.**6.** **Service after issuance of Policy Document and Receipt for Premium**Once the premium is paid by the customer, the insurer is bound to issue a\nreceipt. A receipt is also to be issued even in case the premium is paid inadvance.The agent may approach the insured and enquire whether the Policy Document\nhas been received from the insurance company. It presents a great opportunity\nfor the agent to connect with the customer. The agent will be able to clear any\ndoubts and also explain the various policy provisions and policy holders’ rights\nand privileges. This demonstrates commitment to the customer and provides an\nopportunity to pledge continued support and service. One should also inform the\ncustomer about the free-look period provision, during which period, the policy\ncan be returned and refund of premium obtained.If the policy being purchased is an Electronic insurance policy, the agent can\nhelp the Customer to open an e-Insurance Account (e-I-A), through the\nRegistered Insurance Repository.79This also paves the way for the next step which is to ask the customer for the\nnames and particulars of other individuals he/ she knows, who can possibly\nbenefit from the agent’s services. It would be even better if the client itself\ncontacted these people and introduced the agent to them.**7.** **Policy Renewal**Most general Insurance policies have to be renewed each year. For general\ninsurance policies, at the time of each renewal, the customer has a choice to\ncontinue insuring with the same company or switch to another company. In case\nof Life Insurance, a policy would continue to be in force when the customer pays\nthe premium at regular intervals based on premium payment term. This does\nnot apply to one-time payments.General Insurers usually send a Renewal Notice, well in advance of the date of\nexpiry of the premium paying period, inviting renewal of the policy.The customer’s choice to renew or continue with the policy may often depend\non the trust and goodwill created by the agent and company and the agent needs\nto be in touch to remind the customer about the renewal or continuity of policywell before the due date.High producer agents constantly keep in touch with their clients, and win their\ntrust and loyalty through various acts of service and relationships – like greeting\ntheir clients on various occasions like festivals or family events and being with\nthem to share their joys and sorrows.**8.** **The claim stage**The crucial test comes at the time of claim settlement. The agent must ensure\nthat the incident giving rise to the claim is immediately informed to the insurer\nand that the customer carefully follows all the formalities. The agent may also\nassist in all the investigations that may need to be done to assess the loss. A\ngood agent assists the customers or his representatives in fulfilling the claim", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Policy Document", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_041", "metadata": {"file_size": 7099, "chunk_index": 41, "chunk_tokens": 991, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Document", "Premium", "Premium Payment", "The claim stage", "Method of payment of premium"]}}
{"chunk": "the premium at regular intervals based on premium payment term. This does\nnot apply to one-time payments.General Insurers usually send a Renewal Notice, well in advance of the date of\nexpiry of the premium paying period, inviting renewal of the policy.The customer’s choice to renew or continue with the policy may often depend\non the trust and goodwill created by the agent and company and the agent needs\nto be in touch to remind the customer about the renewal or continuity of policywell before the due date.High producer agents constantly keep in touch with their clients, and win their\ntrust and loyalty through various acts of service and relationships – like greeting\ntheir clients on various occasions like festivals or family events and being with\nthem to share their joys and sorrows.**8.** **The claim stage**The crucial test comes at the time of claim settlement. The agent must ensure\nthat the incident giving rise to the claim is immediately informed to the insurer\nand that the customer carefully follows all the formalities. The agent may also\nassist in all the investigations that may need to be done to assess the loss. A\ngood agent assists the customers or his representatives in fulfilling the claim\nlodgement formalities quickly, correctly and completely.**Test Yourself 2**Identify the scenario where a debate on the need for insurance is not required.I. Property insurance\nII. Business liability insurance\nIII. Motor insurance for third party liabilityIV. Fire insurance80**C.** **Communication skills in customer service**An agent needs to possess soft skills for effective performance in the work place.S **oft skills relate to one’s ability to interact effectively with others, both at work**\n**and outside. Communication skills are the most important of these soft skills.****1.** **Process of communication**What is communication?All communications require a sender, who sends a message, and a person who\nreceived that message. The process is complete once the receiver has understood\nthe message of the sender.**Diagram 3:** **Forms of communication**Communication may be face to face, over the phone, or by mail or internet. It may\nbe formal or informal. Whatever the content or form of the message or the media\nused, the effectiveness of communication depends on whether or not the recipient\nhas understood what was sought to be communicated.Since an insurance policy is essentially a promise, it is important that what is\npromised by the insurer is clearly understood by the insured. The agent as an\nintermediary has to not only provide complete, accurate and unambiguous account\nof the terms of the insurance to the customer, but also seek and clarify doubts or\nqueries that a customer may have.**2.** **Barriers to effective communication**Different kinds of barriers to effective communication can arise at each step in the\nabove process, due to which communication can get distorted. The challenge is to\nvisualize, understand and remove the barriers.**Test Yourself 3**What does not go on to make a healthy relationship?I. AttractionII. TrustIII. CommunicationIV. Dislike81**D.** **Non-verbal Communication**Let us now look at some concepts that the agent needs to understand.**Important****1.** **Making a great first impression**The prospect judges an agent based on his appearance, body language, mannerisms,\ndress and speech. As attraction is the first pillar of a relationship and first\nimpressions last long, some tips for making a good first impression are given below:**i.** **Be on time always** . Plan to arrive a few minutes early, allowing flexibilityfor all kinds of possible delays.**ii.** **Present yourself appropriately** . The appearance should to create the right first impression\n The dress must be appropriate for the meeting or occasion\n The look must be clean and tidy – with good haircut and shave, clean andtidy clothes, neat and tidy make up**iii.** **A warm, confident and winning smile** puts a person and his/ her audienceimmediately at ease with one another.**iv.** **Being open, confident and positive** body language must project confidence and self-assurance stand tall, smile, make eye contact, greet with a firm handshake remain positive even in the face of some criticism or when the meeting isnot going as well as expected**v.** **Interest in the other person** - The most important thing is about beinggenuinely interested in the other person. Take some time to find out about the customer as a person Be caring and attentive to what he or she says Be totally present and available to your customer Not engaging in one’s mobile phone during the interview?**2.** **Body language**Body language refers to movements, gestures, facial expressions. The way we talk,", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e80", "section": "The claim stage", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_042", "metadata": {"file_size": 7099, "chunk_index": 42, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Being open, confident and positive", "Making a great first impression", "A warm, confident and winning smile", "Non-verbal Communication", "Barriers to effective communication"]}}
{"chunk": " The dress must be appropriate for the meeting or occasion\n The look must be clean and tidy – with good haircut and shave, clean andtidy clothes, neat and tidy make up**iii.** **A warm, confident and winning smile** puts a person and his/ her audienceimmediately at ease with one another.**iv.** **Being open, confident and positive** body language must project confidence and self-assurance stand tall, smile, make eye contact, greet with a firm handshake remain positive even in the face of some criticism or when the meeting isnot going as well as expected**v.** **Interest in the other person** - The most important thing is about beinggenuinely interested in the other person. Take some time to find out about the customer as a person Be caring and attentive to what he or she says Be totally present and available to your customer Not engaging in one’s mobile phone during the interview?**2.** **Body language**Body language refers to movements, gestures, facial expressions. The way we talk,\nwalk, sit and stand, all says something about us, and what is happening inside us.It is often said that people listen to only a small percentage of what is actually said.\nWhat we don’t say may speak a lot more about us in a louder way. Obviously, one\nneeds to be very careful about one’s body language.82**a)** **Confidence**Here are a few tips about how to appear confident and self-assured, giving the\nimpression of someone to be seriously listened to: Posture – standing tall with shoulders held back. Solid eye contact - with a \"smiling\" face Purposeful and deliberate gestures**b)** **Trust** Quite often, a sales person’s words fall on deaf ears because the audiencedoes not trust him/ her – his/ her body language does not give the assurance\nthat he/ she is sincere about what he/ she says**3.** **Listening skills**The third set of communication skills that one needs to be aware about and cultivateare listening skills. These follow from a well-known principle of personal\neffectiveness – ‘first try to understand before being understood’.Active listening calls for: Allowing the speaker to finish each point before asking questions Not interrupting the speaker with any counter arguments This may require that we reflect on the message and ask questions to clarifywhat was said Another way to provide feedback is to summarize the speaker’s words andrepeat it back to him or her periodically or at the end of the conversation.**Let us look at the skills required for active listening:****a)** **Demonstrating that one is listening:** For instance one may: Give an occasional nod and smile Adopt a posture that is open and draws out the other to speak freely Have small verbal comments like \"I understand\", \"I see\", \"yes\" and \"uh\".**b)** **Paying attention**One needs to give the speaker one’s undivided attention, and acknowledge him.\nSome aspects of paying attention are as follows:Look at the speaker directly Put aside distracting thoughts Don't mentally prepare a rebuttal83 Avoid all external distractions [for instance, keep your mobile on silentmode] \"Listen\" to the speaker's body language**c)** **Removing filters:**A lot of what we hear may get distorted by one’s personal filters, like the\nassumptions, judgments, and beliefs one carries.**Not being judgemental: If the listener is judgemental,** even if he hears what\nthe speaker is saying, he will understand only according to his biased\ninterpretation.**d)** **Empathetic listening:****Empathy implies hearing and listening patiently, and with full attention, to**\n**what the other person has to say, even when one does not agree with it. It**\n**is important to show the speaker acceptance, not necessarily agreement.****e)** **Responding appropriately:**Active listening implies much more than just hearing what a speaker says. The\ncommunication can be completed only when the listener responds in some way,\nthrough word or action. Certain rules need to be followed for ensuring that the\nspeaker is not put down but treated with respect.These include: Being candid, open, and honest in your response Asserting one’s opinions respectfully Treating another person in a way, one would like oneself to be treated**Example****Asking for clarity** – “I realize that we have not been able to clear about the benefits", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "l83", "section": "A warm, confident and winning smile", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_043", "metadata": {"file_size": 7099, "chunk_index": 43, "chunk_tokens": 992, "has_examples": true, "has_tables": false, "key_concepts": ["Paying attention", "Being open, confident and positive", "A warm, confident and winning smile", "Removing filters:", "Interest in the other person"]}}
{"chunk": "assumptions, judgments, and beliefs one carries.**Not being judgemental: If the listener is judgemental,** even if he hears what\nthe speaker is saying, he will understand only according to his biased\ninterpretation.**d)** **Empathetic listening:****Empathy implies hearing and listening patiently, and with full attention, to**\n**what the other person has to say, even when one does not agree with it. It**\n**is important to show the speaker acceptance, not necessarily agreement.****e)** **Responding appropriately:**Active listening implies much more than just hearing what a speaker says. The\ncommunication can be completed only when the listener responds in some way,\nthrough word or action. Certain rules need to be followed for ensuring that the\nspeaker is not put down but treated with respect.These include: Being candid, open, and honest in your response Asserting one’s opinions respectfully Treating another person in a way, one would like oneself to be treated**Example****Asking for clarity** – “I realize that we have not been able to clear about the benefits\nof some of our health plans. Could you help us by asking us your doubts?”**Paraphrasing the speaker’s exact words** – “So, you are saying that ‘our health plans\nare not attractive enough’ – Have I understood you correctly?”**Test Yourself 4**Which among the following is not an element of active listening?I. Paying good attention\nII. Being extremely judgemental\nIII. Empathetic listening\nIV. Responding appropriately84**E.** **Ethical Behavior**In recent years, there are many reports of improper conduct, and serious concerns\nhave been raised about ethical behaviour in business causing betrayal of trust.This has led to discussions about concepts like accountability, corporate\ngovernance, and treating customers fairly in insurance, which form part of “Ethics”in business.It is not wrong to look after one’s interests. But it is wrong to do so at the cost ofthe interests of others. Unethical behaviour arises when there is no concern forothers and there is high concern for oneself.**Insurance is a business of trust** . Breach of trust amounts to cheating. When wrong\ninformation is given to prospects tempting them to buy insurance, or if the insurance\ngiven does not cater to the specific needs of the prospect, things go wrong.The Code of Ethics spelt out by the IRDAI in various regulations are directed towards\nethical behaviour. It is not enough just to know the code. What is more important\nfor the insurers and their representatives is to always keep the interests of the\nprospect/ policy holder as primary.**Characteristics:** Some characteristics of ethical behaviour are:a) Placing the best interests of the client above one’s own direct or indirectbenefitsb) Holding in strictest confidence and considering as privileged, all business andpersonal information pertaining to client’s affairsc) Making full and adequate disclosure of all facts to enable clients make informeddecisionsThere could be a likelihood of ethics being compromised in the following situations:a) Having to choose between two plans, one giving much less premium orcommission than the otherb) Temptation to recommend discontinuance of an existing policy and taking out anew onec) Being aware of circumstances that, if known to the insurer, could adverselyaffect the interests of the client or the beneficiaries of the claim.**Test Yourself 5**Which among the following is not a characteristic of ethical behaviour?\nI. Making adequate disclosures to enable the clients to make an informed decision\nII. Maintaining confidentiality of client’s business and personal information\nIII. Placing self-interest ahead of client’s interests\nIV. Placing client’s interest ahead of self interest85**Summary**a) The role of customer service and relationships is far more critical in the case ofinsurance than in other products.b) Five major indicators of service quality include reliability, responsiveness,assurance, empathy and tangibles.c) Customer lifetime value may be defined as the sum of economic benefits thatcan be derived from building a sound relationship with a customer over a long\nperiod of time.d) The role of an insurance agent in the area of customer service is absolutelycritical.e) Active listening involves paying attention, providing feedback and respondingappropriately.f) Ethical behaviour involves placing the customer’s interest before one’s own.**Key terms**a) Quality of serviceb) Empathyc) Body languaged) Active listeninge) Ethical behavior**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "y84", "section": "Not being judgemental: If the listener is judgemental,", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_044", "metadata": {"file_size": 7099, "chunk_index": 44, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Ethical Behavior", "Paraphrasing the speaker’s exact words", "Insurance is a business of trust"]}}
{"chunk": "II. Maintaining confidentiality of client’s business and personal information\nIII. Placing self-interest ahead of client’s interests\nIV. Placing client’s interest ahead of self interest85**Summary**a) The role of customer service and relationships is far more critical in the case ofinsurance than in other products.b) Five major indicators of service quality include reliability, responsiveness,assurance, empathy and tangibles.c) Customer lifetime value may be defined as the sum of economic benefits thatcan be derived from building a sound relationship with a customer over a long\nperiod of time.d) The role of an insurance agent in the area of customer service is absolutelycritical.e) Active listening involves paying attention, providing feedback and respondingappropriately.f) Ethical behaviour involves placing the customer’s interest before one’s own.**Key terms**a) Quality of serviceb) Empathyc) Body languaged) Active listeninge) Ethical behavior**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is III.86## CHAPTER C-09## GRIEVANCE REDRESSAL MECHANISM**Chapter Introduction**Insurance industry is essentially a service industry where customer expectations are\nconstantly rising. There is dissatisfaction with the standard of services. Despite\ncontinuous product innovation and significant improvement in the level of customer\nservice, aided by use of modern technology, the industry suffers badly in terms of\ncustomer dissatisfaction and poor image. The Government and the regulator have\ntaken a number of initiatives to improve the situation.IRDAI Regulations on Protection of Policyholders’ Interests 2017 mandate that every\nInsurer shall have their own board approved policy for protection of policyholders’\ninterests which shall includei. Service parameters including turnaround times for various services rendered.\nii. Procedure for speedy resolution of complaints.**Learning Outcomes**87**A.** **Grievance Redressal**The time for high priority action is when the customer has a complaint. Remember\nthat in the case of a complaint, the customer is angry due to a failure of service.\nThis is only a part of the story.Many times, Customers get upset because they understand the situation wrongly.\nAll service failures causes two types of feelings:1. A feeling that the insurer was unfair (a feeling of being cheated)2. A feeling of hurt ego (being made to look and feel small)The customers want to feel valued and human touch is critical in this situation. Asa professional insurance advisor first of all, the agent would not allow such a\ncomplaint situation to happen. He would take up the matter with the appropriate\nofficer of the company.A complaint is a crucial “ **moment of truth** ” in the customer relationship. If the\nagent/ company can use the situation to clarify the position, the situation can\nactually improve customer loyalty.**Remember, no one else in the company has ownership of the client’s problems**\n**as much as an agent does** .Complaints/ grievances give us the chance to show how much we care for the\ncustomer’s interests. They are in fact the pillars on which an insurance agent builds\ngoodwill and business. **Word of mouth publicity (Good/ Bad) plays a significant**\n**role in selling and servicing** .The procedure for grievance redressal is detailed at the end of every policy\ndocument. This should be bought to the notice of customers. As per the regulations,\nany grievance of a policy holder should be first referred to the Insurer’s Grievance\nCell. If it is not satisfactorily resolved, the complainant may approach the Regulator\nthrough the Integrated Grievance Management System.**B.** **Integrated Grievance Management System (IGMS)**Each Insurer has its own grievance redressal mechanism. All operating/ controlling/\ncorporate offices of Insurance companies have Grievance Redressal Officers. A\npolicyholder can approach them directly for any grievance.IRDAI has launched an Integrated Grievance Management System (IGMS) which acts\nas an online consumer complaints registration system. Insurers have to register all\ngrievances that they receive in the system which is integrated with IGMS of IRDAI.\nIGMS helps IRDAI in monitoring grievance redress in the industry and also acts as a\ncentral repository of insurance grievance data.Policyholders can approach the respective insurer first for any grievance. If he does\nnot receive any response from the insurer or if the response/ resolution received is88not to his satisfaction, he can approach the Regulator under the IGMS. The\ncomplaint registration process involves two steps – (i) Registering oneself by", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "t85", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_045", "metadata": {"file_size": 7099, "chunk_index": 45, "chunk_tokens": 1006, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Grievance Redressal", "Answer 3", "Chapter Introduction"]}}
{"chunk": "Cell. If it is not satisfactorily resolved, the complainant may approach the Regulator\nthrough the Integrated Grievance Management System.**B.** **Integrated Grievance Management System (IGMS)**Each Insurer has its own grievance redressal mechanism. All operating/ controlling/\ncorporate offices of Insurance companies have Grievance Redressal Officers. A\npolicyholder can approach them directly for any grievance.IRDAI has launched an Integrated Grievance Management System (IGMS) which acts\nas an online consumer complaints registration system. Insurers have to register all\ngrievances that they receive in the system which is integrated with IGMS of IRDAI.\nIGMS helps IRDAI in monitoring grievance redress in the industry and also acts as a\ncentral repository of insurance grievance data.Policyholders can approach the respective insurer first for any grievance. If he does\nnot receive any response from the insurer or if the response/ resolution received is88not to his satisfaction, he can approach the Regulator under the IGMS. The\ncomplaint registration process involves two steps – (i) Registering oneself by\nentering one’s policy details and (ii) Registering one’s complaints and viewing the\nstatus of the complaints. Complaints are then forwarded to the respective insurance\ncompanies and IRDAI facilitates disposal of Grievances.IGMS tracks complaints and the time taken for their redressal. The complaints can\nbe registered at the following URL: http://www.policyholder.gov.in/Integrated_\nGrievance_Management.aspx**C.** **Consumer Protection****The Consumer Protection Act, 2019:** This original Act of 1986 was passed _“to_\n_provide for better protection of the interest of consumers and to make provision_\n_for the establishment of consumer councils and other authorities for the_\n_settlement of consumer’s disputes”_ . The Act was amended by the Consumer\nProtection (Amendment) Act, 2002 and later on 2019.Some definitions provided in\nthe Act are as follows:“ **Service** ” means service of any description which is made available to potential\nusers and includes the provision of facilities in connection with banking, financing,\n**insurance**, transport, processing, supply of electrical or other energy, board or\nlodging or both, housing construction, entertainment, etc. **Insurance is included as**\n**a service.** However, “Service” does not include the rendering of any service free of\ncharge or under a contract of personal service.“ **Consumer** ” means any person who Buys goods for a consideration. It includes any user of such goods. (It does notinclude a person who obtains such goods for resale or for any commercial\npurpose) or\n Hires or avails of any services for a consideration. It includes the beneficiary ofsuch services. (It does not include any person who avails of such service for any\ncommercial purpose.)“ **Defect** ” means any fault, imperfection, shortcoming, inadequacy in the quality,\nnature and manner of performance which is required to be maintained by or under\nany law or has been undertaken to be performed by a person in pursuance of a\ncontract or otherwise in relation to any service.**“Complaint”** means any allegation in writing made by a complainant that: an unfair trade practice or restrictive trade practice has been adopted\n the goods bought by him suffer from one or more defects\n the services hired or availed of by him suffer from deficiency in any respect\n price charged is in excess of that fixed by law or displayed on package\n goods which will be hazardous to life and safety when used are being offeredfor sale to the public in contravention of the provisions of any law requiring\ntrader to display information in regard to the contents, manner and effect of\nuse of such goods.“ **Consumer dispute** ” means a dispute where the person against whom a complaint\nhas been made, denies and disputes the allegations contained in the complaint.89**D.** **Consumer** **disputes redressal agencies**Consumer disputes redressal agencies are established at district, state and national\nlevels.**i.** **District Consumer Disputes Redressal Commission** The District Consumer Disputes Redressal Commission (District Commission),has jurisdiction to entertain complaints, where value of the goods or services\ndoes not exceed Rs. 1 crore. The District Commission has the powers of a civil\ncourt.**ii.** **State Consumer Disputes Redressal Commission** The State Consumer Disputes Redressal Commission (State Commission) hasoriginal jurisdiction to entertain complaints where the value of goods/ service", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "s88", "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_046", "metadata": {"file_size": 7099, "chunk_index": 46, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Consumer", "Integrated Grievance Management System (IGMS)", "Defect", "Consumer dispute", "State Consumer Disputes Redressal Commission"]}}
{"chunk": " price charged is in excess of that fixed by law or displayed on package\n goods which will be hazardous to life and safety when used are being offeredfor sale to the public in contravention of the provisions of any law requiring\ntrader to display information in regard to the contents, manner and effect of\nuse of such goods.“ **Consumer dispute** ” means a dispute where the person against whom a complaint\nhas been made, denies and disputes the allegations contained in the complaint.89**D.** **Consumer** **disputes redressal agencies**Consumer disputes redressal agencies are established at district, state and national\nlevels.**i.** **District Consumer Disputes Redressal Commission** The District Consumer Disputes Redressal Commission (District Commission),has jurisdiction to entertain complaints, where value of the goods or services\ndoes not exceed Rs. 1 crore. The District Commission has the powers of a civil\ncourt.**ii.** **State Consumer Disputes Redressal Commission** The State Consumer Disputes Redressal Commission (State Commission) hasoriginal jurisdiction to entertain complaints where the value of goods/ service\nand compensation, if any claimed exceeds Rs. 1 crore but does not exceed\nRs.10 crores.\n It also has appellate and supervisory jurisdiction to entertain appeals fromthe District Commission.\n Other powers and authority are similar to those of the District Commission.**iii.** **National Consumer Disputes Redressal Commission** The National Consumer Disputes Redressal Commission (National Commission)is the final authority established under the Act.\n It has original jurisdiction to entertain disputes, where goods/ services andthe compensation claimed exceeds Rs.10 crores.\n It has appellate as well as supervisory jurisdiction to hear the appeals fromthe orders passed by the State Commission.\nEvery order made by a District Commission, State Commission or the National\nCommission shall be enforced by it in the same manner as if it were a decree\nmade by a Court in a suit before it. Appeals against the orders of the National\nCommission have to be made only at the Supreme Court.90**Channels for Consumer Disputes Redressal**|Judicial Channels|Col2|\n|---|---|\n|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|\n|**Established by the**<br>**Central Government**|**Established by the**<br>**State Government**|**a)** **Procedure for filing a complaint**The procedure for filing a complaint is very simple in all the above three\nagencies. There is no fee for filing a complaint or filing an appeal whether before\nthe State Commission or National Commission. The complaint can be filed by\nthe complainant himself or by his authorised agent. It can be filed personally or\ncan even be sent by post. It may be noted that no advocate is necessary for the\npurpose of filing a complaint.**b)** **Consumer Commission Orders**If the Commission is satisfied (a) that the goods in question have the defects\nspecified in the complaint or (b) that the allegations about the services are\nproven; the Commission can issue orders directing the opposite party to do any\nof the following:", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "l2", "section": "Consumer dispute", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_047", "metadata": {"file_size": 7099, "chunk_index": 47, "chunk_tokens": 995, "has_examples": false, "has_tables": true, "key_concepts": ["State Government", "Commission", "Procedure for filing a complaint", "Consumer Commission Orders", "Consumer"]}}
{"chunk": "|**Established by the**<br>**Central Government**|**Established by the**<br>**State Government**|**a)** **Procedure for filing a complaint**The procedure for filing a complaint is very simple in all the above three\nagencies. There is no fee for filing a complaint or filing an appeal whether before\nthe State Commission or National Commission. The complaint can be filed by\nthe complainant himself or by his authorised agent. It can be filed personally or\ncan even be sent by post. It may be noted that no advocate is necessary for the\npurpose of filing a complaint.**b)** **Consumer Commission Orders**If the Commission is satisfied (a) that the goods in question have the defects\nspecified in the complaint or (b) that the allegations about the services are\nproven; the Commission can issue orders directing the opposite party to do any\nof the following:\ni. To **return** to the complainant the **price** (or premium in case of insurance)and/ or charges paid by the complainant\nii. To award such amount as **compensation** to the consumers for any loss orinjury suffered by the consumer due to negligence of the opposite party\niii. To remove the defects or **deficiencies** in the services in question.\niv. To **discontinue the unfair trade practice** or the restrictive trade practiceor not to repeat them\nv. To provide for **adequate costs** to the complainants.**c)** **Nature of complaints**The **majority of consumer disputes** with the three Commissions relating to\ninsurance business fall in the following main categories:91i. Delay in settlement of claims\nii. Non-settlement of claims\niii. Repudiation of claims\niv. Amount or Quantum of loss\nv. Policy terms, conditions etc.**E.** **The Insurance Ombudsman**The Central Government under the powers of the Insurance Regulatory &\nDevelopment Authority Act, 1999 made **Insurance Ombudsman Rules 2017** by a\nnotification published in the official gazette on 25 [th] April 2017.Rules regarding Insurance Ombudsmen apply to all insurers and their agents and\nintermediaries in respect of complaints on all personal lines of insurance, group\ninsurance policies, policies issued to sole proprietorship and micro enterprises.[‘Personal lines’ here means insurances taken in an individual capacity, in contrast\nto insurances sold to corporate entities.] Complaints relating to (a) delay in\nsettlement of claims beyond the time specified by IRDAI, (b) partial or total\nrepudiation of claims by the insurer, (c) disputes about premium paid or payable in\nterms of insurance policy, (d) misrepresentation of policy terms and conditions at\nany time in the policy document or policy contract, (e) legal construction of\ninsurance policies that affect the claim; and (f) policy servicing and related\ngrievances against insurers and their agents and intermediaries.a) Issuance of life insurance policy, general insurance policy including healthinsurance policy which is not in conformity with the proposal form submitted\nby the proposer.\nb) Non issuance of insurance policy after receipt of premium in life insurance andgeneral insurance including health insurance and\nc) Any other matter resulting from the violation of provisions of the InsuranceAct, 1938 or the regulations, circulars, guidelines or instructions issued by the\nIRDAI from time to time or the terms and conditions of the policy contract, in\nso far as they relate to issues mentioned at clauses (a) to (f)\nThe objective of these rules is to resolve all types of complaints mentioned above,\nin a cost effective, and impartial manner.**The Ombudsman, by mutual agreement of the insured and the insurer can act as**\n**a mediator and counsellor within the terms of reference.****The decision of the Ombudsman, whether to accept or reject the complaint, is**\n**final.****a)** **Complaint to the Ombudsman**Any complaint made to the Ombudsman should be in writing, and must be signed\nby the insured or his legal heirs, nominee or assignee, and addressed to an\nOmbudsman within whose jurisdiction, the insurer has a branch/ office. It should\ncontain the facts giving rise to the complaint, supported by documents, the\nnature and extent of the loss caused to the complainant and the relief sought.92**Complaints can be made to the Ombudsman if:**i. The complainant had made a previous written representation to theinsurance company and:\n the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Established by the", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_048", "metadata": {"file_size": 7099, "chunk_index": 48, "chunk_tokens": 999, "has_examples": false, "has_tables": true, "key_concepts": ["State Government", "Complaints can be made to the Ombudsman if:", "Procedure for filing a complaint", "Consumer Commission Orders", "The Insurance Ombudsman"]}}
{"chunk": "The objective of these rules is to resolve all types of complaints mentioned above,\nin a cost effective, and impartial manner.**The Ombudsman, by mutual agreement of the insured and the insurer can act as**\n**a mediator and counsellor within the terms of reference.****The decision of the Ombudsman, whether to accept or reject the complaint, is**\n**final.****a)** **Complaint to the Ombudsman**Any complaint made to the Ombudsman should be in writing, and must be signed\nby the insured or his legal heirs, nominee or assignee, and addressed to an\nOmbudsman within whose jurisdiction, the insurer has a branch/ office. It should\ncontain the facts giving rise to the complaint, supported by documents, the\nnature and extent of the loss caused to the complainant and the relief sought.92**Complaints can be made to the Ombudsman if:**i. The complainant had made a previous written representation to theinsurance company and:\n the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.\nii. The complainant is not satisfied with the reply given by the insurer\niii. The complaint is made within one year from the date of rejection by theinsurance company\niv. The complaint is not pending in any court or consumer Commission or inarbitration\nv. The value of the claim including expenses claimed is not above Rs 30 lakhs.**b)** **Recommendations by the Ombudsman**The Ombudsman will send copies of complaints to both the complainant and the\ninsurance company. The Ombudsman will make his recommendations within one\nmonth of the receipt of the complaint.**c)** **Award**The dispute can be settled by intermediation. If this is not possible, the\nOmbudsman will pass an award to the insured which he thinks is fair within a\nperiod of 3 months from the date of receipt of all requirements from the\ncomplainant and sending a copy of the award to the complainant and the\ninsurer.The insurer shall comply with the award within 30 days of the receipt of the\naward and intimate compliance of the same to the Ombudsman. The award of\nthe Ombudsman shall be binding on the insurer.**F.** **Right to Information**In addition to the rules and regulations that are specific for grievance redressal in\ninsurance, there are certain general laws common to everyone in the country. The\nRight to Information (RTI) Act, 2005 enacted by the Govt. of India is an important\nlaw that gives citizens of India access to the information available with public\nauthorities which promotes transparency and accountability in these organisations.\nThe Act provides for appointment of a Chief Public Information Officer (CPIO) to\ndeal with requests for information. IRDAI is obliged to provide information to\nmembers of public in accordance with the provisions of the said Act. Agents should\nbe aware that as per the RTI Act, IRDAI and Insurance Companies may have to reveal\ncertain information to customers and others; as also allow them to inspect the work,\ndocument, records, extracts or certified copies of documents/ records and also\ninformation stored in electronic form. However, there are certain categories of\ninformation that are exempt from disclosure.93**Test Yourself 1**The ______________ has jurisdiction to entertain complaints, where value of the\ngoods or services and the compensation claimed is up to Rs.20 lakhs.I. District CommissionII. State CommissionIII. Zilla ParishadIV. National Commission**Summary**IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as a central repository of insurance grievance data and as a tool for\nmonitoring grievance redress in the industry.Consumer disputes redressal agencies are established in each district and state\nand at national level.As far as insurance business is concerned, the majority of consumer disputes fall\nin categories such as delay in settlement of claims, non-settlement of claims,\nrepudiation of claims, quantum of loss and policy terms, conditions etc.The Ombudsman, by mutual agreement of the insured and the insurer can act\nas a mediator and counsellor within the terms of reference.- If the dispute is not settled by intermediation, the Ombudsman will pass award\nto the insured which he thinks is fair, and is not more than what is necessary\nto cover the loss of the insured.**Key Terms**1. Integrated Grievance Management System (IGMS)\n2. The Consumer Protection Act, 2019", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "The Ombudsman, by mutual agreement of the insured and the insurer can act as", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_049", "metadata": {"file_size": 7099, "chunk_index": 49, "chunk_tokens": 980, "has_examples": false, "has_tables": false, "key_concepts": ["Complaints can be made to the Ombudsman if:", "Test Yourself 1", "Award", "Right to Information", "Key Terms"]}}
{"chunk": "goods or services and the compensation claimed is up to Rs.20 lakhs.I. District CommissionII. State CommissionIII. Zilla ParishadIV. National Commission**Summary**IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as a central repository of insurance grievance data and as a tool for\nmonitoring grievance redress in the industry.Consumer disputes redressal agencies are established in each district and state\nand at national level.As far as insurance business is concerned, the majority of consumer disputes fall\nin categories such as delay in settlement of claims, non-settlement of claims,\nrepudiation of claims, quantum of loss and policy terms, conditions etc.The Ombudsman, by mutual agreement of the insured and the insurer can act\nas a mediator and counsellor within the terms of reference.- If the dispute is not settled by intermediation, the Ombudsman will pass award\nto the insured which he thinks is fair, and is not more than what is necessary\nto cover the loss of the insured.**Key Terms**1. Integrated Grievance Management System (IGMS)\n2. The Consumer Protection Act, 2019\n3. District Commission4. State Commission5. National Commission6. Insurance Ombudsman**Answers to Test Yourself****Answer 1** -The correct answer is I.94## CHAPTER C-10## REGULATORY ASPECTS FOR CORPORATE AGENTS**Chapter Introduction**In this chapter, we discuss Regulatory aspects of corporate agents.**Learning Outcomes**Regulations of Corporate AgentsThe IRDAI (Registration of Corporate Agent ) regulations,2015 has come into effect\nfrom 1st April, 2016.\nBefore this the IRDAI (Licensing of Corporate Agents) regulations,2002 was dealing\nwith Corporate Agency licencing, etc.,95**Corporate Agents**The IRDAI (Registration of Corporate Agent) regulations, 2015. These regulations\ndeal with matters relating to who can Corporate Agent, Scope and applicability of\nthe regulations, Registration, Arrangement with Insurers for distributions products,\nremuneration, code of conduct, etc..The following definitions are relevant.**1.** **Definitions:**(a) \"Act\" means the Insurance Act, 1938 (4 of 1938), as amended from time to time(b) \"Applicant\" means(i) A company formed under the Companies Act, 2013 (18 of 2013) or any\nenactment thereof or under any previous company law which was in force;or\n(ii) A limited liability partnership formed and registered under the Limited\nLiability Partnership Act, 2008; or\n(iii) A Co-operative Society registered under Co-operative Societies Act, l9l2 orunder any law for registration of co-operative societies, or\n(iv) a banking company as defined in clause (4A) of section 2 of the Act; or\n(v) a corresponding new bank as defined under clause (da) of sub-section (1)\nof section 5 of the Banking Companies Act, 1949 (10 of 1949); or\n(vi) a regional rural bank established under section 3 of the Regional RuralBanks Act, 1976 (21 of 1976): or\n(vii) a Non-Governmental organisation or a micro lending finance organizationcovered under the Co-operative Societies Act, 1912 or a Non-Banking\nFinancial Company registered with the Reserve Bank of India; or\n(viii) Any other person as may be recognized by the Authority to act as acorporate agent.\n(c) “Approved Institution\" means any institution engaged in education and/ortraining particularly in the area of insurance sales, service and marketing,\napproved and notified by the Authority from time to time, and includes\nInsurance Institute of India, Mumbai.\n(d) \"Authorized Verifier\" means a person employed by a Telemarketer for thepurpose of solicitation or sale over telephonic mode and shall fulfill the\nrequirements as specified under regulation 7(3) of these regulations for a\nspecified person;\n(e) \"Authority\" means the Insurance Regulatory and Development Authority of Indiaestablished under the provisions of Section 3 of the Insurance Regulatory and\nDevelopment Authority Act, 1999 (41 of 1999).\n(f) \"Corporate Agent\" means any applicant specified in clause (b) above holds a validcertificate of registration issued by the Authority under these regulations for\nsolicitation and servicing of insurance business for any of the specified category\nof life, general and health.96(g) “Corporate Agent (Life)\" means a corporate agent who holds a valid certificateof registration to act as such, for solicitation and servicing of insurance business\nfor life insurers as specified in these regulations;", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "n4", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_050", "metadata": {"file_size": 7099, "chunk_index": 50, "chunk_tokens": 995, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Corporate Agents", "Definitions:", "Chapter Introduction", "Key Terms"]}}
{"chunk": "(c) “Approved Institution\" means any institution engaged in education and/ortraining particularly in the area of insurance sales, service and marketing,\napproved and notified by the Authority from time to time, and includes\nInsurance Institute of India, Mumbai.\n(d) \"Authorized Verifier\" means a person employed by a Telemarketer for thepurpose of solicitation or sale over telephonic mode and shall fulfill the\nrequirements as specified under regulation 7(3) of these regulations for a\nspecified person;\n(e) \"Authority\" means the Insurance Regulatory and Development Authority of Indiaestablished under the provisions of Section 3 of the Insurance Regulatory and\nDevelopment Authority Act, 1999 (41 of 1999).\n(f) \"Corporate Agent\" means any applicant specified in clause (b) above holds a validcertificate of registration issued by the Authority under these regulations for\nsolicitation and servicing of insurance business for any of the specified category\nof life, general and health.96(g) “Corporate Agent (Life)\" means a corporate agent who holds a valid certificateof registration to act as such, for solicitation and servicing of insurance business\nfor life insurers as specified in these regulations;\n(h) \"Corporate Agent (General)\" means a corporate agent who holds a validcertificate of registration to act as such, for solicitation and servicing of\ninsurance business for general insurers as specified in these regulations;\n(i) \"Corporate Agent (Health)\" means a corporate agent who holds a valid certificateof registration to act as such, for solicitation and servicing of insurance business\nfor health insurers as specified in these regulations;\n(j) \"Corporate Agent (Composite)\" means a corporate agent who holds a validcertificate of registration to act as such, for solicitation and procurement of\ninsurance business for life insurers, general insurers and health insurers or\ncombination of any two or all three as specified in clauses (f) above:\n(k) “Examination Body” for the purpose of these Regulations is Insurance Instituteof India, Mumbai or any other body approved and notified by the Authority for\nconducting certification examination for principal officer and specified persons\nof the corporate agents.\n(l) Fit and Proper\" is the criteria for determining the suitability for registering anApplicant including his principal officer, directors or partners or any other\nemployees to act as Corporate Agent.\n(m)“Principal Officer\" of a Corporate Agent means a director or a partner or anyofficer or employee so designated by it, and approved by the Authority,\nexclusively appointed to supervise the activities of Corporate Agent and who\npossesses the requisite qualifications and practical training and has passed\nexamination as required under these Regulations.\n(n) \"Registration\" means a certificate of registration to act as a corporate agentissued under these regulations.\n(o) \"Regulations\" means Insurance Regulatory and Development Authority of India(Registration of Corporate Agent) Regulations, 2015.\n(p) \"Specified Person\" means an employee of a Corporate Agent who is responsiblefor soliciting and procuring insurance business on behalf of a corporate agent\nand shall have fulfilled the requirements of qualification, training and passing\nof examination as specified in these regulations;\n(q) \"Telemarketer' means an entity registered with Telecom Regulatory Authority ofIndia under Chapter III of the Telecom Commercial Communications Customer\nPreference Regulations, 2010 to conduct the business of sending commercial\ncommunications and holding a certificate issued by the Authority;\n(r) Words and expressions used and not defined in these Regulations but defined inthe Act, as amended from time to time, the Insurance Regulatory and\nDevelopment Authority Act, 1999 or in any of the Regulations / Guidelines made\nthere under shall have the meanings respectively assigned to them in those Acts\n/ Regulations / Guidelines.**2.** **Scope and applicability of these Regulations:**(1) These regulations shall cover Registration of Corporate Agents for the purposeof soliciting, procuring and servicing of Insurance business of life insurers,\ngeneral insurers and health insurers during the validity of certificate of\nregistration as follows.97(a) A Corporate Agent (Life), may have arrangements with a maximum ofthree life insurers to solicit, procure and service their insurance\nProducts.\n(b) A Corporate Agent (General), may have arrangements with a maximumof three general insurers to solicit, procure and service their insurance\nproducts. Further, the Corporate Agent (General) shall solicit, procure\nand service retail lines of general insurance products and commercial\nlines of such insurers having a total sum insured not exceeding rupees\nfive crores per risk for all insurances combined.\n(c) A Corporate Agent (Health), may have arrangements with a maximum ofthree health insurers to solicit, procure and service their insurance\nproducts.\n(d) In the case of Corporate Agent (Composite), the conditions as specifiedin clauses (a) to (c) shall apply.", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Scope and applicability of these Regulations:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_051", "metadata": {"file_size": 7099, "chunk_index": 51, "chunk_tokens": 979, "has_examples": false, "has_tables": false, "key_concepts": ["Scope and applicability of these Regulations:"]}}
{"chunk": "there under shall have the meanings respectively assigned to them in those Acts\n/ Regulations / Guidelines.**2.** **Scope and applicability of these Regulations:**(1) These regulations shall cover Registration of Corporate Agents for the purposeof soliciting, procuring and servicing of Insurance business of life insurers,\ngeneral insurers and health insurers during the validity of certificate of\nregistration as follows.97(a) A Corporate Agent (Life), may have arrangements with a maximum ofthree life insurers to solicit, procure and service their insurance\nProducts.\n(b) A Corporate Agent (General), may have arrangements with a maximumof three general insurers to solicit, procure and service their insurance\nproducts. Further, the Corporate Agent (General) shall solicit, procure\nand service retail lines of general insurance products and commercial\nlines of such insurers having a total sum insured not exceeding rupees\nfive crores per risk for all insurances combined.\n(c) A Corporate Agent (Health), may have arrangements with a maximum ofthree health insurers to solicit, procure and service their insurance\nproducts.\n(d) In the case of Corporate Agent (Composite), the conditions as specifiedin clauses (a) to (c) shall apply.\n(e) any change in the arrangement with the insurance companies shall bedone only with the prior approval of the Authority and with suitable\narrangements for servicing existing policyholders.**3. Consideration of application** –(1) The Authority while considering an application for grant of registration shall takeinto account, all matters relevant for carrying out the activities of a corporate\nagent.(2) Without prejudice to the above, the Authority in particular, shall take intoaccount the following, namely:(a) whether the applicant is not suffering from any of the disqualificationsspecified under sub-section (5) of section 42 D of the Act;\n(b) whether the applicant has the necessary infrastructure, such as, adequateoffice space, equipment and trained manpower on their rolls to effectively\ndischarge its activities;\n(c) whether any person, directly or indirectly connected with the applicant, hasbeen refused in the past the grant of license/registration by the Authority.(d) Whether the principal officer of the applicant is a graduate and has receivedat least fifty hours of theoretical and practical training from an approved\ninstitution according to a syllabus approved by the Authority, and has passed\nan examination, at the end of the period of training mentioned above,\nconducted by the examination body.\nIn case where the principal officer of the applicant is an Associate/ Fellowof the Insurance Institute of India, Mumbai; or Associate/Fellow of the CII,\nLondon; or Associate/Fellow of the institute of Actuaries of India; or holds\nany post graduate qualification of the Institute of Insurance and Risk\nManagement, Hyderabad, the theoretical and practical training shall be\ntwenty five hours.\n(e) whether the principal officer' directors and other employees of the applicanthave not violated the code of conduct as specified in Schedule III to these\nregulations during the last three years;98(f) Whether the applicant, in case the principal business of the applicant isother than insurance' maintain an arms-length relationship in financial\nmatters between its activities as Corporate Agent and other activities.\n(g) Whether the Principal Officer/Director(s)/Partner(s)/Specified Personsis/are Fit and Proper based on the statement in Annexure I of these\nregulation; and\n(h) the Authority is of the opinion that the grant of registration will be in theinterest of policyholders.(3) The specified persons of the applicant shall fulfill the following requirements –a. Having passed minimum of l2th Class or equivalent examination from arecognized Board/Institution:b. (i) The specified person shall have undergone at least fifty hours of training' forthe specified category of life, general, health for' which registration is sought\nfor, from an approved institution and shall have passed the examination\nconducted by the examination body;\n(ii) The specified person of corporate agent (composite) shall have undergone\nat seventy five hours of training from an approved institute and shall have pass\nthe examination conducted by the examination body;c. the specified persons engaged by the corporate agent to solicit and procureinsurance business shall have valid certificate issued by the Authority as,\nspecified in these Regulations.\nThe certificate shall be valid for a period of three years from the date of issuedsubject to the valid registration of the corporate agent;\nThe specified person shall apply through the principal officer of the corporate\nagent to the Authority in the format specified in Annexure 3 of these regulations\nfor issuance of certificate.d. A specified person of a corporate agent wishes to switch over to any other\ncorporate agent, shall do so by applying to the Authority through the new\ncorporate agent along with a no objection certificate issued by the present\ncorporate agent. In case, the present corporate agent does not issue a no", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "l2", "section": "Scope and applicability of these Regulations:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_052", "metadata": {"file_size": 7099, "chunk_index": 52, "chunk_tokens": 995, "has_examples": true, "has_tables": false, "key_concepts": ["Scope and applicability of these Regulations:"]}}
{"chunk": "for, from an approved institution and shall have passed the examination\nconducted by the examination body;\n(ii) The specified person of corporate agent (composite) shall have undergone\nat seventy five hours of training from an approved institute and shall have pass\nthe examination conducted by the examination body;c. the specified persons engaged by the corporate agent to solicit and procureinsurance business shall have valid certificate issued by the Authority as,\nspecified in these Regulations.\nThe certificate shall be valid for a period of three years from the date of issuedsubject to the valid registration of the corporate agent;\nThe specified person shall apply through the principal officer of the corporate\nagent to the Authority in the format specified in Annexure 3 of these regulations\nfor issuance of certificate.d. A specified person of a corporate agent wishes to switch over to any other\ncorporate agent, shall do so by applying to the Authority through the new\ncorporate agent along with a no objection certificate issued by the present\ncorporate agent. In case, the present corporate agent does not issue a no\nobjection certificate within 30 days, it shall be deemed that the said corporate\nagent has no objection to his switching over. The Authority after receipt of\nrequest from the corporate agent, issue a revised certificate changing the name\nof the corporate agent indicating the switching over.4. **Renewal of registration** –(1) As per this regulation a corporate agent may, within thirty days before the\nexpiry of the registration, make an application in Form A along with requisite\nfee to the Authority for renewal of registration.Provided however that if the application reaches the Authority later than that\nperiod but before the actual expiry of the current registration, an additional fee\nof rupees one hundred, plus applicable taxes, shall be payable to the Authority.99Provided further that the Authority may for sufficient reasons offered in writing\nby the applicant for a delay not covered by the previous proviso, accept an\napplication for renewal after the date of the expiry of the registration on\npayment of an additional fee of seven hundred and fifty rupees, plus applicable\ntaxes, by the applicant._Note: A corporate agent is permitted to submit the application for renewal of_\n_registration ninety days prior to the expiry of the registration._(2) Principal Officer and specified persons before seeking a renewal of\nregistration shall have completed, at least twenty five hours of therefore local\nand practical raining, imparted by an approved institution.(3) The Authority, on being satisfied that the applicant fulfills all the conditions\nspecified for a renewal of the registration, shall renew the registration in Form\nC for a period of three years and send intimation to the applicant.**5. Procedure where a registration is not granted -**(1) Where an application for grant of a registration under regulation 4 or renewal\nthereof under regulation 11, does not satisfy the conditions set out in regulation\n7, the Authority may refuse to grant or renew the Certificate of Registration.Before the application is rejected the applicant has to be given a reasonable\nopportunity of being heard.(2) The refusal to grant or renew a Certificate of Registration shall be\ncommunicated by the Authority within thirty days of such refusal to the\napplicant stating therein the grounds on which the application has been\nrejected.(3) Any applicant aggrieved by the decision of the Authority may make an appeal\nto Securities Appellate Tribunal, within a period of forty-five days from the date\non which a copy of the order made by the Authority under sub-regulation (2)\nabove is received by it.6. **Effect of refusal to grant registration-** An applicant, whose application for grantof registration under regulation 4 or of a renewal thereof under regulation 11\nhas been refused or rejected by the Authority, shall, on and from the date of\nthe receipt of the communication under regulation 12(2) cease to act as a\ncorporate agent.\nHe, however, shall continue to be liable to provide services in respect ofcontracts already entered into through him.\nSuch a service shall continue upto the period of expiry of those existingcontracts, which have already been closed, or for a period of six months,\nwhichever is earlier within which time they shall make suitable arrangements\nwith the concerned insurer.1007. **Conditions of grant of registration to Corporate Agent:**The registration granted under regulation 9 or the renewal granted under\nregulation 11 shall be subject to the following conditions:(i) The corporate agent registered under these regulations shall be permitted\nto solicit and service insurance business as specified in regulation (3) above\nonly;\n(ii) The corporate agent shall comply with the provisions of the Act, Insurance\nRegulatory and Development Authority Act, 1999 and the Regulations,\nCirculars, Guidelines and any other instructions issued there under from\ntime to time by the Authority;", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Renewal of registration", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_053", "metadata": {"file_size": 7099, "chunk_index": 53, "chunk_tokens": 988, "has_examples": false, "has_tables": false, "key_concepts": ["Effect of refusal to grant registration-", "Renewal of registration"]}}
{"chunk": "has been refused or rejected by the Authority, shall, on and from the date of\nthe receipt of the communication under regulation 12(2) cease to act as a\ncorporate agent.\nHe, however, shall continue to be liable to provide services in respect ofcontracts already entered into through him.\nSuch a service shall continue upto the period of expiry of those existingcontracts, which have already been closed, or for a period of six months,\nwhichever is earlier within which time they shall make suitable arrangements\nwith the concerned insurer.1007. **Conditions of grant of registration to Corporate Agent:**The registration granted under regulation 9 or the renewal granted under\nregulation 11 shall be subject to the following conditions:(i) The corporate agent registered under these regulations shall be permitted\nto solicit and service insurance business as specified in regulation (3) above\nonly;\n(ii) The corporate agent shall comply with the provisions of the Act, Insurance\nRegulatory and Development Authority Act, 1999 and the Regulations,\nCirculars, Guidelines and any other instructions issued there under from\ntime to time by the Authority;\n(iii) The corporate agent shall take adequate steps for redressal of grievancesof its clients within 14 days of receipt of such complaint and keep the\nAuthority informed about the number, nature and other particulars of the\ncomplaints received from such clients in format and manner as may be\nspecified by the Authority;\n(iv) The corporate agent shall solicit and procure reasonable number ofinsurance policies commensurate with their resources and the number of\nspecified persons they employ.\n(v) The corporate agent shall maintain records in the format specified by the\nAuthority which shall capture policy-wise and specified person-wise details\nwherein each policy solicited by the corporate agent is tagged to the\nspecified person, except for those products which are simple, sold over\nthe counter and specifically approved by the Authority. The corporate\nagent shall put in place systems which allow regular access to such records\nand details by the Authority.\n(vi) The corporate agent under no circumstance shall undertake multi-levelmarketing for solicitation of insurance products;\n(vii) The Corporate Agent shall ensure compliance of Code of Conductapplicable to its directors, principal officer and specified persons;\n(viii) The corporate agent shall maintain separate books of accounts for theircorporate agency business as specified in regulation 31;**8. Payment of fees and the consequences of failure to pay fees –**(1) Every corporate agent shall at the time of application of registration and\nrenewal thereof pay non refundable application fee of Rs.10,000/-, plus\napplicable taxes. No application shall be processed without the application fee.(2) Upon receipt of communication for grant of registration from the Authority,\nthe applicant shall pay a fee of Rs.25,000/-, plus applicable taxes, within 15\ndays of receipt of such communication. On receipt of the fee and on satisfactory\ncompliance of terms and conditions for grant of registration, the Authority shall\ngrant the registration to act as a corporate agent under the category for which\nan application is made.101(3) A corporate agent desirous of applying for renewal shall make an application\nfor renewal in the prescribed format along with a fee of Rs.25, 000/-, plus\napplicable taxes.9. **Remuneration-**The payment of remuneration to or receipt of remuneration by a corporate\nagent shall be governed by the regulations notified in this behalf by the\nAuthority from time to time.**10. Conflict of interest –**While soliciting and procuring the insurance business, the corporate agent shallcomply with the following:(i) The corporate agent having tie-ups with more than one insurer in a particular\nline of business, disclose to the prospective customer the list of insurers, with\nwhom they have arrangements to distribute the products and provide them with\nthe details such products. Further, disclose the scale of commission in respect\nof the insurance product offered, if asked by the prospect;(ii) Where the insurance is sold as an ancillary product along with a principal\nbusiness product, the corporate agent or its shareholder or its associates shall\nnot compel the buyer of the principal business product to necessarily buy the\ninsurance product through it.\nThe Principal Officer and CFO (or its equivalent) of the corporate agent shall file\nwith the Authority a certificate in the format given in the Schedule VIII on halfyearly basis, certifying that there is no forced selling of an insurance product to\nany prospect.**11. Disclosures to the Authority-**(1) An applicant desires to become a corporate agent shall disclose to theAuthority at the time of filing application all material facts relevant for\nconsideration of application, on its own. In case of any change in the\ninformation provided for consideration of their application, subsequent to\nfiling of application or during the processing of application, such change shall", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Conditions of grant of registration to Corporate Agent:", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_054", "metadata": {"file_size": 7099, "chunk_index": 54, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Remuneration-"]}}
{"chunk": "line of business, disclose to the prospective customer the list of insurers, with\nwhom they have arrangements to distribute the products and provide them with\nthe details such products. Further, disclose the scale of commission in respect\nof the insurance product offered, if asked by the prospect;(ii) Where the insurance is sold as an ancillary product along with a principal\nbusiness product, the corporate agent or its shareholder or its associates shall\nnot compel the buyer of the principal business product to necessarily buy the\ninsurance product through it.\nThe Principal Officer and CFO (or its equivalent) of the corporate agent shall file\nwith the Authority a certificate in the format given in the Schedule VIII on halfyearly basis, certifying that there is no forced selling of an insurance product to\nany prospect.**11. Disclosures to the Authority-**(1) An applicant desires to become a corporate agent shall disclose to theAuthority at the time of filing application all material facts relevant for\nconsideration of application, on its own. In case of any change in the\ninformation provided for consideration of their application, subsequent to\nfiling of application or during the processing of application, such change shall\nbe disclosed to the Authority, voluntary by the applicant, for consideration\nof the Authority.(2) Similarly, a corporate agent disclose, to the Authority voluntarily, anychange in material facts, based on which a registration was made to them,\nwithin a reasonable time but not later than 30 days from the happening of\nsuch change.\n(3) A corporate shall disclose to the Authority proceedings initiated against themby other regulatory or Government bodies within a reasonable time but not\nlater than 30 days from the initiation of such proceedings. Any action or\ndirection issued by such other bodies shall also be disclosed to the Authority\nwithin the time limits prescribed above102(4) The corporate agent shall disclose to the Authority the details of its officesin which they propose to distribute insurance products and details of\nSpecified Persons along with their certificate number issued by the\nAuthority. Further, any opening or closure of an office by a corporate agent\nshall be informed to the Authority.\n(5) Failure to adhere to the conditions set out above shall attract regulatoryactions such as suspension or cancelation of registration, imposition of\nmonetary penalty or any other action.**12. Arrangements with insurers for distribution of products**a) Corporate agents registered under these regulations shall have to enter intoarrangements with insurers for distribution of products. These arrangements\nshall have to be disclosed to the Authority within 30 days of entering into\nsuch arrangements. The minimum period of such arrangement shall be forone year;\n(b) while entering into such arrangements, no corporate agent shall promise norshall any insurer compel the corporate agent to distribute the products of a\nParticular insurer;\n(c) Arrangements shall have provisions to include duties and responsibilities ofcorporate agents towards the policyholders, duties and responsibilities of\ninsurers and corporate agents, terms and conditions for termination of\narrangements;\n(d) No arrangements shall be made against the interests of Policyholders;\n(e) In case a corporate agent wishes to terminate arrangement with any insurer,they may do so after informing the insurer and the Authority, the reasons or\ntermination of arrangement. In such cases, they shall ensure that the policies\nsolicited and placed with the insurer are serviced till the expiry of policies,\nor for a Period of six months, whichever is earlier with in which time they\nshall make suitable arrangements with the concerned insurer;\n(f) In case an insurer wishes to terminate the arrangement with any corporateagent, they may do so after informing the corporate agent and the Authority,\nthe reasons for termination of arrangement.\nIn such cases, the concerned insurer shall take the responsibility of servicing\nthe policies Procured by the corporate agent. In all such cases, the insurer\nshall inform the policyholder concerned of the changes made in servicing\narrangements;\n(g) No insurer shall directly pay incentives (cash or non-cash) to the principalofficer, specified persons and other employees of the corporate agents;**13.** **Servicing of policyholders-**(1) A corporate agent registered under these regulations shall have the duty toservice its policyholders during the entire period of contract. Servicing\nincludes assisting in payment of premium required under section 64VB of the\nAct, providing necessary assistance and guidance in the event of a claim.103**14. Sale of Insurance by tele-marketing mode and distance marketing activities****of a corporate agent –**(1) A corporate agent who intends to engage the services of a telemarketer or\nengage in distance marketing activities for the purpose of distribution of\ninsurance products shall follow the instructions as laid down in Schedule VII.(2) A corporate agent shall have to comply with the following additional", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e102", "section": "Servicing of policyholders-", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_055", "metadata": {"file_size": 7099, "chunk_index": 55, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Servicing of policyholders-"]}}
{"chunk": "the reasons for termination of arrangement.\nIn such cases, the concerned insurer shall take the responsibility of servicing\nthe policies Procured by the corporate agent. In all such cases, the insurer\nshall inform the policyholder concerned of the changes made in servicing\narrangements;\n(g) No insurer shall directly pay incentives (cash or non-cash) to the principalofficer, specified persons and other employees of the corporate agents;**13.** **Servicing of policyholders-**(1) A corporate agent registered under these regulations shall have the duty toservice its policyholders during the entire period of contract. Servicing\nincludes assisting in payment of premium required under section 64VB of the\nAct, providing necessary assistance and guidance in the event of a claim.103**14. Sale of Insurance by tele-marketing mode and distance marketing activities****of a corporate agent –**(1) A corporate agent who intends to engage the services of a telemarketer or\nengage in distance marketing activities for the purpose of distribution of\ninsurance products shall follow the instructions as laid down in Schedule VII.(2) A corporate agent shall have to comply with the following additional\nconditions for engaging the services of a telemarketer:a. The telemarketer engaged by the corporate agent shall comply with variouscirculars and/or guidelines or any other direction issued by Telecom\nRegulatory Authority of India in the matter;b. A corporate agent intends to undertake telemarketing activities forinsurance intermediation shall seek prior approval of the Authority in the\nform specified by the Authority at Annexure 4 of these regulations. The\nAuthority on verification of the same issue a certificate to the telemarketer;\nc. Further, the corporate agent shall file with the Authority the names ofAuthorised verifiers engaged/proposed to be engaged by the telemarketer\nin the form specified at Annexure 5 of these regulations,.\nd. The Authority on verification of the same issue a certificate to theAuthorised verifier.e. In case an Authorised Verifier intends to switch to another telemarketer whois also dealing with insurance intermediation, they shall obtain a No\nObjection Certificate from the erstwhile telemarketer and submit the same\nto the Authority for issuing a fresh certificate. In case, the present\ntelemarketer does not issue a no objection certificate within 30 days from\nthe date of application for the same, it shall be deemed that the\ntelemarketer has no objection to his switching over;\nf. Application for removal or addition of Authorised Verifiers shall be made bythe Corporate Agent concerned through the Principal Officer;\ng. In case the corporate agent registers as telemarketer with TRAI, thecorporate agent shall act as telemarketer for only those insurers with whom\nhe has arrangements;\nh. No corporate agent or its telemarketer shall make outbound calls to anyperson unless he or she has shown interest in buying an insurance policy by\nmaking enquiries to that effect. They shall maintain the database of such\npersons and the enquiry made for verification and checking by the Authority\nor any person authorized by it.\ni. The telemarketer shall disclose to the prospective customer the followinginformation\n(a) The name of the corporate agent they represent;\n(b) The registration number of the corporate agent;\n(c) Contact number of the telemarketer and-/or corporate agent in case the\ncustomer desires to call back or verify the telesales information;104(d) Name and identification number of the person (Authorised Verifier)\nmaking the tele-call.\nj. A corporate agent engaging a telemarketer shall enter into an agreementwith the telemarketer and the agreement shall provide the details such as\nsource of the database, duties and responsibilities, payment details, period\nof agreement, actions to be taken in case of violation of Act, regulations,\nguidelines, circulars, directions issued by the Authority, Code of Conduct of\nAuthorised Verifiers. The agreements shall be made available to the\nAuthority or any person authorized by the Authority for verification as and\nwhen required;\nk. Every telemarketer and the authorized Verifier shall abide by the Code ofConduct applicable to corporate agents as specified in Schedule III of these\nregulations.\nl. The Authority shall have the power to inspect the premises of thetelemarketer or any other premises, which the Authority feels necessary for\nthe verification of records / documents, and seek any document/record,\nrecord statements of any employee of the telemarketer or make copies of\nany documents/records at its discretion:\nm. The telemarketer shall have to comply with any other terms and conditionsas may be prescribed by the Authority from time to time in the matter.(3) A telemarketer shall not be engaged with more than three insurers or", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Servicing of policyholders-", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_056", "metadata": {"file_size": 7099, "chunk_index": 56, "chunk_tokens": 997, "has_examples": false, "has_tables": false, "key_concepts": ["Servicing of policyholders-"]}}
{"chunk": "source of the database, duties and responsibilities, payment details, period\nof agreement, actions to be taken in case of violation of Act, regulations,\nguidelines, circulars, directions issued by the Authority, Code of Conduct of\nAuthorised Verifiers. The agreements shall be made available to the\nAuthority or any person authorized by the Authority for verification as and\nwhen required;\nk. Every telemarketer and the authorized Verifier shall abide by the Code ofConduct applicable to corporate agents as specified in Schedule III of these\nregulations.\nl. The Authority shall have the power to inspect the premises of thetelemarketer or any other premises, which the Authority feels necessary for\nthe verification of records / documents, and seek any document/record,\nrecord statements of any employee of the telemarketer or make copies of\nany documents/records at its discretion:\nm. The telemarketer shall have to comply with any other terms and conditionsas may be prescribed by the Authority from time to time in the matter.(3) A telemarketer shall not be engaged with more than three insurers or\ninsurance related entities**15. Code of conduct for Corporate Agents-**(1) Every Corporate Agent shall abide by the Code of Conduct as specified in\nSchedule III of these regulations,(2) The corporate agent shall be responsible for all (the acts and omissions of its\nprincipal officer, specified persons and other employees including violation of\ncode of conduct specified under these regulations and liable to a penalty which\nmay extend to one crore rupees under the provisions of Sec.102 of the Act.**16. Maintenance of Records**A Corporate Agent shall maintain the following records including in electronic\nform and shall be made available as and when required by the Aurhority –(i) Know Your Client (KYC) records of the client, as required under therelevant Authority’s guidelines and provisions of Prevention of Money\nLaundering Act;\n(ii) Copy of the proposal form duly signed by the client and submitted to theinsurer with ACR signed by the specified person of corporate agent;\n(iii)A register containing list of clients, details of policy such as type of policy,premium amount, date of issue of the policy, charges or fees received;105(iv) A register containing details of complaints received which include name ofthe complainant, nature of complaint, details of policy issued/solicited\nand action taken thereon;\n(v) A register which shall contain the name, address, telephone no,photograph, date of commencement of employment, date of leaving the\nservice, if any, monthly remuneration paid to the specified person;\n(vi) Copies of the correspondence exchanged with the Authority;\n(vii) Any other record as may be specified by the Authority from time to time.**17. Maintenance of books of account, records, etc. –**(1) A corporate agent, which is incorporated exclusively for the purposes of\ninsurance intermediation, shall prepare the following books of accounts for\nevery financial year(i) a balance sheet or a statement of affairs as at the end of each accountingperiod;\n(ii) a profit and loss account for that period;\n(iii) a statement of cash/fund flow:\n(iv) Additional statements as may be required by the Authority from time to\nrime.**Note.1** : For purposes of this regulation, the financial year shall be a period of 12\nmonths (or less where a business is started after 1 [st] April) commencing on the first\nday of the April of an year and ending on the 31 [st] day of March of the year following\nand the accounts shall be maintained on accrual basis._Note.2: There shall be a schedule to their financial statements or providing the_\n_details of all the incomes received from insurers and insurer's group companies,_\n_insurer-wise, by the corporate agent, and also the details of payments received by_\n_the group companies and/or associates of the corporate agent from any insurer and_\n_the details thereof._(a) A copy of the audited financial statements as stated in sub-regulation (1) alongwith the auditor's report thereon shall be submitted to the Authority before\n30 [th] September every year along with the remarks or observations of the\nauditors, if any, on the conduct of the business, state of accounts, etc., and a\nsuitable explanation on such observations shall be appended to such accounts\nfiled with the Authority.(b) Within ninety days from the date of the Auditor's report necessary steps torectify any deficiencies, made out in the auditor's report, be made and\ninformed to the Authority.(c) All the books of account, statements, document, etc., shall be maintained atthe head office of the corporate agent or such other branch office as may be", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "Note.1", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_057", "metadata": {"file_size": 7099, "chunk_index": 57, "chunk_tokens": 993, "has_examples": false, "has_tables": false, "key_concepts": ["Note.1"]}}
{"chunk": "and the accounts shall be maintained on accrual basis._Note.2: There shall be a schedule to their financial statements or providing the_\n_details of all the incomes received from insurers and insurer's group companies,_\n_insurer-wise, by the corporate agent, and also the details of payments received by_\n_the group companies and/or associates of the corporate agent from any insurer and_\n_the details thereof._(a) A copy of the audited financial statements as stated in sub-regulation (1) alongwith the auditor's report thereon shall be submitted to the Authority before\n30 [th] September every year along with the remarks or observations of the\nauditors, if any, on the conduct of the business, state of accounts, etc., and a\nsuitable explanation on such observations shall be appended to such accounts\nfiled with the Authority.(b) Within ninety days from the date of the Auditor's report necessary steps torectify any deficiencies, made out in the auditor's report, be made and\ninformed to the Authority.(c) All the books of account, statements, document, etc., shall be maintained atthe head office of the corporate agent or such other branch office as may be\ndesignated and notified to the Authority, and shall be available on all working\ndays to such officers of the Authority, and authorised in this behalf for\ninspection.106(d) All the books, documents, statements, contract notes etc., referred to in thisregulation and maintained by the corporate agent shall be retained for a\nminimum period of ten years from the end of the year to which they relate.\nHowever, the documents pertaining to the cases where claims are reported and\nthe settlement is pending for a decision from courts, the documents are\nrequired to be maintained till the disposal of the cases by the court.(2) In the case of corporate agents whose principal business is other than insuranceintermediation, they shall maintain segment wise reporting capturing the\nrevenues received for insurance intermediation and other income frominsurers.(3) Every insurer who is engaging the services of a corporate agent shall file withthe Authority a certificate, separately for all such corporate agents, in the\nformat given in the Schedule VIA to be signed by the CEO and CFO. A similar\ncertificate from the Principal Officer and CFO (or its equivalent) of the\ncorporate agent specifying the commission/ remuneration received from the\ninsurer shall be filed with the Authority as given in Schedule VlB.107**Code of Conduct****I.** **General Code of Conduct****1.** Every corporate agent shall follow recognised standards of professional conductand discharge their duties in the interest of the policyholders. While doing soa) conduct its dealings with clients with utmost good faith and integrity at alltimes;\nb) act with care and diligence;\nc) ensure that the client understands his relationship with the corporate agentand on whose behalf the corporate agent is acting;\nd) treat all information supplied by the prospective clients as completelyconfidential to themselves and to the insurer(s) to which the business is\nbeing offered;\ne) take appropriate steps to maintain the security of confidential documents intheir possession;\nf) No director of a company or a partner of a firm or the chief executive or aprincipal officer or a specified person shall hold similar position with another\ncorporate agent;**2.** **Every Corporate Agent shall**a) be responsible for all acts of omission and commission of its principal officerand every specified person;\nb) ensure that the principal officer and all specified persons are properlytrained, skilled and knowledgeable in the insurance products they market;\nc) ensure that the principal officer and the specified person do not make to theprospect any misrepresentation on policy benefits and returns available\nunder policy;\nd) ensure that no prospect is forced to buy an insurance product;\ne) give adequate pre-sale and post-sale advice to the insured in respect of theinsurance product;\nf) Extend all possible help and cooperation to an insured in completion of allformalities and documentation in the event of a claim;\ng) give due publicity to the fact that the corporate agent does not underwritethe risk or act as an insurer;\nh) enter into agreements with the insurers in which the duties andresponsibilities of both are defined**II.** **Pre-sale Code of Conduct****3.** Every corporate agent or principal officer or a specified person shall also followthe code of conduct specified below:i) Every corporate agent/principal officer/ specified person shall,a) identify himself and disclose his registration/ certificate to the prospect ondemand;\nb) disseminate the requisite information in respect of insurance productsoffered for sale by the insurers with whom they have arrangement and take108into account the needs of the prospects while recommending a specific\ninsurance plan;\nc) disclose the scales of commission in respect of the insurance product offeredfor sale, if asked by the prospect;", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e108", "section": "Code of Conduct", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_058", "metadata": {"file_size": 7099, "chunk_index": 58, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["General Code of Conduct", "II.", "Pre-sale Code of Conduct", "Every Corporate Agent shall", "Code of Conduct"]}}
{"chunk": "under policy;\nd) ensure that no prospect is forced to buy an insurance product;\ne) give adequate pre-sale and post-sale advice to the insured in respect of theinsurance product;\nf) Extend all possible help and cooperation to an insured in completion of allformalities and documentation in the event of a claim;\ng) give due publicity to the fact that the corporate agent does not underwritethe risk or act as an insurer;\nh) enter into agreements with the insurers in which the duties andresponsibilities of both are defined**II.** **Pre-sale Code of Conduct****3.** Every corporate agent or principal officer or a specified person shall also followthe code of conduct specified below:i) Every corporate agent/principal officer/ specified person shall,a) identify himself and disclose his registration/ certificate to the prospect ondemand;\nb) disseminate the requisite information in respect of insurance productsoffered for sale by the insurers with whom they have arrangement and take108into account the needs of the prospects while recommending a specific\ninsurance plan;\nc) disclose the scales of commission in respect of the insurance product offeredfor sale, if asked by the prospect;\nd) indicate the premium to be charged by the insurer for the insurance productoffered for sale;\ne) explain to the prospect the nature of information required in the proposalform by the insurer, and also the importance of disclosure of material\ninformation in the purchase of an insurance contract;\nf) bring to the notice of the insurer any adverse habits or income inconsistencyof the prospect, in the form of a Confidential Report along with every\nproposal submitted to the insurer, and any material fact that may adversely\naffect the underwriting decision of the insurer as regards acceptance of the\nproposal, by making all reasonable enquiries about the prospect;\ng) inform promptly the prospect about the acceptance or rejection of theproposal by the insurer;\nh) obtain the requisite documents at the time of filing the proposal form withthe insurer, and other documents subsequently asked for by the insurer for\ncompletion of the proposal;ii) No corporate agent/ principal officer/ specified person shall,----a) solicit or procure insurance business without holding a valid\nregistration/certificate;\nb) induce the prospect to omit any material information in the proposal form;\nc) induce the prospect to submit wrong information in the proposal form ordocuments submitted to the insurer for acceptance of the proposal;\nd) behave in a discourteous manner with the prospect;\ne) interfere with any proposal introduced by any other specified person or anyinsurance intermediary;\nf) offer different rates, advantages, terms and conditions other than thoseoffered by the insurer;\ng) force a policyholder to terminate the existing policy and to effect a newproposal from him within three years from the date of such termination;\nh) No corporate agent shall have a portfolio of insurance business from oneperson or one organization or one group of organizations under which the\npremium is in excess of fifty percent of total premium procured in any year;\ni) become or remain a director of any insurance company, except with theprior approval of the Authority,\nj) indulge in any sort of money laundering activities;\nk) indulge in sourcing of business by themselves or through call centers byway of misleading calls or spurious calls;\nl) undertake multi-level marketing for soliciting and procuring of insuranceproducts;\nm) engage untrained and unauthorised persons to bring in business;\nn) provide insurance consultancy or claims consultancy or any other insurancerelated services except soliciting and servicing of insurance products as per\nthe certificate of registration.109o) Engage, encourage, enter into a contract with or have any sort ofarrangement with any person other than\na specified person, to refer, solicit, generate lead, advise, introduce, find\nor provide contact details of prospective policyholders in furtherance of the\ndistribution of the insurance product;\np) Pay or allow the payment of any fee, commission, incentive by any othername whatsoever for the purpose of sale, introduction, lead generation,\nreferring or finding to any person or entity**III. Post-Sale Code of Conduct**4. Every Corporate Agent shall\na) advise every individual policyholder to effect nomination or assignment orchange of address or exercise of options, as the case may be, and offer\nnecessary assistance in this behalf, wherever necessary;\nb) with a view to conserve the insurance business already procured throughhim, make every attempt to ensure remittance of the premiums by the\npolicyholders within the stipulated time, by giving notice to the policyholder\norally and in writing.\nc) ensure that its client is aware of the expiry date of the insurance even if itchooses not to offer further cover to the client:\nd) ensure that renewal notices contain a warning about the duty of disclosureincluding the necessity to advise changes affecting the policy, which have", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": "e108", "section": "II.", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_059", "metadata": {"file_size": 7099, "chunk_index": 59, "chunk_tokens": 991, "has_examples": false, "has_tables": true, "key_concepts": ["Pre-sale Code of Conduct", "III. Post-Sale Code of Conduct", "II."]}}
{"chunk": "a specified person, to refer, solicit, generate lead, advise, introduce, find\nor provide contact details of prospective policyholders in furtherance of the\ndistribution of the insurance product;\np) Pay or allow the payment of any fee, commission, incentive by any othername whatsoever for the purpose of sale, introduction, lead generation,\nreferring or finding to any person or entity**III. Post-Sale Code of Conduct**4. Every Corporate Agent shall\na) advise every individual policyholder to effect nomination or assignment orchange of address or exercise of options, as the case may be, and offer\nnecessary assistance in this behalf, wherever necessary;\nb) with a view to conserve the insurance business already procured throughhim, make every attempt to ensure remittance of the premiums by the\npolicyholders within the stipulated time, by giving notice to the policyholder\norally and in writing.\nc) ensure that its client is aware of the expiry date of the insurance even if itchooses not to offer further cover to the client:\nd) ensure that renewal notices contain a warning about the duty of disclosureincluding the necessity to advise changes affecting the policy, which have\noccurred since the policy inception or the last renewal date;\ne) ensure that renewal notices contain a requirement for keeping a record(including copies of letters) of all information supplied to the insurer for the\npurpose of renewal of the contract;\nf) ensure that the client receives the insurer’s renewal invitation well in timebefore the expiry date.\ng) render necessary assistance to the policyholders or claimants orbeneficiaries in complying with the requirements for settlement of claims by\nthe insurer;\nh) explain to its clients their obligation to notify claims promptly and to discloseall material facts and advise subsequent developments as soon as possible;\ni) advise the client to make true, fair and complete disclosure where it believesthat the client has not done so. lf further disclosure is nor forthcoming it\nshall consider declining to act further for the client;\nj) give prompt advice to the client of any requirements concerning the claim;\nk) forward any information received from the client regarding a claim or anincident that may give rise to a claim without delay, and in any event within\nthree working days;\nl) advise the client without delay of the insurer's decision or otherwise of aclaim; and give all reasonable assistance to the client in pursuing his claim.\nm) shall not demand or receive a share of proceeds from the beneficiary underan insurance contract;\nn) ensure that letters of instructor, policies and renewal documents containdetails of complaints handling procedures:\no) accept complaints either by phone or in writing:110p) acknowledge a complaint within fourteen days from the receipt ofcorrespondence, advise the member of staff who will be dealing with the\ncomplaint and the timetable for dealing with it;\nq) ensure that response letters are sent and inform the complainant of what hemay do if he is unhappy with the response;\nr) ensure that complaints are dealt with at a suitably senior level;\ns) Have in place a system for recording and monitoring complaints.111", "source_file": "Final IC-38 - Corporate Agent _Common _ English.md", "chapter": null, "section": "III. Post-Sale Code of Conduct", "chunk_id": "Final IC-38 - Corporate Agent _Common _ English_060", "metadata": {"file_size": 7099, "chunk_index": 60, "chunk_tokens": 632, "has_examples": true, "has_tables": false, "key_concepts": ["III. Post-Sale Code of Conduct"]}}
{"chunk": "## IC - 38 **CORPORATE AGENTS** **COMPOSITE****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## CORPORATE AGENTS **COMPOSITE** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nCorporate Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**COMMON CHAPTERS **|**COMMON CHAPTERS **|\n|C-01|Introduction to Insurance|2|\n|C-02|Core Elements of Insurance|18|\n|C-03|Principles of Insurance|27|\n|C-04|Features of Insurance Contracts|40|\n|C-05|Underwriting and Rating|48|\n|C-06|Claims Processing|56|\n|C-07|Documentation|63|\n|C-08|Customer Service|72|\n|C-09|Grievance Redressal Mechanism|87|\n|C-10|Regulatory Aspects for Corporate Agents|95|\n|**SECTION **|**LIFE INSURANCE **|**LIFE INSURANCE **|\n|L-01|What Life Insurance Involves|113|\n|L-02|Financial Planning|119|\n|L-03|Life Insurance Products: Traditional|132|\n|L-04|Life insurance products: Non-Traditional|142|\n|L-05|Applications of Life Insurance|148|\n|L-06|Pricing and Valuation in Life Insurance|153|\n|L-07|Life Insurance Documentation|162|\n|L-08|Life Insurance Underwriting|175|\n|L-09|Life Insurance Claims|188|\n|**SECTION**|**HEALTH INSURANCE **|**HEALTH INSURANCE **|\n|H-01|Introduction to Health Insurance|196|\n|H-02|Health Insurance Documentation|203|", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "C-46", "section": "CORPORATE AGENTS", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_000", "metadata": {"file_size": 20690, "chunk_index": 0, "chunk_tokens": 994, "has_examples": false, "has_tables": true, "key_concepts": ["LIFE INSURANCE", "IC - 38", "India, Mumbai.", "COMMON CHAPTERS", "ACKNOWLEDGEMENT"]}}
{"chunk": "|C-07|Documentation|63|\n|C-08|Customer Service|72|\n|C-09|Grievance Redressal Mechanism|87|\n|C-10|Regulatory Aspects for Corporate Agents|95|\n|**SECTION **|**LIFE INSURANCE **|**LIFE INSURANCE **|\n|L-01|What Life Insurance Involves|113|\n|L-02|Financial Planning|119|\n|L-03|Life Insurance Products: Traditional|132|\n|L-04|Life insurance products: Non-Traditional|142|\n|L-05|Applications of Life Insurance|148|\n|L-06|Pricing and Valuation in Life Insurance|153|\n|L-07|Life Insurance Documentation|162|\n|L-08|Life Insurance Underwriting|175|\n|L-09|Life Insurance Claims|188|\n|**SECTION**|**HEALTH INSURANCE **|**HEALTH INSURANCE **|\n|H-01|Introduction to Health Insurance|196|\n|H-02|Health Insurance Documentation|203|\n|H-03|Health Insurance Products|210|\n|H-04|Health Insurance Underwriting|236|\n|H-05|Health Insurance Claims|251|\n|**SECTION **|**GENERAL INSURANCE **|**GENERAL INSURANCE **|\n|G-01|General Insurance Documentation|267|\n|G-02|Underwriting and Rate Making|282|\n|G-03|Personal and Retail Insurance|291|\n|G-04|Commercial Insurance|301|\n|G-05|General Insurance Claims|324|\n|**SECTION **|**ANNEXURES **<br>|**ANNEXURES **<br>|\n|A-1|~~Annexures – Specimen Proposal forms and Claims Forms~~<br>for filling up<br>|333|iv## SECTION **AN OVERVIEW**1## CHAPTER C-01## INTRODUCTION TO INSURANCE**Chapter Introduction**This chapter aims to introduce the basics of insurance, trace its evolution and how\nit works. It intends to teach how insurance provides protection against economic\nlosses arising as a result of unforeseen events and serves as an instrument of risktransfer.2**A.** **Insurance – History and Evolution**We live in a world of uncertainty. We hear about: Trains colliding Floods destroying entire communities Earthquakes destroying buildings Young people dying unexpectedly**Diagram 1:** **Events happening around us**Why do these events make people anxious and afraid?The reason is simple.**i.** Firstly these **events are unpredictable.** If one can anticipate and predict anevent, one can prepare for it.**ii.** Secondly, such unpredictable and untoward events are often a **cause of****economic loss and grief** .The people around can come to the aid of individuals who are affected by such\nevents, by having a system of sharing and mutual support. The idea of insurance is\nthousands of years old. Yet, the present form of insurance, is only two or threecenturies old.**1.** **History of insurance**Insurance has existed in some form or other since 3000 BC. Many civilisations, have\npracticed the concept of pooling and sharing among themselves, all the losses\nsuffered by some members of the community. Let us take a look at some of the\nways in which this concept was applied.3**2.** **Insurance through the ages – Some instances**|Bottomry Loans|Traders of Babylon paid extra money to their lenders to write off<br>their loans if shipment was lost or stolen.<br>Traders of Bharuch and Surat also had similar practices.|\n|---|---|\n|**Benevolent**<br>**Societies/**<br>**Friendly**<br>**Societies**|Greeks of 7th Cy. AD, used to pay in advance to take care of the<br>family of members who died and also the funeral expenses of the<br>member.<br>Similar practices were followed in England as well.|\n|**Rhodes**|Traders of Rhodes who were sending goods by sea, were sharing<br>losses if any of them lost their goods due to jettison1.|\n|**Chinese Traders**|**Chinese traders**in ancient days used to send their goods in<br>different ships, so that even if some boats sank, their loss would be<br>partial.|**3.** **Modern concepts of insurance**In India the principle of life insurance was reflected in the joint-family system.\nLosses arising from the demise of a member were shared by various family", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "C-07", "section": "SECTION", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_001", "metadata": {"file_size": 20690, "chunk_index": 1, "chunk_tokens": 989, "has_examples": false, "has_tables": true, "key_concepts": ["Rhodes", "ANNEXURES", "AN OVERVIEW", "Modern concepts of insurance", "Societies/"]}}
{"chunk": "|---|---|\n|**Benevolent**<br>**Societies/**<br>**Friendly**<br>**Societies**|Greeks of 7th Cy. AD, used to pay in advance to take care of the<br>family of members who died and also the funeral expenses of the<br>member.<br>Similar practices were followed in England as well.|\n|**Rhodes**|Traders of Rhodes who were sending goods by sea, were sharing<br>losses if any of them lost their goods due to jettison1.|\n|**Chinese Traders**|**Chinese traders**in ancient days used to send their goods in<br>different ships, so that even if some boats sank, their loss would be<br>partial.|**3.** **Modern concepts of insurance**In India the principle of life insurance was reflected in the joint-family system.\nLosses arising from the demise of a member were shared by various family\nmembers so that each member of the family continued to feel secure.The break-up of the joint family system and emergence of the nuclear family in\nthe modern era, coupled with the stress of daily life has made it necessary to\nevolve alternative systems for security. This highlights the importance of lifeinsurance to an individual.**i.** **Lloyds** : The origins of modern commercial insurance started at Lloyd’sCoffee House in London, where traders agreed to share losses they suffered\ndue to various perils at sea.**ii.** **Amicable Society for a Perpetual Assurance** founded in 1706 in London isconsidered to be the first life insurance company in the world.**4.** **History of insurance in India****a)** **India** : Modern insurance in India began in early 1800 or thereabouts, with\nagencies of foreign insurers starting marine insurance business.|The Oriental Life<br>Insurance Co. Ltd|The first life insurance company to be set up in India<br>was an English company|\n|---|---|\n|**Triton Insurance Co. Ltd.**|The first non-life insurer to be established in India|\n|**Bombay Mutual**<br>**Assurance Society Ltd.**|The first Indian insurance company. It was formed<br>in 1870 in Mumbai|1 Jettison/ Jettisoning’ refers to throwing away some of the cargo to reduce the weight of the ship while at sea.4Many other Indian companies were set up subsequently as a result of the Swadeshi\nmovement at the turn of the century.**Important**a) The **Insurance Act 1938** was the first legislation to regulate the conduct ofinsurance companies in India. This Act, as amended from time to time continuesto be in force.b) Life insurance business was nationalised on 1st September 1956 and the **Life****Insurance Corporation of India (LIC)** was formed. From 1956 to 1999, the LIC\nheld exclusive rights to do life insurance business in India.c) In 1972, the non-life insurance business was also nationalised and the **General****Insurance Corporation of India (GIC) and its four subsidiaries** were set up.d) **The Malhotra Committee, in its report submitted in 1994, recommended**opening of the market for competitione) The Insurance market was liberalised in 2000, with the passing of the InsuranceRegulatory & Development Act, 1999 (IRDAI), which also established the\nInsurance Regulatory and Development Authority of India (IRDAI) in April 2000 as\na statutory regulatory body for the insurance industry.f) An amendment of the Insurance Act in 2021, has allowed Foreign investors, tohold up to 74% of the paid up equity capital in an Indian Insurance company.\nForeign insurers can now establish branches in India to do reinsurance.**a.** **Insurance industry today (As on 30** **[th]** **September 2021)**a) There are 24 Life insurance companies operating in India. Of these, LifeInsurance Corporation (LIC) of India is a public sector company (PSU) and the\nremaining 23 life insurance companies are in the private sector.b) There are 34 General Insurance companies of which 4 - National InsuranceCo. Ltd, The New India Assurance Co. Ltd., The Oriental Insurance Co. Ltd\nand United India Insurance Co. Ltd. are PSU Companies dealing with all lines\nof general insurance. 26 Private Companies also deal with all lines of general\ninsurance. 6General Insurers deal only in Health insurance. 2 are specialised\ninsurers - Agricultural Insurance Company [AIC] and Export Credit and", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "n1", "section": "Benevolent", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_002", "metadata": {"file_size": 20690, "chunk_index": 2, "chunk_tokens": 977, "has_examples": true, "has_tables": true, "key_concepts": ["Rhodes", "Assurance Society Ltd.", "Modern concepts of insurance", "Insurance industry today (As on 30", "September 2021)"]}}
{"chunk": "Insurance Regulatory and Development Authority of India (IRDAI) in April 2000 as\na statutory regulatory body for the insurance industry.f) An amendment of the Insurance Act in 2021, has allowed Foreign investors, tohold up to 74% of the paid up equity capital in an Indian Insurance company.\nForeign insurers can now establish branches in India to do reinsurance.**a.** **Insurance industry today (As on 30** **[th]** **September 2021)**a) There are 24 Life insurance companies operating in India. Of these, LifeInsurance Corporation (LIC) of India is a public sector company (PSU) and the\nremaining 23 life insurance companies are in the private sector.b) There are 34 General Insurance companies of which 4 - National InsuranceCo. Ltd, The New India Assurance Co. Ltd., The Oriental Insurance Co. Ltd\nand United India Insurance Co. Ltd. are PSU Companies dealing with all lines\nof general insurance. 26 Private Companies also deal with all lines of general\ninsurance. 6General Insurers deal only in Health insurance. 2 are specialised\ninsurers - Agricultural Insurance Company [AIC] and Export Credit and\nGuarantees Corporation [ECGC], both set up as Public sector entities.c) There is one Reinsurance Company – The General Insurance Corporation ofIndia [GIC Re] and 11 foreign Reinsurers that operate through branch offices.5d) The Department of Posts (called as India Post) of the Government of India,also transacts life insurance known as Postal Life Insurance. India post is\nexempt from the purview of the Insurance Regulator.**Test Yourself 1**Which among the following is the regulatory body for the insurance industry in India?I. Insurance Authority of IndiaII. Insurance Regulatory and Development Authority of IndiaIII. Life Insurance Corporation of IndiaIV. General Insurance Corporation of India**How insurance works**Modern commerce was founded on the principle of ownership of property. When an\nasset loses value (by loss or destruction), the owner of the asset suffers an economic\nloss. This loss can be compensated from a common fund made up of small\ncontributions from many similar asset owners. This process of transferring the\nchance and consequence of a loss making event is insurance.This mechanism of pooling risks works differently in the case of death and disabilityas there is no loss/ destruction of a commercial asset.**Definition**Insurance may thus be considered as a process by which the losses of a few are\nshared amongst many of those exposed to similar uncertain events/ situations.**Diagram 2:** **How insurance works**There are however some questions that need to be answered.i. Would people agree to part with their hard earned money, to create such acommon fund?ii. How could they trust that their contributions are actually being used for thedesired purpose?6iii. How would they know if they are paying too much or too little?iv. Who would take the responsibility of managing these funds and paying thosewho suffer the loss?The need for an Insurer comes as an answer to all these questions. The Insurer\nassesses the risk, decides and collects the individual contributions (called premium),\npools the risks and premiums, and arranges to pay to those who suffer the loss. The\ninsurer must also win the trust of the individuals and the community.**1.** **Insurance is about value**a) Firstly, there must be an asset which has an economic value. The **Asset** may be:i. P **hysical** (like a car or a building) orii. N **on-physical** (like reputation, goodwill, liability to pay to someone) oriii. P **ersonal** (like one’s eyes, limbs, body and physical capabilities).b) The asset may lose its value if a certain event happens. This chance of loss iscalled as **risk** . The cause of the risk event is known as **peril** .c) There is a principle known as **pooling** . This consists of collecting numerousindividual contributions (known as premiums) from various persons. These\npersons have similar assets which are exposed to similar risks. Their assets are\nalso referred to as ‘risks’ in many contexts.d) This pool of funds is used to compensate the few who might suffer the lossescaused by a **peril** .e) This process of pooling funds and compensating the unfortunate few is carriedout through an institution known as the **insurer** (Insurance Company).f) The insurer enters into an insurance **contract** with each person who seeks toparticipate in this mechanism of pooling. The persons who participate are known\nas **insured.****2.** **Insurance reduces Risk Burden**The burden of risk refers to the costs, losses and disabilities one has to bear as a", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Insurance industry today (As on 30", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_003", "metadata": {"file_size": 20690, "chunk_index": 3, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Asset", "Insurance is about value", "Insurance industry today (As on 30", "Definition"]}}
{"chunk": "persons have similar assets which are exposed to similar risks. Their assets are\nalso referred to as ‘risks’ in many contexts.d) This pool of funds is used to compensate the few who might suffer the lossescaused by a **peril** .e) This process of pooling funds and compensating the unfortunate few is carriedout through an institution known as the **insurer** (Insurance Company).f) The insurer enters into an insurance **contract** with each person who seeks toparticipate in this mechanism of pooling. The persons who participate are known\nas **insured.****2.** **Insurance reduces Risk Burden**The burden of risk refers to the costs, losses and disabilities one has to bear as a\nresult of being exposed to a given loss situation/ event.**Diagram 3:** **Risk burdens that one carries**There are two types of risk burdens that one carries – **primary and secondary** .7**a)** **Primary burden of risk**The **primary burden of risk** consists of losses that are actually suffered by\nhouseholds (and business units), as a result of pure risk events. These losses are\noften direct and measurable; and can be easily compensated for by insurance.**Example**When a factory gets destroyed by fire, the actual value of goods damaged or\ndestroyed can be estimated and the compensation can be paid to the owner of\nthe factory who has suffered the loss.Similarly, if an individual undergoes a heart surgery, the medical cost of the\nsame is known and compensated. In addition there may be some indirect losses.**Example**A fire may interrupt business operations and lead to loss of profits which also\ncan be estimated and the compensation can be paid to the one who suffers sucha loss.Someone whose scooter hits a pedestrian is liable to pay the victim the\ncompensation that the Court decides.**b)** **Secondary burden of risk**Even when no such event occurs and there is no loss, the people who are exposed\nto the peril carry some burden. That is, apart from the primary burden, one also\ncarries a secondary burden of risk.The **secondary burden of risk** consists of costs and strains that one has to bear,\neven if the said event does not occur, from the mere fact that one is exposedto a loss situation.Let us understand some of these burdens:i. Firstly there is **physical and mental strain caused by fear and anxiety** . This\ncan cause stress and affect a person’s wellbeing.ii. Secondly when one is **uncertain about whether a loss would occur or not**,it would be prudent to keep a reserve fund to meet such an eventuality.\nSuch funds may be held in liquid form and yield low returns.By transferring the risk to an insurer, it becomes possible to enjoy peace of mind\nand also invest one’s funds more effectively. It is precisely for these reasons thatinsurance is needed.In India, one must purchase third party insurance if he/ she owns a vehicle because\nit is mandatory if one wants to drive on a public road. At the same time it would be\nprudent to cover the possibility of loss of own damage to the car though it is not8mandatory. It is also compulsory to have a Personal Accident cover for the Owner\nDriver.**Test Yourself 2**Which among the following is a secondary burden of risk?\nI. Business interruption cost\nII. Goods damaged cost\nIII. Setting aside reserves as a provision for meeting potential losses in the future\nIV. Hospitalisation costs as a result of heart attack**B.** **The Principle of Risk Pooling**Insurance companies enter into contracts with different entities – policyholders,\nwho can be individuals or corporates. The benefits they pay to policyholders are\ncontractual obligations. Insurance contracts are meaningful only if the Insurers are\nfinancially capable of taking over the risks and compensating for the losses, if and\nwhen they occur. The structure arises from application of the mutuality or the\npooling principle.**Mutuality** and Diversification are two important ways to reduce risk in financial\nmarkets. They are fundamentally different.|Diversification|Mutuality|\n|---|---|\n|Here the funds are spread out among<br>various assets (eggs are placed in different<br>baskets).|Under mutuality or pooling, the funds of<br>various individuals are combined (all eggs<br>are placed in one basket).|\n|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured immediately\ncreates a large quantity of funds ( corpus)that is available to him/ her in the event", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "t8", "section": "Insurance reduces Risk Burden", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_004", "metadata": {"file_size": 20690, "chunk_index": 4, "chunk_tokens": 1005, "has_examples": true, "has_tables": true, "key_concepts": ["Mutuality", "The Principle of Risk Pooling", "Example", "Primary burden of risk", "Secondary burden of risk"]}}
{"chunk": "contractual obligations. Insurance contracts are meaningful only if the Insurers are\nfinancially capable of taking over the risks and compensating for the losses, if and\nwhen they occur. The structure arises from application of the mutuality or the\npooling principle.**Mutuality** and Diversification are two important ways to reduce risk in financial\nmarkets. They are fundamentally different.|Diversification|Mutuality|\n|---|---|\n|Here the funds are spread out among<br>various assets (eggs are placed in different<br>baskets).|Under mutuality or pooling, the funds of<br>various individuals are combined (all eggs<br>are placed in one basket).|\n|Funds flow from one source to many<br>destinations.|Funds flow from many sources to one.|**Diagram 4:** **Mutuality -** Mutuality (Funds flow from many sources to one)The Principle of Mutuality is what gives insurance contracts their power and\nuniqueness. By paying a small contribution (the premium), an insured immediately\ncreates a large quantity of funds ( corpus)that is available to him/ her in the event\nof a loss arising due to the insured risk. This potential corpus of money is what\nmakes insurance unique and without any substitutes among all financial products.9**C.** **Risk Management Techniques**One may also ask whether insurance is the right solution to all kinds of risksituations. The answer is ‘No’.Insurance is only one of the methods by which individuals may seek to manage their\nrisks. Here they transfer the risks they face to an insurance company. However there\nare other methods of dealing with risks, which are explained below:**1.** **Risk avoidance**Reducing risk by avoiding a loss situation is known as risk avoidance. Thus one may\ntry to avoid activities or situations, or avoid dealing with property or persons due\nto which there can be an exposure.**Example**i. One may avoid certain manufacturing risks by contracting out the manufacturingto someone else.ii. One may not venture outside the house for fear of meeting with an accident ormay not travel at all for fear of falling ill when abroad.Risk avoidance is considered a negative way to handle risk. Individuals and societies\nneed to take some risks for doing activities for their progress. Avoiding such risk\ntaking activities would lead to losing the benefits from such activity.**2.** **Risk retention**One tries to manage the impact of risk and decides to bear the risk and its effects\nby oneself. This is known as self-insurance.**Example**A business house may decide, based on experience about its capacity to bear small\nlosses upto a certain limit, to retain the risk with itself.**3.** **Risk reduction and control**This is a more practical and relevant approach than risk avoidance. It means taking\nsteps to lower the chance of occurrence of a loss and/ or to reduce severity of its\nimpact if such loss should occur.**Important**Measures to reduce the chance of occurrence of loss causing events are known as\n‘ **Loss Prevention** ’. The measures to reduce the degree of loss, in case a loss\nhappens, are called ‘ **Loss Reduction** ’/ Loss Minimisation.Risk reduction involves reducing the frequency and/ or sizes of losses through:10**a)** **Education and training of various types of employees in proper risk****practices – e.g.** (i) participating in ‘fire drills’; (ii)wearing of seatbeltshelmets on cars.**b)** **Making Environmental changes –** like improving physical conditions - e.g. (i)installing fire alarms; (ii) spraying chemicals to kill mosquitoes to reduce\nspread of Malaria.**c)** **Changes made in dangerous or hazardous operations,** while usingmachinery and equipment or in the performance of other task - e.g. (i)\nwearing helmets inside construction sites; (ii) wearing gloves and face shields\nwhile handling chemicals.**d)** **Leading a healthy lifestyle** - helps in reduce the incidence of falling ill - e.g.(i) undergoing regular medical check-ups; (ii) practicing yoga regularly.**e)** **Separation**, or spreading out various items of property into varied locationsrather than concentrating them, to reduce impact of mishap in any one\nlocation - e.g. (i) storing large quantities of flammable substances at separate\nlocations; (ii) fixing fire proof doors in hazardous areas of factories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself as theyoccur. The firm assumes and finances its own risk, either through its own or", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Mutuality", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_005", "metadata": {"file_size": 20690, "chunk_index": 5, "chunk_tokens": 986, "has_examples": true, "has_tables": true, "key_concepts": ["Mutuality", "Making Environmental changes –", "Changes made in dangerous or hazardous operations,", "Leading a healthy lifestyle", "Separation"]}}
{"chunk": "spread of Malaria.**c)** **Changes made in dangerous or hazardous operations,** while usingmachinery and equipment or in the performance of other task - e.g. (i)\nwearing helmets inside construction sites; (ii) wearing gloves and face shields\nwhile handling chemicals.**d)** **Leading a healthy lifestyle** - helps in reduce the incidence of falling ill - e.g.(i) undergoing regular medical check-ups; (ii) practicing yoga regularly.**e)** **Separation**, or spreading out various items of property into varied locationsrather than concentrating them, to reduce impact of mishap in any one\nlocation - e.g. (i) storing large quantities of flammable substances at separate\nlocations; (ii) fixing fire proof doors in hazardous areas of factories.**4.** **Risk financing**This refers to the provision of funds to meet losses that may occur.**a)** **Risk retention through self-financing** involves bearing losses oneself as theyoccur. The firm assumes and finances its own risk, either through its own or\nborrowed funds, this is known as **self-insurance** .**b)** **Risk retention within a bigger group:** If the risk is part of a bigger group,like a parent company, the risk can be retained within the larger group which\nwould finance the losses. This can be a group formed by mutual consent aswell.**c)** **Risk transfer** is an alternative to risk retention. It involves transferring theresponsibility for losses to another party.**Insurance is one of the major forms of risk transfer. Instead of facing the**\n**uncertainty of many of the other forms, people prefer Insurance as it**\n**provides certainty and peace of mind.****5.** **Insurance vs Assurance**Insurance is used for most General insurance contracts which provide protection\nagainst an event that may or may not happen, and where the loss amount can\nbe assessed only after the event.Assurance refers to financial coverage for extended periods or until death. In\nthe case of life, the happening of death (the loss making event), is certain. Only\nthe timing is uncertain. Further, it is not possible to estimate the amount of\neconomic loss suffered when a person dies. The loss amount that is to be paid,11must be fixed in advance. This is why people use the term ‘Assurance’ in caseof Life insurance.**Though there are such subtle technical differences, the terms ‘Insurance’**\n**and ‘Assurance’ are used interchangeably in most markets, including India.**_[One of the biggest general insurers in India carries the name – New India_\n_**Assurance**_ _Company Ltd. and no life company in India is using the word_\n_**‘Assurance’**_ _in its name!]_**Diagram 5:** **How insurance indemnifies the insured****Test Yourself 3**Which among the following is a method of risk transfer?\nI. Bank Fixed DepositII. InsuranceIII. Equity sharesIV. Real Estate**D.** **Insurance as a tool for managing risk**The term ‘Risk’ refers not to a loss that has actually been suffered but a loss that is\nlikely to occur. It is thus an expected loss. The cost of this expected loss is the\nproduct of two factors:i. The **probability** that the peril being insured against may happen, leading tothe lossii. The **severity (impact)** or the amount of loss that may be suffered as a result.12The cost of risk would increase in direct proportion with both the **probability** and\nthe **severity** (amount of loss). This works in different ways – (a) If the amount of\nloss is very high, and the probability of its occurrence is small, the cost of the risk\nwould be low as such instances may be very few. (b) Even if the amount of loss is\nsmall, if the probability of its occurrence is very high, the cost of the risk would be\nhigh, as there would be many such occurrences. Insurance can be seen as a powerful\ntool for managing one’s risk. It protects one from the financial impact of losingone’s assets/ wealth due to an insured loss.**Diagram 6:** **Considerations before opting for insurance****E.** **Considerations before opting for Insurance**When deciding whether to insure or not, one needs to evaluate the cost of\ntransferring the risk [the insurance premium] against the cost of bearing it oneself.\nInsurance would be most required where the loss impact could be very high, but the\nprobability (and hence the premium), is very low. E.g. (i) the chance of an", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Changes made in dangerous or hazardous operations,", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_006", "metadata": {"file_size": 20690, "chunk_index": 6, "chunk_tokens": 960, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance vs Assurance", "Considerations before opting for insurance", "Risk financing", "Changes made in dangerous or hazardous operations,", "Separation"]}}
{"chunk": "the **severity** (amount of loss). This works in different ways – (a) If the amount of\nloss is very high, and the probability of its occurrence is small, the cost of the risk\nwould be low as such instances may be very few. (b) Even if the amount of loss is\nsmall, if the probability of its occurrence is very high, the cost of the risk would be\nhigh, as there would be many such occurrences. Insurance can be seen as a powerful\ntool for managing one’s risk. It protects one from the financial impact of losingone’s assets/ wealth due to an insured loss.**Diagram 6:** **Considerations before opting for insurance****E.** **Considerations before opting for Insurance**When deciding whether to insure or not, one needs to evaluate the cost of\ntransferring the risk [the insurance premium] against the cost of bearing it oneself.\nInsurance would be most required where the loss impact could be very high, but the\nprobability (and hence the premium), is very low. E.g. (i) the chance of an\nearthquake; (ii) the chance of a ship sinking.**a)** **Do not risk a lot for a little** : A reasonable relationship must be there betweenthe cost of transferring the risk and the value derived.Would it make sense to insure an ordinary ball pen?**b)** **Do not risk more than one can afford to lose:** If the loss that can arise as aresult of an event is large enough to cause bankruptcy, retention of the risk\nwould not be appropriate.If a large oil refinery gets destroyed, the owners cannot afford to bear the loss.**c)** **Consider the likely outcomes of the risk carefully:** It is best to insure thoseassets for which the probability of occurrence (frequency) of a loss is low but\nthe possible impact (severity), is high.The loss of a space satellite can be so costly that it has to be insured.13**Test Yourself 4**Which among the following scenarios needs insurance?I. The sole bread winner of a family might die untimely\nII. A person may lose his wallet\nIII. Stock prices may fall drastically\nIV. A house may lose value due to natural wear and tear**F.** **Insurance Market Players**The Insurance Companies (Insurers) are the major players in the insurance industry.\nIn addition to insurers, there are multiple parties who are part of the Insurance\nvalue chain. There is the Insurance Regulator, which regulates the entire market.Intermediaries like Agents, Brokers, Banks (through Bancassurance) Insurance\nMarketing Firms and Point of Sales Persons are in the field of interacting with the\nprospects/ insured finding out their needs, giving them information about the\npolicies available for covering their needs.Surveyors and Loss Assessors/ Adjusters go into assessing claims and ancillary work.\nThird Party Administrators deal with Health and Travel Insurance Claims.\nRegulations provides that all intermediaries have a responsibility towards thecustomer.Agents, being intermediaries between the insurance company and the insured have\nthe responsibility to ensure all material information about the risk is provided bythe insured to insurer.**Important****Duty of an Insurance Agent/ Intermediary towards the Prospect (Customer)**IRDAI regulations provides that intermediaries have certain responsibilities towards\nthe prospect. The intermediary has a responsibility towards the insurer as well.The regulation states that where the prospect depends upon the advice of the\ninsurer or his agent or an insurance intermediary, such a person must advise the\nprospect in a fair manner. It also says that “An insurer or its agent or other\nintermediary shall provide all material information in respect of a proposed cover\nto the prospect to enable the prospect to decide on the best cover that would be inhis or her interest”.If the proposal and other connected papers are not filled by the customer, a\ncertificate may be incorporated at the end of proposal form from the customer that\nthe contents of the form and documents have been fully explained to him and that\nhe has fully understood the importance of the proposed contract.When the customer pays the insurer towards premium, the insurer is bound to issue\na receipt. That is, even if the premium is paid in advance.14**G.** **Role of Insurance in the Society**Insurance companies play an important role in a country’s economic development.\nThey ensure that the wealth of the country is protected and preserved. Some of\ntheir contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunate fewmembers who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Diagram 6:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_007", "metadata": {"file_size": 20690, "chunk_index": 7, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Considerations before opting for insurance", "Considerations before opting for Insurance", "Test Yourself 4", "Do not risk more than one can afford to lose:", "Important"]}}
{"chunk": "to the prospect to enable the prospect to decide on the best cover that would be inhis or her interest”.If the proposal and other connected papers are not filled by the customer, a\ncertificate may be incorporated at the end of proposal form from the customer that\nthe contents of the form and documents have been fully explained to him and that\nhe has fully understood the importance of the proposed contract.When the customer pays the insurer towards premium, the insurer is bound to issue\na receipt. That is, even if the premium is paid in advance.14**G.** **Role of Insurance in the Society**Insurance companies play an important role in a country’s economic development.\nThey ensure that the wealth of the country is protected and preserved. Some of\ntheir contributions are given below.a) Insurance is founded on the principle of Mutuality, in which the collectivepower of the community is brought together to support its unfortunate fewmembers who suffer an economic loss. There are no substitutes forinsurance.b) Insurance companies collect small amounts of premium and pool themtogether as huge funds. These funds are held and invested for the interests\nof policyholders and the benefit of the community. They are not unduly\ninvested in speculative ventures.c) Insurance provides the benefit of protection to numerous insured - bothindividuals and enterprises –against losses caused by accidents or fortuitous\nevents. It preserves capital and releases it for development of business and\nindustry, which helps the country’s growth.d) Insurance enables investment of capital leading to commercial and industrialdevelopment. It also helps in removing the fear, worry and anxiety\nassociated with entrepreneurship.e) Many Banks and Financial institutions do not advance loans on propertyunless it is insured against loss or damage. Many of them insist on assigning\nthe policy as collateral security.f) Before accepting large complicated risks, general insurers arrange forinspection of the property by qualified engineers/ other experts. They assess\nthe risk and suggest risk management measures to reduce the risk and help\nin rating.g) Insurance earns foreign exchange for the country like trade, shipping andbanking services.h) Insurers are associated with institutions engaged in fire loss prevention,cargo loss prevention, industrial safety and road safety.i) Entrepreneurs get the confidence to invest in new or relatively unknownfields with the protection offered by Insurance.**Information****Insurance and Social Security**a) Social security is an obligation of the State. Social security schemes of theState involve the use of compulsory or voluntary insurance, as a tool of social\nsecurity. The Employees State Insurance Act, 1948 provides for **Employees**\n**State Insurance Corporation** to pay for the expenses of sickness,15disablement, maternity and death for industrial employees and their families,who are covered.b) Insurers play an important role in social security schemes sponsored by theGovernment such as1. PMJJBY –Pradhan Mantri Jeevan Jyoti Bima Yojana\n2. PMSBY – Pradhan Mantri Suraksha Bima Yojana\n3. PMFBY- Pradhan Mantri Fasal Bima Yojana\n4. PMJAY – Pradhan Mantri Jan Arogya Yojana (Ayushmaan Bharat)\n5. PMVVY - Pradhan Mantri Vaya Vandana Yojana – a Pension plan\n6. APY - Atal Pension YojanaThese, and other Government schemes have been benefiting the Indian\nsociety/ community.c) In addition to supporting Government schemes, the insurance industry offersinsurance covers on a commercial basis which have the ultimate objective of\nproviding social security. The **rural insurance schemes**, operated on a\ncommercial basis, are designed to provide social security to the rural families.**Test Yourself 5**Which of the following insurance schemes are sponsored by the Government of\nIndia?I. PM Jan Arogya Yojana - Ayushmaan Bharat\nII. PM Fasal Bima Yojana\nIII. PM Suraksha Bima Yojana\nIV. All of the above**Summary**Insurance is risk transfer through risk pooling.Commercial insurance business as practiced today started at the Lloyd’s CoffeeHouse in London.An insurance arrangement involves the following: Asset,\n Risk,\n Peril,\n Contract,\n Insurer and\n InsuredWhen persons having similar assets, exposed to similar risks, contribute into a\ncommon pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,16 Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s1", "section": "G.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_008", "metadata": {"file_size": 20690, "chunk_index": 8, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance and Social Security", "Information", "State Insurance Corporation", "Test Yourself 5", "Employees"]}}
{"chunk": "India?I. PM Jan Arogya Yojana - Ayushmaan Bharat\nII. PM Fasal Bima Yojana\nIII. PM Suraksha Bima Yojana\nIV. All of the above**Summary**Insurance is risk transfer through risk pooling.Commercial insurance business as practiced today started at the Lloyd’s CoffeeHouse in London.An insurance arrangement involves the following: Asset,\n Risk,\n Peril,\n Contract,\n Insurer and\n InsuredWhen persons having similar assets, exposed to similar risks, contribute into a\ncommon pool of funds it is known as pooling.Apart from insurance, other risk management techniques include: Risk avoidance,16 Risk control,\n Risk retention,\n Risk financing and\n Risk transfer- The thumb rules of insurance are: Do not risk more than one can afford to lose,\n Consider the likely outcomes of the risk carefully and\n Do not risk a lot for a little**Key Terms**1. Risk2. Pooling3. Asset4. Burden of risk5. Risk avoidance6. Risk control7. Risk retention8. Risk financing9. Risk transfer**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is I.\n**Answer 5** - The correct option is IV.17## CHAPTER C-02## CORE ELEMENTS OF INSURANCE**Chapter Introduction**In this chapter, we shall learn about the various key elements and principles of\ninsurance that govern the working of insurance.**Learning Outcomes**After studying this chapter, one should be able to:1. Understand Assets are2. Understand Risk, Hazards and Perils3. Appreciate Risk Management4. Understand Risk Pooling in insurance18**A.** **Elements of insurance**We have seen that the process of insurance has four elements Asset Risk Risk poolingLet us now look at the various elements of the insurance process in some detail.**1.** **Asset****Definition**An asset may be defined as ‘anything that confers some benefits and has aneconomic value to its owner’.An asset must have the following features: **Economic value:** An asset must have economic value. Value can arise in twoways.**a)** **Income generation** : Asset may be productive and generate income.**Example**A machine used to manufacture biscuits, or a cow that yields milk, both generate\nincome for their owner. A healthy worker is an asset to an organization.**b)** **Serving needs** : An asset could also add value by satisfying one or a group ofneeds.**Example**A refrigerator cools and preserves food while a car provides comfort and\nconvenience in transportation, similarly a body free of illness adds value to oneself\nand family also. **Scarcity and Ownership**What about air and sunlight? Are they not assets? - **The answer is ‘No’.**Few things are as valuable as air and sunlight. We cannot live without them. Yet\nthey are not considered as assets in the economic sense of the term.There are two reasons for this: Their supply is abundant and not scarce.\n They are not owned by any one individual but are freely available to all.This implies that an asset must satisfy two more conditions to qualify as such - its\nscarcity and its ownership or possession by someone.19 **Insurance of assets**Insurance provides protection only against financial losses arising from unexpected\nevents and not natural wear and tear, of assets due to usage over time.We must note that **insurance cannot protect an asset from loss or damage** . An\nearthquake will destroy a house whether it is insured or not. The insurer can only\npay a sum of money, which would reduce the economic impact of the loss.Losses can arise in the event of breach of an agreement.**Example**An exporter would lose a great deal if the importer on the other side refused to\naccept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives and\nthose of our loved ones. Our lives can be seriously affected when subjected to anaccident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death or disability.These kinds of losses are covered by insurances of the person or personal lines of", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "k2", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_009", "metadata": {"file_size": 20690, "chunk_index": 9, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Income generation", "Key Terms", "Answer 5", "Life insurance", "Serving needs"]}}
{"chunk": "scarcity and its ownership or possession by someone.19 **Insurance of assets**Insurance provides protection only against financial losses arising from unexpected\nevents and not natural wear and tear, of assets due to usage over time.We must note that **insurance cannot protect an asset from loss or damage** . An\nearthquake will destroy a house whether it is insured or not. The insurer can only\npay a sum of money, which would reduce the economic impact of the loss.Losses can arise in the event of breach of an agreement.**Example**An exporter would lose a great deal if the importer on the other side refused to\naccept the goods or defaulted on payments. **Life insurance**What about our lives? There is indeed nothing as valuable to us as our own lives and\nthose of our loved ones. Our lives can be seriously affected when subjected to anaccident or an illness.This can impact in two ways: Firstly there are costs of treatment of a particular disease.\n Secondly there may be loss of economic earnings, both due to death or disability.These kinds of losses are covered by insurances of the person or personal lines of\ninsurance. Insurance is possible for anyone who has assets that have value [i.e.\nwhich generate income or meet some needs]; the loss of which [due to fortuitous\nor accidental events] cause financial loss that can be [measured in terms of money].Thus these assets are commonly referred to as subject matter of insurance in\ninsurance parlance.**2.** **Risk**The second element in the process of insurance is the concept of risk. Risk can be\ndefined as the **chance of a loss** . Risk thus refers to the likely loss or damage that\ncan arise on account of happening of an event. [Risk is sometimes used to refer the\nsubject matter of insurance, as well.] One do not usually expect one’s house to burn\nor one’s car to have an accident. Yet it can happen.Examples of risks are the possibility of economic loss arising from the burning of a\nhouse or a burglary or an accident which results in the loss of a limb.This has two implications.**i.** **Firstly,** it means that that the loss may or may not happen.**ii.** **Secondly,** the event, the occurrence of which actually leads to the loss, isknown as a **peril** . It is the cause of the loss.20**Example**Examples of perils are fire, earthquakes, floods, lightning, burglary, heart attacketc.**Natural wear and tear**It is true that nothing lasts forever. Every asset has a finite lifetime during which it\nis functional and yields benefits. This is a natural process and one discards or\nchanges one’s mobiles, washing machines and clothes when they are worn out.\nTherefore losses arising out of normal wear and tear are not covered in insurance.**Exposure to risk** : Occurrence of a peril need not necessarily lead to a loss. A person\nstaying in Mumbai does not suffer any loss due to a flood in coastal Andhra. For loss\nto happen the asset must be exposed to the peril. Exposure to risk alone is not\nenough ground for insurance compensation.ExampleA fire may break out in factory premises without causing actual damage. Insurance\ncomes into play only if there is an actual economic (financial) loss as a result of a\nperil.**Degree of Risk Exposure:**Two assets may be exposed to the same peril but the likelihood of loss or the amount\nof loss may vary greatly. A vehicle carrying explosives can yield far greater loss from\nfire than tanker carrying water.**3.** **Risk Management** **Extent of damage likely to be suffered**This is given by the degree of loss and its impact on an individual or business.\nOn this basis one may identify three types of risk events or situations: **Critical**Where losses are of such a magnitude; that may result in total loss or\nbankruptcy. Losses can be critical when the accident results in significant and\nsevere impact, disability, damage to equipment and the environment, which\nmay be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.21 A torpedo from a pirate ship sinks an entire passenger ship but most passengersare saved. A major accident resulting in a kidney damage necessitating a kidney transplantoperation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of people,", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Insurance of assets", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_010", "metadata": {"file_size": 20690, "chunk_index": 10, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Secondly,", "Insurance of assets", "Example: Critical", "Risk Management", "Critical"]}}
{"chunk": "fire than tanker carrying water.**3.** **Risk Management** **Extent of damage likely to be suffered**This is given by the degree of loss and its impact on an individual or business.\nOn this basis one may identify three types of risk events or situations: **Critical**Where losses are of such a magnitude; that may result in total loss or\nbankruptcy. Losses can be critical when the accident results in significant and\nsevere impact, disability, damage to equipment and the environment, which\nmay be reversible to some extent. Critical losses would include those resulting\nin serious financial losses, compelling a firm to borrow to continue operations.**Example: Critical** A fire in the plant of a large multinational company at Gurgaon destroysinventory worth Rs 1 crore. The loss is heavy but not so high as to lead to\nbankruptcy.21 A torpedo from a pirate ship sinks an entire passenger ship but most passengersare saved. A major accident resulting in a kidney damage necessitating a kidney transplantoperation entailing prohibitive costs. **Catastrophic**Catastrophic losses signify death or total disability for a large number of people,\nwidespread loss of assets, having significant environmental impact which are\npractically irreversible. Catastrophic losses usually signify disasters that are\nsudden, widespread and unstoppable.**Example: Catastrophic** An earthquake or flood that completely destroys a few villages\n A major fire that completely destroys a multi crore installation over a largeterritory\n The terrorist attack of 9/ 11 on World Trade Centre which caused injuries to alarge number of people\n A pandemic like Covid – 19 causing disease to people across the globe. **Marginal/ Insignificant**Where the possible losses are insignificant and can be easily met from an\nindividual or a firm’s existing assets or current income without imposing anyundue financial strain.**Example** A minor car accident results in the side being slightly grazed due to which someof the paint is damaged and a fender is slightly bent.\n An individual suffering from common cold and cough..**4.** **Hazards and Perils**The condition or conditions which increase the probability of a loss or its severity,\nand thus impact(s) the risk is known as hazard. When insurers make an assessment\nof the risk, it is generally with reference to the hazards to which the asset is subject.The term hazard in insurance language refers to those conditions or features or\ncharacteristics which create or increase the chance of loss arising from a given peril.\nA thorough knowledge of various hazards to which a risk is exposed to is most\nessential for underwriting. Examples of the link between assets, peril and hazards\nare given below.22|Asset|Peril|Hazard|\n|---|---|---|\n|**Life**|Cancer|Excessive Smoking|\n|**Factory**|Fire|Explosive material left Unattended|\n|**Car**|Car Accident|Careless driving by driver|\n|**Cargo**|Storm|Water seeping in cargo and spoiling; Cargo not packaged in<br>waterproof containers|**Important** **Types of hazards****a)** **Physical hazard** is a physical condition that increases the chance of loss.**Example**i. Defective wiring in a building\nii. Indulging in water sports\niii. Leading a sedentary lifestyle**b)** **Moral hazard** refers to dishonesty or character defects in an individual thatinfluence the frequency or severity of the loss. A dishonest individual may\nattempt to commit fraud and make money by misusing the facility of insurance.**Example**If one deliberately sets a fire to one’s property and collects claims against losses\nunder the policy, such claims are clearly fraudulent and could be justifiably rejectedA classic instance of moral hazard is purchasing insurance for a factory and then\nburning it down to collect the insurance amount or buying health insurance after\nonset of a major ailment.**c)** **Legal hazard** is more prevalent in cases involving a liability to pay for damages.It arises when certain features of the legal system or regulatory environment\ncan increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of accidents\ncan raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the price[premiums] charged for insurance coverage would increase if the susceptibility to\nloss, arising as a result of the presence of associated hazards, is high.23**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Risk Management", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_011", "metadata": {"file_size": 20690, "chunk_index": 11, "chunk_tokens": 1011, "has_examples": true, "has_tables": true, "key_concepts": ["Example: Critical", "Legal hazard", "Cargo", "Extent of damage likely to be suffered", "Factory"]}}
{"chunk": "attempt to commit fraud and make money by misusing the facility of insurance.**Example**If one deliberately sets a fire to one’s property and collects claims against losses\nunder the policy, such claims are clearly fraudulent and could be justifiably rejectedA classic instance of moral hazard is purchasing insurance for a factory and then\nburning it down to collect the insurance amount or buying health insurance after\nonset of a major ailment.**c)** **Legal hazard** is more prevalent in cases involving a liability to pay for damages.It arises when certain features of the legal system or regulatory environment\ncan increase the incidence or severity of losses.**Example**The enactment of law governing workmen’s compensation in the case of accidents\ncan raise the amount of liability payable considerably.A major concern in insurance is the relationship between risks and associated\nhazards. Assets are classified into various risk categories on this basis and the price[premiums] charged for insurance coverage would increase if the susceptibility to\nloss, arising as a result of the presence of associated hazards, is high.23**5.** **Mathematical Principle of Insurance (Risk pooling)**The third element in insurance is a mathematical principle that makes insurance\npossible. It is known as the principle of risk pooling.**Example**Suppose there are 100000 RCC houses exposed to the risk of fire that can cause an\naverage loss of Rs. 50000. If the chance of a house catching fire is 2 in 1000 [or 2/\n1000 = 0.002] it would mean that the total amount of loss suffered would be Rs\n10000000 [= 50000x 0.002 x 100000].If an insurer were to get the owners of each of the 100000 houses to contribute Rs\n100 and if these contributions (100000 x 100 = Rs.10000000) were to be pooled into\na single fund, it would be enough to pay for the loss of the unfortunate few whosuffered from the fire.To ensure that there is equity [fairness] among all those being insured, it is\nnecessary that the houses should all be similarly exposed to the risk. In the above\nexample risk exposure to mud houses will be different.**a)** **How exactly does the principle work in insurance?**It is by pooling number of risks of all the insured similarly placed and exposed\nto possibility of loss due to a peril that the insurer is able to assume that risk\nand its financial impact.|Large<br>number<br>of people|Paying<br>Premium|Premium|Paying Claims to a<br>few who suffered<br>loss|\n|---|---|---|---|\n|**Many**<br>**people**<br>**pay**|**Small**<br>**amounts of**<br>**money as**<br>**Premiums**|**These small amounts are pooled**<br>**together as a Common Pool, big**<br>**enough to pay a statistically**<br>**estimated number of claims**|**Big amounts are**<br>**paid to those who**<br>**suffer a loss**|**b)** **Risk pooling and the law of large numbers**The probability of damage [derived as 2 out of 1000 or 0.002 in the example\nabove] forms the basis on which the premium is determined. The insurer would\nface no risk of loss if the actual experience was as expected. In such a situation\nthe premiums of the numerous insured would be sufficient to completely\ncompensate for the losses of those who have been affected by the peril. The\ninsurer would however face a risk if the actual experience was more adverse\nthan expected and the premiums collected were not sufficient to pay the claims.How can the insurer be sure about its predictions? This becomes possible because\nof a principle known as the “Law of large numbers”. It states that the larger the\nsize of the pool of risks, the actual average of losses would be closer to the\nestimated or expected average loss.24**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have the\nsufficient money, they are considered solvent and if they do not have money to\nmeet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or solvency\nmargin) to meet unforeseen deviations between expected and actual claims\nsituations. Solvency Ratio assesses the extent to which assets are available to\ncover the insurers’ commitments towards future payments. Different countries", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_012", "metadata": {"file_size": 20690, "chunk_index": 12, "chunk_tokens": 1015, "has_examples": true, "has_tables": true, "key_concepts": ["How exactly does the principle work in insurance?", "Premiums", "These small amounts are pooled", "Example", "Legal hazard"]}}
{"chunk": "insurer would however face a risk if the actual experience was more adverse\nthan expected and the premiums collected were not sufficient to pay the claims.How can the insurer be sure about its predictions? This becomes possible because\nof a principle known as the “Law of large numbers”. It states that the larger the\nsize of the pool of risks, the actual average of losses would be closer to the\nestimated or expected average loss.24**c)** **Insurance Companies to remain Solvent:**If the pools of risks and the premium pools created are not sufficient to meet\nthe liabilities towards paying claims (in case they occur), the system of risk\npooling and insurance may fail. Insurers need to have sufficient money with\nthem to honour their promises to all the members of the pool. If they have the\nsufficient money, they are considered solvent and if they do not have money to\nmeet their obligations, they become insolvent.In other words, Insurers need to keep with them some surplus money (or solvency\nmargin) to meet unforeseen deviations between expected and actual claims\nsituations. Solvency Ratio assesses the extent to which assets are available to\ncover the insurers’ commitments towards future payments. Different countries\nuse different measures to assess Solvency Ratio. In India, IRDAI has mandated\nthat insurers are required to maintain a minimum solvency ratio of 1.5.**Example**To give a simple illustration, the probability of getting heads on a toss of the coin\nis 1 out of 2. But one cannot be sure to actually get 2 heads if a coin is tossed fourtimes.Only when the number of tosses gets very large and closer to infinity, the chance of\ngetting heads once for every two tosses will become closer to one.It follows that insurers can be sure of their ground only when they have been able\nto insure a large number of insured. An insurer who has insured only a few hundred\nhouses, likely would be worse affected than one who has insured several thousandhouses.**Important****Conditions for insuring a risk**When does it make sense to insure a risk from the insurer’s point of view?Six broad requirements for a risk to be considered insurable are given below.**i.** **A sufficiently large number of homogenously [similar] exposed units** to makethe losses reasonably predictable. This follows from the **law of large numbers** .\nWithout this it would be difficult to make predictions.**ii.** **Loss produced by the risk must be definite and measurable** . It is difficult todecide the compensation if one cannot say for sure that a loss has occurred andhow much it is.**iii.** **Loss must be fortuitous or accidental** . It must be the result of an event thatmay or may not happen. The event must be beyond the control of insured. No\ninsurer would cover a loss that is intentionally caused by the insured.25**iv.** **Sharing of losses of the few by many** can work only if a small percentage of theinsured group suffers loss at any given period of time.**v.** **Economic feasibility:** The cost of insurance must not be high in relation to thepossible loss; otherwise the insurance would be economically unviable.**vi.** **Public policy:** Finally the contract should not be contrary to public policy andmorality.**Test Yourself 1**Which one of the following does not represent an insurable risk?I. FireII. Stolen goods\nIII. Burglary\nIV. Loss of goods due to ship capsizing**Summary**a) The process of insurance has four elements (asset, risk, risk pooling and aninsurance contract).b) An asset may be anything that confers some benefit and is of economic value toits owner.c) A chance of loss represents risk.d) Condition or conditions that increase the probability or severity of the loss arereferred to as hazards.e) The mathematical principle, that makes insurance possible is known as principleof risk pooling.**Key terms**a) Asset\nb) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.26## CHAPTER C-03## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk being\nproposed, whether requested or not\". All insurance contracts are based on the\nprinciple of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "C-03", "section": "Insurance Companies to remain Solvent:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_013", "metadata": {"file_size": 20690, "chunk_index": 13, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Sharing of losses of the few by many", "Conditions for insuring a risk", "Public policy:", "Test Yourself 1"]}}
{"chunk": "b) Risk\nc) Hazard\nd) Risk pooling\ne) Offer and acceptance\nf) Lawful consideration**Answers to Test Yourself****Answer 1** - The correct option is II.26## CHAPTER C-03## PRINCIPLES OF INSURANCE**Chapter Introduction**In this chapter, we discuss the principles, based on which the mechanism ofinsurance works.a) Utmost Good Faith or \"Uberrima fides\" is defined as involving “a positive duty\nto voluntarily disclose, accurately and fully, all facts material to the risk being\nproposed, whether requested or not\". All insurance contracts are based on the\nprinciple of Uberrima Fidesb) The existence of ‘Insurable Interest’ is an essential ingredient of every\ninsurance contract and is considered as the legal pre-requisite for insurance.c) Indemnity ensures that the insured is compensated to the extent of his loss on\nthe occurrence of the contingent event.d) Subrogation means the transfer of all rights and remedies, with respect to the\nsubject matter of insurance, from the insured to the insurer.e) The principle of contribution implies that if the same property is insured with\nmore than one insurance company, the compensation paid by all the insurers\ntogether cannot exceed the actual loss suffered.f) Proximate cause is a key principle of insurance and is concerned with how the\nloss or damage actually occurred and whether it is indeed as a result of an\ninsured peril.27**A.** **Uberrima Fides**Insurance contracts have various special features that are discussed below:**1.** **Utmost Good Faith or** _**‘Uberrima Fides’**_Utmost Good Faith or \"Uberrima fides\", one of the fundamental principles of an\ninsurance contract, is defined as “a positive duty to voluntarily disclose, accurately\nand fully, all facts material to the risk being proposed, whether requested or not\".All commercial contracts are based on Good Faith in so much as there shall be nofraud or deceit when giving information or doing the transaction. The rule observed\nhere is that of **“Caveat Emptor”** which means **Buyer Beware** . The parties to the\ncontract are expected to examine the subject matter of the contract and so long as\none party does not mislead the other and the answers are given truthfully, there is\nno question of the other party avoiding the contract.Insurance contracts stand on a different footing as the subject matter of the\ncontract is intangible and cannot be easily known to the insurer. Again, there are\nmany facts, which may be known only to the proposer. The insurer has to rely\nentirely on the proposer for information. Hence the proposer has a legal duty to\ndisclose all material information about the subject matter of insurance to the\ninsurers. That is, the insured should not make any misrepresentation regarding any\nfact that is material for the insurance contract. This higher obligation of full\nrepresentation and full disclosure in respect of Insurance contracts makes themcontracts of Utmost Good Faith.**If Utmost Good Faith is not observed by either party, the contract may be**\n**avoided by the other.** This follows from the logic that no one should be allowed to\ntake advantage of his own wrong especially while entering into a contract ofinsurance.**a)** **Material fact** has been defined as a fact that would affect the judgment of aninsurance underwriter in deciding whether to accept the risk and if so, the rate\nof premium and the terms and conditions. The insured has an obligation to fully\nand accurately disclose all facts that are material to an insurance contract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk? If so, at what rate of premium and subject to what terms and conditions?This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to material28facts which he ought to know. There is a corresponding duty of the insurer not to\nwithhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer should\ndisclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age, hobbies,\nfinancial information like income details of proposer, pre-existing life", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "C-03", "section": "Answers to Test Yourself", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_014", "metadata": {"file_size": 20690, "chunk_index": 14, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Material fact", "Example", "Utmost Good Faith or", "Chapter Introduction"]}}
{"chunk": "of premium and the terms and conditions. The insured has an obligation to fully\nand accurately disclose all facts that are material to an insurance contract.Whether an undisclosed fact was material or not would depend on the\ncircumstances of the individual case and could be decided ultimately only in a\ncourt of law. The insured **has to disclose** facts that affect the risk.Material facts denote the information which enables the insurers to decide: Whether they will accept the risk? If so, at what rate of premium and subject to what terms and conditions?This legal duty of utmost good faith arises under common law. The duty applies\nnot only to material facts which the proposer knows, but also extends to material28facts which he ought to know. There is a corresponding duty of the insurer not to\nwithhold any information about the policy to the insured.**Example**The following are some examples of material information that the proposer should\ndisclose while making a proposal:**i.** **Life Insurance:** One’s own medical history, family history of hereditaryillnesses, habits like smoking and drinking, absence from work, age, hobbies,\nfinancial information like income details of proposer, pre-existing life\ninsurance policies, occupation etc.**ii.** **Fire Insurance:** Construction, location/ situation of risk and usage ofbuilding, age of the building, nature of goods in premises etc.**iii.** **Marine Insurance:** Description of goods, method of packing and mode oftransit etc.**iv.** **Motor Insurance:** Description of vehicle, date of purchase and RegionalRegistration authority etc.**v.** **Health Insurance:** Pre-existing disease, age etc.**b)** **When a Fact becomes ‘Material’: Some types of material facts that one** needsto disclose are those indicating that the particular risk represents a greater\nexposure than can be normally expected.**Example**Hazardous nature of cargo being sent by a ship, past history of illness, past history\nburglary of a house.i. Existence of policies taken from all insurers and their present statusii. All questions in the proposal form or application for insurance are consideredto be material, as these relate to various aspects of the subject matter of\ninsurance and its exposure to risk. They need to be answered truthfully and\nbe full in all respects.The following are some scenarios wherein material facts need not be disclosed.**Information**a. **Material Facts that need not be disclosed:** Unless there is a specific enquiry byunderwriters, the proposer has no obligation to disclose facts like:**i.** **Measures implemented to reduce the risk. E.g.:** The presence of a fireextinguisher**ii.** **Facts which the insured does not know or is unaware of. E.g.:** Anindividual, who had high blood pressure but was not aware about the same29at the time of taking the policy, cannot be charged with non-disclosure ofthis fact.**iii.** **Which could be discovered, by reasonable diligence.** It is not necessary todisclose every minute material fact. The underwriters must be conscious\nenough to ask for the same if they require further information. E.g.: When\ninsuring a textile shop one does not need to specifically say that some of the\nsynthetic clothes in the shop are highly combustible.**iv.** **Matters of law** : Everybody is supposed to know the law of the land. **E.g.:**Municipal laws about storing of explosives**v.** **About which insurer appears to be indifferent (or has waived the need****for further information)**In such cases, the insurer cannot later disclaim responsibility on grounds that the\nanswers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is accepted\nand a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose any\nmaterial facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo some\nsurgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to disclose_", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "l28", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_015", "metadata": {"file_size": 20690, "chunk_index": 15, "chunk_tokens": 961, "has_examples": true, "has_tables": false, "key_concepts": ["Information", "Motor Insurance:", "Health Insurance:", "Example", "Matters of law"]}}
{"chunk": "answers were incomplete.**b.** **Duty to Disclose:** In the case of insurance contracts, the duty to disclose ispresent throughout the entire period of negotiation until the proposal is accepted\nand a Life Insurance policy is issued.Once the Life Insurance policy is accepted, there is no further need to disclose any\nmaterial facts that may come up during the term of the policy.**Example**Mr. Rajan has taken a Life insurance policy for a term of fifteen years. Six years\nafter taking the policy, Mr. Rajan has some heart problems and has to undergo some\nsurgery. Mr. Rajan does not need to disclose this fact to the insurer._[However, if the policy is in a lapsed condition because of failure to pay the_\n_premiums when due and the policy holder seeks to revive the policy contract and_\n_bring it back in force, he may, at the time of such revival, have the duty to disclose_\n_all facts that are material and relevant, as though it is a new policy.]_In the case he has Health Insurance, at the time of renewing the policy, Mr. Rajanhas to inform the insurer about this health issue.Similarly, in the case of General Insurance, at the time of renewing the Fire policy\nfor an enterprise/ factory, the insured has to inform the insurer if a change was\nmade in the occupancy of the building.At the time of renewing the Hull policy for a ship, the insured has to inform the\ninsurer if the ship was modified to carry a different type cargo; say, hazardous\nchemicals instead of pulses.c. **Situations of Non-Disclosure** may arise when the insured is silent about materialfacts because the insurer has not raised any specific enquiry. Such situations may\nalso arise through evasive answers to queries raised by the insurer.30Often non-disclosure may be inadvertent (meaning that it may be made without\none’s knowledge or intention) or because the proposer thought that a fact wasnot material. In such a case it is innocent.When a fact is intentionally suppressed it is treated as concealment. Here, thereis the intent to deceive.d. **Misrepresentation:** Any statement made during negotiation of a contract ofinsurance is called representation. A representation may be a definite statement\nof fact or a statement of belief, intention or expectation. It is expected that the\nstatement must be substantially correct. Representations that concern matters\nof belief or expectation must be made in good faith. Misrepresentation is of twokinds:**i.** **Innocent Misrepresentation** relates to inaccurate statements, which aremade without any fraudulent intention.**ii.** **Fraudulent Misrepresentation** on the other hand refers to false statementsthat are made with deliberate intent to deceive the insurer or are maderecklessly without due regard for truth.An insurance contract generally becomes void when there is a clear case of\nconcealment with intent to deceive, or when there is fraudulent\nmisrepresentation.Amendments (March, 2015) to Insurance Act, 1938 have provided certain\nguidelines about the conditions under which a policy can be called into question\nfor fraud. The new provisions are as followse. **Fraud:** The term “Fraud” has been specified under **Section 45 (2) of the****Insurance Act (amended in 2015).** Accordingly, a Life Insurance policy can be\ncalled in question on the ground of Fraud by the insurer only within a time period\nand not later. However, Insurers can do so only within three years from (a) the\ndate of issuance of the policy (b) the date of commencement of risk, (c) the date\nof revival of the policy or (d) the date of the rider to the policy, whichever islater.The insurer needs to communicate the reasons on which the policy is questioned\nin writing to the insured or his/ her legal representatives, nominees or assignees.The expression \"fraud\" means any act committed by the insured, with the intent\nto deceive the insurer or to induce the insurer to issue an insurance policy. It is\nalso provided that in case the policyholder is not alive, the onus of disproving\nfraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.31**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Duty to Disclose:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_016", "metadata": {"file_size": 20690, "chunk_index": 16, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Misrepresentation:", "Innocent Misrepresentation", "Section 45 (2) of the", "Fraud:", "Situations of Non-Disclosure"]}}
{"chunk": "of revival of the policy or (d) the date of the rider to the policy, whichever islater.The insurer needs to communicate the reasons on which the policy is questioned\nin writing to the insured or his/ her legal representatives, nominees or assignees.The expression \"fraud\" means any act committed by the insured, with the intent\nto deceive the insurer or to induce the insurer to issue an insurance policy. It is\nalso provided that in case the policyholder is not alive, the onus of disproving\nfraud, lies upon the beneficiaries.**B.** **Insurable interest**The existence of ‘insurable interest’ is an essential ingredient of every insurance\ncontract and is considered as the legal pre-requisite for insurance.31**Three essential elements of insurable interest:**i. There must be property, right, interest, life or potential liability capable ofbeing insured.ii. Such property, right, interest, life or potential liability must be the subjectmatter of insurance.iii. The insured must bear a legal relationship to the subject matter such that hestands to benefit by the safety of the property, right, interest, life or freedom\nof liability. By the same token, he must stand to lose financially by any loss,\ndamage, injury or creation of liability.Let us see how insurance differs from a gambling or wager agreement.**a)** **Gambling and insurance:** Unlike a card game, where one could win or lose, afire can have only one consequence – loss to the owner of the house.The owner takes insurance to ensure that the loss suffered is compensated for\nin some way.In other words, Insurable Interest is the interest the insured has in the subjectmatter of insurance. Insurable interest makes an insurance contract valid andenforceable under the law.**Example**If Mr. Patel has brought a house with a mortgage loan of Rs 15 lakhs from a bank\nand he has repaid 12 lakhs of this amount, the bank’s interest would be only to the\ntune of the balance three lakhs which is outstanding.Thus the bank also has an insurable interest financially in the house for the balance\namount of loan that is unpaid and would ensure that it is made a co insured in the\npolicyMr. Patel owns a house for which he has taken a mortgage loan of Rs. 15 lakhs from\na bank. Ponder over the questions below: Does he have an insurable interest in the house? Does the bank have an insurable interest in the house? What about his neighbour?Mr. Dass has a family consisting of spouse, two kids and old parents. Ponder over\nthe below questions: Does he have an insurable interest in their well-being? Does he stand to financially lose if any of them are hospitalised? What about his neighbour’s kids? Would he have an insurable interest in them?32It would be relevant here to make a distinction between the subject matter of\ninsurance and the subject matter of an insurance contract.**The subject matter of insurance** relates to property being insured against, whichhas an intrinsic value of its own.**The subject matter of an insurance contract** on the other hand is the insured’s\nfinancial interest in that property. It is only when the insured has such an interest\nin the property that he/ she has the legal right to insure. The insurance policy in\nthe strictest sense covers not the property per se, but the insured’s financial\ninterest in the property.**Diagram 1:** **Insurable interest according to common law****b)** **Time when insurable interest should be present:** In life insurance, insurableinterest should be present at the time of taking the policy. In general insurance,\ninsurable interest should be present both at the time of taking the policy and at\nthe time of claim with some exceptions like marine policies in which case itmust exist at the time of claim.In case of fire and accident insurance, insurable interest should be present both\nat the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses if\nthe family meets with an accident or undergoes hospitalisation. However, in\nmarine cargo insurance, insurable interest is required only at the time of loss as\nthe ownership of the goods would change hands when the cost is paid, which\ncan happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the loss\nor damage actually occurred and whether it is as a result of an insured peril. If the\nloss has been caused by the insured peril, the insurer is liable. If the immediate", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_017", "metadata": {"file_size": 20690, "chunk_index": 17, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["The subject matter of an insurance contract", "Time when insurable interest should be present:", "Diagram 1:", "Example", "Insurable interest according to common law"]}}
{"chunk": "insurable interest should be present both at the time of taking the policy and at\nthe time of claim with some exceptions like marine policies in which case itmust exist at the time of claim.In case of fire and accident insurance, insurable interest should be present both\nat the time of taking the policy and at the time of loss.In case of health and personal accident insurance apart from self, family can\nalso be insured by the proposer since he/ she stands to incur financial losses if\nthe family meets with an accident or undergoes hospitalisation. However, in\nmarine cargo insurance, insurable interest is required only at the time of loss as\nthe ownership of the goods would change hands when the cost is paid, which\ncan happen during the period of transit.**C.** **Proximate Cause**Proximate cause is a key principle of insurance and is concerned with how the loss\nor damage actually occurred and whether it is as a result of an insured peril. If the\nloss has been caused by the insured peril, the insurer is liable. If the immediate\ncause is an insured peril, the insurer is bound to make good the loss, otherwise he\nis not. This application of principle is practically more in respect of non-lifeinsurance claims.33When a loss occurs, there can often be a series of events leading up to the incident\nand so it is sometimes difficult to determine the nearest or proximate cause. Under\nthis rule, the insurer looks for the predominant cause which sets into motion the\nchain of events producing the loss. This may not necessarily be the last event that\nimmediately preceded the loss i.e. it is not necessarily an event which is closest to,\nor immediately responsible for causing the loss. For example, a fire might cause a\nwater pipe to burst. Despite the resultant loss being water damage, the fire would\nstill be considered the proximate cause of the incident. Other causes may be\nclassified as remote causes, which are separate from proximate causes. Remote\ncauses may be present but are not effectual in causing an event.**Definition**Proximate cause is defined as the active and efficient cause that sets in motion achain of events which brings about a result, without the intervention of any force\nstarted and working actively from a new and independent source.How does the principle of proximate cause apply to insurance contracts? Since\ninsurance provides for payment of a death benefit, regardless of the cause of death,\nthe principle of proximate cause would not usually apply. However many insurance\ncontracts may also have an accident benefit add-on wherein an additional sum\nassured is payable in the event of accidental death. In such a situation, it becomes\nnecessary to ascertain the cause - whether the death occurred as a result of an\naccident. The principle of proximate cause would become applicable in suchinstances.To understand the principle of proximate cause, consider the following situation:**Example****Scenario 1:** Mr. Ajay had parked his car in the garage and gone on a long vacation.\nSix months later, when he came back and started the car, he noticed that the airconditioning of the car was not working. Mr. Ajay filed a claim with the insurance\ncompany for the cost of repairing the air-conditioning and the insurance company\nrejected the claim. The reason given by the insurance company was that the damage\nwas due to the ‘normal wear and tear’ of the car and the air-conditioning system,\nwhich was an excluded peril in the insurance policy. Mr Ajay approached the Court\nand after examining the survey report which said that the car was 12 years old and\nneither the car nor the air-conditioning had been serviced/ repaired during the\nprevious 6 years, the damage was due to the ‘normal wear and tear’ and the\ninsurance company was not liable to pay the claim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the34immediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e34", "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_018", "metadata": {"file_size": 20690, "chunk_index": 18, "chunk_tokens": 935, "has_examples": true, "has_tables": false, "key_concepts": ["Scenario 1:", "Example", "Scenario 2:", "Definition", "Proximate Cause"]}}
{"chunk": "was due to the ‘normal wear and tear’ of the car and the air-conditioning system,\nwhich was an excluded peril in the insurance policy. Mr Ajay approached the Court\nand after examining the survey report which said that the car was 12 years old and\nneither the car nor the air-conditioning had been serviced/ repaired during the\nprevious 6 years, the damage was due to the ‘normal wear and tear’ and the\ninsurance company was not liable to pay the claim.**Scenario 2:** Mr. Pinto, while riding a horse, fell on the ground and had his leg\nbroken, he was lying on the wet ground for a long time before he was taken to\nhospital. Because of lying on the wet ground, he had fever that developed into\npneumonia, finally dying of this cause. Though pneumonia might seem to be the34immediate cause, in fact it was the accidental fall that emerged as the proximate\ncause and the claim was paid under personal accident insurance.There are certain losses which are suffered by the insured as a result of fire but\nwhich cannot be said to be proximately caused by fire. In practice, some of these\nlosses are customarily paid by business under fire insurance policies.Example of such losses can be – Damage to property caused by water used to extinguish fire Damage to property caused by fire brigade in execution of their duty Damage to property during its removal from a burning building to a safe place**Test Yourself 1**Mr. Pinto contracted pneumonia as a result of lying on wet ground after a horse\nriding accident. The pneumonia resulted in death of Mr. Pinto. What is the\nproximate cause of the death?I. PneumoniaII. HorseIII. Horse riding accidentIV. Bad luck**D.** **Indemnity**The Principle of Indemnity is applicable to Non-life insurance policies. **It means that**\n**the policyholder, who suffers a loss, is compensated so as to put him or her in**\n**the same financial position as he or she was before the occurrence of the loss**\n**event** . The insurance contract guarantees that the insured would be indemnified or\ncompensated up to the amount of loss and no more.The philosophy is that one should not make a profit through insuring one’s assets\nand recovering more than the loss. The insurer would assess the economic value of\nthe loss suffered and compensate accordingly.**Example**Ram has insured his house, worth Rs. 10 lakhs, for the full amount. He suffers loss\non account of fire estimated at Rs. 70,000. The insurance company would pay him\nan amount of Rs. 70,000. The insured can claim no further amount.The indemnity to be paid would depend on the type of insurance one\ntakes.Indemnity might take one or more of the following modes of settlement: Cash payment\n Repair of a damaged item\n Replacement of the lost or damaged item\n Reinstatement (Restoration). E.g. Rebuilding a house destroyed by fire35**Diagram 2:** **Indemnity****a)** **Agreed Value:** However, there is some subject matter whose value cannot beeasily estimated or ascertained at the time of loss. For instance, it may be\ndifficult to put a price in the case of family heirlooms or rare artefacts. Similarly\nin marine insurance policies it may be difficult to estimate the extent of loss\nsuffered in a ship accident half way around the world.In such instances, a principle known as the ‘Agreed Value’ is adopted. The\ninsurer and insured agree on the value of the property to be insured, at the\nbeginning of the insurance contract. In the event of total loss, the insurer agrees\nto pay the agreed amount of the policy. This type of policy is known as “ **Agreed**\n**Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss only\nin the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs. 5\nlakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this entire\namount. It is deemed that the house owner has insured only to the tune of half\nits value and he is thus entitled to claim just 50% [Rs. 30,000] of the amount ofloss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e34", "section": "Scenario 2:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_019", "metadata": {"file_size": 20690, "chunk_index": 19, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Indemnity", "It means that", "Test Yourself 1", "Agreed Value:", "Agreed"]}}
{"chunk": "insurer and insured agree on the value of the property to be insured, at the\nbeginning of the insurance contract. In the event of total loss, the insurer agrees\nto pay the agreed amount of the policy. This type of policy is known as “ **Agreed**\n**Value Policy** ”.**b)** **Underinsurance:** Consider a situation now where the property has not been\ninsured for its full value. One would then be entitled to indemnity for loss only\nin the same proportion as one’s insurance.Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs. 5\nlakhs. If the loss on account of fire is Rs. 60,000, one cannot claim this entire\namount. It is deemed that the house owner has insured only to the tune of half\nits value and he is thus entitled to claim just 50% [Rs. 30,000] of the amount ofloss. This is known as underinsurance.In most types of non-life insurance policies, which deal with insurance of\nproperty and liability, the insured is compensated to the extent of actual\namount of loss i.e. the amount of money needed to replace lost or damaged\nproperty at current market prices less depreciation.**E.** **Subrogation**Subrogation means the transfer of all rights and remedies with respect to the\nsubject matter of insurance, from the insured to the insurer. Subrogation follows\nfrom the principle of Indemnity. Hence, it is often called a ‘corollary’ of Indemnity.In other words, if an insured suffers a loss and the loss has been indemnified by the\ninsurer, the insured’s right to get compensated by any third party for that loss,36would get shifted to the insurer. Note that the amount of damage that can be\ncollected by the insurance company is only to the extent of the amount paid by the\ninsurance company.**Important****Subrogation:** It is the process an insurance company uses to recover claim amounts\npaid to a policy holder from a negligent third party.Subrogation can also be defined as surrender of rights by the insured to an insurance\ncompany that has paid a claim against the third party.**Example**Mr. Kishore’s household goods were being carried in Sylvain Transport service. They\ngot damaged due to driver’s negligence, to the extent of Rs. 45,000 and the insurer\npaid an amount of Rs. 30,000 to Mr. Kishore. The insurer stands subrogated to the\nextent of only Rs. 30,000 and collect that amount from Sylvain Transports.In case the matter went into litigation and the Court directed Sylvain Transports to\npay Rs.35,000 as compensation to Mr. Kishore, he is liable to pay the insurer the\nclaim amount of Rs 30,000 under the subrogation clause, and to keep the balance\namount of Rs 5,000 with himself.The Subrogation Clause prevents the insured from collecting more than the loss from the insurance company and from any third party. Subrogation arises only in\ncase of contracts of indemnity and not against benefit policies like Life Insurance\nPolicy or Personal Accident Policy.**Example**Mr. Suresh dies in an air crash. His family is entitled to collect the full Sum Assured\nof Rs 50 lakhs from the insurer who has issued a Personal Accident Policy plus the\ncompensation paid by the airline, say, Rs 15 lakhs.**F.** **Contribution:**Like Subrogation, ‘Contribution’ also follows from the Principle of Indemnity.\nHence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be met when\nthe insured has taken insurance from more than one insurer. Contribution implies\nthat if the same property is insured with more than one insurance company, the\ncompensation paid by all the insurers together cannot exceed the actual loss\nsuffered. The policy holder can claim from each of the insurers only a portion of the\nloss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs. Suppose37a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he can claim anamount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise in", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e37", "section": "Agreed", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_020", "metadata": {"file_size": 20690, "chunk_index": 20, "chunk_tokens": 978, "has_examples": true, "has_tables": false, "key_concepts": ["Subrogation:", "Agreed", "Example", "Important", "Underinsurance:"]}}
{"chunk": "Hence, it is also called a ‘corollary’ of Indemnity. Contribution is a principle that\narises in general insurance contracts. It tells us how the liability is to be met when\nthe insured has taken insurance from more than one insurer. Contribution implies\nthat if the same property is insured with more than one insurance company, the\ncompensation paid by all the insurers together cannot exceed the actual loss\nsuffered. The policy holder can claim from each of the insurers only a portion of the\nloss in proportion to the amount insured with each.Example: If Mr Srinivas has taken a fire policy on his house with two insurance\ncompanies, with both of whom, he insured for the full value of Rs.12 lakhs. Suppose37a fire breaks out and he suffers a loss of Rs 3 lakhs as a result, he can claim anamount of Rs 1.5 lakhs from each of the insurers.The Principle of Contribution applies only to indemnity policies. It does not arise in\nthe case of Life Insurance, because there is no upper limit that can be placed onthe losses suffered when there is a loss of life.**Test Yourself 2**Which among the following is an example of coercion?I. Ramesh signs a contract without having knowledge of the fine print\nII. Ramesh threatens to kill Mahesh if he does not sign the contract\nIII. Ramesh uses his professional standing to get Mahesh to sign a contract\nIV. Ramesh provides false information to get Mahesh to sign a contract**Test Yourself 3**Which among the following options cannot be insured by Ramesh?I. Ramesh’s houseII. Ramesh’s spouseIII. Ramesh’s friendIV. Ramesh’s parents**Test Yourself 4**What is the significance of the principle of contribution?I. It ensures that the insured also contributes a certain portion of the claim alongwith the insurerII. It ensures that all the insured who are a part of the pool, contribute to the claimmade by a participant of the pool, in the proportion of the premium paid bythemIII. It ensures that multiple insurers covering the same subject matter; cometogether and contribute the claim amount in proportion to their exposure to the\nsubject matter\nIV. It ensures that the premium is contributed by the insured in equal instalmentsover the year.**Summary**The special features of insurance policies include:i. Uberrima fides,\nii. Insurable interest,\niii. Proximate cause,\niv. Indemnity\nv. Subrogation38vi. Contribution**Key Terms**1. Non-Disclosure2. Misrepresentation3. Material facts4. Agreed Value5. Under Insurance**Answers to Test Yourself****Answer 1** - The correct option is III\n**Answer 2** - The correct option is II\n**Answer 3** - The correct option is III\n**Answer 4** - The correct option is III39## CHAPTER C-04 **FEATURES OF INSURANCE CONTRACTS****Chapter Introduction**In this chapter, we discuss the elements that govern the working and specialfeatures of an insurance contract.40**A.** **Insurance contracts – Legal aspects and special features.**The chapter also deals with the legal aspects and special features of an insurancecontract.**1.** **The Insurance Contract**Insurance involves a contractual agreement in which the insurer agrees to\nprovide financial protection against certain specified risks for a price or\nconsideration known as the premium. The contractual agreement takes the form\nof an insurance policy.**2.** **Legal aspects of an insurance contract**This section looks at some features of an insurance contract and considers thelegal principles that govern insurance contracts in general.**Important**A contract is an agreement between parties, enforceable at law. The provisions of\nthe Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**41**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said to\nmake an offer or proposal. Usually, the offer is made by the proposer, and\nacceptance made by the insurer.When a person to whom the offer is made signifies his assent thereto, this is deemed", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e37", "section": "Test Yourself 2", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_021", "metadata": {"file_size": 20690, "chunk_index": 21, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Insurance contract", "Test Yourself 4", "Chapter Introduction", "Diagram 2:"]}}
{"chunk": "the Indian Contract Act, 1872 govern all contracts in India, including insurancecontracts.An insurance policy is a contract entered into between two parties, viz., the\ncompany, called the **insurer**, and the policy holder, called the **insured** and fulfils\nthe requirements enshrined in the Indian Contract Act, 1872.**Diagram 1:** **Insurance contract**41**B.** **Elements of a valid contract****Diagram 2:** **Elements of a valid contract**The elements of a valid contract are:**1.** **Offer and acceptance**When one person signifies to another his willingness to do or to abstain from doing\nanything with a view to obtaining the assent of the other to such act, he is said to\nmake an offer or proposal. Usually, the offer is made by the proposer, and\nacceptance made by the insurer.When a person to whom the offer is made signifies his assent thereto, this is deemed\nto be an acceptance. Hence, when a proposal is accepted, it becomes a promise.\nThe acceptance needs to be communicated to the proposer which results in theformation of a contract.When a proposer accepts the terms of the insurance plan and signifies his/ her\nassent by paying the deposit amount, which, on acceptance of the proposal, gets\nconverted to the first premium, the proposal becomes a policy. If any condition is\nput, it becomes a counter offer. The policy bond becomes the evidence of thecontract.**2.** **Consideration**This means that the contract must contain some mutual benefit for the parties. The\npremium is the consideration from the insured, and the promise to indemnify, is theconsideration from the insurers.**3.** **Agreement between the parties (Consensus Ad-Idem)**Both the parties, the insurer and the policyholder, should agree to the same thing\nin the same sense. In other words, there should be “ **consensus ad-idem** ” between\nboth parties.42**4.** **Free consent**There should be free consent while entering into a contract. Consent is said to\nbe free when it is not caused by Coercion/ By Force\n Undue influence Fraud Misrepresentation\n MistakeWhen consent to an agreement is caused by coercion, fraud or\nmisrepresentation, the agreement is voidable.**5.** **Capacity of the parties**Both the parties to the contract must be legally competent to enter into the\ncontract. The policyholder must be legally an adult at the time of signing the\nproposal and should be of sound mind and not disqualified under law. For\nexample, minors cannot enter into insurance contracts.**6.** **Legality**The object of the contract must be legal, for example, no insurance can be had\nfor illegal acts. Every agreement of which the object or consideration is unlawful\nis void. The object of an insurance contract is a lawful object.Also one’s entering into an insurance contract should be done out of one’s free\nwill, without any kind of force, fear or mistake.**C.** **Paying Premium in Advance**As per Indian laws, Insurers are not allowed to assume risk unless they receive the\npremium in advance. In other words, insurance protection cannot be sold on creditbasis in India.Section 64 VB of the Insurance Act 1938 states, “No risk to be assumed unless\npremium is received in advance”. No insurer shall assume any risk unless and until\nthe premium is received in advance or is guaranteed to be paid or a deposit is made\nin advance in the prescribed manner. This is an important feature of the insurance\nindustry in India.The Insurance Rules, 1939, provide certain exceptions to this condition of advance\npayment of premium, in respect of particular categories of insurances. Section 59\nof the Insurance Rules allows accepting premiums in instalments in respect of\nSickness Insurance, Group Personal Accident Insurance Medical Benefits Insurance\nand Hospitalisation Insurance Schemes, subject to certain conditions. Section 59 of\nthe Insurance Rules allows relaxations for policies issued to Government and semiGovernment bodies, Fidelity Guarantee Insurance policies covering Government and43semi-Government employees, Workmen's Compensation policies, Cash in Transit\npolicies, and some other categories of insurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a proper\nunderstanding the product and not just bought/ sold. Hence, insurance is to be\n‘solicited’ or asked for by the customer. Traditionally, insurers declare that\n“Insurance is the subject matter of solicitation”. To elucidate, insurance is not\na ready-made product like a packet of biscuits or a bar of chocolate to be\nbought/ sold outright. Customers have to discuss their insurance needs with a", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d43", "section": "Diagram 1:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_022", "metadata": {"file_size": 20690, "chunk_index": 22, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Legality", "Capacity of the parties", "Agreement between the parties (Consensus Ad-Idem)", "Paying Premium in Advance", "Diagram 1:"]}}
{"chunk": "in advance in the prescribed manner. This is an important feature of the insurance\nindustry in India.The Insurance Rules, 1939, provide certain exceptions to this condition of advance\npayment of premium, in respect of particular categories of insurances. Section 59\nof the Insurance Rules allows accepting premiums in instalments in respect of\nSickness Insurance, Group Personal Accident Insurance Medical Benefits Insurance\nand Hospitalisation Insurance Schemes, subject to certain conditions. Section 59 of\nthe Insurance Rules allows relaxations for policies issued to Government and semiGovernment bodies, Fidelity Guarantee Insurance policies covering Government and43semi-Government employees, Workmen's Compensation policies, Cash in Transit\npolicies, and some other categories of insurances subject to certain conditions.**Solicitation**Insurance has always been regarded as something to be purchased after a proper\nunderstanding the product and not just bought/ sold. Hence, insurance is to be\n‘solicited’ or asked for by the customer. Traditionally, insurers declare that\n“Insurance is the subject matter of solicitation”. To elucidate, insurance is not\na ready-made product like a packet of biscuits or a bar of chocolate to be\nbought/ sold outright. Customers have to discuss their insurance needs with a\nperson qualified for the same and based on professional advice, the right\ninsurance product is to be purchased. The Insurance product has to be\nunderstood and the offering most suited to the specific needs and requirements\nof the customer in terms of the policy coverage, exclusions, terms and\nconditions, is to be considered.‘Solicitation’ is usually initiated when an insurer or an authorised intermediary\napproaches a prospect with a view to understand his/ her insurance needs and\nprovides professional advice in selecting appropriate insurance products. The\nprospect solicits the proper solution and provides all requisite details to the\nadvisor. As per regulations of IRDAI, **Insurance Agents** are appointed by an\ninsurer for the purpose of engaging in the solicitation process and procuring\ninsurance business, including business relating to the continuance, renewal or\nrevival of policies of insurance. Only authorised employees of insurance\ncompanies, and specified persons of licensed intermediaries, who are trained\nand authorised for the purpose can be part of the process of solicitation andsales of insurance.**D.** **Enabling Provisions****1.** **Grace Period**Grace period is the specified period of time immediately following the premium\ndue date during which a payment can be made to renew or continue a policy in\nforce without loss of continuity benefits such as waiting periods and coverage of\npre-existing diseases. Coverage is not available for the period for which no\npremium is received. The days of grace are computed from the next day after the\ndue date fixed for payment of the premium.For **Life insurance**, if there is no grace period, a single delay in payment can\nlead to a policy lapse. This would be detrimental for the policyholder, the\ninsurer and the insurance industry in general. IRDAI Regulations allow a grace\nperiod of 15 days is applicable in case of Monthly mode of Premium collection and\n30 days in other modes.44In respect of **Health insurance** also, certain number of days as grace period is\nallowed for renewal of individual health policies. This period depends on the policy\nof the company and the product offered. All continuity benefits are maintained if\nthe policy is renewed within the grace period. However Claims, if any, during the\nbreak period will not be considered. As per IRDAI Regulations, the grace period is\n15 days in case of Monthly mode of Premium collection and 30 days in other modes.**Motor Policies** are usually valid for a period of one year and have to be renewed\nbefore the due date. Grace period for paying the premium do not apply. In case\na comprehensive policy lapses for more than 90 days, the accrued No Claim\nBonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condone delaysin renewal up to 30 days without deeming such condonation as a break in\npolicy. Insurers were requested to contact the policyholders well in\nadvance to avoid discontinuance in coverage.iii. As regards Motor Vehicle Third Party Insurance policies that fell due forrenewal and premiums could not be paid due to the Covid-19 situation,\nIRDAI allowed a grace period till 15th May, 2020.**2.** **Free-Look Period introduced by “IRDAI”**Insurance contracts are drafted by the insurer, and the other party has to adhere to", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d43", "section": "Solicitation", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_023", "metadata": {"file_size": 20690, "chunk_index": 23, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Insurance Agents", "Health insurance", "Grace Period", "Motor Policies", "Solicitation"]}}
{"chunk": "before the due date. Grace period for paying the premium do not apply. In case\na comprehensive policy lapses for more than 90 days, the accrued No Claim\nBonus (NCB) benefit would also be lost.In the interest of smooth operation of affairs during the Covid-19 pandemic,\nIRDAI permitted the following relaxations:i. In case of Life insurance policies, Insurers were asked to enhance thegrace period by additional 30 days if desired by the policyholders.ii. In case of Health insurance policies, Insurers were told to condone delaysin renewal up to 30 days without deeming such condonation as a break in\npolicy. Insurers were requested to contact the policyholders well in\nadvance to avoid discontinuance in coverage.iii. As regards Motor Vehicle Third Party Insurance policies that fell due forrenewal and premiums could not be paid due to the Covid-19 situation,\nIRDAI allowed a grace period till 15th May, 2020.**2.** **Free-Look Period introduced by “IRDAI”**Insurance contracts are drafted by the insurer, and the other party has to adhere to\nit if he/ she wants the insurance. Such contracts where someone has to accept the\ncontract as it is and cannot make any change to it are legally called Contracts of\nAdhesion. Because of this one-sided situation, the Courts always make insurers\nliable for any ambiguity or confusion that may arise in interpreting these terms andconditions.To reduce this one-sidedness and make insurance transactions more customerfriendly, IRDAI has built into its regulations a consumer-friendly provision called\n‘Free-Look Period’ whereby, if the customer is not satisfied with any term and\nconditions of the policy, he/ she can return it and get a refund. This provision\nwhereby policyholders are given the option of cancelling the policy within 15 days\n(30 days, in case of electronic policies and policies sourced through distance mode)\nafter receiving the policy document, in case they are not satisfied with the policy,\nhas been introduced for Life Insurance and Health Insurance policies (having a\ntenure of at least one year). The company has to be intimated in writing and the\npremium is refunded less, proportionate risk premium for the period of cover,\nexpenses and charges.45**Cancellation of Policies:** When policies are cancelled by the insurer, the proportion\nof the premium corresponding to the expired period of insurance is charged/\nretained by the insurer and the proportion corresponding to the unexpired period\nof insurance is returned to the insured, provided no claim has been paid under the\npolicy. Such proportionate calculation of premium is called Pro-rata premium.When annual policies are cancelled by the insured, insurers usually charge/ retain\npremiums at a higher rate and refund premiums at higher rates, instead of\ncalculating pro-rata premiums. This would prevent anti-selection against the\ninsurers and take care of the initial expenses of the insurer. Such rates are disclosed\nas part of the terms and conditions of the insurance contract and referred to as\nShort period scales.**Important****i.** **Coercion** - Involves pressure applied through criminal means.**ii.** **Undue influence** – using one’s position to dominate the will of another person,to obtain an undue advantage over that person.**iii.** **Fraud** – inducing another to act on a false belief that is caused by arepresentation one does not believe to be true. It can arise either from\ndeliberate concealment of facts or through misrepresenting them.**iv.** **Mistake** - Error in one’s knowledge or belief or interpretation of a thing or event.This can lead to an error in understanding and agreement about the subjectmatter of the contract.**Test Yourself 1**Which among the following cannot be an element in a valid insurance contract?I. Offer and AcceptanceII. CoercionIII. ConsiderationIV. Legality**Summary**i. Insurance involves a contractual agreement in which the insurer agrees toprovide financial protection against specified risks for a price or consideration\nknown as the premium.\nii. A contract is an agreement between parties, enforceable at law.iii. The elements of a valid contract include:Offer and acceptanceConsideration,Consensus ad-idem,- Free consentCapacity of the parties and46Legality of the object**Key Terms**1. Offer and Acceptance2. Lawful consideration3. Consensus ad idem**Test Yourself 2**During the Free-look period, if the policyholder, who has bought a policy through\nan Agent, disagrees to any of its terms and conditions, he/ she can return it and get\na refund subject to the following conditions:I. He/ she can exercise this option within 15 days of receiving the policy document\nII. He/ she has to communicate to the company in writing", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d-19", "section": "Free-Look Period introduced by “IRDAI”", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_024", "metadata": {"file_size": 20690, "chunk_index": 24, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Cancellation of Policies:", "Mistake", "Free-Look Period introduced by “IRDAI”", "Important"]}}
{"chunk": "known as the premium.\nii. A contract is an agreement between parties, enforceable at law.iii. The elements of a valid contract include:Offer and acceptanceConsideration,Consensus ad-idem,- Free consentCapacity of the parties and46Legality of the object**Key Terms**1. Offer and Acceptance2. Lawful consideration3. Consensus ad idem**Test Yourself 2**During the Free-look period, if the policyholder, who has bought a policy through\nan Agent, disagrees to any of its terms and conditions, he/ she can return it and get\na refund subject to the following conditions:I. He/ she can exercise this option within 15 days of receiving the policy document\nII. He/ she has to communicate to the company in writing\nIII. The premium refund will be adjusted for proportionate risk premium for theperiod on cover, expenses incurred by the insurer on medical examination and\nstamp duty chargesIV. All the above**Test Yourself 3**If the policyholder has bought a policy and does not want it, he/ she can return it\nduring the _________ period, and get a refund.I. Free evaluationII. Free-lookIII. CancellationIV. Free trial**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.47## CHAPTER C-05## UNDERWRITING AND RATING**Chapter Introduction**In this chapter you will learn the basics of underwriting and rating. You will learn\nabout the different methods of dealing with hazards in the process of rating of risks.\nYou will be able to appreciate the common aspects of underwriting, product\napproval and rating.**Learning Outcomes**After studying this chapter, you should be able to:1. Define the basics of underwriting2. Understand the basics of product approvals in India3. Appreciate rating factors and the importance of ratemaking48**A.** **Basics of Underwriting**In the previous chapters, we have seen that the concept of insurance involves\nmanaging risk through pooling. Insurers create a pool consisting of premiums that\nare made by several individuals/ commercial/ industrial firms/ organizations.This process of understanding risks, classifying risks, identifying which category they\nfall into, **deciding whether to accept the risk or not** and if so, how much premium\nthe insurer would require to accept the risk and whether any extra conditions are\nto be imposed on the risk - all these are part of **underwriting** .It is also important to know what rate is to be charged and how the rates are made.**Definition**Underwriting is the process of determining whether a risk offered for insurance is\nacceptable, and if so, at what rates, terms and conditions.Underwriting comprises the following steps:i. Assessment and evaluation of hazard and risk in terms of frequency andseverity of lossii. Formulation of policy coverage and terms and conditionsiii. Fixing of rates of premiumThe underwriter decides on whether or not to accept the riskThe next step would be to decide the **rates, terms and conditions** under which the\nrisk is to be accepted.Underwriting skills are acquired through a continuous learning process involving\nadequate training, field exposure and deep insights. To be a fire insurance\nunderwriter one needs to have a good knowledge of the likely causes of fire, impact\nof fire on various physical goods and property, the process involved in an industry,\ngeography, climatic conditions etc.Similarly a marine insurance underwriter must be aware about port/ road\nconditions, problems encountered by cargo/ goods in transit or storage, ships andtheir seaworthiness and so on.A health underwriter needs to understand the risk profile of the insured, age,\nmedical aspects, fitness levels and family history and measure the effect of each\nfactor affecting the risk.**Sources of information for underwriting**The first stage in any numerical (or statistical) analysis is the collection of data.\nWhen pricing a risk, an underwriter should gather as much information as possibleto aid accurate assessment.49**Sources of information are:**i. **Proposal form or underwriting presentation**ii. **Risk surveys**iii. **Historic claims experience data:** For some classes of business, such aspersonal and motor lines, underwriters often utilise historic claims\nexperience data to provide an indication of the likely future claims\nexperience, and to arrive at a suitable premium **.****Underwriting, equity and business sustainability**The need for careful underwriting and risk classification in insurance arises from the\nsimple fact that **all risks are not equal** . Each risk thus needs to be appropriately\nassessed and priced in accordance with the likelihood of loss occurrence and\nseverity.Since all risks are not equal, it would not be proper to ask all those who are to be", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d46", "section": "Key Terms", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_025", "metadata": {"file_size": 20690, "chunk_index": 25, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Sources of information for underwriting", "Answer 3", "Underwriting, equity and business sustainability"]}}
{"chunk": "medical aspects, fitness levels and family history and measure the effect of each\nfactor affecting the risk.**Sources of information for underwriting**The first stage in any numerical (or statistical) analysis is the collection of data.\nWhen pricing a risk, an underwriter should gather as much information as possibleto aid accurate assessment.49**Sources of information are:**i. **Proposal form or underwriting presentation**ii. **Risk surveys**iii. **Historic claims experience data:** For some classes of business, such aspersonal and motor lines, underwriters often utilise historic claims\nexperience data to provide an indication of the likely future claims\nexperience, and to arrive at a suitable premium **.****Underwriting, equity and business sustainability**The need for careful underwriting and risk classification in insurance arises from the\nsimple fact that **all risks are not equal** . Each risk thus needs to be appropriately\nassessed and priced in accordance with the likelihood of loss occurrence and\nseverity.Since all risks are not equal, it would not be proper to ask all those who are to be\ninsured, to pay equal premium. **The purpose of underwriting is to classify risks so**\n**that, depending on their characteristics and degree of risk posed, an appropriate**\n**rate of premium may be charged.** It is important for the underwriter to ensure\nthat the risk evaluation is done properly and the premium charged is neither too\nlow to cover the risk nor too high to make it non-competitive.The main features of underwriting are as followsi. To **identify risk** based upon the characteristicsii. To **determine the level** of risk presented by the proposerThe objectives of underwriting are achieved, in short, by deciding the level of\nacceptability, adequacy of premium and other terms.**B.** **Product Filing with IRDAI**Every Insurance product needs to be filed with IRDAI for approval before it is offered\nfor sale. IRDAI allots a Unique Identification number (UIN) for every insurance\nproduct. Once products are introduced in the market, there are guidelines to be\nfollowed for withdrawing the product as well.**1.** The Regulator asks for a clear commitment by the Board of the insurer that it iswilling to accept the risks in the policy and agrees to pay the claims. It also asks\nthe insurer to commit that the policy wordings are fair to the customer and that\nthe prices are decided on a scientific basis.**2.** The insurer should plan for the possibility of withdrawal of the products in thefuture and the options that would be available to the policyholder on such\nwithdrawal of the product.**3.** The withdrawn product shall not be offered to the prospective customers.50**C.** **Basics of Ratemaking**Insurance is based on transfer of risk to the insurer. By purchasing an insurance\npolicy, the insured is able to reduce the impact of financial losses arising from the\nperil against which the property is insured. The Insurer needs to adopt a process of\ncalculating a price to cover the future cost of insurance claims and expenses,\nincluding a margin for profit. This is known as **ratemaking.****A rate is the price of a given unit of insurance.** For example, a rate may be\nexpressed as Rs.1.00 per mile (per thousand) sum assured for earthquake coverage.\nEach rate is established after looking at past trends and changes in the current\nenvironment that may affect potential losses in the future.**Note that rates are not the same as premiums.****Premium = (Sum Insured) x (rate)****Example**Taking an example of health insurance, numerical or percentage assessments are\nmade on each component of the risk. Factors like age, race, occupation, habits etc.\nare examined and scored numerically based on predetermined criteria.The amount of premium to be paid by each depends on a rate, which is determined\nby two factors; The probability of loss due to a loss event (caused by an insured peril) and The estimated amount of loss that may arise due to the loss event**Example**Assume the average amount of a house being destroyed by fire is Rs 1,00,000.The probability of the loss of a house being destroyed by fire 1 out of 100 [or 0.01].\nThat is, the experience is that out of a 100 insured houses, one house gets destroyed\nby fire.The expected average loss would be Rs.1,00,000 x 0.01 = Rs. 1000.So, Insurers would need to charge a minimum of Rs.1000 to insure a house of\nRs.1,00,000 value.How can the insurer ensure that the pool is sufficient to compensate for the losses\nthat are actually incurred?As seen earlier, the whole mechanism of insurance involves pooling of many similar", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Sources of information for underwriting", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_026", "metadata": {"file_size": 20690, "chunk_index": 26, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Product Filing with IRDAI", "Premium = (Sum Insured) x (rate)", "Sources of information for underwriting", "Underwriting, equity and business sustainability", "Example"]}}
{"chunk": "made on each component of the risk. Factors like age, race, occupation, habits etc.\nare examined and scored numerically based on predetermined criteria.The amount of premium to be paid by each depends on a rate, which is determined\nby two factors; The probability of loss due to a loss event (caused by an insured peril) and The estimated amount of loss that may arise due to the loss event**Example**Assume the average amount of a house being destroyed by fire is Rs 1,00,000.The probability of the loss of a house being destroyed by fire 1 out of 100 [or 0.01].\nThat is, the experience is that out of a 100 insured houses, one house gets destroyed\nby fire.The expected average loss would be Rs.1,00,000 x 0.01 = Rs. 1000.So, Insurers would need to charge a minimum of Rs.1000 to insure a house of\nRs.1,00,000 value.How can the insurer ensure that the pool is sufficient to compensate for the losses\nthat are actually incurred?As seen earlier, the whole mechanism of insurance involves pooling of many similar\nrisks so that the probability of the number of losses (frequency) as well as the extent\nof loss (severity) becomes predictable. This principle, referred to as ‘the law of\nlarge numbers’ states that as the sample size grows, the results come closer to the\nexpected value. Insurance companies need to sell more policies to more and more\npeople to make their expectations/ predictions work.51An example is that if a coin is tossed, the chances of getting ‘heads’ or ‘tails’ is\n50:50. However, if the coin is tossed only once, the result can be 100% heads and\n0% ‘tails’ or 0% ‘heads’ and or 100% tails. However, if one tosses a coin many times,\nthe chance of the average count of ‘heads’ and ‘tails’ being 100% and 0% reduces\nand will get closer to 50:50.**Example**In the field of property insurance, the chances of a wooden structure catching fire\nare more than stone structures; hence, a higher premium is required to insure thewooden structure.The same concept applies to Life and Health Insurance also. An individual suffering\nfrom high blood pressure or diabetes has higher chances of suffering a heart attack.**Test Yourself 1**Identify the two factors that affect insurance ratemaking.I. Probability and severity of riskII. Source and nature of riskIII. Source and timing of risk\nIV. Nature and impact of risk**1.** **Determining the rate of premium**The pure rate of premium is arrived at on the basis of past loss experience.\nTherefore, statistical data regarding past losses is most essential for purposes of\ncalculating rates. To fix the rates, it is necessary to give a ‘mathematical value’ tothe risks.**Example**If loss experience of a large number of motor cycles is collected for a period of say\n10 years, we will get the sum total of the losses resulting from damage to the\nvehicles. By expressing this amount of loss as percentage of the total value of motor\ncycles we can fix the ‘mathematical value’ of the risk. This may be expressed in the\nformula given below:Let us suppose that: The Value of a motor cycle: Rs. 50,000/  Loss experience: Out of 1000 motor cycles, 50 motor cycles get stolen over10 years\n On an average, 5 motor cycles become total losses due to theft every yearApplying the formula, the result will be:52Losses per year (Rs. 50,000 X 5) = Rs. 2,50,000**Total Values of 1000 motor vehicles (Rs.** 50,000 X 1000) **= Rs. 5,00,00,000**This means that average loss percentage per vehicle (L/ V) x 100= [2,50,000/\n5,00,00,000] x 100 = 0.5%Therefore the rate of premium that a motor cycle owner pays is half a percent of\nRs. 50,000/ - i.e. Rs. 250/ - per year. This is called the **‘Pure’ premium,** also known\nas ‘Burning Cost’.At the rate of Rs. 250 per motor cycle, Rs. 2.5 lakhs is collected which is paid outin claims on total losses of 5 vehicles.If the pure premium, which is arrived above, is collected it would constitute a fund\nwhich will be sufficient only to pay for losses.In the example above we can see that there is no surplus. But insurance operations", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "r10", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_027", "metadata": {"file_size": 20690, "chunk_index": 27, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Example", "Determining the rate of premium", "Total Values of 1000 motor vehicles (Rs."]}}
{"chunk": "5,00,00,000] x 100 = 0.5%Therefore the rate of premium that a motor cycle owner pays is half a percent of\nRs. 50,000/ - i.e. Rs. 250/ - per year. This is called the **‘Pure’ premium,** also known\nas ‘Burning Cost’.At the rate of Rs. 250 per motor cycle, Rs. 2.5 lakhs is collected which is paid outin claims on total losses of 5 vehicles.If the pure premium, which is arrived above, is collected it would constitute a fund\nwhich will be sufficient only to pay for losses.In the example above we can see that there is no surplus. But insurance operations\nalso involve costs of administration (expenses of management) and costs of\nprocurement of business (agency commission). It is also necessary to provide a\nmargin for unexpected heavy losses.Finally, since insurance is transacted on a commercial basis, like any other business,\nit is necessary to provide for a margin of profit which is a return on the capitalinvested in the business.**Therefore, the ‘pure premium’ is suitably loaded or increased by adding**\n**percentages to provide for expenses, reserves and profits.****The final rate of premium will consist of the following components:** Loss payments\n Loss expenses (e.g. survey fees)\n Agency commission\n Expenses of management\n Margin for reserves for unexpected heavy losses e.g. 7 total losses against 5expected\n Margin for profitsBy taking all the relevant rating factors into consideration, one can ensure the rates\nare adequate, excessive or unfairly discriminatory as between risks of similar type\nand quality.**Test Yourself 2**What is pure premium?I. Premium sufficiently big enough to pay for losses only\nII. Premium applicable to marginal members of the society\nIII. Premium after loading for administrative costs\nIV. Premium derived from the most recent loss experience period53**2.** **Deductible**‘Deductible’ or ‘excess’ is a cost-sharing provision between an insurer and insured.\nDeductibles provide that only the claims in excess of a particular threshold are\npayable by the insurer. In other words, the insurer will not be liable for claims below\na specified level. The level or the threshold would be set as a fixed amount, or a\npercentage or even as a specified period of time (when it is called time-excess.) In\ncase of health policies, there could be a condition that claims would be payable\nonly if the hospitalization is beyond a specified number of days/ hours. Deductibles\nare not used in life policies.In products such as property, motor and home insurances, deductibles are\npredetermined amounts that the insured must bear towards an indemnity claim.\nDeductibles can be compulsory for some policies or voluntary. Insurers generally\ncharge lower premiums when the insured voluntarily opt for higher deductibles. An\nagent must examine how specific deductibles work and inform the insured whether\nthe deductible is applicable on a ‘per year’ or ‘per event’ basis.There are various reasons for having deductibles. Corporate customers covering\nfactories, multiple cargo consignments, large groups of employee, public liability\nexposures etc. and having huge amounts of Sum Insured, may prefer to bear small\nclaims themselves and avoid the documentation to prove claims. For example, a\nlarge factory owner paying lakhs or rupees as premium may not be bothered about\na minor repair cost of a machine amounting to around Rs.2,000.Some type of policies may need the insured also to bear some part of the loss to\nensure that he/ she takes due care. For instance, health insurers may insist on a\ndeductible so that insured would not overspend on costly hospital rooms just\nbecause insurance is there. Some Insurers also may not prefer spending time on\nprocessing small claims. Also, in certain situations, insurers may not want to get\nexposed to the financial stress caused by accumulation of a large number of small\nlosses at one location. For example, a small flood in an industrial estate area can\ncause many low value claims from all the warehouses in the area.**Franchise:** Franchise refers to a threshold set, usually as a percentage of the sum\ninsured, below which no claim is admissible, as in the case of deductibles. However,\nwhen the claim amount is beyond the franchise limit, the entire claim is admissible\nby the insurer. In other words, franchise determines the minimum threshold of the\ninsurance companies' financial responsibility. Franchise will apply to the policy in\nthe same way and for the same reasons as a deductible in case of claims below the\nthreshold, but in the event of a claim exceeding the franchise, the full amount of", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d53", "section": "Therefore, the ‘pure premium’ is suitably loaded or increased by adding", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_028", "metadata": {"file_size": 20690, "chunk_index": 28, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Deductible", "Franchise:", "Test Yourself 2"]}}
{"chunk": "ensure that he/ she takes due care. For instance, health insurers may insist on a\ndeductible so that insured would not overspend on costly hospital rooms just\nbecause insurance is there. Some Insurers also may not prefer spending time on\nprocessing small claims. Also, in certain situations, insurers may not want to get\nexposed to the financial stress caused by accumulation of a large number of small\nlosses at one location. For example, a small flood in an industrial estate area can\ncause many low value claims from all the warehouses in the area.**Franchise:** Franchise refers to a threshold set, usually as a percentage of the sum\ninsured, below which no claim is admissible, as in the case of deductibles. However,\nwhen the claim amount is beyond the franchise limit, the entire claim is admissible\nby the insurer. In other words, franchise determines the minimum threshold of the\ninsurance companies' financial responsibility. Franchise will apply to the policy in\nthe same way and for the same reasons as a deductible in case of claims below the\nthreshold, but in the event of a claim exceeding the franchise, the full amount of\nthe loss will be paid.54**D.** **Rating factors**The relevant elements that are used to add up the rates and make the rating plan\nare referred to as **rating factors** . Insurers use ‘rating factors’ to determine the risk\nand to decide the price they will charge. The Insurer uses his assessments to establish a base rate. The Insurer then adjusts this rate with discounts applied for positive featuressuch as superior fire protection on property risk and loadings applied for\nadverse features such as presence of inflammable materials in the premises. In Life Insurance the usual practice is to apply loading for adverse health,habits, heredity or occupational factors.**Key Terms**- Deductibles- Franchise**Answers to Test Yourself****Answer 1** - The correct option is I.**Answer 2** - The correct option is I.55## CHAPTER C-06## CLAIMS PROCESSING**Chapter Introduction**The insured get to taste the benefit of insurance only when they are affected by\nlosses. The entire insurance industry is sensitive to the losses faced by insured and\ntry to settle the claims that arise as amicably as possible and as fast as possible.After studying this chapter, you should be able to understand:1. Claims settlement2. Importance of claim procedures56**A.** **Loss Assessment and Claim settlement**Claims Assessment (Loss Assessment) is the process of determining whether the loss\nsuffered by the insured is covered by the insurance policy, i.e. the loss does not fall\nunder any exclusion and there is no breach of warranty.Settlement of claims has to be based on considerations of fairness. For an Insurancecompany, expeditious settlement of claim is the benchmark of efficiency for its\nservices. Each company has internal guidelines about time taken in claims\nprocessing, which its employees follow.This is generally known by the term “Turnaround time” (TAT). Some insurers have\nalso put in place, facility for the insured to check claim status online from time to\ntime. Some insurance companies have also set up claims hub for speedy processingof claims.**Important aspects in an insurance claim**Although most companies are bound by their TAT it is important for an agent to\nknow the aspects that are looked into for settling a claim. Six of the most important\naspects for Non-life claims are given below.i. Whether the loss causing event is within the scope of the policyii. Whether the insured has complied with his part of the policy conditionsiii. Compliance with warranties. The survey report would indicate whether or notwarranties have been complied with.iv. Observance of utmost good faith by the proposer, during the currency of thepolicy.v. On the occurrence of a loss, the insured is expected to act as if he is uninsured.In other words, he has a duty to take measures to minimise the loss.vi. Determination of the amount payable. The amount of loss payable is subject tothe sum insured. However, the amount payable will also depend upon the\nfollowing: The extent of the insured’s insurable interest in the property affected\n The value of salvage\n Application of underinsurance\n Application of contribution and subrogation conditionsIn the matter of claims relating to life insurance, the insurer checks whether1) Conditions of policy have not been breached\n2) Utmost good faith has been followed and\n3) No material facts have been concealed fraudulently.57**B.** **Categories of claim**Insurance Claims fall into the following categories:**i.** **Standard claims**These are claims which are clearly within the terms and conditions of the policy.\nThe assessment of claim is done keeping in view scope and the sum insured opted", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "C-06", "section": "Franchise:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_029", "metadata": {"file_size": 20690, "chunk_index": 29, "chunk_tokens": 1020, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Categories of claim", "Rating factors", "Chapter Introduction"]}}
{"chunk": "following: The extent of the insured’s insurable interest in the property affected\n The value of salvage\n Application of underinsurance\n Application of contribution and subrogation conditionsIn the matter of claims relating to life insurance, the insurer checks whether1) Conditions of policy have not been breached\n2) Utmost good faith has been followed and\n3) No material facts have been concealed fraudulently.57**B.** **Categories of claim**Insurance Claims fall into the following categories:**i.** **Standard claims**These are claims which are clearly within the terms and conditions of the policy.\nThe assessment of claim is done keeping in view scope and the sum insured opted\nfor and other methods of indemnity laid down for various classes of insurance.**ii.** **Condition of average or average clause**This is a condition in some policies which penalises the insured for insuring his\nproperty at a sum insured less than its actual value known as underinsurance. In the\nevent of a claim the insured gets an amount that is proportionately reduced fromhis actual loss in accordance to the amount underinsured. Such situations occurmore in the case of non-life insurance.**iii.** **Act of God perils - Catastrophic losses**Natural perils like storm, cyclone, flood, inundation, and earthquake are termed as\n“Act of God” perils. These perils may result in losses to many policies of insurer in\nthe affected region. Surveyors are appointed for assessment of certain categoriesof non-life insurance claims.In such major and catastrophic losses, the surveyor is asked to proceed to the loss\nsite immediately for an early assessment and loss minimisation efforts.\nSimultaneously, insurers’ officials also visit the scene of loss particularly when the\namount involved is large. The purpose of the visit is to obtain an immediate, on the\nspot idea of the nature and extent of loss.Preliminary reports are also submitted if the surveyors face some problems in\nregards to the assessment and may desire guidance and instructions from insurers\nwho are thus given an opportunity to discuss the issues with the insured, ifnecessary.**iv.** **On account payment**In Non-life insurance claims, apart from preliminary reports, interim reports may be\nsubmitted from time to time where repairs and/ or replacements are made over a\nlong period. Interim reports also give the insurer an idea of the development of\nassessment of loss. It also helps in recommendation of \"On account payment\" of the\nclaim if desired by the insured. This usually happens if the loss is large and the\ncompletion of assessment may take some time.If the claim is found to be in order, payment is made to the claimant and entries\nmade in the company records. Appropriate recoveries are made from the co-insurers\nand reinsurers, if any. In some cases, the insured may not be the person to whom\nthe money is to be paid.58**v.** **Discharge vouchers**Settlement of the claim is made only after obtaining a discharge under the policy.\nA sample of discharge receipt for claims (under personal accident insurance) for\ninjuries is worded along the following lines: (may vary from company to company)Name of the InsuredClaim No. Policy No.Received from the Company Ltd.The sum of Rs. ___________ in full and final settlement of compensation due\nto me/ us on account of injuries sustained by me/ us due to accident which\noccurred on or about the___________ I/ we give this discharge receipt to the\nCompany in full and final settlement of all my/ our claim present or future\narising directly or indirectly in respect of the said claim.Date (Signature)vi. **Post settlement action**The action taken after settlement of the non-life claim in relation to underwritingvaries from one class of business to another.**Example**Sum insured under a fire policy stands reduced to the extent of the amount of\nclaim paid. However, it can be reinstated on payment of pro-rata premium, which\nis deducted from the amount of claim paid.On payment of the capital sum insured under a personal accident policy, the policy\nstands cancelled.Similarly, payment of a claim under individual fidelity guarantee policy\nautomatically terminates the policy.**vii.** **Salvage**Salvage generally refers to damaged property. On payment of loss, the salvage\nbelongs to insurers.**Example**When motor claims are settled on total loss basis, the damaged vehicle is taken over\nby insurers. Salvage can also arise in other non-life insurances like fire claims,\nmarine cargo claims etc.Salvage is disposed of according to the procedure laid down by the companies for\nthe purpose. Surveyors, who have assessed the loss, will also recommend methods", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "r1", "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_030", "metadata": {"file_size": 20690, "chunk_index": 30, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Discharge vouchers", "On account payment", "Condition of average or average clause", "Example", "Act of God perils - Catastrophic losses"]}}
{"chunk": "arising directly or indirectly in respect of the said claim.Date (Signature)vi. **Post settlement action**The action taken after settlement of the non-life claim in relation to underwritingvaries from one class of business to another.**Example**Sum insured under a fire policy stands reduced to the extent of the amount of\nclaim paid. However, it can be reinstated on payment of pro-rata premium, which\nis deducted from the amount of claim paid.On payment of the capital sum insured under a personal accident policy, the policy\nstands cancelled.Similarly, payment of a claim under individual fidelity guarantee policy\nautomatically terminates the policy.**vii.** **Salvage**Salvage generally refers to damaged property. On payment of loss, the salvage\nbelongs to insurers.**Example**When motor claims are settled on total loss basis, the damaged vehicle is taken over\nby insurers. Salvage can also arise in other non-life insurances like fire claims,\nmarine cargo claims etc.Salvage is disposed of according to the procedure laid down by the companies for\nthe purpose. Surveyors, who have assessed the loss, will also recommend methods\nof disposal.**viii.** **Recoveries**After settlement of claims, the insurers under subrogation rights applicable to\ninsurance contracts, are entitled to the rights and remedies of the insured and to59recover the loss paid from a third party who may be responsible for the loss under\nrespective laws applicable. Thus, insurers can recover the loss from shipping\ncompanies, railways, road carriers, airlines, port trust authorities etc.**Example**In the case of non-delivery of consignment, the carriers are responsible for the loss.\nSimilarly, the port trust is liable for goods which are safely landed but subsequently\nmissing. For this purpose, a letter of subrogation duly stamped is obtained from theinsured before the settlement of the claim.**ix.** **Disputes related to claims**Despite best efforts, there could be delay in payment, non-payment (repudiation)\nof the claim, or the claim being admitted for a lesser amount, which might lead to\ndissatisfaction and dispute between Insurer and the insured.Apart from these, the most common reasons, to name a few are: Non-disclosure of material facts Lack of coverage Loss caused by excluded perils Lack of adequate sum insured Breach of warranty Issues regarding quantum due to underinsurance, depreciation, etc.All this could cause considerable grief to the insured at a time when he is already\nsuffering from financial constraints arising due to losses. In order to reduce his\nsufferings, grievance redressal and dispute handling procedures are well laid out in\nthe policy itself. Policies of fire or property have the condition of “Arbitration” in\nthe policy itself.**C.** **Arbitration**Arbitration is a method of settling disputes arising out of contracts. Arbitration is\ndone in accordance with the provisions of the Arbitration and Conciliation Act, 1996.\nThe normal method of enforcing a contract or settling a dispute there under would\nbe to go to a court of law. Such litigation, however, involves considerable delay and\nexpense. The Arbitration Act allows the parties to submit disputes under a contract\nto the more informal, less costly and private process of arbitration.Arbitration may be done by a single arbitrator or by more than one, chosen by the\nparties to the dispute themselves. In the event of a single arbitrator, the parties\nhave to agree about that person. Many commercial insurance policies contain an\n**arbitration clause** stating that disputes will be subject to arbitration. Fire and most\nmiscellaneous policies also contain an arbitration clause which provides that if the\nliability under the policy is admitted by the company, and there is a difference\nconcerning the quantum to be paid, such a difference must be referred to60arbitration. Normally the arbitrator’s decision is considered final and binding on\nboth the parties.The wording of the condition varies from policy to policy. Generally, it provides asfollows:i. The dispute is submitted to the decision of a single arbitrator to be appointedby the parties, or in the event of any disagreement between them upon\nappointment of a single arbitrator, to the decision of two arbitrators each\nappointed by the parties.ii. These two arbitrators shall appoint an Umpire, who presides at the meetings.The procedure during these meetings resembles that of a court of law. Each", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "o59", "section": "Post settlement action", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_031", "metadata": {"file_size": 20690, "chunk_index": 31, "chunk_tokens": 954, "has_examples": true, "has_tables": false, "key_concepts": ["Disputes related to claims", "Arbitration", "Example", "Salvage", "Post settlement action"]}}
{"chunk": "parties to the dispute themselves. In the event of a single arbitrator, the parties\nhave to agree about that person. Many commercial insurance policies contain an\n**arbitration clause** stating that disputes will be subject to arbitration. Fire and most\nmiscellaneous policies also contain an arbitration clause which provides that if the\nliability under the policy is admitted by the company, and there is a difference\nconcerning the quantum to be paid, such a difference must be referred to60arbitration. Normally the arbitrator’s decision is considered final and binding on\nboth the parties.The wording of the condition varies from policy to policy. Generally, it provides asfollows:i. The dispute is submitted to the decision of a single arbitrator to be appointedby the parties, or in the event of any disagreement between them upon\nappointment of a single arbitrator, to the decision of two arbitrators each\nappointed by the parties.ii. These two arbitrators shall appoint an Umpire, who presides at the meetings.The procedure during these meetings resembles that of a court of law. Each\nparty states his case, if necessary, with the help of a counsel and witnesses areexamined.iii. If the two arbitrators do not agree on a decision, the matter is submitted beforethe Umpire, who makes his award.iv. Costs are awarded at the discretion of the arbitrator/ arbitrators or Umpiremaking the award.Disputes relating to question of liability are to be settled through litigation.**Example**If the insurers contend that the loss is not payable because it is not covered under\nthe policy, the matter has to be decided by a Court of Law. Again, if the insurers\nrefuse to pay the claim on the ground that the policy is void because it was obtained\nthrough fraudulent non-disclosure of material facts (breach of the legal duty of\n‘utmost good faith’), the issue has to be resolved through litigation.**D.** **Other dispute resolution mechanisms**As per IRDAI regulations, all policies have to mention about the grievance redressalmechanism available to the insured in the event the insured is dissatisfied with theservice of the insurer for any reason.In case of claims under personal lines of business, a dissatisfied insured can\napproach Insurance Ombudsman. The procedure is discussed in detail in Chapter 9.\nThe Office details of Insurance Ombudsman are given in the policy. Decision of\nOmbudsman is binding on Insurer but not on insured.Matters like the financial authority and the limitations of Ombudsmen are also\ndiscussed in detail in Chapter 9.61**Test Yourself 1**Which of the following activities would not be categorised under professionalsettlement of claims?I. Seeking information relating to the cause of the loss\nII. Approaching the claim with a prejudice\nIII. Ascertaining whether the loss was a result of an insured peril\nIV. Quantifying the amount payable under the claim**Answers to Test Yourself****Answer 1** - The correct option is II.**Key Terms**Turn Around TimeSalvageRecoveriesClaims Assessment62## CHAPTER C-07## DOCUMENTATION**Chapter Introduction**In the insurance industry we deal with a large number of forms and documents.\nThese are required for the purpose of bringing clarity in the relationship between\nthe insured and the insurer. In this chapter, we shall deal with the various\ndocuments that are involved at the proposal stage and their significance.**After learning this Chapter you will be able to:**Understand proposal stage documentation and its importanceFamiliarize with the purposes of the ProspectusUnderstand the importance of the Proposal formAppreciate Anti-Money Laundering (AML), Know Your Customer (KYC) norms\nand the important documents, commonly applicable for practically all\npoliciesImportance of Age Proof and acceptable documents.63**A.** **Prospectus**Prospectus is a proposal stage document. The prospectus is a formal legal document\nused by insurance companies that provides details about the product. It can mean\na document issued by the insurer in physical, electronic or any other format to sell\nor promote insurance products. For this purpose, Insurance products would also\ninclude the add-on covers/ riders offered, if any. The prospectus is like an\nintroductory document which helps the prospective policyholder to get familiar with\nthe company’s products.As per IRDAI’s (Protection of Policyholders’ Interests) Regulations, 2017 the\nprospectus should contain all facts that are necessary for a prospective policyholder\nto make an informed decision regarding purchase of a policy. It should contain the\nfollowing for each plan of insurance:The Unique Identification Number (UIN) allotted by the Authority for the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "o60", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_032", "metadata": {"file_size": 20690, "chunk_index": 32, "chunk_tokens": 989, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus", "Test Yourself 1", "Example", "After learning this Chapter you will be able to:"]}}
{"chunk": "and the important documents, commonly applicable for practically all\npoliciesImportance of Age Proof and acceptable documents.63**A.** **Prospectus**Prospectus is a proposal stage document. The prospectus is a formal legal document\nused by insurance companies that provides details about the product. It can mean\na document issued by the insurer in physical, electronic or any other format to sell\nor promote insurance products. For this purpose, Insurance products would also\ninclude the add-on covers/ riders offered, if any. The prospectus is like an\nintroductory document which helps the prospective policyholder to get familiar with\nthe company’s products.As per IRDAI’s (Protection of Policyholders’ Interests) Regulations, 2017 the\nprospectus should contain all facts that are necessary for a prospective policyholder\nto make an informed decision regarding purchase of a policy. It should contain the\nfollowing for each plan of insurance:The Unique Identification Number (UIN) allotted by the Authority for the\nconcerned insurance product- The extent of insurance coverThe Scope of benefits/ entitlements – guaranteed and non-guaranteedWarranties, exclusions/ exceptions of the insurance cover with explanations- The terms and conditions of the insurance coverDescription of the contingency or contingencies to be covered by insuranceThe class or classes of lives or property eligible for insurance under the terms\nof such prospectusWhether the plan is participative or non-participativeThe allowable Add-on covers (also called Riders in Life insurance) on the productand their benefits are also stated.Other important information which a Prospectus includes:1. Any differences in covers and premium. E.g. for different age groups or fordifferent entry ages\n2. Renewal terms of the policy\n3. Terms of cancellation of policy under certain circumstances\n4. The details of any discounts or loading applicable under differentcircumstances5. The possibility of any revision or modification of the terms of the policyincluding the premium\n6. Any incentives to reward policyholders for early entry, continued renewals,favourable claims experience etc. with the same insurer.\n7. Prospectus shall necessarily contain the product UIN allotted by IRDAI648. IRDAI Regulations mandate that Prospectus shall contain a copy of Section 41.This section prohibits any direct or indirect inducement to any person for\nbuying a new insurance, continuing or renewing any kind of insurance relating\nto lives or property in India, including any rebate of the whole or part of the\ncommission payable on the policy.In particular the prospectus informs the proposer about the availability of facilityfor nomination.**Test Yourself 1**Which of the following it not usually part of the insurance prospectus?I. Name of OmbudsmanII. Date of Scope of benefitsIII. The EntitlementsIV. The Exceptions**B.** **Proposal Form**The insurance policy is a legal contract between the insurer and the policyholder.\nAs required for any contract, it has a proposal and its acceptance.The “Proposal form” is the application document that is used for making a proposal.\nIt is a form to be filled in by the proposer in written or electronic or any other\nformat approved by the Authority. It contains all information required by the insurer\nto decide whether to accept or reject to cover the risk. In case the risk is accepted,\nthe insurer can on the basis of this information, decide the rates, terms and\nconditions of the cover to be granted.The Principle of Utmost Good Faith and the Duty of Disclosure of material\ninformation begin with the Proposal Form for insurance. The proposer must provide\nall information correctly and completely as this document becomes the basis of\ngranting insurance and any wrong or concealed information could result in denial ofclaim.This duty to disclose continues beyond the proposal stage even after finalizing the\ninsurance contract. That is, any material change that happens anytime during the\nperiod of insurance needs to be disclosed in non-life policies.Information collected from the Proposal Form during the course of solicitation of an\ninsurance policy or issuance of an insurance policy are confidential and should not\nbe shared with any third party. Where a proposal deposit is refundable to a prospect\nfor any reason, the same shall be refunded within 15 days from the date of\nunderwriting decision on the proposal.65As per IRDAI guidelines, it is the duty of the insurer to furnish to the insured, free\nof charge, within 30 days of the acceptance of a proposal, a copy of the proposal\nsubmitted by the Insured. The agent is expected to keep track of these timelines,\nfollow up internally and communicate with the prospect/ insured as and when", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s5", "section": "A.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_033", "metadata": {"file_size": 20690, "chunk_index": 33, "chunk_tokens": 957, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 1", "Prospectus", "Proposal Form"]}}
{"chunk": "conditions of the cover to be granted.The Principle of Utmost Good Faith and the Duty of Disclosure of material\ninformation begin with the Proposal Form for insurance. The proposer must provide\nall information correctly and completely as this document becomes the basis of\ngranting insurance and any wrong or concealed information could result in denial ofclaim.This duty to disclose continues beyond the proposal stage even after finalizing the\ninsurance contract. That is, any material change that happens anytime during the\nperiod of insurance needs to be disclosed in non-life policies.Information collected from the Proposal Form during the course of solicitation of an\ninsurance policy or issuance of an insurance policy are confidential and should not\nbe shared with any third party. Where a proposal deposit is refundable to a prospect\nfor any reason, the same shall be refunded within 15 days from the date of\nunderwriting decision on the proposal.65As per IRDAI guidelines, it is the duty of the insurer to furnish to the insured, free\nof charge, within 30 days of the acceptance of a proposal, a copy of the proposal\nsubmitted by the Insured. The agent is expected to keep track of these timelines,\nfollow up internally and communicate with the prospect/ insured as and when\nrequired by way of customer service.**a)** **Proposal Form - Details**The proposal form is first stage of documentation through which the insured informsthe insurer: Who he/ she is What kind of insurance he/ she needs Details of what he/ she wants to insure and For what period of time Details of the risk (E.g., for Life and Health insurances – details of health orany ailments suffered are to be given) Details would include the monetary value proposed on the subject matter ofinsurance and all **material facts** connected with the proposed insurance.In other words, the Proposal form collects details on the proposer’s identity such as\nname, father’s name, address and other identifying inputs. To determine the true\nidentity of their customers, documents like address proof, PAN card, photographs\netc. are collected with the proposal.In respect of Life and Health insurances, details of the proposers’ family members\n(including parents) indicating their longevity, status of health and ailments suffered\nby any of them are collected. Depending on the product, the medical details of the\nlife proposed for insurance, personal characteristics and his/ her personal history\nof disease may also be asked for.Details of the monetary value proposed on the subject matter of insurance and the\nmaterial facts connected with the proposed insurance would be collected for manylines of insurance.The insurance advisor’s recommendations including the reasons for such\nrecommendation may also be part of the proposal form. There would be a\ndeclaration that the recommended policy’s details have been fully explained to the\nproposer and the latter has acknowledged the same.A Proposal form may have the following Sections starting with details of the Insurer,\nthe Agent, the details of the product, the Sum Assured, the mode of payment of\npremiums etc. The form would also contain the signature of the proposer, as proof\nof the fact that he/ she has filled up the form and has submitted the proposal.66Other details asked for are the Proposer’s name, date of birth, contact details,\nmarital status, nationality, names of parents and spouse, educational qualifications,\nhabits and ID Proof, family particulars, employment details, bank details, name of\nnominee/ appointee; details of existing insurance and reasons for opting for the\npolicy.Depending on the Product, medical details of the life proposed for insurance,\npersonal characteristics and his/ her personal history of disease may be asked for.Aspects related to the personal financial planning of the life being proposed\nincluding his/ her work span, projected income and expenses, as well as needs for\nsavings and investment, health, retirement and insurance may also be enquiredabout.The Agents recommendations including the reasons for such recommendation may\nalso be part of the proposal form. In compliance to the IRDAI regulations mentioned\nabove, the Agent would make a declaration that the recommended policy’s details\nhave been fully explained to the proposer and the latter has acknowledged thesame.Proposal forms are printed by insurers usually with the insurance company’s name,\nlogo, address and the class/ type of insurance/ product that it is used for. It is\ncustomary for insurance companies to add a printed note in the proposal form,\nthough there is no standard format or practice in this regard.**b)** **Declaration in the Proposal Form**Insurance companies usually add a declaration at the end of the proposal form to\nbe signed by the proposer. This ensures that the insured takes the pain to fill up the\nform accurately and has understood the facts given therein, so that at the time of\na claim there is no scope for disagreements on account of misrepresentation of", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Proposal Form - Details", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_034", "metadata": {"file_size": 20690, "chunk_index": 34, "chunk_tokens": 1009, "has_examples": false, "has_tables": false, "key_concepts": ["Proposal Form - Details", "Declaration in the Proposal Form"]}}
{"chunk": "including his/ her work span, projected income and expenses, as well as needs for\nsavings and investment, health, retirement and insurance may also be enquiredabout.The Agents recommendations including the reasons for such recommendation may\nalso be part of the proposal form. In compliance to the IRDAI regulations mentioned\nabove, the Agent would make a declaration that the recommended policy’s details\nhave been fully explained to the proposer and the latter has acknowledged thesame.Proposal forms are printed by insurers usually with the insurance company’s name,\nlogo, address and the class/ type of insurance/ product that it is used for. It is\ncustomary for insurance companies to add a printed note in the proposal form,\nthough there is no standard format or practice in this regard.**b)** **Declaration in the Proposal Form**Insurance companies usually add a declaration at the end of the proposal form to\nbe signed by the proposer. This ensures that the insured takes the pain to fill up the\nform accurately and has understood the facts given therein, so that at the time of\na claim there is no scope for disagreements on account of misrepresentation of\nfacts. Such declaration converts the common law principle of utmost good faith to\na contractual duty of utmost good faith.**Example**Examples of such declarations are:‘I/ We hereby declare and warrant that the above statements are true and complete\nin all respects and that there is no other information which is relevant to the\napplication for insurance that has not been disclosed to you.’‘I/ We agree that this proposal and the declarations shall be the basis of the contract\nbetween me/ us and (insurer’s name).’67**Test Yourself 2**Which of the following is not relevant in respect of a Proposal form?I. Utmost Good-faith\nII. Amount expected to be claimed\nIII. Duty to Disclose material facts\nIV. Confidentiality of details given**Some examples of such notes are:**‘Non-disclosure of facts material to the assessment of the risk, providing misleading\ninformation, fraud or non-co-operation by the insured will nullify the cover under\nthe policy issued’.‘The company will not be on risk until the proposal has been accepted by the\nCompany and full premium paid’.**C.** **Know Your Customer (KYC) Norms****Anti-Money Laundering and KYC Norms**Money Laundering is the process by which criminals transfer funds to conceal the\ntrue origin and ownership of the proceeds of criminal activities. Money laundering\nprocesses are used by criminals to make funds obtained through illegal activities\nappear legal money. In the process, they try to cover up the criminal origin of the\nmoney and make it appear valid.Criminals attempt to use financial services, including banks and insurance, to\nlaunder their money. They make transactions using false identities, for example, by\npurchasing some form of insurance and then managing to withdraw that money and\nthen disappearing once their purpose is served. Governments across the world,\nincluding India constantly try to prevent such money laundering attempts.**Definition**Money laundering is the process of bringing illegal money into an economy by hiding\nits illegal origin so that it appears to be legally acquired. The Government of India\nlaunched the PMLA, 2002 to rein in money-laundering activities.The Prevention of Money Laundering Act (PMLA), 2002 came into effect from 2005\nto control money laundering activities and to provide for confiscation of property\nderived from money-laundering.The Anti-Money Laundering guidelines issued by IRDAI soon after have indicated\nsuitable measures to determine the true identity of customers requesting for\ninsurance services, reporting of suspicious transactions and proper record keeping\nof cases involving or suspected of involving money laundering. It is necessary to be68vigilant and ensure, right at the beginning of the contract that it is not intended to\nbe a tool for money laundering of any sort.The Prevention of Money Laundering Act, 2002 (PMLA) was been brought into force\nby the Government of India with effect from 1st July 2005. As per the Act, every\nbanking company, financial institution (which includes Insurance companies) and\nintermediary shall have to maintain a record of all the transactions prescribed under\nthe PMLA. Accordingly, IRDAI issued the Guidelines on Anti-Money laundering/\nCounter Financing of Terrorism (AML/ CFT) 31st March 2006.Know your customer is the process used by a business to verify the identity of their\nclients. Banks and insurers are increasingly demanding their customers provide\ndetailed information to prevent identity theft, financial fraud and money\nlaundering. The objective of KYC guidelines is to prevent financial institutions from\nbeing used by criminal elements for money laundering activities.Insurers, hence, need to determine the true identity of their customers. Agents", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e68", "section": "Declaration in the Proposal Form", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_035", "metadata": {"file_size": 20690, "chunk_index": 35, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Example", "Some examples of such notes are:", "Definition", "Declaration in the Proposal Form", "Test Yourself 2"]}}
{"chunk": "of cases involving or suspected of involving money laundering. It is necessary to be68vigilant and ensure, right at the beginning of the contract that it is not intended to\nbe a tool for money laundering of any sort.The Prevention of Money Laundering Act, 2002 (PMLA) was been brought into force\nby the Government of India with effect from 1st July 2005. As per the Act, every\nbanking company, financial institution (which includes Insurance companies) and\nintermediary shall have to maintain a record of all the transactions prescribed under\nthe PMLA. Accordingly, IRDAI issued the Guidelines on Anti-Money laundering/\nCounter Financing of Terrorism (AML/ CFT) 31st March 2006.Know your customer is the process used by a business to verify the identity of their\nclients. Banks and insurers are increasingly demanding their customers provide\ndetailed information to prevent identity theft, financial fraud and money\nlaundering. The objective of KYC guidelines is to prevent financial institutions from\nbeing used by criminal elements for money laundering activities.Insurers, hence, need to determine the true identity of their customers. Agents\nshould ensure that proposers submit the proposal form along with the following as\npart of the KYC procedure:i. Proof of identity – driving license, passport, voter ID card, PAN card,Photographs etc.ii. Proof of address – driving license, passport, telephone bill, electricity bill,bank passbook etc. Different documentation are prescribed for individuals,\ncorporates, partnership firms, trusts and foundationsiii. Income proof documents and financial status, esp. in case of high-valuetransactionsiv. Purpose of insurance contract**a)** **Age Proof – for Personal Lines**While dealing with person related insurances like Life, Health, Personal Accident,\netc. Insurance companies use age as an important factor to determine the risk\nprofile of the insured. In life business, as age assumes great importance, life insurers\nused to follow more detailed norms of age related documentation. [However, the\nGovernment, the Reserve Bank of India and the IRDAI are becoming stricter on\nfollowing KYC norms.]An important part of the underwriting process is admission of\nage, after verifying the proof of age.**i.** **Standard Age Proofs**There are two types of age proofs that insurers come across as evidence of\nage. Valid age proofs may be standard or non-standard. Standard **age proofs** are normally issued by a public authority, like birthcertificate issued by a municipality or other government body, school\nleaving certificate, passport etc.69 Non-standard, when a standard age proof is not available (not to beaccepted readily)Some documents considered as standard age proofs are:i. School or college certificateii. Birth certificate extracted from municipal recordsiii. Passportiv. PAN cardv. Service registervi. Identity card in case of defence personnelvii. Marriage certificate issued by appropriate authority**ii.** **Non-standard age proofs**When standard age proofs like the above are not available, the life insurer\nmay allow submission of a non-standard age proof. Some documents\nconsidered as non-standard age proofs are:i. Horoscopeii. Ration cardiii. An affidavit by way of self-declarationiv. Certificate from village panchayat**Test Yourself 3**Which of the following is not acceptable as valid Age Proof?I. Birth certificate extracted from municipal recordsII. Birth Certificate issued by Member of Legislative AssemblyIII. PassportIV. PAN Card**Answers to Test Yourself****Answer 1** -The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** – The correct option is II.**Summary**Prospectus is a formal legal document used by insurance companies that\nprovides details about the product.The application document used for making the proposal is commonly known as\nthe ‘proposal form’.70Some documents considered as standard age proofs include school or college\ncertificate, birth certificate extracted from municipal records etc.Insurers need to determine the true identity of their customers. KYC documents\nlike address proof, PAN card and photographs etc. need to be collected as a part\nof the KYC procedure.**Key Terms**1. Prospectus\n2. Proposal form\n3. Moral hazard\n4. Know your Customer (KYC)\n5. Age Proof\n6. Standard and non-standard age proofs\n7. Free-look period71## CHAPTER C-08## CUSTOMER SERVICE**Chapter Introduction**In this chapter you will learn the importance of customer service. You will learn the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e68", "section": "Age Proof – for Personal Lines", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_036", "metadata": {"file_size": 20690, "chunk_index": 36, "chunk_tokens": 958, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Test Yourself 3"]}}
{"chunk": "**Answer 2** - The correct option is II.\n**Answer 3** – The correct option is II.**Summary**Prospectus is a formal legal document used by insurance companies that\nprovides details about the product.The application document used for making the proposal is commonly known as\nthe ‘proposal form’.70Some documents considered as standard age proofs include school or college\ncertificate, birth certificate extracted from municipal records etc.Insurers need to determine the true identity of their customers. KYC documents\nlike address proof, PAN card and photographs etc. need to be collected as a part\nof the KYC procedure.**Key Terms**1. Prospectus\n2. Proposal form\n3. Moral hazard\n4. Know your Customer (KYC)\n5. Age Proof\n6. Standard and non-standard age proofs\n7. Free-look period71## CHAPTER C-08## CUSTOMER SERVICE**Chapter Introduction**In this chapter you will learn the importance of customer service. You will learn the\nrole of agents in providing service to customers. You will also learn how tocommunicate and relate with customers.After studying this chapter, you should be able to:Understand the importance of customer service1. Describe quality of service2. Examine the importance of service in the insurance industry3. Discuss the role of an insurance agent in providing good service4. Explain the process of communication5. Demonstrate the importance of non-verbal communication6. Recommend ethical behaviour72**A.** **Customer Service – General concepts****1.** **Why Customer Service?**Customers are the most important part of any industry and no enterprise can afford\nto treat them indifferently. The role of customer service and relationships is\nimportant in the service sector and more so for insurance.Every enterprise has a goal to delight its customers. This can be explained by\nexamining how buying insurance differs from buying a car.A car can be seen, touched, test driven and experienced, whereas the Insurance of\nthe car is just a promise to pay if there is loss or damage to the car due to an\naccident. This promise is intangible – it cannot be seen, touched or experienced.While the customer of the car will be able to understand and experience the car\neasily, the customer of insurance can evaluate and experience the insurance\nprotection that he buys only when a loss happens and the insurance company settles\nthe claim. All customers do not get the chance to experience this. In insurance,\nwhen such a situation arises, if the service exceeds expectations, the customer\nwould be delighted.**2.** **Quality of service**It is necessary for insurance companies and their personnel, which includes their\nagents, to render high quality service and delight the customer.**But what is high quality service? What are its attributes?**The well-known SERVQUAL approach to service quality of Zeithaml, Parasuraman\nand Berry highlights 5 major indicators of service quality:**a)** **Reliability** : The ability to perform the promised service dependably andaccurately is considered the most important indicator of good service. It isthe foundation on which trust is built.**b)** **Responsiveness** : Refers to the willingness and ability of service personnel tohelp customers and provide prompt response to the customer’s needs. It may\nbe measured by indicators like speed, accuracy, and attitude while givingthe service.**c)** **Assurance** : Refers to the knowledge, competence and courtesy displayed byan employee or agent in understanding and meeting the needs of a customer,\nthus conveying trust and confidence.**d)** **Empathy** : Empathy is described as the human touch. It is reflected in thecaring attitude and individualised attention provided to customers.**e)** **Tangibles** : Represent physical environmental factors like location, layoutand cleanliness as also the sense of professionalism that a customer feels\nwhen contacting a service provider. First impressions last long.73**3.** **Customer service and insurance**Leading sales producers in the insurance industry state that the secret of reaching\nthe top and staying there is in getting the patronage and support of a large number\nof existing clients with whose help the business gets built. These clients are a source\nof commissions from renewal of existing contracts. These can be a valuable source\nfor acquiring new customers.One great mantra of success in insurance selling is to be able to convert one’s\ncustomers into one’s clients. Customers are those who buy a product. Clients, on\nthe other hand are people with whom an agent relates for life, who continue to buy\nfrom him/ her as also help and possibly, support him/ her in reaching out to and\nselling to other customers.Clients are built by working with deep commitment to serving one’s customers. To\nunderstand how keeping a customer happy benefits the agent and the company, one", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d71", "section": "Answer 2", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_037", "metadata": {"file_size": 20690, "chunk_index": 37, "chunk_tokens": 996, "has_examples": true, "has_tables": false, "key_concepts": ["Answer 2", "Customer service and insurance", "Answer 3", "Reliability", "Chapter Introduction"]}}
{"chunk": "when contacting a service provider. First impressions last long.73**3.** **Customer service and insurance**Leading sales producers in the insurance industry state that the secret of reaching\nthe top and staying there is in getting the patronage and support of a large number\nof existing clients with whose help the business gets built. These clients are a source\nof commissions from renewal of existing contracts. These can be a valuable source\nfor acquiring new customers.One great mantra of success in insurance selling is to be able to convert one’s\ncustomers into one’s clients. Customers are those who buy a product. Clients, on\nthe other hand are people with whom an agent relates for life, who continue to buy\nfrom him/ her as also help and possibly, support him/ her in reaching out to and\nselling to other customers.Clients are built by working with deep commitment to serving one’s customers. To\nunderstand how keeping a customer happy benefits the agent and the company, one\nshould understand the concept of Customer’s Lifetime Value.**Customer Lifetime Value** may be defined as the sum of economic benefits that can\nbe derived from building a sound relationship with a customer over a long period oftime.**Diagram 1:** **Customer Lifetime Value**An agent who renders service and builds close relationships with her customers,\nbuilds goodwill and brand value, which helps in expanding the business.**Test Yourself 1**What is meant by customer lifetime value?I. Sum of costs incurred while servicing the customer over his lifetime\nII. Rank given to customer based on business generated\nIII. Sum of economic benefits that can be achieved by building a long termrelationship with the customerIV. Maximum insurance that can be attributed to the customer74**4.** **Customer Relationships and Service**While customer service is a key element in creating satisfied and loyal customers,\nit is also necessary to build a strong relationship with them. A Customer’s views\nabout an insurer depends on the service and relationships experience the insureroffers.What goes to make a healthy relationship? At its heart, of course, there is trust. At\nthe same time, there are other elements, which reinforce and promote that trust.Let us illustrate some of the elements.**Diagram 2:** **Elements for Trust**i. Every relationship begins with **attraction** : Attraction means being liked and beingable to build a rapport with the customer, starting with creating a great first\nimpression. Attraction is regarded the key to unlocking every heart. Without it a\nrelationship is hardly possible. A sales person cannot make much headway if he/\nshe is not liked by the customer.ii. The second element of a relationship is one’s presence, being there when needediii. **Communication:** Even if one is not fully present and unable to do full justice toall the expectations of one’s customers, one can still **maintain a strong**\n**relationship by communicating in a manner that is assuring, full of empathy**\n**and conveying a sense of responsibility.**The above dimensions of communication call for discipline and skills. They\nultimately reflect how one thinks and sees.Companies emphasise on customer relationship management, as the cost of\nretaining a customer is far lower than acquiring a new customer. A customer relation\nopportunity arises at various touch points e.g. while understanding customers\ninsurance needs, explaining coverage’s, handing over forms etc.**B.** **Insurance agent’s role in providing customer service.**Let us now consider how an agent can render great service to the customer. It is\nimportant to realise that from the moment a customer gets contacted by a sales\nperson to the final point of settlement of a claim, the customer goes on a journey\nof experience that we shall call the ‘ **Customer Journey’** . The agent needs to\npartner with the customer through the entire duration of the contract, hand holding75him/ her in each step of the journey to create memorable experiences at everystep.Let us look at some milestones in the journey and the role played at each step.**1.** **The Sale**It is said that selling is both an art and a science. It is a science because it calls for\na set process which, if consistently and properly followed, is likely to lead to\nsuccess. It is also an art in the sense that each sales person brings his or her\ndistinctive beliefs, style and personality into the process and the results depend on\nwhat each person puts into the process.- **Prospecting:** The Sales Process begins with **Prospecting**, which literally means\n‘searching’ for a prospective customer. Searching is important as ‘ _**One cannot**_\n_**find till one searches’,**_ it is the most important step in the process. An agent\ntypically begins with his or her natural market, made up of known and easily\napproachable people. The challenge lies in getting across to more networks of", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "r74", "section": "Customer service and insurance", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_038", "metadata": {"file_size": 20690, "chunk_index": 38, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["One cannot", "Customer service and insurance", "Customer Journey’", "Prospecting:", "Diagram 1:"]}}
{"chunk": "of experience that we shall call the ‘ **Customer Journey’** . The agent needs to\npartner with the customer through the entire duration of the contract, hand holding75him/ her in each step of the journey to create memorable experiences at everystep.Let us look at some milestones in the journey and the role played at each step.**1.** **The Sale**It is said that selling is both an art and a science. It is a science because it calls for\na set process which, if consistently and properly followed, is likely to lead to\nsuccess. It is also an art in the sense that each sales person brings his or her\ndistinctive beliefs, style and personality into the process and the results depend on\nwhat each person puts into the process.- **Prospecting:** The Sales Process begins with **Prospecting**, which literally means\n‘searching’ for a prospective customer. Searching is important as ‘ _**One cannot**_\n_**find till one searches’,**_ it is the most important step in the process. An agent\ntypically begins with his or her natural market, made up of known and easily\napproachable people. The challenge lies in getting across to more networks of\npeople who are outside one’s immediate circle – getting to know them and be\nknown by them.All the people one knows and approaches may not be proper candidates for\ninsurance or they may not be interested in buying. It is thus necessary to **qualify**\nthem so that one targets only those who are likely to buy insurance. The\nprospecting process becomes successful only when an agent is able to build\nstrong relationships with the prospect. The first task of any sales person is thus\nto **sell trust and build confidence.**_**Invite for an Interview:**_ While personal relationships are the foundation on\nwhich insurance business is built, it is necessary to convert the goodwill one\nearns into a sale. This begins when the sales person sets up a formal appointment\nfor a detailed sales interview. This step is critical for establishing one’s\nprofessional credentials and also to separate business from casual discussions.- _**Determining the needs and recommending the Solution:**_ The heart of the Sales\nInterview is the steps wherein the sales agent determines and makes the\nprospective customer aware about the exact needs for which insurance is a\nsolution. A master sales person is distinguished by his/ her skill in guiding a\nprospect, through asking gentle questions, to understand the gaps in protection\nthat give rise to the needs for insurance.The Agent has the responsibility to provide _Best Advice_ to the Prospect about the\nright kind of insurance solutions to meet his/ her needs. Firstly one must determine\nand make the prospective customer aware about the exact needs for which\ninsurance is a solution. This also includes giving proper advice on the amount of\ninsurance to be purchased. For example the amount of life insurance to be76purchased by an individual needs to be linked to his/ her income and paying\ncapacity.It is also important to keep a basic percept in mind, especially when buying non-life\ninsurance: Do not recommend insuring where the risk can be managed otherwise.Whether insurance is needed or not, depends on the circumstances. If the premium\npayments are high compared to the loss involved, it may be advisable to just bear\nthe risk. On the other hand, if the loss consequences of a risk are likely to be severe,\nit is wise to insure against it.**Example**To a homeowner living in a flood prone area, purchasing an add-on cover against\nfloods would prove to be helpful. On the other hand, if the home owner owns a\nhome at a place where the risk of floods is negligible it may not be necessary toobtain such cover.Many customers may not be much concerned about getting maximum insurance per\nrupee spent, but would be interested in **reducing the cost of handling risk** . The\nconcern would be thus on identifying those risks which a customer cannot retainand hence must be insured.The agent becomes successful when he/ she renders best advice. The agent needs\nto constantly ask himself/ herself about his/ her role vis-à-vis the customer. He/\nshe should go to the customer not just to get a sale but to relate to the customer\nas a coach and partner who can help him/ her to manage his/ her risks more\neffectively?_**Handling Objections and Closing the Sale:**_ It may not be enough to give best\nadvice and recommendations to a customer about the right products to buy. One\nalso needs to persuade him/ her to take the decision to buy. Quite often the\ncustomer may have a number of questions and may raise objections that need\nto be addressed before he/ she decides to commit to the purchase. Whilst\nhandling these objections, it is vitally important to understand that the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "g75", "section": "Customer Journey’", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_039", "metadata": {"file_size": 20690, "chunk_index": 39, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["One cannot", "Customer Journey’", "Prospecting:", "Example", "Prospecting"]}}
{"chunk": "home at a place where the risk of floods is negligible it may not be necessary toobtain such cover.Many customers may not be much concerned about getting maximum insurance per\nrupee spent, but would be interested in **reducing the cost of handling risk** . The\nconcern would be thus on identifying those risks which a customer cannot retainand hence must be insured.The agent becomes successful when he/ she renders best advice. The agent needs\nto constantly ask himself/ herself about his/ her role vis-à-vis the customer. He/\nshe should go to the customer not just to get a sale but to relate to the customer\nas a coach and partner who can help him/ her to manage his/ her risks more\neffectively?_**Handling Objections and Closing the Sale:**_ It may not be enough to give best\nadvice and recommendations to a customer about the right products to buy. One\nalso needs to persuade him/ her to take the decision to buy. Quite often the\ncustomer may have a number of questions and may raise objections that need\nto be addressed before he/ she decides to commit to the purchase. Whilst\nhandling these objections, it is vitally important to understand that the\nobjections being voiced may reflect underlying concerns that need to beidentified and resolved.In sum, the role of an insurance agent is more than that of a mere sales person. He/\nshe also **needs to be a risk assessor, underwriter, risk management counsellor,**\n**designer of customised solutions and a relationship builder** (who thrives on\nbuilding trust and long-term relationships), all rolled into one.**2.** **The Proposal stage**The agent has to support the customer in filling out the proposal for insurance. The\ninsured is required to take responsibility for the statements made therein. The\nsalient aspects of a proposal form have been discussed in a later chapter.77The agent should explain and clarify to the proposer the details to be filled as\nanswers to each of the questions in the proposal form. A failure to give proper and\ncomplete information can jeopardise the customer’s claim.Sometimes, if additional information is required to complete the policy, the\ncompany may inform the customer directly or through the agent/ advisor. The agent\nshould help the customer in completing such formalities, explaining why they arenecessary.IRDAI (Issuance of e-Insurance Policies) Regulations, 2016, provide for e – Proposal\nforms that are similar to the physical proposal form and having a provision to the\nProspect to give his consent to the proposal, which can be validated by one time\npassword (mobile phone OTP).**3.** **Acceptance stage****a)** **Cover notes/ Certificates of Insurance**After underwriting is completed it may take some time before the policy is issued.\nPending the preparation of the policy or when the negotiations for insurance are\nin progress and it is necessary to provide cover on a provisional basis or when the\npremises are being inspected for determining the actual rate applicable, a cover\nnote is issued to confirm protection under the policy.As Cover notes and Certificates of Insurance are used predominantly in marine\nand motor classes of business, cover note is discussed in detail under the GeneralInsurance Section.It is the agent’s responsibility to ensure that the cover note is issued by the\ncompany, where applicable, to the insured. Promptness in this regardcommunicates to the client that his/ her interests are safe in the hands of theagent and the company.**b)** **Policy Document**The policy is a formal document which provides an evidence of the contract of\ninsurance. This document has to be stamped in accordance with the provisions\nof the Indian Stamp Act, 1899. The insurer is duty bound to give the policydocument to the insured.**4.** **Premium Payment****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance.A good agent takes active interest in ensuring that the insured pays the premium\nfor taking or continuing or renewing his policy and the customer is made aware\nof various options available for payment of premium.78**5.** **Method of payment of premium**The premium to be paid by any person proposing to take an insurance policy or by", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Handling Objections and Closing the Sale:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_040", "metadata": {"file_size": 20690, "chunk_index": 40, "chunk_tokens": 891, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Document", "Handling Objections and Closing the Sale:", "Premium", "Acceptance stage", "Cover notes/ Certificates of Insurance"]}}
{"chunk": "and motor classes of business, cover note is discussed in detail under the GeneralInsurance Section.It is the agent’s responsibility to ensure that the cover note is issued by the\ncompany, where applicable, to the insured. Promptness in this regardcommunicates to the client that his/ her interests are safe in the hands of theagent and the company.**b)** **Policy Document**The policy is a formal document which provides an evidence of the contract of\ninsurance. This document has to be stamped in accordance with the provisions\nof the Indian Stamp Act, 1899. The insurer is duty bound to give the policydocument to the insured.**4.** **Premium Payment****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance.A good agent takes active interest in ensuring that the insured pays the premium\nfor taking or continuing or renewing his policy and the customer is made aware\nof various options available for payment of premium.78**5.** **Method of payment of premium**The premium to be paid by any person proposing to take an insurance policy or by\nthe policyholder to an insurer may be made in any one or more of the followingmethods:a) Cashb) Any recognised banking negotiable instrument such as cheques, demanddrafts, pay order, banker’s cheques drawn on any schedule bank in India;c) Postal money order;d) Credit or debit cards;e) Bank guarantee or cash deposit;f) Internet;g) E-transferh) Direct credits via standing instruction of proposer or the policyholder or thelife insured through bank transfers;i) Any other method or payment as may be approved by the Authority fromtime to time;As per IRDA Regulations, in case the proposer/ policyholder opts for premium\npayment through net banking or credit/ debit card, the payment must be made\nonly through net banking account or credit/ debit card issued on the name of\nsuch proposer/ policyholder.**6.** **Service after issuance of Policy Document and Receipt for Premium**Once the premium is paid by the customer, the insurer is bound to issue a\nreceipt. A receipt is also to be issued even in case the premium is paid inadvance.The agent may approach the insured and enquire whether the Policy Document\nhas been received from the insurance company. It presents a great opportunity\nfor the agent to connect with the customer. The agent will be able to clear any\ndoubts and also explain the various policy provisions and policy holders’ rights\nand privileges. This demonstrates commitment to the customer and provides an\nopportunity to pledge continued support and service. One should also inform the\ncustomer about the free-look period provision, during which period, the policy\ncan be returned and refund of premium obtained.If the policy being purchased is an Electronic insurance policy, the agent can\nhelp the Customer to open an e-Insurance Account (e-I-A), through the\nRegistered Insurance Repository.79This also paves the way for the next step which is to ask the customer for the\nnames and particulars of other individuals he/ she knows, who can possibly\nbenefit from the agent’s services. It would be even better if the client itself\ncontacted these people and introduced the agent to them.**7.** **Policy Renewal**Most general Insurance policies have to be renewed each year. For general\ninsurance policies, at the time of each renewal, the customer has a choice to\ncontinue insuring with the same company or switch to another company. In case\nof Life Insurance, a policy would continue to be in force when the customer pays\nthe premium at regular intervals based on premium payment term. This does\nnot apply to one-time payments.General Insurers usually send a Renewal Notice, well in advance of the date of\nexpiry of the premium paying period, inviting renewal of the policy.The customer’s choice to renew or continue with the policy may often depend\non the trust and goodwill created by the agent and company and the agent needs\nto be in touch to remind the customer about the renewal or continuity of policywell before the due date.High producer agents constantly keep in touch with their clients, and win their\ntrust and loyalty through various acts of service and relationships – like greeting\ntheir clients on various occasions like festivals or family events and being with\nthem to share their joys and sorrows.**8.** **The claim stage**The crucial test comes at the time of claim settlement. The agent must ensure\nthat the incident giving rise to the claim is immediately informed to the insurer\nand that the customer carefully follows all the formalities. The agent may also\nassist in all the investigations that may need to be done to assess the loss. A\ngood agent assists the customers or his representatives in fulfilling the claim", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Policy Document", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_041", "metadata": {"file_size": 20690, "chunk_index": 41, "chunk_tokens": 991, "has_examples": true, "has_tables": false, "key_concepts": ["Policy Document", "Premium", "Premium Payment", "The claim stage", "Method of payment of premium"]}}
{"chunk": "the premium at regular intervals based on premium payment term. This does\nnot apply to one-time payments.General Insurers usually send a Renewal Notice, well in advance of the date of\nexpiry of the premium paying period, inviting renewal of the policy.The customer’s choice to renew or continue with the policy may often depend\non the trust and goodwill created by the agent and company and the agent needs\nto be in touch to remind the customer about the renewal or continuity of policywell before the due date.High producer agents constantly keep in touch with their clients, and win their\ntrust and loyalty through various acts of service and relationships – like greeting\ntheir clients on various occasions like festivals or family events and being with\nthem to share their joys and sorrows.**8.** **The claim stage**The crucial test comes at the time of claim settlement. The agent must ensure\nthat the incident giving rise to the claim is immediately informed to the insurer\nand that the customer carefully follows all the formalities. The agent may also\nassist in all the investigations that may need to be done to assess the loss. A\ngood agent assists the customers or his representatives in fulfilling the claim\nlodgement formalities quickly, correctly and completely.**Test Yourself 2**Identify the scenario where a debate on the need for insurance is not required.I. Property insurance\nII. Business liability insurance\nIII. Motor insurance for third party liabilityIV. Fire insurance80**C.** **Communication skills in customer service**An agent needs to possess soft skills for effective performance in the work place.S **oft skills relate to one’s ability to interact effectively with others, both at work**\n**and outside. Communication skills are the most important of these soft skills.****1.** **Process of communication**What is communication?All communications require a sender, who sends a message, and a person who\nreceived that message. The process is complete once the receiver has understood\nthe message of the sender.**Diagram 3:** **Forms of communication**Communication may be face to face, over the phone, or by mail or internet. It may\nbe formal or informal. Whatever the content or form of the message or the media\nused, the effectiveness of communication depends on whether or not the recipient\nhas understood what was sought to be communicated.Since an insurance policy is essentially a promise, it is important that what is\npromised by the insurer is clearly understood by the insured. The agent as an\nintermediary has to not only provide complete, accurate and unambiguous account\nof the terms of the insurance to the customer, but also seek and clarify doubts or\nqueries that a customer may have.**2.** **Barriers to effective communication**Different kinds of barriers to effective communication can arise at each step in the\nabove process, due to which communication can get distorted. The challenge is to\nvisualize, understand and remove the barriers.**Test Yourself 3**What does not go on to make a healthy relationship?I. AttractionII. TrustIII. CommunicationIV. Dislike81**D.** **Non-verbal Communication**Let us now look at some concepts that the agent needs to understand.**Important****1.** **Making a great first impression**The prospect judges an agent based on his appearance, body language, mannerisms,\ndress and speech. As attraction is the first pillar of a relationship and first\nimpressions last long, some tips for making a good first impression are given below:**i.** **Be on time always** . Plan to arrive a few minutes early, allowing flexibilityfor all kinds of possible delays.**ii.** **Present yourself appropriately** . The appearance should to create the right first impression\n The dress must be appropriate for the meeting or occasion\n The look must be clean and tidy – with good haircut and shave, clean andtidy clothes, neat and tidy make up**iii.** **A warm, confident and winning smile** puts a person and his/ her audienceimmediately at ease with one another.**iv.** **Being open, confident and positive** body language must project confidence and self-assurance stand tall, smile, make eye contact, greet with a firm handshake remain positive even in the face of some criticism or when the meeting isnot going as well as expected**v.** **Interest in the other person** - The most important thing is about beinggenuinely interested in the other person. Take some time to find out about the customer as a person Be caring and attentive to what he or she says Be totally present and available to your customer Not engaging in one’s mobile phone during the interview?**2.** **Body language**Body language refers to movements, gestures, facial expressions. The way we talk,", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e80", "section": "The claim stage", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_042", "metadata": {"file_size": 20690, "chunk_index": 42, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Being open, confident and positive", "Making a great first impression", "A warm, confident and winning smile", "Non-verbal Communication", "Barriers to effective communication"]}}
{"chunk": " The dress must be appropriate for the meeting or occasion\n The look must be clean and tidy – with good haircut and shave, clean andtidy clothes, neat and tidy make up**iii.** **A warm, confident and winning smile** puts a person and his/ her audienceimmediately at ease with one another.**iv.** **Being open, confident and positive** body language must project confidence and self-assurance stand tall, smile, make eye contact, greet with a firm handshake remain positive even in the face of some criticism or when the meeting isnot going as well as expected**v.** **Interest in the other person** - The most important thing is about beinggenuinely interested in the other person. Take some time to find out about the customer as a person Be caring and attentive to what he or she says Be totally present and available to your customer Not engaging in one’s mobile phone during the interview?**2.** **Body language**Body language refers to movements, gestures, facial expressions. The way we talk,\nwalk, sit and stand, all says something about us, and what is happening inside us.It is often said that people listen to only a small percentage of what is actually said.\nWhat we don’t say may speak a lot more about us in a louder way. Obviously, one\nneeds to be very careful about one’s body language.82**a)** **Confidence**Here are a few tips about how to appear confident and self-assured, giving the\nimpression of someone to be seriously listened to: Posture – standing tall with shoulders held back. Solid eye contact - with a \"smiling\" face Purposeful and deliberate gestures**b)** **Trust** Quite often, a sales person’s words fall on deaf ears because the audiencedoes not trust him/ her – his/ her body language does not give the assurance\nthat he/ she is sincere about what he/ she says**3.** **Listening skills**The third set of communication skills that one needs to be aware about and cultivateare listening skills. These follow from a well-known principle of personal\neffectiveness – ‘first try to understand before being understood’.Active listening calls for: Allowing the speaker to finish each point before asking questions Not interrupting the speaker with any counter arguments This may require that we reflect on the message and ask questions to clarifywhat was said Another way to provide feedback is to summarize the speaker’s words andrepeat it back to him or her periodically or at the end of the conversation.**Let us look at the skills required for active listening:****a)** **Demonstrating that one is listening:** For instance one may: Give an occasional nod and smile Adopt a posture that is open and draws out the other to speak freely Have small verbal comments like \"I understand\", \"I see\", \"yes\" and \"uh\".**b)** **Paying attention**One needs to give the speaker one’s undivided attention, and acknowledge him.\nSome aspects of paying attention are as follows:Look at the speaker directly Put aside distracting thoughts Don't mentally prepare a rebuttal83 Avoid all external distractions [for instance, keep your mobile on silentmode] \"Listen\" to the speaker's body language**c)** **Removing filters:**A lot of what we hear may get distorted by one’s personal filters, like the\nassumptions, judgments, and beliefs one carries.**Not being judgemental: If the listener is judgemental,** even if he hears what\nthe speaker is saying, he will understand only according to his biased\ninterpretation.**d)** **Empathetic listening:****Empathy implies hearing and listening patiently, and with full attention, to**\n**what the other person has to say, even when one does not agree with it. It**\n**is important to show the speaker acceptance, not necessarily agreement.****e)** **Responding appropriately:**Active listening implies much more than just hearing what a speaker says. The\ncommunication can be completed only when the listener responds in some way,\nthrough word or action. Certain rules need to be followed for ensuring that the\nspeaker is not put down but treated with respect.These include: Being candid, open, and honest in your response Asserting one’s opinions respectfully Treating another person in a way, one would like oneself to be treated**Example****Asking for clarity** – “I realize that we have not been able to clear about the benefits", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "l83", "section": "A warm, confident and winning smile", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_043", "metadata": {"file_size": 20690, "chunk_index": 43, "chunk_tokens": 992, "has_examples": true, "has_tables": false, "key_concepts": ["Paying attention", "Being open, confident and positive", "A warm, confident and winning smile", "Removing filters:", "Interest in the other person"]}}
{"chunk": "assumptions, judgments, and beliefs one carries.**Not being judgemental: If the listener is judgemental,** even if he hears what\nthe speaker is saying, he will understand only according to his biased\ninterpretation.**d)** **Empathetic listening:****Empathy implies hearing and listening patiently, and with full attention, to**\n**what the other person has to say, even when one does not agree with it. It**\n**is important to show the speaker acceptance, not necessarily agreement.****e)** **Responding appropriately:**Active listening implies much more than just hearing what a speaker says. The\ncommunication can be completed only when the listener responds in some way,\nthrough word or action. Certain rules need to be followed for ensuring that the\nspeaker is not put down but treated with respect.These include: Being candid, open, and honest in your response Asserting one’s opinions respectfully Treating another person in a way, one would like oneself to be treated**Example****Asking for clarity** – “I realize that we have not been able to clear about the benefits\nof some of our health plans. Could you help us by asking us your doubts?”**Paraphrasing the speaker’s exact words** – “So, you are saying that ‘our health plans\nare not attractive enough’ – Have I understood you correctly?”**Test Yourself 4**Which among the following is not an element of active listening?I. Paying good attention\nII. Being extremely judgemental\nIII. Empathetic listening\nIV. Responding appropriately84**E.** **Ethical Behavior**In recent years, there are many reports of improper conduct, and serious concerns\nhave been raised about ethical behaviour in business causing betrayal of trust.This has led to discussions about concepts like accountability, corporate\ngovernance, and treating customers fairly in insurance, which form part of “Ethics”in business.It is not wrong to look after one’s interests. But it is wrong to do so at the cost ofthe interests of others. Unethical behaviour arises when there is no concern forothers and there is high concern for oneself.**Insurance is a business of trust** . Breach of trust amounts to cheating. When wrong\ninformation is given to prospects tempting them to buy insurance, or if the insurance\ngiven does not cater to the specific needs of the prospect, things go wrong.The Code of Ethics spelt out by the IRDAI in various regulations are directed towards\nethical behaviour. It is not enough just to know the code. What is more important\nfor the insurers and their representatives is to always keep the interests of the\nprospect/ policy holder as primary.**Characteristics:** Some characteristics of ethical behaviour are:a) Placing the best interests of the client above one’s own direct or indirectbenefitsb) Holding in strictest confidence and considering as privileged, all business andpersonal information pertaining to client’s affairsc) Making full and adequate disclosure of all facts to enable clients make informeddecisionsThere could be a likelihood of ethics being compromised in the following situations:a) Having to choose between two plans, one giving much less premium orcommission than the otherb) Temptation to recommend discontinuance of an existing policy and taking out anew onec) Being aware of circumstances that, if known to the insurer, could adverselyaffect the interests of the client or the beneficiaries of the claim.**Test Yourself 5**Which among the following is not a characteristic of ethical behaviour?\nI. Making adequate disclosures to enable the clients to make an informed decision\nII. Maintaining confidentiality of client’s business and personal information\nIII. Placing self-interest ahead of client’s interests\nIV. Placing client’s interest ahead of self interest85**Summary**a) The role of customer service and relationships is far more critical in the case ofinsurance than in other products.b) Five major indicators of service quality include reliability, responsiveness,assurance, empathy and tangibles.c) Customer lifetime value may be defined as the sum of economic benefits thatcan be derived from building a sound relationship with a customer over a long\nperiod of time.d) The role of an insurance agent in the area of customer service is absolutelycritical.e) Active listening involves paying attention, providing feedback and respondingappropriately.f) Ethical behaviour involves placing the customer’s interest before one’s own.**Key terms**a) Quality of serviceb) Empathyc) Body languaged) Active listeninge) Ethical behavior**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y84", "section": "Not being judgemental: If the listener is judgemental,", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_044", "metadata": {"file_size": 20690, "chunk_index": 44, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Ethical Behavior", "Paraphrasing the speaker’s exact words", "Insurance is a business of trust"]}}
{"chunk": "II. Maintaining confidentiality of client’s business and personal information\nIII. Placing self-interest ahead of client’s interests\nIV. Placing client’s interest ahead of self interest85**Summary**a) The role of customer service and relationships is far more critical in the case ofinsurance than in other products.b) Five major indicators of service quality include reliability, responsiveness,assurance, empathy and tangibles.c) Customer lifetime value may be defined as the sum of economic benefits thatcan be derived from building a sound relationship with a customer over a long\nperiod of time.d) The role of an insurance agent in the area of customer service is absolutelycritical.e) Active listening involves paying attention, providing feedback and respondingappropriately.f) Ethical behaviour involves placing the customer’s interest before one’s own.**Key terms**a) Quality of serviceb) Empathyc) Body languaged) Active listeninge) Ethical behavior**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is III.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is III.86## CHAPTER C-09## GRIEVANCE REDRESSAL MECHANISM**Chapter Introduction**Insurance industry is essentially a service industry where customer expectations are\nconstantly rising. There is dissatisfaction with the standard of services. Despite\ncontinuous product innovation and significant improvement in the level of customer\nservice, aided by use of modern technology, the industry suffers badly in terms of\ncustomer dissatisfaction and poor image. The Government and the regulator have\ntaken a number of initiatives to improve the situation.IRDAI Regulations on Protection of Policyholders’ Interests 2017 mandate that every\nInsurer shall have their own board approved policy for protection of policyholders’\ninterests which shall includei. Service parameters including turnaround times for various services rendered.\nii. Procedure for speedy resolution of complaints.**Learning Outcomes**87**A.** **Grievance Redressal**The time for high priority action is when the customer has a complaint. Remember\nthat in the case of a complaint, the customer is angry due to a failure of service.\nThis is only a part of the story.Many times, Customers get upset because they understand the situation wrongly.\nAll service failures causes two types of feelings:1. A feeling that the insurer was unfair (a feeling of being cheated)2. A feeling of hurt ego (being made to look and feel small)The customers want to feel valued and human touch is critical in this situation. Asa professional insurance advisor first of all, the agent would not allow such a\ncomplaint situation to happen. He would take up the matter with the appropriate\nofficer of the company.A complaint is a crucial “ **moment of truth** ” in the customer relationship. If the\nagent/ company can use the situation to clarify the position, the situation can\nactually improve customer loyalty.**Remember, no one else in the company has ownership of the client’s problems**\n**as much as an agent does** .Complaints/ grievances give us the chance to show how much we care for the\ncustomer’s interests. They are in fact the pillars on which an insurance agent builds\ngoodwill and business. **Word of mouth publicity (Good/ Bad) plays a significant**\n**role in selling and servicing** .The procedure for grievance redressal is detailed at the end of every policy\ndocument. This should be bought to the notice of customers. As per the regulations,\nany grievance of a policy holder should be first referred to the Insurer’s Grievance\nCell. If it is not satisfactorily resolved, the complainant may approach the Regulator\nthrough the Integrated Grievance Management System.**B.** **Integrated Grievance Management System (IGMS)**Each Insurer has its own grievance redressal mechanism. All operating/ controlling/\ncorporate offices of Insurance companies have Grievance Redressal Officers. A\npolicyholder can approach them directly for any grievance.IRDAI has launched an Integrated Grievance Management System (IGMS) which acts\nas an online consumer complaints registration system. Insurers have to register all\ngrievances that they receive in the system which is integrated with IGMS of IRDAI.\nIGMS helps IRDAI in monitoring grievance redress in the industry and also acts as a\ncentral repository of insurance grievance data.Policyholders can approach the respective insurer first for any grievance. If he does\nnot receive any response from the insurer or if the response/ resolution received is88not to his satisfaction, he can approach the Regulator under the IGMS. The\ncomplaint registration process involves two steps – (i) Registering oneself by", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "t85", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_045", "metadata": {"file_size": 20690, "chunk_index": 45, "chunk_tokens": 1006, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Grievance Redressal", "Answer 3", "Chapter Introduction"]}}
{"chunk": "Cell. If it is not satisfactorily resolved, the complainant may approach the Regulator\nthrough the Integrated Grievance Management System.**B.** **Integrated Grievance Management System (IGMS)**Each Insurer has its own grievance redressal mechanism. All operating/ controlling/\ncorporate offices of Insurance companies have Grievance Redressal Officers. A\npolicyholder can approach them directly for any grievance.IRDAI has launched an Integrated Grievance Management System (IGMS) which acts\nas an online consumer complaints registration system. Insurers have to register all\ngrievances that they receive in the system which is integrated with IGMS of IRDAI.\nIGMS helps IRDAI in monitoring grievance redress in the industry and also acts as a\ncentral repository of insurance grievance data.Policyholders can approach the respective insurer first for any grievance. If he does\nnot receive any response from the insurer or if the response/ resolution received is88not to his satisfaction, he can approach the Regulator under the IGMS. The\ncomplaint registration process involves two steps – (i) Registering oneself by\nentering one’s policy details and (ii) Registering one’s complaints and viewing the\nstatus of the complaints. Complaints are then forwarded to the respective insurance\ncompanies and IRDAI facilitates disposal of Grievances.IGMS tracks complaints and the time taken for their redressal. The complaints can\nbe registered at the following URL: http://www.policyholder.gov.in/Integrated_\nGrievance_Management.aspx**C.** **Consumer Protection****The Consumer Protection Act, 2019:** This original Act of 1986 was passed _“to_\n_provide for better protection of the interest of consumers and to make provision_\n_for the establishment of consumer councils and other authorities for the_\n_settlement of consumer’s disputes”_ . The Act was amended by the Consumer\nProtection (Amendment) Act, 2002 and later on 2019.Some definitions provided in\nthe Act are as follows:“ **Service** ” means service of any description which is made available to potential\nusers and includes the provision of facilities in connection with banking, financing,\n**insurance**, transport, processing, supply of electrical or other energy, board or\nlodging or both, housing construction, entertainment, etc. **Insurance is included as**\n**a service.** However, “Service” does not include the rendering of any service free of\ncharge or under a contract of personal service.“ **Consumer** ” means any person who Buys goods for a consideration. It includes any user of such goods. (It does notinclude a person who obtains such goods for resale or for any commercial\npurpose) or\n Hires or avails of any services for a consideration. It includes the beneficiary ofsuch services. (It does not include any person who avails of such service for any\ncommercial purpose.)“ **Defect** ” means any fault, imperfection, shortcoming, inadequacy in the quality,\nnature and manner of performance which is required to be maintained by or under\nany law or has been undertaken to be performed by a person in pursuance of a\ncontract or otherwise in relation to any service.**“Complaint”** means any allegation in writing made by a complainant that: an unfair trade practice or restrictive trade practice has been adopted\n the goods bought by him suffer from one or more defects\n the services hired or availed of by him suffer from deficiency in any respect\n price charged is in excess of that fixed by law or displayed on package\n goods which will be hazardous to life and safety when used are being offeredfor sale to the public in contravention of the provisions of any law requiring\ntrader to display information in regard to the contents, manner and effect of\nuse of such goods.“ **Consumer dispute** ” means a dispute where the person against whom a complaint\nhas been made, denies and disputes the allegations contained in the complaint.89**D.** **Consumer** **disputes redressal agencies**Consumer disputes redressal agencies are established at district, state and national\nlevels.**i.** **District Consumer Disputes Redressal Commission** The District Consumer Disputes Redressal Commission (District Commission),has jurisdiction to entertain complaints, where value of the goods or services\ndoes not exceed Rs. 1 crore. The District Commission has the powers of a civil\ncourt.**ii.** **State Consumer Disputes Redressal Commission** The State Consumer Disputes Redressal Commission (State Commission) hasoriginal jurisdiction to entertain complaints where the value of goods/ service", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s88", "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_046", "metadata": {"file_size": 20690, "chunk_index": 46, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Consumer", "Integrated Grievance Management System (IGMS)", "Defect", "Consumer dispute", "State Consumer Disputes Redressal Commission"]}}
{"chunk": " price charged is in excess of that fixed by law or displayed on package\n goods which will be hazardous to life and safety when used are being offeredfor sale to the public in contravention of the provisions of any law requiring\ntrader to display information in regard to the contents, manner and effect of\nuse of such goods.“ **Consumer dispute** ” means a dispute where the person against whom a complaint\nhas been made, denies and disputes the allegations contained in the complaint.89**D.** **Consumer** **disputes redressal agencies**Consumer disputes redressal agencies are established at district, state and national\nlevels.**i.** **District Consumer Disputes Redressal Commission** The District Consumer Disputes Redressal Commission (District Commission),has jurisdiction to entertain complaints, where value of the goods or services\ndoes not exceed Rs. 1 crore. The District Commission has the powers of a civil\ncourt.**ii.** **State Consumer Disputes Redressal Commission** The State Consumer Disputes Redressal Commission (State Commission) hasoriginal jurisdiction to entertain complaints where the value of goods/ service\nand compensation, if any claimed exceeds Rs. 1 crore but does not exceed\nRs.10 crores.\n It also has appellate and supervisory jurisdiction to entertain appeals fromthe District Commission.\n Other powers and authority are similar to those of the District Commission.**iii.** **National Consumer Disputes Redressal Commission** The National Consumer Disputes Redressal Commission (National Commission)is the final authority established under the Act.\n It has original jurisdiction to entertain disputes, where goods/ services andthe compensation claimed exceeds Rs.10 crores.\n It has appellate as well as supervisory jurisdiction to hear the appeals fromthe orders passed by the State Commission.\nEvery order made by a District Commission, State Commission or the National\nCommission shall be enforced by it in the same manner as if it were a decree\nmade by a Court in a suit before it. Appeals against the orders of the National\nCommission have to be made only at the Supreme Court.90**Channels for Consumer Disputes Redressal**|Judicial Channels|Col2|\n|---|---|\n|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|<br> <br> <br> <br> <br>**National Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**State Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br>**District Consumer**<br>**Disputes Redressal**<br>**Commission** <br> <br> <br> <br> <br> <br>**Established by the**<br>**Central Government**<br> <br>**Established by the State**<br>**Government**<br> <br>**Established by the**<br>**State Government**|\n|**Established by the**<br>**Central Government**|**Established by the**<br>**State Government**|**a)** **Procedure for filing a complaint**The procedure for filing a complaint is very simple in all the above three\nagencies. There is no fee for filing a complaint or filing an appeal whether before\nthe State Commission or National Commission. The complaint can be filed by\nthe complainant himself or by his authorised agent. It can be filed personally or\ncan even be sent by post. It may be noted that no advocate is necessary for the\npurpose of filing a complaint.**b)** **Consumer Commission Orders**If the Commission is satisfied (a) that the goods in question have the defects\nspecified in the complaint or (b) that the allegations about the services are\nproven; the Commission can issue orders directing the opposite party to do any\nof the following:", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "l2", "section": "Consumer dispute", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_047", "metadata": {"file_size": 20690, "chunk_index": 47, "chunk_tokens": 995, "has_examples": false, "has_tables": true, "key_concepts": ["State Government", "Commission", "Procedure for filing a complaint", "Consumer Commission Orders", "Consumer"]}}
{"chunk": "|**Established by the**<br>**Central Government**|**Established by the**<br>**State Government**|**a)** **Procedure for filing a complaint**The procedure for filing a complaint is very simple in all the above three\nagencies. There is no fee for filing a complaint or filing an appeal whether before\nthe State Commission or National Commission. The complaint can be filed by\nthe complainant himself or by his authorised agent. It can be filed personally or\ncan even be sent by post. It may be noted that no advocate is necessary for the\npurpose of filing a complaint.**b)** **Consumer Commission Orders**If the Commission is satisfied (a) that the goods in question have the defects\nspecified in the complaint or (b) that the allegations about the services are\nproven; the Commission can issue orders directing the opposite party to do any\nof the following:\ni. To **return** to the complainant the **price** (or premium in case of insurance)and/ or charges paid by the complainant\nii. To award such amount as **compensation** to the consumers for any loss orinjury suffered by the consumer due to negligence of the opposite party\niii. To remove the defects or **deficiencies** in the services in question.\niv. To **discontinue the unfair trade practice** or the restrictive trade practiceor not to repeat them\nv. To provide for **adequate costs** to the complainants.**c)** **Nature of complaints**The **majority of consumer disputes** with the three Commissions relating to\ninsurance business fall in the following main categories:91i. Delay in settlement of claims\nii. Non-settlement of claims\niii. Repudiation of claims\niv. Amount or Quantum of loss\nv. Policy terms, conditions etc.**E.** **The Insurance Ombudsman**The Central Government under the powers of the Insurance Regulatory &\nDevelopment Authority Act, 1999 made **Insurance Ombudsman Rules 2017** by a\nnotification published in the official gazette on 25 [th] April 2017.Rules regarding Insurance Ombudsmen apply to all insurers and their agents and\nintermediaries in respect of complaints on all personal lines of insurance, group\ninsurance policies, policies issued to sole proprietorship and micro enterprises.[‘Personal lines’ here means insurances taken in an individual capacity, in contrast\nto insurances sold to corporate entities.] Complaints relating to (a) delay in\nsettlement of claims beyond the time specified by IRDAI, (b) partial or total\nrepudiation of claims by the insurer, (c) disputes about premium paid or payable in\nterms of insurance policy, (d) misrepresentation of policy terms and conditions at\nany time in the policy document or policy contract, (e) legal construction of\ninsurance policies that affect the claim; and (f) policy servicing and related\ngrievances against insurers and their agents and intermediaries.a) Issuance of life insurance policy, general insurance policy including healthinsurance policy which is not in conformity with the proposal form submitted\nby the proposer.\nb) Non issuance of insurance policy after receipt of premium in life insurance andgeneral insurance including health insurance and\nc) Any other matter resulting from the violation of provisions of the InsuranceAct, 1938 or the regulations, circulars, guidelines or instructions issued by the\nIRDAI from time to time or the terms and conditions of the policy contract, in\nso far as they relate to issues mentioned at clauses (a) to (f)\nThe objective of these rules is to resolve all types of complaints mentioned above,\nin a cost effective, and impartial manner.**The Ombudsman, by mutual agreement of the insured and the insurer can act as**\n**a mediator and counsellor within the terms of reference.****The decision of the Ombudsman, whether to accept or reject the complaint, is**\n**final.****a)** **Complaint to the Ombudsman**Any complaint made to the Ombudsman should be in writing, and must be signed\nby the insured or his legal heirs, nominee or assignee, and addressed to an\nOmbudsman within whose jurisdiction, the insurer has a branch/ office. It should\ncontain the facts giving rise to the complaint, supported by documents, the\nnature and extent of the loss caused to the complainant and the relief sought.92**Complaints can be made to the Ombudsman if:**i. The complainant had made a previous written representation to theinsurance company and:\n the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Established by the", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_048", "metadata": {"file_size": 20690, "chunk_index": 48, "chunk_tokens": 999, "has_examples": false, "has_tables": true, "key_concepts": ["State Government", "Complaints can be made to the Ombudsman if:", "Procedure for filing a complaint", "Consumer Commission Orders", "The Insurance Ombudsman"]}}
{"chunk": "The objective of these rules is to resolve all types of complaints mentioned above,\nin a cost effective, and impartial manner.**The Ombudsman, by mutual agreement of the insured and the insurer can act as**\n**a mediator and counsellor within the terms of reference.****The decision of the Ombudsman, whether to accept or reject the complaint, is**\n**final.****a)** **Complaint to the Ombudsman**Any complaint made to the Ombudsman should be in writing, and must be signed\nby the insured or his legal heirs, nominee or assignee, and addressed to an\nOmbudsman within whose jurisdiction, the insurer has a branch/ office. It should\ncontain the facts giving rise to the complaint, supported by documents, the\nnature and extent of the loss caused to the complainant and the relief sought.92**Complaints can be made to the Ombudsman if:**i. The complainant had made a previous written representation to theinsurance company and:\n the insurance company had rejected the complaint or\n the complainant had not received any reply within one month afterreceipt of the complaint by the insurer.\nii. The complainant is not satisfied with the reply given by the insurer\niii. The complaint is made within one year from the date of rejection by theinsurance company\niv. The complaint is not pending in any court or consumer Commission or inarbitration\nv. The value of the claim including expenses claimed is not above Rs 30 lakhs.**b)** **Recommendations by the Ombudsman**The Ombudsman will send copies of complaints to both the complainant and the\ninsurance company. The Ombudsman will make his recommendations within one\nmonth of the receipt of the complaint.**c)** **Award**The dispute can be settled by intermediation. If this is not possible, the\nOmbudsman will pass an award to the insured which he thinks is fair within a\nperiod of 3 months from the date of receipt of all requirements from the\ncomplainant and sending a copy of the award to the complainant and the\ninsurer.The insurer shall comply with the award within 30 days of the receipt of the\naward and intimate compliance of the same to the Ombudsman. The award of\nthe Ombudsman shall be binding on the insurer.**F.** **Right to Information**In addition to the rules and regulations that are specific for grievance redressal in\ninsurance, there are certain general laws common to everyone in the country. The\nRight to Information (RTI) Act, 2005 enacted by the Govt. of India is an important\nlaw that gives citizens of India access to the information available with public\nauthorities which promotes transparency and accountability in these organisations.\nThe Act provides for appointment of a Chief Public Information Officer (CPIO) to\ndeal with requests for information. IRDAI is obliged to provide information to\nmembers of public in accordance with the provisions of the said Act. Agents should\nbe aware that as per the RTI Act, IRDAI and Insurance Companies may have to reveal\ncertain information to customers and others; as also allow them to inspect the work,\ndocument, records, extracts or certified copies of documents/ records and also\ninformation stored in electronic form. However, there are certain categories of\ninformation that are exempt from disclosure.93**Test Yourself 1**The ______________ has jurisdiction to entertain complaints, where value of the\ngoods or services and the compensation claimed is up to Rs.20 lakhs.I. District CommissionII. State CommissionIII. Zilla ParishadIV. National Commission**Summary**IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as a central repository of insurance grievance data and as a tool for\nmonitoring grievance redress in the industry.Consumer disputes redressal agencies are established in each district and state\nand at national level.As far as insurance business is concerned, the majority of consumer disputes fall\nin categories such as delay in settlement of claims, non-settlement of claims,\nrepudiation of claims, quantum of loss and policy terms, conditions etc.The Ombudsman, by mutual agreement of the insured and the insurer can act\nas a mediator and counsellor within the terms of reference.- If the dispute is not settled by intermediation, the Ombudsman will pass award\nto the insured which he thinks is fair, and is not more than what is necessary\nto cover the loss of the insured.**Key Terms**1. Integrated Grievance Management System (IGMS)\n2. The Consumer Protection Act, 2019", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "The Ombudsman, by mutual agreement of the insured and the insurer can act as", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_049", "metadata": {"file_size": 20690, "chunk_index": 49, "chunk_tokens": 980, "has_examples": false, "has_tables": false, "key_concepts": ["Complaints can be made to the Ombudsman if:", "Test Yourself 1", "Award", "Right to Information", "Key Terms"]}}
{"chunk": "goods or services and the compensation claimed is up to Rs.20 lakhs.I. District CommissionII. State CommissionIII. Zilla ParishadIV. National Commission**Summary**IRDAI has launched an Integrated Grievance Management System (IGMS) which\nacts as a central repository of insurance grievance data and as a tool for\nmonitoring grievance redress in the industry.Consumer disputes redressal agencies are established in each district and state\nand at national level.As far as insurance business is concerned, the majority of consumer disputes fall\nin categories such as delay in settlement of claims, non-settlement of claims,\nrepudiation of claims, quantum of loss and policy terms, conditions etc.The Ombudsman, by mutual agreement of the insured and the insurer can act\nas a mediator and counsellor within the terms of reference.- If the dispute is not settled by intermediation, the Ombudsman will pass award\nto the insured which he thinks is fair, and is not more than what is necessary\nto cover the loss of the insured.**Key Terms**1. Integrated Grievance Management System (IGMS)\n2. The Consumer Protection Act, 2019\n3. District Commission4. State Commission5. National Commission6. Insurance Ombudsman**Answers to Test Yourself****Answer 1** -The correct answer is I.94## CHAPTER C-10## REGULATORY ASPECTS FOR CORPORATE AGENTS**Chapter Introduction**In this chapter, we discuss Regulatory aspects of corporate agents.**Learning Outcomes**Regulations of Corporate AgentsThe IRDAI ( Registration of Corporate Agent ) regulations,2015 has come into effect\nfrom 1st April, 2016.\nBefore this the IRDAI (Licensing of Corporate Agents) regulations,2002 was dealing\nwith Corporate Agency licencing, etc.,95**Corporate Agents**The IRDAI (Registration of Corporate Agent) regulations, 2015. These regulations\ndeal with matters relating to who can Corporate Agent, Scope and applicability of\nthe regulations, Registration, Arrangement with Insurers for distributions products,\nremuneration, code of conduct, etc..The following definitions are relevant.**1.** **Definitions:**(a) \"Act\" means the Insurance Act, 1938 (4 of 1938), as amended from time to time(b) \"Applicant\" means(i) A company formed under the Companies Act, 2013 (18 of 2013) or any\nenactment thereof or under any previous company law which was in force;or\n(ii) A limited liability partnership formed and registered under the Limited\nLiability Partnership Act, 2008; or\n(iii) A Co-operative Society registered under Co-operative Societies Act, l9l2 orunder any law for registration of co-operative societies, or\n(iv) a banking company as defined in clause (4A) of section 2 of the Act; or\n(v) a corresponding new bank as defined under clause (da) of sub-section (1)\nof section 5 of the Banking Companies Act, 1949 (10 of 1949); or\n(vi) a regional rural bank established under section 3 of the Regional RuralBanks Act, 1976 (21 of 1976): or\n(vii) a Non-Governmental organisation or a micro lending finance organizationcovered under the Co-operative Societies Act, 1912 or a Non-Banking\nFinancial Company registered with the Reserve Bank of India; or\n(viii) Any other person as may be recognized by the Authority to act as acorporate agent.\n(c) “Approved Institution\" means any institution engaged in education and/ortraining particularly in the area of insurance sales, service and marketing,\napproved and notified by the Authority from time to time, and includes\nInsurance Institute of India, Mumbai.\n(d) \"Authorized Verifier\" means a person employed by a Telemarketer for thepurpose of solicitation or sale over telephonic mode and shall fulfill the\nrequirements as specified under regulation 7(3) of these regulations for a\nspecified person;\n(e) \"Authority\" means the Insurance Regulatory and Development Authority of Indiaestablished under the provisions of Section 3 of the Insurance Regulatory and\nDevelopment Authority Act, 1999 (41 of 1999).\n(f) \"Corporate Agent\" means any applicant specified in clause (b) above holds a validcertificate of registration issued by the Authority under these regulations for\nsolicitation and servicing of insurance business for any of the specified category\nof life, general and health.96(g) “Corporate Agent (Life)\" means a corporate agent who holds a valid certificateof registration to act as such, for solicitation and servicing of insurance business\nfor life insurers as specified in these regulations;", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "n4", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_050", "metadata": {"file_size": 20690, "chunk_index": 50, "chunk_tokens": 995, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Corporate Agents", "Definitions:", "Chapter Introduction", "Key Terms"]}}
{"chunk": "(c) “Approved Institution\" means any institution engaged in education and/ortraining particularly in the area of insurance sales, service and marketing,\napproved and notified by the Authority from time to time, and includes\nInsurance Institute of India, Mumbai.\n(d) \"Authorized Verifier\" means a person employed by a Telemarketer for thepurpose of solicitation or sale over telephonic mode and shall fulfill the\nrequirements as specified under regulation 7(3) of these regulations for a\nspecified person;\n(e) \"Authority\" means the Insurance Regulatory and Development Authority of Indiaestablished under the provisions of Section 3 of the Insurance Regulatory and\nDevelopment Authority Act, 1999 (41 of 1999).\n(f) \"Corporate Agent\" means any applicant specified in clause (b) above holds a validcertificate of registration issued by the Authority under these regulations for\nsolicitation and servicing of insurance business for any of the specified category\nof life, general and health.96(g) “Corporate Agent (Life)\" means a corporate agent who holds a valid certificateof registration to act as such, for solicitation and servicing of insurance business\nfor life insurers as specified in these regulations;\n(h) \"Corporate Agent (General)\" means a corporate agent who holds a validcertificate of registration to act as such, for solicitation and servicing of\ninsurance business for general insurers as specified in these regulations;\n(i) \"Corporate Agent (Health)\" means a corporate agent who holds a valid certificateof registration to act as such, for solicitation and servicing of insurance business\nfor health insurers as specified in these regulations;\n(j) \"Corporate Agent (Composite)\" means a corporate agent who holds a validcertificate of registration to act as such, for solicitation and procurement of\ninsurance business for life insurers, general insurers and health insurers or\ncombination of any two or all three as specified in clauses (f) above:\n(k) “Examination Body” for the purpose of these Regulations is Insurance Instituteof India, Mumbai or any other body approved and notified by the Authority for\nconducting certification examination for principal officer and specified persons\nof the corporate agents.\n(l) Fit and Proper\" is the criteria for determining the suitability for registering anApplicant including his principal officer, directors or partners or any other\nemployees to act as Corporate Agent.\n(m)“Principal Officer\" of a Corporate Agent means a director or a partner or anyofficer or employee so designated by it, and approved by the Authority,\nexclusively appointed to supervise the activities of Corporate Agent and who\npossesses the requisite qualifications and practical training and has passed\nexamination as required under these Regulations.\n(n) \"Registration\" means a certificate of registration to act as a corporate agentissued under these regulations.\n(o) \"Regulations\" means Insurance Regulatory and Development Authority of India(Registration of Corporate Agent) Regulations, 2015.\n(p) \"Specified Person\" means an employee of a Corporate Agent who is responsiblefor soliciting and procuring insurance business on behalf of a corporate agent\nand shall have fulfilled the requirements of qualification, training and passing\nof examination as specified in these regulations;\n(q) \"Telemarketer' means an entity registered with Telecom Regulatory Authority ofIndia under Chapter III of the Telecom Commercial Communications Customer\nPreference Regulations, 2010 to conduct the business of sending commercial\ncommunications and holding a certificate issued by the Authority;\n(r) Words and expressions used and not defined in these Regulations but defined inthe Act, as amended from time to time, the Insurance Regulatory and\nDevelopment Authority Act, 1999 or in any of the Regulations / Guidelines made\nthere under shall have the meanings respectively assigned to them in those Acts\n/ Regulations / Guidelines.**2.** **Scope and applicability of these Regulations:**(1) These regulations shall cover Registration of Corporate Agents for the purposeof soliciting, procuring and servicing of Insurance business of life insurers,\ngeneral insurers and health insurers during the validity of certificate of\nregistration as follows.97(a) A Corporate Agent (Life), may have arrangements with a maximum ofthree life insurers to solicit, procure and service their insurance\nProducts.\n(b) A Corporate Agent (General), may have arrangements with a maximumof three general insurers to solicit, procure and service their insurance\nproducts. Further, the Corporate Agent (General) shall solicit, procure\nand service retail lines of general insurance products and commercial\nlines of such insurers having a total sum insured not exceeding rupees\nfive crores per risk for all insurances combined.\n(c) A Corporate Agent (Health), may have arrangements with a maximum ofthree health insurers to solicit, procure and service their insurance\nproducts.\n(d) In the case of Corporate Agent (Composite), the conditions as specifiedin clauses (a) to (c) shall apply.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Scope and applicability of these Regulations:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_051", "metadata": {"file_size": 20690, "chunk_index": 51, "chunk_tokens": 979, "has_examples": false, "has_tables": false, "key_concepts": ["Scope and applicability of these Regulations:"]}}
{"chunk": "there under shall have the meanings respectively assigned to them in those Acts\n/ Regulations / Guidelines.**2.** **Scope and applicability of these Regulations:**(1) These regulations shall cover Registration of Corporate Agents for the purposeof soliciting, procuring and servicing of Insurance business of life insurers,\ngeneral insurers and health insurers during the validity of certificate of\nregistration as follows.97(a) A Corporate Agent (Life), may have arrangements with a maximum ofthree life insurers to solicit, procure and service their insurance\nProducts.\n(b) A Corporate Agent (General), may have arrangements with a maximumof three general insurers to solicit, procure and service their insurance\nproducts. Further, the Corporate Agent (General) shall solicit, procure\nand service retail lines of general insurance products and commercial\nlines of such insurers having a total sum insured not exceeding rupees\nfive crores per risk for all insurances combined.\n(c) A Corporate Agent (Health), may have arrangements with a maximum ofthree health insurers to solicit, procure and service their insurance\nproducts.\n(d) In the case of Corporate Agent (Composite), the conditions as specifiedin clauses (a) to (c) shall apply.\n(e) any change in the arrangement with the insurance companies shall bedone only with the prior approval of the Authority and with suitable\narrangements for servicing existing policyholders.**3. Consideration of application** –(1) The Authority while considering an application for grant of registration shall takeinto account, all matters relevant for carrying out the activities of a corporate\nagent.(2) Without prejudice to the above, the Authority in particular, shall take intoaccount the following, namely:(a) whether the applicant is not suffering from any of the disqualificationsspecified under sub-section (5) of section 42 D of the Act;\n(b) whether the applicant has the necessary infrastructure, such as, adequateoffice space, equipment and trained manpower on their rolls to effectively\ndischarge its activities;\n(c) whether any person, directly or indirectly connected with the applicant, hasbeen refused in the past the grant of license/registration by the Authority.(d) Whether the principal officer of the applicant is a graduate and has receivedat least fifty hours of theoretical and practical training from an approved\ninstitution according to a syllabus approved by the Authority, and has passed\nan examination, at the end of the period of training mentioned above,\nconducted by the examination body.\nIn case where the principal officer of the applicant is an Associate/ Fellowof the Insurance Institute of India, Mumbai; or Associate/Fellow of the CII,\nLondon; or Associate/Fellow of the institute of Actuaries of India; or holds\nany post graduate qualification of the Institute of Insurance and Risk\nManagement, Hyderabad, the theoretical and practical training shall be\ntwenty five hours.\n(e) whether the principal officer' directors and other employees of the applicanthave not violated the code of conduct as specified in Schedule III to these\nregulations during the last three years;98(f) Whether the applicant, in case the principal business of the applicant isother than insurance' maintain an arms-length relationship in financial\nmatters between its activities as Corporate Agent and other activities.\n(g) Whether the Principal Officer/Director(s)/Partner(s)/Specified Personsis/are Fit and Proper based on the statement in Annexure I of these\nregulation; and\n(h) the Authority is of the opinion that the grant of registration will be in theinterest of policyholders.(3) The specified persons of the applicant shall fulfill the following requirements –a. Having passed minimum of l2th Class or equivalent examination from arecognized Board/Institution:b. (i) The specified person shall have undergone at least fifty hours of training' forthe specified category of life, general, health for' which registration is sought\nfor, from an approved institution and shall have passed the examination\nconducted by the examination body;\n(ii) The specified person of corporate agent (composite) shall have undergone\nat seventy five hours of training from an approved institute and shall have pass\nthe examination conducted by the examination body;c. the specified persons engaged by the corporate agent to solicit and procureinsurance business shall have valid certificate issued by the Authority as,\nspecified in these Regulations.\nThe certificate shall be valid for a period of three years from the date of issuedsubject to the valid registration of the corporate agent;\nThe specified person shall apply through the principal officer of the corporate\nagent to the Authority in the format specified in Annexure 3 of these regulations\nfor issuance of certificate.d. A specified person of a corporate agent wishes to switch over to any other\ncorporate agent, shall do so by applying to the Authority through the new\ncorporate agent along with a no objection certificate issued by the present\ncorporate agent. In case, the present corporate agent does not issue a no", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "l2", "section": "Scope and applicability of these Regulations:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_052", "metadata": {"file_size": 20690, "chunk_index": 52, "chunk_tokens": 995, "has_examples": true, "has_tables": false, "key_concepts": ["Scope and applicability of these Regulations:"]}}
{"chunk": "for, from an approved institution and shall have passed the examination\nconducted by the examination body;\n(ii) The specified person of corporate agent (composite) shall have undergone\nat seventy five hours of training from an approved institute and shall have pass\nthe examination conducted by the examination body;c. the specified persons engaged by the corporate agent to solicit and procureinsurance business shall have valid certificate issued by the Authority as,\nspecified in these Regulations.\nThe certificate shall be valid for a period of three years from the date of issuedsubject to the valid registration of the corporate agent;\nThe specified person shall apply through the principal officer of the corporate\nagent to the Authority in the format specified in Annexure 3 of these regulations\nfor issuance of certificate.d. A specified person of a corporate agent wishes to switch over to any other\ncorporate agent, shall do so by applying to the Authority through the new\ncorporate agent along with a no objection certificate issued by the present\ncorporate agent. In case, the present corporate agent does not issue a no\nobjection certificate within 30 days, it shall be deemed that the said corporate\nagent has no objection to his switching over. The Authority after receipt of\nrequest from the corporate agent, issue a revised certificate changing the name\nof the corporate agent indicating the switching over.4. **Renewal of registration** –(1) As per this regulation a corporate agent may, within thirty days before the\nexpiry of the registration, make an application in Form A along with requisite\nfee to the Authority for renewal of registration.Provided however that if the application reaches the Authority later than that\nperiod but before the actual expiry of the current registration, an additional fee\nof rupees one hundred, plus applicable taxes, shall be payable to the Authority.99Provided further that the Authority may for sufficient reasons offered in writing\nby the applicant for a delay not covered by the previous proviso, accept an\napplication for renewal after the date of the expiry of the registration on\npayment of an additional fee of seven hundred and fifty rupees, plus applicable\ntaxes, by the applicant._Note: A corporate agent is permitted to submit the application for renewal of_\n_registration ninety days prior to the expiry of the registration._(2) Principal Officer and specified persons before seeking a renewal of\nregistration shall have completed, at least twenty five hours of therefore local\nand practical raining, imparted by an approved institution.(3) The Authority, on being satisfied that the applicant fulfills all the conditions\nspecified for a renewal of the registration, shall renew the registration in Form\nC for a period of three years and send intimation to the applicant.**5. Procedure where a registration is not granted -**(1) Where an application for grant of a registration under regulation 4 or renewal\nthereof under regulation 11, does not satisfy the conditions set out in regulation\n7, the Authority may refuse to grant or renew the Certificate of Registration.Before the application is rejected the applicant has to be given a reasonable\nopportunity of being heard.(2) The refusal to grant or renew a Certificate of Registration shall be\ncommunicated by the Authority within thirty days of such refusal to the\napplicant stating therein the grounds on which the application has been\nrejected.(3) Any applicant aggrieved by the decision of the Authority may make an appeal\nto Securities Appellate Tribunal, within a period of forty-five days from the date\non which a copy of the order made by the Authority under sub-regulation (2)\nabove is received by it.6. **Effect of refusal to grant registration-** An applicant, whose application for grantof registration under regulation 4 or of a renewal thereof under regulation 11\nhas been refused or rejected by the Authority, shall, on and from the date of\nthe receipt of the communication under regulation 12(2) cease to act as a\ncorporate agent.\nHe, however, shall continue to be liable to provide services in respect ofcontracts already entered into through him.\nSuch a service shall continue upto the period of expiry of those existingcontracts, which have already been closed, or for a period of six months,\nwhichever is earlier within which time they shall make suitable arrangements\nwith the concerned insurer.1007. **Conditions of grant of registration to Corporate Agent:**The registration granted under regulation 9 or the renewal granted under\nregulation 11 shall be subject to the following conditions:(i) The corporate agent registered under these regulations shall be permitted\nto solicit and service insurance business as specified in regulation (3) above\nonly;\n(ii) The corporate agent shall comply with the provisions of the Act, Insurance\nRegulatory and Development Authority Act, 1999 and the Regulations,\nCirculars, Guidelines and any other instructions issued there under from\ntime to time by the Authority;", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Renewal of registration", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_053", "metadata": {"file_size": 20690, "chunk_index": 53, "chunk_tokens": 988, "has_examples": false, "has_tables": false, "key_concepts": ["Effect of refusal to grant registration-", "Renewal of registration"]}}
{"chunk": "has been refused or rejected by the Authority, shall, on and from the date of\nthe receipt of the communication under regulation 12(2) cease to act as a\ncorporate agent.\nHe, however, shall continue to be liable to provide services in respect ofcontracts already entered into through him.\nSuch a service shall continue upto the period of expiry of those existingcontracts, which have already been closed, or for a period of six months,\nwhichever is earlier within which time they shall make suitable arrangements\nwith the concerned insurer.1007. **Conditions of grant of registration to Corporate Agent:**The registration granted under regulation 9 or the renewal granted under\nregulation 11 shall be subject to the following conditions:(i) The corporate agent registered under these regulations shall be permitted\nto solicit and service insurance business as specified in regulation (3) above\nonly;\n(ii) The corporate agent shall comply with the provisions of the Act, Insurance\nRegulatory and Development Authority Act, 1999 and the Regulations,\nCirculars, Guidelines and any other instructions issued there under from\ntime to time by the Authority;\n(iii) The corporate agent shall take adequate steps for redressal of grievancesof its clients within 14 days of receipt of such complaint and keep the\nAuthority informed about the number, nature and other particulars of the\ncomplaints received from such clients in format and manner as may be\nspecified by the Authority;\n(iv) The corporate agent shall solicit and procure reasonable number ofinsurance policies commensurate with their resources and the number of\nspecified persons they employ.\n(v) The corporate agent shall maintain records in the format specified by the\nAuthority which shall capture policy-wise and specified person-wise details\nwherein each policy solicited by the corporate agent is tagged to the\nspecified person, except for those products which are simple, sold over\nthe counter and specifically approved by the Authority. The corporate\nagent shall put in place systems which allow regular access to such records\nand details by the Authority.\n(vi) The corporate agent under no circumstance shall undertake multi-levelmarketing for solicitation of insurance products;\n(vii) The Corporate Agent shall ensure compliance of Code of Conductapplicable to its directors, principal officer and specified persons;\n(viii) The corporate agent shall maintain separate books of accounts for theircorporate agency business as specified in regulation 31;**8. Payment of fees and the consequences of failure to pay fees –**(1) Every corporate agent shall at the time of application of registration and\nrenewal thereof pay non refundable application fee of Rs.10,000/-, plus\napplicable taxes. No application shall be processed without the application fee.(2) Upon receipt of communication for grant of registration from the Authority,\nthe applicant shall pay a fee of Rs.25,000/-, plus applicable taxes, within 15\ndays of receipt of such communication. On receipt of the fee and on satisfactory\ncompliance of terms and conditions for grant of registration, the Authority shall\ngrant the registration to act as a corporate agent under the category for which\nan application is made.101(3) A corporate agent desirous of applying for renewal shall make an application\nfor renewal in the prescribed format along with a fee of Rs.25, 000/-, plus\napplicable taxes.9. **Remuneration-**The payment of remuneration to or receipt of remuneration by a corporate\nagent shall be governed by the regulations notified in this behalf by the\nAuthority from time to time.**10. Conflict of interest –**While soliciting and procuring the insurance business, the corporate agent shallcomply with the following:(i) The corporate agent having tie-ups with more than one insurer in a particular\nline of business, disclose to the prospective customer the list of insurers, with\nwhom they have arrangements to distribute the products and provide them with\nthe details such products. Further, disclose the scale of commission in respect\nof the insurance product offered, if asked by the prospect;(ii) Where the insurance is sold as an ancillary product along with a principal\nbusiness product, the corporate agent or its shareholder or its associates shall\nnot compel the buyer of the principal business product to necessarily buy the\ninsurance product through it.\nThe Principal Officer and CFO (or its equivalent) of the corporate agent shall file\nwith the Authority a certificate in the format given in the Schedule VIII on halfyearly basis, certifying that there is no forced selling of an insurance product to\nany prospect.**11. Disclosures to the Authority-**(1) An applicant desires to become a corporate agent shall disclose to theAuthority at the time of filing application all material facts relevant for\nconsideration of application, on its own. In case of any change in the\ninformation provided for consideration of their application, subsequent to\nfiling of application or during the processing of application, such change shall", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Conditions of grant of registration to Corporate Agent:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_054", "metadata": {"file_size": 20690, "chunk_index": 54, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Remuneration-"]}}
{"chunk": "line of business, disclose to the prospective customer the list of insurers, with\nwhom they have arrangements to distribute the products and provide them with\nthe details such products. Further, disclose the scale of commission in respect\nof the insurance product offered, if asked by the prospect;(ii) Where the insurance is sold as an ancillary product along with a principal\nbusiness product, the corporate agent or its shareholder or its associates shall\nnot compel the buyer of the principal business product to necessarily buy the\ninsurance product through it.\nThe Principal Officer and CFO (or its equivalent) of the corporate agent shall file\nwith the Authority a certificate in the format given in the Schedule VIII on halfyearly basis, certifying that there is no forced selling of an insurance product to\nany prospect.**11. Disclosures to the Authority-**(1) An applicant desires to become a corporate agent shall disclose to theAuthority at the time of filing application all material facts relevant for\nconsideration of application, on its own. In case of any change in the\ninformation provided for consideration of their application, subsequent to\nfiling of application or during the processing of application, such change shall\nbe disclosed to the Authority, voluntary by the applicant, for consideration\nof the Authority.(2) Similarly, a corporate agent disclose, to the Authority voluntarily, anychange in material facts, based on which a registration was made to them,\nwithin a reasonable time but not later than 30 days from the happening of\nsuch change.\n(3) A corporate shall disclose to the Authority proceedings initiated against themby other regulatory or Government bodies within a reasonable time but not\nlater than 30 days from the initiation of such proceedings. Any action or\ndirection issued by such other bodies shall also be disclosed to the Authority\nwithin the time limits prescribed above102(4) The corporate agent shall disclose to the Authority the details of its officesin which they propose to distribute insurance products and details of\nSpecified Persons along with their certificate number issued by the\nAuthority. Further, any opening or closure of an office by a corporate agent\nshall be informed to the Authority.\n(5) Failure to adhere to the conditions set out above shall attract regulatoryactions such as suspension or cancelation of registration, imposition of\nmonetary penalty or any other action.**12. Arrangements with insurers for distribution of products**a) Corporate agents registered under these regulations shall have to enter intoarrangements with insurers for distribution of products. These arrangements\nshall have to be disclosed to the Authority within 30 days of entering into\nsuch arrangements. The minimum period of such arrangement shall be forone year;\n(b) while entering into such arrangements, no corporate agent shall promise norshall any insurer compel the corporate agent to distribute the products of a\nParticular insurer;\n(c) Arrangements shall have provisions to include duties and responsibilities ofcorporate agents towards the policyholders, duties and responsibilities of\ninsurers and corporate agents, terms and conditions for termination of\narrangements;\n(d) No arrangements shall be made against the interests of Policyholders;\n(e) In case a corporate agent wishes to terminate arrangement with any insurer,they may do so after informing the insurer and the Authority, the reasons or\ntermination of arrangement. In such cases, they shall ensure that the policies\nsolicited and placed with the insurer are serviced till the expiry of policies,\nor for a Period of six months, whichever is earlier with in which time they\nshall make suitable arrangements with the concerned insurer;\n(f) In case an insurer wishes to terminate the arrangement with any corporateagent, they may do so after informing the corporate agent and the Authority,\nthe reasons for termination of arrangement.\nIn such cases, the concerned insurer shall take the responsibility of servicing\nthe policies Procured by the corporate agent. In all such cases, the insurer\nshall inform the policyholder concerned of the changes made in servicing\narrangements;\n(g) No insurer shall directly pay incentives (cash or non-cash) to the principalofficer, specified persons and other employees of the corporate agents;**13.** **Servicing of policyholders-**(1) A corporate agent registered under these regulations shall have the duty toservice its policyholders during the entire period of contract. Servicing\nincludes assisting in payment of premium required under section 64VB of the\nAct, providing necessary assistance and guidance in the event of a claim.103**14. Sale of Insurance by tele-marketing mode and distance marketing activities****of a corporate agent –**(1) A corporate agent who intends to engage the services of a telemarketer or\nengage in distance marketing activities for the purpose of distribution of\ninsurance products shall follow the instructions as laid down in Schedule VII.(2) A corporate agent shall have to comply with the following additional", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e102", "section": "Servicing of policyholders-", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_055", "metadata": {"file_size": 20690, "chunk_index": 55, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Servicing of policyholders-"]}}
{"chunk": "the reasons for termination of arrangement.\nIn such cases, the concerned insurer shall take the responsibility of servicing\nthe policies Procured by the corporate agent. In all such cases, the insurer\nshall inform the policyholder concerned of the changes made in servicing\narrangements;\n(g) No insurer shall directly pay incentives (cash or non-cash) to the principalofficer, specified persons and other employees of the corporate agents;**13.** **Servicing of policyholders-**(1) A corporate agent registered under these regulations shall have the duty toservice its policyholders during the entire period of contract. Servicing\nincludes assisting in payment of premium required under section 64VB of the\nAct, providing necessary assistance and guidance in the event of a claim.103**14. Sale of Insurance by tele-marketing mode and distance marketing activities****of a corporate agent –**(1) A corporate agent who intends to engage the services of a telemarketer or\nengage in distance marketing activities for the purpose of distribution of\ninsurance products shall follow the instructions as laid down in Schedule VII.(2) A corporate agent shall have to comply with the following additional\nconditions for engaging the services of a telemarketer:a. The telemarketer engaged by the corporate agent shall comply with variouscirculars and/or guidelines or any other direction issued by Telecom\nRegulatory Authority of India in the matter;b. A corporate agent intends to undertake telemarketing activities forinsurance intermediation shall seek prior approval of the Authority in the\nform specified by the Authority at Annexure 4 of these regulations. The\nAuthority on verification of the same issue a certificate to the telemarketer;\nc. Further, the corporate agent shall file with the Authority the names ofAuthorised verifiers engaged/proposed to be engaged by the telemarketer\nin the form specified at Annexure 5 of these regulations,.\nd. The Authority on verification of the same issue a certificate to theAuthorised verifier.e. In case an Authorised Verifier intends to switch to another telemarketer whois also dealing with insurance intermediation, they shall obtain a No\nObjection Certificate from the erstwhile telemarketer and submit the same\nto the Authority for issuing a fresh certificate. In case, the present\ntelemarketer does not issue a no objection certificate within 30 days from\nthe date of application for the same, it shall be deemed that the\ntelemarketer has no objection to his switching over;\nf. Application for removal or addition of Authorised Verifiers shall be made bythe Corporate Agent concerned through the Principal Officer;\ng. In case the corporate agent registers as telemarketer with TRAI, thecorporate agent shall act as telemarketer for only those insurers with whom\nhe has arrangements;\nh. No corporate agent or its telemarketer shall make outbound calls to anyperson unless he or she has shown interest in buying an insurance policy by\nmaking enquiries to that effect. They shall maintain the database of such\npersons and the enquiry made for verification and checking by the Authority\nor any person authorized by it.\ni. The telemarketer shall disclose to the prospective customer the followinginformation\n(a) The name of the corporate agent they represent;\n(b) The registration number of the corporate agent;\n(c) Contact number of the telemarketer and-/or corporate agent in case the\ncustomer desires to call back or verify the telesales information;104(d) Name and identification number of the person (Authorised Verifier)\nmaking the tele-call.\nj. A corporate agent engaging a telemarketer shall enter into an agreementwith the telemarketer and the agreement shall provide the details such as\nsource of the database, duties and responsibilities, payment details, period\nof agreement, actions to be taken in case of violation of Act, regulations,\nguidelines, circulars, directions issued by the Authority, Code of Conduct of\nAuthorised Verifiers. The agreements shall be made available to the\nAuthority or any person authorized by the Authority for verification as and\nwhen required;\nk. Every telemarketer and the authorized Verifier shall abide by the Code ofConduct applicable to corporate agents as specified in Schedule III of these\nregulations.\nl. The Authority shall have the power to inspect the premises of thetelemarketer or any other premises, which the Authority feels necessary for\nthe verification of records / documents, and seek any document/record,\nrecord statements of any employee of the telemarketer or make copies of\nany documents/records at its discretion:\nm. The telemarketer shall have to comply with any other terms and conditionsas may be prescribed by the Authority from time to time in the matter.(3) A telemarketer shall not be engaged with more than three insurers or", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Servicing of policyholders-", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_056", "metadata": {"file_size": 20690, "chunk_index": 56, "chunk_tokens": 997, "has_examples": false, "has_tables": false, "key_concepts": ["Servicing of policyholders-"]}}
{"chunk": "source of the database, duties and responsibilities, payment details, period\nof agreement, actions to be taken in case of violation of Act, regulations,\nguidelines, circulars, directions issued by the Authority, Code of Conduct of\nAuthorised Verifiers. The agreements shall be made available to the\nAuthority or any person authorized by the Authority for verification as and\nwhen required;\nk. Every telemarketer and the authorized Verifier shall abide by the Code ofConduct applicable to corporate agents as specified in Schedule III of these\nregulations.\nl. The Authority shall have the power to inspect the premises of thetelemarketer or any other premises, which the Authority feels necessary for\nthe verification of records / documents, and seek any document/record,\nrecord statements of any employee of the telemarketer or make copies of\nany documents/records at its discretion:\nm. The telemarketer shall have to comply with any other terms and conditionsas may be prescribed by the Authority from time to time in the matter.(3) A telemarketer shall not be engaged with more than three insurers or\ninsurance related entities**15. Code of conduct for Corporate Agents-**(1) Every Corporate Agent shall abide by the Code of Conduct as specified in\nSchedule III of these regulations,(2) The corporate agent shall be responsible for all (the acts and omissions of its\nprincipal officer, specified persons and other employees including violation of\ncode of conduct specified under these regulations and liable to a penalty which\nmay extend to one crore rupees under the provisions of Sec.102 of the Act.**16. Maintenance of Records**A Corporate Agent shall maintain the following records including in electronic\nform and shall be made available as and when required by the Aurhority –(i) Know Your Client (KYC) records of the client, as required under therelevant Authority’s guidelines and provisions of Prevention of Money\nLaundering Act;\n(ii) Copy of the proposal form duly signed by the client and submitted to theinsurer with ACR signed by the specified person of corporate agent;\n(iii)A register containing list of clients, details of policy such as type of policy,premium amount, date of issue of the policy, charges or fees received;105(iv) A register containing details of complaints received which include name ofthe complainant, nature of complaint, details of policy issued/solicited\nand action taken thereon;\n(v) A register which shall contain the name, address, telephone no,photograph, date of commencement of employment, date of leaving the\nservice, if any, monthly remuneration paid to the specified person;\n(vi) Copies of the correspondence exchanged with the Authority;\n(vii) Any other record as may be specified by the Authority from time to time.**17. Maintenance of books of account, records, etc. –**(1) A corporate agent, which is incorporated exclusively for the purposes of\ninsurance intermediation, shall prepare the following books of accounts for\nevery financial year(i) a balance sheet or a statement of affairs as at the end of each accountingperiod;\n(ii) a profit and loss account for that period;\n(iii) a statement of cash/fund flow:\n(iv) Additional statements as may be required by the Authority from time to\nrime.**Note.1** : For purposes of this regulation, the financial year shall be a period of 12\nmonths (or less where a business is started after 1 [st] April) commencing on the first\nday of the April of an year and ending on the 31 [st] day of March of the year following\nand the accounts shall be maintained on accrual basis._Note.2: There shall be a schedule to their financial statements or providing the_\n_details of all the incomes received from insurers and insurer's group companies,_\n_insurer-wise, by the corporate agent, and also the details of payments received by_\n_the group companies and/or associates of the corporate agent from any insurer and_\n_the details thereof._(a) A copy of the audited financial statements as stated in sub-regulation (1) alongwith the auditor's report thereon shall be submitted to the Authority before\n30 [th] September every year along with the remarks or observations of the\nauditors, if any, on the conduct of the business, state of accounts, etc., and a\nsuitable explanation on such observations shall be appended to such accounts\nfiled with the Authority.(b) Within ninety days from the date of the Auditor's report necessary steps torectify any deficiencies, made out in the auditor's report, be made and\ninformed to the Authority.(c) All the books of account, statements, document, etc., shall be maintained atthe head office of the corporate agent or such other branch office as may be", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Note.1", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_057", "metadata": {"file_size": 20690, "chunk_index": 57, "chunk_tokens": 993, "has_examples": false, "has_tables": false, "key_concepts": ["Note.1"]}}
{"chunk": "and the accounts shall be maintained on accrual basis._Note.2: There shall be a schedule to their financial statements or providing the_\n_details of all the incomes received from insurers and insurer's group companies,_\n_insurer-wise, by the corporate agent, and also the details of payments received by_\n_the group companies and/or associates of the corporate agent from any insurer and_\n_the details thereof._(a) A copy of the audited financial statements as stated in sub-regulation (1) alongwith the auditor's report thereon shall be submitted to the Authority before\n30 [th] September every year along with the remarks or observations of the\nauditors, if any, on the conduct of the business, state of accounts, etc., and a\nsuitable explanation on such observations shall be appended to such accounts\nfiled with the Authority.(b) Within ninety days from the date of the Auditor's report necessary steps torectify any deficiencies, made out in the auditor's report, be made and\ninformed to the Authority.(c) All the books of account, statements, document, etc., shall be maintained atthe head office of the corporate agent or such other branch office as may be\ndesignated and notified to the Authority, and shall be available on all working\ndays to such officers of the Authority, and authorised in this behalf for\ninspection.106(d) All the books, documents, statements, contract notes etc., referred to in thisregulation and maintained by the corporate agent shall be retained for a\nminimum period of ten years from the end of the year to which they relate.\nHowever, the documents pertaining to the cases where claims are reported and\nthe settlement is pending for a decision from courts, the documents are\nrequired to be maintained till the disposal of the cases by the court.(2) In the case of corporate agents whose principal business is other than insuranceintermediation, they shall maintain segment wise reporting capturing the\nrevenues received for insurance intermediation and other income frominsurers.(3) Every insurer who is engaging the services of a corporate agent shall file withthe Authority a certificate, separately for all such corporate agents, in the\nformat given in the Schedule VIA to be signed by the CEO and CFO. A similar\ncertificate from the Principal Officer and CFO (or its equivalent) of the\ncorporate agent specifying the commission/ remuneration received from the\ninsurer shall be filed with the Authority as given in Schedule VlB.107**Code of Conduct****I.** **General Code of Conduct****1.** Every corporate agent shall follow recognised standards of professional conductand discharge their duties in the interest of the policyholders. While doing soa) conduct its dealings with clients with utmost good faith and integrity at alltimes;\nb) act with care and diligence;\nc) ensure that the client understands his relationship with the corporate agentand on whose behalf the corporate agent is acting;\nd) treat all information supplied by the prospective clients as completelyconfidential to themselves and to the insurer(s) to which the business is\nbeing offered;\ne) take appropriate steps to maintain the security of confidential documents intheir possession;\nf) No director of a company or a partner of a firm or the chief executive or aprincipal officer or a specified person shall hold similar position with another\ncorporate agent;**2.** **Every Corporate Agent shall**a) be responsible for all acts of omission and commission of its principal officerand every specified person;\nb) ensure that the principal officer and all specified persons are properlytrained, skilled and knowledgeable in the insurance products they market;\nc) ensure that the principal officer and the specified person do not make to theprospect any misrepresentation on policy benefits and returns available\nunder policy;\nd) ensure that no prospect is forced to buy an insurance product;\ne) give adequate pre-sale and post-sale advice to the insured in respect of theinsurance product;\nf) Extend all possible help and cooperation to an insured in completion of allformalities and documentation in the event of a claim;\ng) give due publicity to the fact that the corporate agent does not underwritethe risk or act as an insurer;\nh) enter into agreements with the insurers in which the duties andresponsibilities of both are defined**II.** **Pre-sale Code of Conduct****3.** Every corporate agent or principal officer or a specified person shall also followthe code of conduct specified below:i) Every corporate agent/principal officer/ specified person shall,a) identify himself and disclose his registration/ certificate to the prospect ondemand;\nb) disseminate the requisite information in respect of insurance productsoffered for sale by the insurers with whom they have arrangement and take108into account the needs of the prospects while recommending a specific\ninsurance plan;\nc) disclose the scales of commission in respect of the insurance product offeredfor sale, if asked by the prospect;", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e108", "section": "Code of Conduct", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_058", "metadata": {"file_size": 20690, "chunk_index": 58, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["General Code of Conduct", "II.", "Pre-sale Code of Conduct", "Every Corporate Agent shall", "Code of Conduct"]}}
{"chunk": "under policy;\nd) ensure that no prospect is forced to buy an insurance product;\ne) give adequate pre-sale and post-sale advice to the insured in respect of theinsurance product;\nf) Extend all possible help and cooperation to an insured in completion of allformalities and documentation in the event of a claim;\ng) give due publicity to the fact that the corporate agent does not underwritethe risk or act as an insurer;\nh) enter into agreements with the insurers in which the duties andresponsibilities of both are defined**II.** **Pre-sale Code of Conduct****3.** Every corporate agent or principal officer or a specified person shall also followthe code of conduct specified below:i) Every corporate agent/principal officer/ specified person shall,a) identify himself and disclose his registration/ certificate to the prospect ondemand;\nb) disseminate the requisite information in respect of insurance productsoffered for sale by the insurers with whom they have arrangement and take108into account the needs of the prospects while recommending a specific\ninsurance plan;\nc) disclose the scales of commission in respect of the insurance product offeredfor sale, if asked by the prospect;\nd) indicate the premium to be charged by the insurer for the insurance productoffered for sale;\ne) explain to the prospect the nature of information required in the proposalform by the insurer, and also the importance of disclosure of material\ninformation in the purchase of an insurance contract;\nf) bring to the notice of the insurer any adverse habits or income inconsistencyof the prospect, in the form of a Confidential Report along with every\nproposal submitted to the insurer, and any material fact that may adversely\naffect the underwriting decision of the insurer as regards acceptance of the\nproposal, by making all reasonable enquiries about the prospect;\ng) inform promptly the prospect about the acceptance or rejection of theproposal by the insurer;\nh) obtain the requisite documents at the time of filing the proposal form withthe insurer, and other documents subsequently asked for by the insurer for\ncompletion of the proposal;ii) No corporate agent/ principal officer/ specified person shall,----a) solicit or procure insurance business without holding a valid\nregistration/certificate;\nb) induce the prospect to omit any material information in the proposal form;\nc) induce the prospect to submit wrong information in the proposal form ordocuments submitted to the insurer for acceptance of the proposal;\nd) behave in a discourteous manner with the prospect;\ne) interfere with any proposal introduced by any other specified person or anyinsurance intermediary;\nf) offer different rates, advantages, terms and conditions other than thoseoffered by the insurer;\ng) force a policyholder to terminate the existing policy and to effect a newproposal from him within three years from the date of such termination;\nh) No corporate agent shall have a portfolio of insurance business from oneperson or one organization or one group of organizations under which the\npremium is in excess of fifty percent of total premium procured in any year;\ni) become or remain a director of any insurance company, except with theprior approval of the Authority,\nj) indulge in any sort of money laundering activities;\nk) indulge in sourcing of business by themselves or through call centers byway of misleading calls or spurious calls;\nl) undertake multi-level marketing for soliciting and procuring of insuranceproducts;\nm) engage untrained and unauthorised persons to bring in business;\nn) provide insurance consultancy or claims consultancy or any other insurancerelated services except soliciting and servicing of insurance products as per\nthe certificate of registration.109o) Engage, encourage, enter into a contract with or have any sort ofarrangement with any person other than\na specified person, to refer, solicit, generate lead, advise, introduce, find\nor provide contact details of prospective policyholders in furtherance of the\ndistribution of the insurance product;\np) Pay or allow the payment of any fee, commission, incentive by any othername whatsoever for the purpose of sale, introduction, lead generation,\nreferring or finding to any person or entity**III. Post-Sale Code of Conduct**4. Every Corporate Agent shall\na) advise every individual policyholder to effect nomination or assignment orchange of address or exercise of options, as the case may be, and offer\nnecessary assistance in this behalf, wherever necessary;\nb) with a view to conserve the insurance business already procured throughhim, make every attempt to ensure remittance of the premiums by the\npolicyholders within the stipulated time, by giving notice to the policyholder\norally and in writing.\nc) ensure that its client is aware of the expiry date of the insurance even if itchooses not to offer further cover to the client:\nd) ensure that renewal notices contain a warning about the duty of disclosureincluding the necessity to advise changes affecting the policy, which have", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e108", "section": "II.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_059", "metadata": {"file_size": 20690, "chunk_index": 59, "chunk_tokens": 991, "has_examples": false, "has_tables": true, "key_concepts": ["Pre-sale Code of Conduct", "III. Post-Sale Code of Conduct", "II."]}}
{"chunk": "a specified person, to refer, solicit, generate lead, advise, introduce, find\nor provide contact details of prospective policyholders in furtherance of the\ndistribution of the insurance product;\np) Pay or allow the payment of any fee, commission, incentive by any othername whatsoever for the purpose of sale, introduction, lead generation,\nreferring or finding to any person or entity**III. Post-Sale Code of Conduct**4. Every Corporate Agent shall\na) advise every individual policyholder to effect nomination or assignment orchange of address or exercise of options, as the case may be, and offer\nnecessary assistance in this behalf, wherever necessary;\nb) with a view to conserve the insurance business already procured throughhim, make every attempt to ensure remittance of the premiums by the\npolicyholders within the stipulated time, by giving notice to the policyholder\norally and in writing.\nc) ensure that its client is aware of the expiry date of the insurance even if itchooses not to offer further cover to the client:\nd) ensure that renewal notices contain a warning about the duty of disclosureincluding the necessity to advise changes affecting the policy, which have\noccurred since the policy inception or the last renewal date;\ne) ensure that renewal notices contain a requirement for keeping a record(including copies of letters) of all information supplied to the insurer for the\npurpose of renewal of the contract;\nf) ensure that the client receives the insurer’s renewal invitation well in timebefore the expiry date.\ng) render necessary assistance to the policyholders or claimants orbeneficiaries in complying with the requirements for settlement of claims by\nthe insurer;\nh) explain to its clients their obligation to notify claims promptly and to discloseall material facts and advise subsequent developments as soon as possible;\ni) advise the client to make true, fair and complete disclosure where it believesthat the client has not done so. lf further disclosure is nor forthcoming it\nshall consider declining to act further for the client;\nj) give prompt advice to the client of any requirements concerning the claim;\nk) forward any information received from the client regarding a claim or anincident that may give rise to a claim without delay, and in any event within\nthree working days;\nl) advise the client without delay of the insurer's decision or otherwise of aclaim; and give all reasonable assistance to the client in pursuing his claim.\nm) shall not demand or receive a share of proceeds from the beneficiary underan insurance contract;\nn) ensure that letters of instructor, policies and renewal documents containdetails of complaints handling procedures:\no) accept complaints either by phone or in writing:110p) acknowledge a complaint within fourteen days from the receipt ofcorrespondence, advise the member of staff who will be dealing with the\ncomplaint and the timetable for dealing with it;\nq) ensure that response letters are sent and inform the complainant of what hemay do if he is unhappy with the response;\nr) ensure that complaints are dealt with at a suitably senior level;\ns) Have in place a system for recording and monitoring complaints.111## SECTION## LIFE INSURANCE112## CHAPTER L-01## WHAT LIFE INSURANCE INVOLVES**Chapter Introduction**We have seen some aspects related to Insurance in the common chapters. However,\nwhen it comes to Life insurance, we need to look at them more deeply. An asset\n The risk insured against\n The principle of pooling\n The contractLet us now examine the features of life insurance. This chapter will take a brief\nlook at the various components of life insurance mentioned above.**Learning Outcomes**113**A.** **Life insurance business – Components, human life value, mutuality****a)** **The Asset – Human Life Value (HLV)**We have already seen that an asset is a kind of property that yields value or a return.\nFor most kinds of property both the value and loss of value amounts can be measured\nin precise monetary terms.**Example**If the estimated damage of a car meeting an accident is Rs 50000, the insurer will\ncompensate the owner for this loss.How do we estimate the amount of loss when a person dies?Is he worth Rs. 50,000 or Rs. 5,00,000?An Agent must be able to answer the above question when meeting a customer.\nBased on this the agent can determine how much insurance to recommend to the\ncustomer. It is in fact the first lesson a life insurance agent must learn.Luckily we have a measure, developed almost seventy years ago by Prof. Hubener.\nIt is known as **Human Life Value (HLV)** and is used worldwide.The HLV concept considers human life as a kind of property or asset that earns an\nincome. It thus measures the value of human life based on an individual’s expected", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "E112", "section": "III. Post-Sale Code of Conduct", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_060", "metadata": {"file_size": 20690, "chunk_index": 60, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["The Asset – Human Life Value (HLV)", "III. Post-Sale Code of Conduct", "Example", "Chapter Introduction", "Learning Outcomes"]}}
{"chunk": "For most kinds of property both the value and loss of value amounts can be measured\nin precise monetary terms.**Example**If the estimated damage of a car meeting an accident is Rs 50000, the insurer will\ncompensate the owner for this loss.How do we estimate the amount of loss when a person dies?Is he worth Rs. 50,000 or Rs. 5,00,000?An Agent must be able to answer the above question when meeting a customer.\nBased on this the agent can determine how much insurance to recommend to the\ncustomer. It is in fact the first lesson a life insurance agent must learn.Luckily we have a measure, developed almost seventy years ago by Prof. Hubener.\nIt is known as **Human Life Value (HLV)** and is used worldwide.The HLV concept considers human life as a kind of property or asset that earns an\nincome. It thus measures the value of human life based on an individual’s expected\nnet future earnings. Net earnings means the income a person expects to earn each\nyear in the future, less the amount he would spend on himself. It thus indicates the\neconomic loss a family would suffer if the wage earner were to die prematurely.\nThese earnings are capitalised, using an appropriate interest rate to discount them.Although there are multiple parameters used to calculate HLV including taking into\naccount inflation, wage rise, future earning capacity etc., a simple thumb rule to\ncalculate HLV is to determine the amount that would generate the annual income\nthe family would be needing by way of interest. In other words HLV is the annual\ncontribution for the family by the breadwinner divided by the prevailing rate of\ninterest.**Example**Mr. Rajan earns Rs. 1,20,000 a year and spends Rs. 24,000 on himself. The net\nearnings his family would lose, were he to die prematurely, would be Rs. 96,000 per\nyear. Suppose the rate of interest is 8% (expressed as 0.08).**Human-Life-Value (HLV) = Annual Contribution for Dependents ÷ Rate of****Interest**HLV = 96000/ 0.08 = Rs. 12,00,000HLV helps to determine how much insurance one should have for full protection. It\nalso tells us the upper limit beyond which providing life insurance may not be\nreasonable.114In general, the amount of insurance should be around 10 to 15 times one’s annual\nincome. Thus one should grow suspicious if Mr. Rajan was to ask insurance of Rs. 2\ncrores, while earning only Rs. 1.2 lakhs a year. The actual amount of insurance\npurchased would depend on factors like how much insurance one can afford and\nwould like to buy.**B.** **Risk and Life Insurance**As we have seen above, life insurance provides protection against those risk events\nthat can destroy or reduce the value of human life as an asset. There are three kinds\nof situations where such loss can occur. They are typical concerns which ordinary\npeople face.**Diagram 1:** Typical concerns faced by ordinary peopleGeneral insurance on the other hand typically deals with risks that affect property\n– like fire, loss of cargo while at sea, theft and burglary and motor accidents. They\nalso cover events leading to loss of name and goodwill. These are covered by liability\ninsurance.Finally there are risks that can affect the person. Termed as personal risks, these\nmay also be covered by general insurance.**Example**Accident insurance which protects against losses suffered due to an accident.**a)** **How exactly does life insurance differ from general insurance?**|General Insurance|Life Insurance|\n|---|---|\n| Indemnity: General insurance policies,<br>with the exception of Personal Accident<br>Insurance, are usually contracts of<br>indemnity i.e. after an event like fire, the<br>insurer assesses the exact amount of loss<br>that has occurred and compensates only<br>that amount of loss – no more, no less.| **Assurance:** Life insurance policies are<br>contracts of assurance.<br> The amount of benefit to be paid in<br>the event of death is fixed at the<br>beginning of the contract.<br> An assured sum is paid to the<br>nominees or beneficiaries of the<br>insured when he dies.|\n| Duration: The contract is generally short<br>period or for one year renewable basis| The contract is generally long term<br>though some one year renewable<br>contracts are also prevalent|", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_061", "metadata": {"file_size": 20690, "chunk_index": 61, "chunk_tokens": 975, "has_examples": true, "has_tables": true, "key_concepts": ["Interest", "Diagram 1:", "Example", "Assurance:", "Risk and Life Insurance"]}}
{"chunk": "may also be covered by general insurance.**Example**Accident insurance which protects against losses suffered due to an accident.**a)** **How exactly does life insurance differ from general insurance?**|General Insurance|Life Insurance|\n|---|---|\n| Indemnity: General insurance policies,<br>with the exception of Personal Accident<br>Insurance, are usually contracts of<br>indemnity i.e. after an event like fire, the<br>insurer assesses the exact amount of loss<br>that has occurred and compensates only<br>that amount of loss – no more, no less.| **Assurance:** Life insurance policies are<br>contracts of assurance.<br> The amount of benefit to be paid in<br>the event of death is fixed at the<br>beginning of the contract.<br> An assured sum is paid to the<br>nominees or beneficiaries of the<br>insured when he dies.|\n| Duration: The contract is generally short<br>period or for one year renewable basis| The contract is generally long term<br>though some one year renewable<br>contracts are also prevalent|\n| Uncertainty: In general insurance<br>contracts, the concerned risk event is| There is no such question Death is<br>certain once a person is born. What is|115|uncertain. No one can be certain about<br>whether a house would catch fire or a car<br>meet an accident.|uncertain is the time of death. Life<br>insurance offers protection against<br>the risk of premature death.|\n|---|---|\n| Increase in probability: In case of General<br>insurance perils like fire or earthquake,<br>the probability of happening of the event<br>does not increase with time.| In life insurance the probability of<br>death increases with age.|**b)** **Nature of life insurance risk**Since probability of death increases with age, lower premiums are charged for those\nwho are young and higher premiums for older people. One result was that old\nindividuals who were in good health, tended to withdraw while unhealthy members\nremained in the scheme. Insurance companies faced serious problems as a result.\nTheir attempts to develop life insurance policies that people could afford led to the\ndevelopment of level premiums.**c)** **Level premiums**The level premium is fixed such that it does not increase with age but remains\nconstant throughout the contract period. This means premiums collected in early\nyears is more than the amount needed to cover death claims of those dying when\nyoung, while premiums collected in later years are less than what is needed to meet\nclaims of those dying at higher ages. The level premium is an average of both. The\nexcess premiums of earlier ages compensate for the deficit of premiums in later\nages. The level premium feature is illustrated below.**Diagram 2:** **Level Premium**Level premiums are required because life insurance contracts are long term\ninsurance contracts that run for 10, 20 or many more years. The concept of level\npremiums, do not arise for general insurance policies, which are typically short term\nand expire annually.116**Example**The level premium rate is arrived at by the insurers based on the mortality\n(probability of death) during the term of the policy as the age of the insured would\nincrease every year. The rate once decided shall be constant for the entire term of\nthe policy.**d)** **The Principle of Risk Pooling and Life Insurance**We have already discussed the Principle of Pooling and Mutuality earlier. The\npooling principle plays two specific roles in life insurance.i. It **provides protection against the economic loss arising as a result of one’s****untimely death** . This is done by creating a fund that pools the contributions of\nmany who have purchased a life insurance contract.**e)** **The Life Insurance Contract**The Policy document is the **evidence of the insurance contract** which a details all\nthe terms and conditions of the **insurance** .The contract states the sum assured of the life insurance policy. Life insurance is\nregarded a **financial security** as the sum Insured is guaranteed by the contract. The\nguarantee implies that life insurance is managed efficiently and conservatively;\nstrongly regulated and strictly supervised.Since Life insurance contracts involve both risk cover and savings, they are often\ncompared with financial products. They are also seen as a way of holding wealth\nthan as protection. Indeed, many life insurance products have a large cash value or\nsavings component which can form a significant part of an individual’s savings. Some\ndo argue that it may be better to buy only Term Insurance from an insurance\ncompany and invest the balance premiums in instruments that yield higher returns.Let us consider the arguments for and against traditional cash value insurance", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_062", "metadata": {"file_size": 20690, "chunk_index": 62, "chunk_tokens": 1006, "has_examples": true, "has_tables": true, "key_concepts": ["Nature of life insurance risk", "The Life Insurance Contract", "Level premiums", "Example", "Assurance:"]}}
{"chunk": "many who have purchased a life insurance contract.**e)** **The Life Insurance Contract**The Policy document is the **evidence of the insurance contract** which a details all\nthe terms and conditions of the **insurance** .The contract states the sum assured of the life insurance policy. Life insurance is\nregarded a **financial security** as the sum Insured is guaranteed by the contract. The\nguarantee implies that life insurance is managed efficiently and conservatively;\nstrongly regulated and strictly supervised.Since Life insurance contracts involve both risk cover and savings, they are often\ncompared with financial products. They are also seen as a way of holding wealth\nthan as protection. Indeed, many life insurance products have a large cash value or\nsavings component which can form a significant part of an individual’s savings. Some\ndo argue that it may be better to buy only Term Insurance from an insurance\ncompany and invest the balance premiums in instruments that yield higher returns.Let us consider the arguments for and against traditional cash value insurance\ncontracts.**a)** **Advantages**i. Insurance has historically been proven as a **safe and secure investment**\n**offering** a minimum guaranteed rate of return, which may increase with\ncontract duration.ii. Regularity of premium payments requires compulsory planning of one’s\nsavings and results in savings **discipline** .iii. The Insurer takes care of professional investment management and **frees** the**individual** of this responsibilityiv. Insurance **provides liquidity** . The insured can take a loan on or surrenderthe policy and convert it into cash.v. Both cash value type life insurance and annuities may enjoy some **income**\n**tax advantages.**vi. Insurance may be **safe from creditors’ claims**, generally in the event of theinsured’s bankruptcy or death.117**b)** **Disadvantages**i. As insurance gives relatively fixed and stable returns, it can be seriously\naffected by inflation.ii. High marketing and other initial costs reduces the amount of cash value\naccumulated in earlier years of life insurance policies.iii. The guaranteed yield may be below that of other financial instruments**Test Yourself 1**How does diversification reduce risks in financial markets?I. Collecting funds from multiple sources and investing them in one placeII. Investing funds across various asset classesIII. Maintaining time difference between investmentsIV. Investing in safe assets**Summary**a) Asset is a kind of property that yields value or a return.b) The HLV concept considers human life as a kind of property or asset that earnsan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings.c) The level premium is a premium fixed such that it does not increase with agebut remains constant throughout the contract period.d) Mutuality is one of the important ways to reduce risk in financial markets, theother being diversification.e) The element of guarantee in a life insurance contract implies that life insuranceis subject to stringent regulation and strict supervision.**Key Terms**1. Asset2. Human Life Value3. Level premium4. Mutuality5. Diversification**Answers to Test Yourself****Answer 1** - The correct answer is II.118## CHAPTER L-02## FINANCIAL PLANNING**Chapter Introduction**In previous chapters we discussed life insurance and its role in providing financial\nprotection. Security is only one of the concerns of individuals who seek to allocate\ntheir income and wealth to meet various needs of the present and the future. Life\ninsurance must be understood in the wider context of “Personal Financial Planning”.\nThe purpose of this chapter is to introduce the subject of financial planning.**Learning Outcomes**119**A.** **Financial planning and the individual life cycle****1.** **What is financial planning?**Most of us spend a major part of our lives working to make money. Financial planning\nis a smart way to make money work for us.**Definition**Financial planning is a process of identifying one’s life’s goals, translating these\ngoals into financial goals and managing one’s finances to achieve those goals.Financial planning involves preparing a roadmap to meet both current and future\nneeds, which may be unforeseen. It plays a crucial role in building a life with less\nworry. Careful planning can help to set one’s priorities and work to achieve your\nvarious goals.**Diagram 1:** **Types of Goals**i. Goals may be **short term** : Buying an LCD TV set or a family vacationii. They could be **medium term** : Buying a house or a vacation abroadiii. The **long term** goals may include: Education or marriage of one’s child orpost retirement provision**2.** **Individual’s life cycle**From the day a person is born till the day of his/ her death, he/ she goes through", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "t2", "section": "The Life Insurance Contract", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_063", "metadata": {"file_size": 20690, "chunk_index": 63, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Individual’s life cycle", "Test Yourself 1", "Financial planning and the individual life cycle", "Diagram 1:"]}}
{"chunk": "is a smart way to make money work for us.**Definition**Financial planning is a process of identifying one’s life’s goals, translating these\ngoals into financial goals and managing one’s finances to achieve those goals.Financial planning involves preparing a roadmap to meet both current and future\nneeds, which may be unforeseen. It plays a crucial role in building a life with less\nworry. Careful planning can help to set one’s priorities and work to achieve your\nvarious goals.**Diagram 1:** **Types of Goals**i. Goals may be **short term** : Buying an LCD TV set or a family vacationii. They could be **medium term** : Buying a house or a vacation abroadiii. The **long term** goals may include: Education or marriage of one’s child orpost retirement provision**2.** **Individual’s life cycle**From the day a person is born till the day of his/ her death, he/ she goes through\nvarious stages in life, during which he/ she is expected to play a series of roles\nThese stages are illustrated in the diagram given below.**Diagram 2:** **The Economic Life Cycle**120**Life Stages and Priorities****a)** **Learner (till say age 20 -25)** :The stage when one is preparing for hisfuture byimproving his or her knowledge and skills. Funds are required\nfor financing one’s education. For instance, meeting the high cost of\nfees for Medical or Management Education.**b)** **Earner (from 25 onwards)** :When one has found employment andperhaps earns enough to meet his or her needs and has some surplus to\nspare.There are family responsibilities and one may also save and invest\nin order to have money to meet the needs that may arise in the\nimmediate future.For instance, a young man takes a housing loan and\ninvests in a house.**c)** **Partner(on getting marriage at say 28 - 30)** : The stage when one ismarried and has a family of one’s own.This creates new needs like\nhaving a house of one’s own, perhaps a car, consumer durables,\nplanning for children’s future etc.**d)** **Parent(say 28 to 35)** : The years when one becomes the parent of oneor more children.One now has to worry about their health and\neducation - getting them into good schools etc.**e)** **Provider(say age 35 to 55)** : The stage when children have grown intoteenagers, and includes their high school and college years. One is\nconcerned about the high cost of education to make the child qualified\nto face the challenges of life.For instance, consider the amount that\nneeds to be set up to finance a medical course that runs for five years.In\nmany Indian homes, making provision for marriage and settlement of\ngirl children is a critical area of concern.Indeed, marriage and\neducation of children is a prime motive for savings for most Indian\nfamilies today.**f)** **Empty Nester(age 55 to 65):** The term ‘empty nester’ implies that theoffspring have flown away leaving the nest [the household] empty.This\nis the period when children have married and sometimes have migrated\nto other places for work, leaving the parents.Hopefully by this stage,\none has liquidated one’sliabilities [like housing loan and other\nmortgages] and has built up a fund for reirement.It is also the period\nwhen ailments like BP and Diabetes begin to manifest and plague one’s\nlife.Health care,financial independence and security of income become\nvery important at this stage.**g)** **Retirement – the twilight years (age 60 and beyond):** The age whenone has retired from active work and spends one’s savings to meet the\nneeds of life.The living needs of the husband and wife as long as both\nare alive is the focus.One is concerned abouthealth\nissues,adequateincome and loneliness.This is also the period when one\nwould seek to enhance the quality of life and enjoy many of the things\nthat one had dreamt of but could not achieve – like pursuing a hobby or\ngoing on a vacation or a pilgrimage.Whether one ages gracefully or in\npoverty would depend on how much one has provided for these years.121As we can see above, the economic life cycle has three phases: a student or Pre –\njob phase; the working phase that begins between ages 18 to 25 and lasts for 35 to\n40 years; and the retirement years that begin after one has stopped working.**3.** **Why does one need to save and purchase various financial assets?**The reason is that during each stage in an individual’s life, when one performs a", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Definition", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_064", "metadata": {"file_size": 20690, "chunk_index": 64, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["The Economic Life Cycle", "Diagram 1:", "Life Stages and Priorities", "Types of Goals", "Earner (from 25 onwards)"]}}
{"chunk": "life.Health care,financial independence and security of income become\nvery important at this stage.**g)** **Retirement – the twilight years (age 60 and beyond):** The age whenone has retired from active work and spends one’s savings to meet the\nneeds of life.The living needs of the husband and wife as long as both\nare alive is the focus.One is concerned abouthealth\nissues,adequateincome and loneliness.This is also the period when one\nwould seek to enhance the quality of life and enjoy many of the things\nthat one had dreamt of but could not achieve – like pursuing a hobby or\ngoing on a vacation or a pilgrimage.Whether one ages gracefully or in\npoverty would depend on how much one has provided for these years.121As we can see above, the economic life cycle has three phases: a student or Pre –\njob phase; the working phase that begins between ages 18 to 25 and lasts for 35 to\n40 years; and the retirement years that begin after one has stopped working.**3.** **Why does one need to save and purchase various financial assets?**The reason is that during each stage in an individual’s life, when one performs a\nparticular role, a number of needs come up for which funds have to be provided.**Example**When a person gets married and starts a family of his own, he may need to have his\nown house. As children grow older, funds are needed for their higher education. As\nan individual goes well past middle age, the concern is for having money to meet\nhealth costs and post retirement savings so that one does not need to depend on\none’s children and become a burden. Living with independence and dignity becomes\nimportant.The Savings – Investment process may be considered as being made of two decisions.**i.** **Postponement of consumption:** an allocation of resources between present andfuture consumption.**ii.** **Parting with liquidity** (or ready purchasing power) in exchange for less liquidassets. For instance, purchase of a life insurance policy would mean exchanging\nmoney for a contract which is less liquid.Financial planning includes both kinds of decisions. One needs to plan in order to\nsave for the future and also must invest wisely in appropriate assets to meet the\nvarious needs that will arise in future.**4.** **Individual needs**If we look at the stages of the life cycle that has been discussed above, we would\nsee that three types of needs can arise. These give rise to three types of financial\nproducts.a) **Enabling future transactions**The first set of needs arise from funds for meeting a range of anticipated\nexpenditures that are expected to arise at different stages of the life cycle.\nThere are two types of such needs:**i.** **Specific transaction needs** : that are linked to specific life events whichrequire a commitment of resources. For instance making a provision for\nhigher education/ marriage of dependents; or purchase of a house or\nconsumer durables**ii.** **General transaction needs:** Amounts set aside from current consumptionwithout being earmarked for any specific purposes – these are popularly\ntermed as ‘future provisions’**b)** **Meeting contingencies**Contingencies are unforeseen life events that may call for large funds. These\ncannot met from current income and need to be pre-funded. Some of these122events, like death and disability or unemployment, lead to a loss of income.\nOthers, like a fire, may result in a loss of wealth.Such needs may be addressed through insurance, if the probability of their\noccurrence is low but cost impact is high. One may alternatively meet them by\nsetting aside a large amount of liquid assets as a reserve.**c)** **Wealth accumulation**The accumulation motive refers to an individual’s desire to invest for\naccumulating wealth, taking advantage of favourable market opportunities.\nSome individuals may take a cautious approach while investing, while some may\nbe willing to take more risks, with a view to earn a higher return. Higher return\nis desired because it helps to increase one’s wealth or net worth more rapidly.\nWealth is linked with independence, enterprise, power and influence.**5.** **Financial products**Corresponding to the above sets of needs there are three types of products in the\nfinancial market:|Transactional<br>products|Bank deposits and other savings instruments that enable one<br>to have adequate purchasing power (liquidity) at the right<br>time and quantum.|\n|---|---|\n|**Contingency**<br>**products like**<br>**insurance**|These provide protection against large losses that may be<br>suffered in the event of sudden unforeseen events.|", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e122", "section": "Retirement – the twilight years (age 60 and beyond):", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_065", "metadata": {"file_size": 20690, "chunk_index": 65, "chunk_tokens": 982, "has_examples": true, "has_tables": true, "key_concepts": ["Wealth accumulation", "Individual needs", "Financial products", "Contingency", "Parting with liquidity"]}}
{"chunk": "occurrence is low but cost impact is high. One may alternatively meet them by\nsetting aside a large amount of liquid assets as a reserve.**c)** **Wealth accumulation**The accumulation motive refers to an individual’s desire to invest for\naccumulating wealth, taking advantage of favourable market opportunities.\nSome individuals may take a cautious approach while investing, while some may\nbe willing to take more risks, with a view to earn a higher return. Higher return\nis desired because it helps to increase one’s wealth or net worth more rapidly.\nWealth is linked with independence, enterprise, power and influence.**5.** **Financial products**Corresponding to the above sets of needs there are three types of products in the\nfinancial market:|Transactional<br>products|Bank deposits and other savings instruments that enable one<br>to have adequate purchasing power (liquidity) at the right<br>time and quantum.|\n|---|---|\n|**Contingency**<br>**products like**<br>**insurance**|These provide protection against large losses that may be<br>suffered in the event of sudden unforeseen events.|\n|**Wealth**<br>**accumulation**<br>**products**|Shares and high yielding bonds or real estate are examples of<br>such products. Here the investment is made with a view to<br>committing money for making more money.|An individual would typically have a mix of all of the above needs and thus may\nneed to have all three types of products. In a nutshell one may say there is:i. A need to save – For cash requirementsii. A need to insure – Against uncertaintiesiii. A need to invest – For wealth creation**6.** **Risk profile and investments**As an individual moves through various stages in the life cycle, from young earner\ntowards middle ages and then towards the final years of one’s work life, the risk\nprofile, or approach towards taking risks also changes.When one is young, one may be quite aggressive and willing to take risks in order to\naccumulate as much wealth as possible. As the years pass however, one may become\nmore prudent and careful about investing. One is now concerned to secure and\nconsolidate one’s investments.Finally, as one nears retirement one may be more conservative. The focus is now to\nhave a corpus from which one can spend in the post retirement years. One may also\nthink about making donations for one’s children, for gifting to charity etc.123**One’s investment style also changes to keep pace with the risk profile.** This is\nindicated below:**Diagram 3:** **Risk Profile and Investment Style****Risk Profile** **Investment Style****Test Yourself 1**Which among the following gives specific protection against unforeseen events?I. InsuranceII. Transactional products like bank Fixed DepositsIII. SharesIV. Debentures**B.** **Role of financial planning****1.** **Financial planning**Financial planning is the process of carefully evaluating a ~~cl~~ ient’s current and future\nneeds along with his or her risk profile and income, to chart out a road map for\nmeeting various anticipated/ unforeseen needs through recommending appropriate\nfinancial products.Elements of financial planning include: Investing - allocating assets based on one’s risk taking appetite, Risk management, Retirement planning, Tax and estate planning, and Financing one’s needsTo put it in a nutshell financial planning involves 360 degrees planning.124**Diagram 4:** **Elements of Financial Planning****2.** **Role of Financial planning**Financial planning is not a new discipline. It was practiced in simple form by our\nfore fathers. There were limited investment options then. A few decades ago many\nconsidered equity investment as akin to gambling. Savings were largely channelled\nin bank deposits, postal savings schemes and other fixed income instruments. The\nchallenges facing our society and our customers are far different today. Some of\nthem are:**i.** **Disintegration of the joint family**The joint family has given way to the nuclear family, consisting of father,\nmother and children. The typical head and earning member of this family has to\nbear the responsibility for taking care of oneself and one’s immediate family.\nThis may call for a lot of proper planning and advice from a professional financial\nplanner.**ii.** **Multiple investment choices**A large number of investment instruments are available today for wealth\ncreation, each offering varying degrees of risk and return. To achieve financial\ngoals, one has to choose wisely and make the right investment decisions based\non one’s risk taking appetite. Financial planning can help with one’s asset\nallocation.**iii.** **Changing lifestyles**Instant pleasure seems to be the order of the day. Individuals want to have the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Wealth accumulation", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_066", "metadata": {"file_size": 20690, "chunk_index": 66, "chunk_tokens": 1002, "has_examples": true, "has_tables": true, "key_concepts": ["Wealth accumulation", "Financial products", "Risk profile and investments", "Contingency", "Risk Profile"]}}
{"chunk": "fore fathers. There were limited investment options then. A few decades ago many\nconsidered equity investment as akin to gambling. Savings were largely channelled\nin bank deposits, postal savings schemes and other fixed income instruments. The\nchallenges facing our society and our customers are far different today. Some of\nthem are:**i.** **Disintegration of the joint family**The joint family has given way to the nuclear family, consisting of father,\nmother and children. The typical head and earning member of this family has to\nbear the responsibility for taking care of oneself and one’s immediate family.\nThis may call for a lot of proper planning and advice from a professional financial\nplanner.**ii.** **Multiple investment choices**A large number of investment instruments are available today for wealth\ncreation, each offering varying degrees of risk and return. To achieve financial\ngoals, one has to choose wisely and make the right investment decisions based\non one’s risk taking appetite. Financial planning can help with one’s asset\nallocation.**iii.** **Changing lifestyles**Instant pleasure seems to be the order of the day. Individuals want to have the\nlatest mobile phones, cars, large homes, memberships of prestigious clubs, etc.\nTo satisfy these desires, people often borrow heavily and spend a good part of\ntheir income to pay off loans, leaving little scope to save. Financial planning\nhelps to plan and one’s expenditure so that one can cut down unnecessary\nexpenses so as to maintain one’s present standard of living while upgrading it\nover time.**iv.** **Inflation**Inflation is a rise in the general level of prices of goods and services in an\neconomy over a period of time. This leads to a fall in the value of money. As a\nresult, the purchasing power of money gets reduced. Inflation can play havoc125post retirement. Financial planning can help to ensure that one is equipped to\ndeal with inflation, especially in later years.**v.** **Other contingencies and needs**Financial planning also enables individuals to meet a number of other needs and\nchallenges like medical emergencies and tax liabilities. Individuals also need to\nensure that their estate consisting of their wealth and properties, smoothly pass\non to their loved ones after their death. There are other needs like the need to\ndo charity or meet certain social and religious obligations during one’s lifetime\nand even thereafter. Financial planning is the means to achieve all this.3. **When is the right time to start financial planning?****Financial planning** is not meant only for the wealthy. Indeed, Planning should\nideally start one earns one’s first salary. There is no trigger point to tell when one\nshould begin to plan.**There is however an important principle that should guide us – the longer the**\n**time period of our investments, the more they will multiply.**Hence one should start early. One’s investments would then get the maximum\nbenefit of time. Again, planning is not only for wealthy individuals. It is for\neveryone. To achieve one’s financial goals, one must follow a disciplined approach.\nAn unplanned, impulsive approach to financial planning is one of the prime causes\nof financial distress of individuals.**Test Yourself 2**When is the best time to start financial planning?I. Post retirement\nII. As soon as one gets his first salary\nIII. After marriage\nIV. Only after one gets rich**C.** **Financial planning - Types**Let us now look at the various types of financial planning exercises that an individual\nmay need to do.**Diagram 5:** **Financial Planning Advisory Services**126Consider the various advisory services that may be provided. There are six such\nareas that are taken up Cash planning Investment planning Insurance planning Retirement planning Estate planning Tax planning**1.** **Cash planning**Managing cash flows has two purposes.i. To manage income and expenditures flow including establishing andmaintaining a reserve of liquid assets to meet unanticipated needs.ii. To systematically create and maintain a surplus of cash for capitalinvestment.Cash Planning involves a number of steps. One must prepare a budget and analyse\none’s income and expenditure flows to check on what regular and lump sum costs\nhave been incurred. While fixed expenses cannot be controlled easily, one can\nreduce, postpone and manage expenses that are variable. The next step is to\n**predict future monthly income and expenses over the whole year and** design a\nplan for managing these cash flows.Another part of the cash planning process is to design strategies for maximizing\ndiscretionary income.**Example**One can restructure one’s outstanding debts.One can meet outstanding credit card debts through consolidating them and paying", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "c125", "section": "Disintegration of the joint family", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_067", "metadata": {"file_size": 20690, "chunk_index": 67, "chunk_tokens": 981, "has_examples": true, "has_tables": false, "key_concepts": ["Financial Planning Advisory Services", "Multiple investment choices", "Example", "Changing lifestyles", "Financial planning"]}}
{"chunk": "may need to do.**Diagram 5:** **Financial Planning Advisory Services**126Consider the various advisory services that may be provided. There are six such\nareas that are taken up Cash planning Investment planning Insurance planning Retirement planning Estate planning Tax planning**1.** **Cash planning**Managing cash flows has two purposes.i. To manage income and expenditures flow including establishing andmaintaining a reserve of liquid assets to meet unanticipated needs.ii. To systematically create and maintain a surplus of cash for capitalinvestment.Cash Planning involves a number of steps. One must prepare a budget and analyse\none’s income and expenditure flows to check on what regular and lump sum costs\nhave been incurred. While fixed expenses cannot be controlled easily, one can\nreduce, postpone and manage expenses that are variable. The next step is to\n**predict future monthly income and expenses over the whole year and** design a\nplan for managing these cash flows.Another part of the cash planning process is to design strategies for maximizing\ndiscretionary income.**Example**One can restructure one’s outstanding debts.One can meet outstanding credit card debts through consolidating them and paying\nthem off through a bank loan with lower interest.One may reallocate one’s investments to make them earn more income.**2.** **Insurance planning**There are certain risks to which individuals are exposed that can keep them from\nattaining their personal financial goals. Insurance planning involves constructing a\nplan of action to provide adequate insurance against such risks.The task here is to estimate how much insurance is needed and determining what\ntype of policy is best suited.**i.** **Life insurance** may be decided by estimating the income and expenserequirements of the dependents in the event of premature death of the\nbread winner.**ii.** **Health insurance** requirements may be assessed in terms of thehospitalisation expenses that are likely to be incurred in any family medicalemergency.127a. Finally **insurance for one’s assets** may be considered in terms of thetype and quantum of cover required to protect one’s home/ vehicle/\nfactory etc. from the risk of loss.**3.** **Investment planning**There is no one right way to invest. What is appropriate would vary from individual\nto individual. Investment planning is a process of determining the most suitable\ninvestment and asset allocation strategies based on an individual’s risk taking\nappetite, financial goals and the time horizon to meet those goals.**a)** **Investment parameters****Diagram 6:** **Investment Parameters**The first step here is to define certain investment parameters. These include:**i.** **Returns** : Returns on Investment is often the most important parameter thatpeople look for when they invest their money. The rate of return determines\nhow fast one’s wealth from investments would grow over time. The role of\nreturns can be appreciated when one considers the ‘Power of compounding’.\nFor instance, if an amount of Rs 1000 is invested today at 8% rate of interest,\nat the end of five years, it would accumulate to Rs 1469 and at the end of\n10 years it would more than double to reach Rs 2159. This expectation of\nreturns which helps to accumulate wealth is one of the prime motives of\ninvestment. At the same time, one must note that higher rates of return may\nbe typically accompanied with higher levels of risk. One has to make a tradeoff between return and risk. This depends on an individual’s risk tolerance.**ii.** **Risk tolerance** : A measure of how much risk someone is willing to take inpurchasing an investment.**iii.** **Time horizon** : This is the amount of time available to attain a financialobjective. The longer the time horizon, the less concern is there about short128term liability. One can invest in longer term, in less liquid assets that earn\na higher return.**iv.** **Liquidity** : Individuals with limited investment capacity, or uncertain incomeand expenditure flows, or who are investing for meeting a particular\npersonal or business expenditure, would be concerned with liquidity [This\nrefers to the ability to convert investment into cash without loss of value.]**v.** **Marketability** : The ease with which an asset can be bought or sold.**vi.** **Diversification** : The extent to which one seeks to diversify or spread theinvestments to reduce the risks.**vii.** **Taxes** : Many investments confer certain income tax benefits and one maylike to consider the post-tax returns of various investments.**b)** **Selection of appropriate investment vehicles**The next step is selection of appropriate investment vehicles based on the above\nparameters. The actual selection would depend on the individual’s expectations\nabout return and risk.In India there are a variety of products that may be considered for the purpose of", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "t128", "section": "Diagram 5:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_068", "metadata": {"file_size": 20690, "chunk_index": 68, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Investment planning", "Time horizon", "Risk tolerance", "Taxes", "Life insurance"]}}
{"chunk": "a higher return.**iv.** **Liquidity** : Individuals with limited investment capacity, or uncertain incomeand expenditure flows, or who are investing for meeting a particular\npersonal or business expenditure, would be concerned with liquidity [This\nrefers to the ability to convert investment into cash without loss of value.]**v.** **Marketability** : The ease with which an asset can be bought or sold.**vi.** **Diversification** : The extent to which one seeks to diversify or spread theinvestments to reduce the risks.**vii.** **Taxes** : Many investments confer certain income tax benefits and one maylike to consider the post-tax returns of various investments.**b)** **Selection of appropriate investment vehicles**The next step is selection of appropriate investment vehicles based on the above\nparameters. The actual selection would depend on the individual’s expectations\nabout return and risk.In India there are a variety of products that may be considered for the purpose of\ninvestments. These include: Fixed deposits of banks/ corporates, Small savings schemes of post office, Public issues of shares, Debentures or other securities, Mutual funds Unit linked policies that are issued by life insurance companies etc.**4.** **Retirement planning**It is the process of determining the amount of money that an individual needs to\nmeet his needs post retirement and deciding on various retirement options for\nmeeting these needs. Retirement planning involves three phases**a)** **Accumulation:** Accumulation of funds is done through various kinds ofstrategies to set aside money for investment with this purpose.**b)** **Conservation:** Conservation refers to the efforts made to ensure that one’sinvestments are put to hard work and that the principal gets maximised during\nthe individual’s working years.**c)** **Distribution:** Distribution refers to the optimal method of converting the corpusor principal into withdrawals/ annuity payments for meeting income needs\nafter retirement.**5.** **Estate planning**It is a plan for the devolution and transfer of one’s estate after one’s demise. There\nare various processes like nomination and assignment or preparation of a will. The\nbasic idea is to ensure that one’s property and assets are smoothly distributed and\nor utilised according to one’s wishes after one is no more.129**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full\nadvantage of the tax breaks. As per the tax laws in India, life insurance premium\npaid by an individual on a life insurance policy on his/ her own life, on the life of\nhis/ her spouse and children is eligible for deduction under Section 80C of the\nIncome Tax Act for calculating the taxable income. Currently, this deduction is\nallowed up to Rs.1,50,000 subject to conditions. The maturity proceeds (sum\nassured plus bonus) of such policies are also exempted under Section 10 (10D).\nSimilarly, Death Claim amounts are exempt from Income Tax at the hands of the\nrecipient. One must note that the purpose here is to minimise and not evade taxes.Life insurance agents may be often required by their clients and prospective\ncustomers to advise them not only about meeting their insurance needs but also for\nsupport in meeting their other financial needs as well. A sound knowledge of\nfinancial planning would be of great value to any insurance agent.**Test Yourself 3**Which among the following is not an objective of tax planning?I. Maximum tax benefitII. Reduced tax burden as a result of prudent investmentsIII. Tax evasionIV. Full advantage of tax breaks**Summary**Financial planning is a process of: Identifying one’s life’s goals, Translating these identified goals into financial goals and Managing one’s finances in ways that will help one to achieve those goalsBased on the individual life cycle three types of financial products are needed.\nThese help in: Enabling future transactions, Meeting contingencies and Wealth accumulationThe need for financial planning is further increased by the changing societal\ndynamics like disintegration of the joint family, multiple investment choices\nthat are available today and changing lifestyles etc.The best time to start financial planning is right after one receives the first\nsalary.Financial planning advisory services include: Cash planning,130 Investment planning,\n Insurance planning,\n Retirement planning,\n Estate planning and\n Tax planning**Key Terms**1. Financial planning\n2. Life stages\n3. Risk profile\n4. Cash planning\n5. Investment planning\n6. Insurance planning\n7. Retirement planning\n8. Estate planning\n9. Suitability information", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Liquidity", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_069", "metadata": {"file_size": 20690, "chunk_index": 69, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Estate planning", "Tax planning", "Retirement planning", "Taxes", "Test Yourself 3"]}}
{"chunk": "These help in: Enabling future transactions, Meeting contingencies and Wealth accumulationThe need for financial planning is further increased by the changing societal\ndynamics like disintegration of the joint family, multiple investment choices\nthat are available today and changing lifestyles etc.The best time to start financial planning is right after one receives the first\nsalary.Financial planning advisory services include: Cash planning,130 Investment planning,\n Insurance planning,\n Retirement planning,\n Estate planning and\n Tax planning**Key Terms**1. Financial planning\n2. Life stages\n3. Risk profile\n4. Cash planning\n5. Investment planning\n6. Insurance planning\n7. Retirement planning\n8. Estate planning\n9. Suitability information\n10. Tax planning**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.131## CHAPTER L-03## LIFE INSURANCE PRODUCTS: TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of life insurance products. It begins by\ntalking about products in general and then proceeds to discussing the need for life\ninsurance products and the role they play in achieving various life goals. Finally we\nlook at some traditional life insurance products.**Learning Outcomes**132**A.** **Overview of life insurance products****1.** **What is a product?**To begin with, let us understand what is meant by a ‘product’. In popular terms a\nproduct is normally just considered as a commodity or good that is brought and sold\nin the market.It is necessary to understand that every Product is a bundle of features or attributes\nthat confer certain benefits.All Companies try to differentiate their products by making them more attractive\nto customers and offering different kinds of features and benefits. A life insurance\nagent’s role is to understand and pitch on these features and benefits to make the\nproducts of their companies unique and attractive compared to others.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the\nfeatures of each brand is different from the other.Products may be:**i.** **Tangible** : refers to physical objects that can be directly seen or felt by touch\n(for instance a car or a television set)**ii.** **Intangible:** refers to products that can only be perceived indirectly.Life insurance is a product that is intangible.**2.** **Purpose of Life Insurance products.**Human beings possess **an immensely valuable asset** - **human capital – which is the**\n**source of our productive earning capacity.** However, there is an uncertainty about\nlife and human well-being. Events like death and disease can destroy our Earning\ncapabilities and life savings. Insurance provides protection for such situations.Life insurance products offer protection against the loss of economic value of an\nindividual’s productive abilities, as a result of death or disability. The moment an\nindividual takes a life insurance policy and pays the first premium, **an immediate**\n**estate is created** in his/ her name and its proceeds are available to his/ her\ndependents or loved ones.Life insurance provides peace of mind and protection to the near and dear ones of\nan individual, in case of one’ unfortunate death. Beyond providing such protection,\nlife insurance fulfils other needs of the market, such as savings, wealth\naccumulation, safety and security of investment and certain rates of return, which\nare not discussed in this course.Life insurance industry has seen enormous innovations in product offerings over the\nlast two centuries. The journey began with death benefit products but over the\nperiod, multiple living benefits like endowment, disability benefits, dreaded disease\ncovers and so on were added.133One of the major innovations of recent years was the creation of market linked\npolicies where the insured was invited to participate in choosing and managing his\ninvestment assets. Another major innovation was the evolution of flexible\nunbundled products, in which different benefits as well as cost components could\nbe varied by the policy holder as per changing needs, affordability and life-stages.**3.** **Suitability Information**In order to make insurance intermediaries including agents and brokers more\naccountable and reduce instances of mis-selling, IRDAI has created a concept of\n‘product suitability’. ‘Suitability information’ is the information of a prospect on\nage, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, etc. That is, before selling an insurance\npolicy to a client, an Agents should be able to justify the suitability of the product", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "L-03", "section": "Key Terms", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_070", "metadata": {"file_size": 20690, "chunk_index": 70, "chunk_tokens": 983, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Tangible", "Answer 3", "Suitability Information"]}}
{"chunk": "are not discussed in this course.Life insurance industry has seen enormous innovations in product offerings over the\nlast two centuries. The journey began with death benefit products but over the\nperiod, multiple living benefits like endowment, disability benefits, dreaded disease\ncovers and so on were added.133One of the major innovations of recent years was the creation of market linked\npolicies where the insured was invited to participate in choosing and managing his\ninvestment assets. Another major innovation was the evolution of flexible\nunbundled products, in which different benefits as well as cost components could\nbe varied by the policy holder as per changing needs, affordability and life-stages.**3.** **Suitability Information**In order to make insurance intermediaries including agents and brokers more\naccountable and reduce instances of mis-selling, IRDAI has created a concept of\n‘product suitability’. ‘Suitability information’ is the information of a prospect on\nage, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, etc. That is, before selling an insurance\npolicy to a client, an Agents should be able to justify the suitability of the product\nfor the client’s needs.In other words, the Agent takes into account the particular prospect’s risk profile age, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, insurance needs etc. and decides\nwhether the product is suitable for that prospect. The nature of product, the\namount of premium, the mode of premium payment and tenure of the policy as well\nas the manner of premium payment are also part of the parameters of ‘Suitability’.IRDAI mandates that the suitability information collected should be signed by the\nprospect and the agent; and preserved by the Insurer as part of the policy records\nand made available for inspection by the Authority.**4.** **Riders in Life Insurance Products**A rider is a provision typically added through an endorsement, which becomes part\nof the contract. Riders are commonly used to provide supplementary benefits like\nincreasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different\nrequirements of a person into a single plan.Riders provide a means to provide benefits like Disability cover, accident cover and\nCritical Illness cover as additional benefits in a standard life insurance contract.\nPolicy holders can avail of them by paying an extra premium.**Test Yourself 1**Which among the following is an intangible product?\nI. CarII. HouseIII. Life insurance\nIV. Soap134**B.** **Traditional life insurance products**We shall now learn about some of the traditional types of life insurance products.**Diagram 1:** **Traditional Life Insurance Products****1.** **Term insurance plans**Term insurance is a contract that is valid only during a certain time period. This\nmay range from the short time required to complete an airplane trip to multiple\nyears. Protection may extend up to age 65 or 70. One-year term policies are quite\nsimilar to property and casualty insurance contracts. There is no savings or cash\nvalue element in this policy.In October 2020, IRDAI has introduced a Standard Individual Term Life Insurance\nProduct called, “Saral Jeevan Bima” (the Insurer’s name shall be prefixed to the\nproduct name), a non-linked non-participating individual pure risk premium life\ninsurance plan, which provides for payment of Sum Assured in lump sum to the\nnominee in case of the Life Assured’s unfortunate death during the policy term.Apart from certain benefits and riders specified by the Regulator, no other riders/\nbenefits/ options/ variants are allowed to be offered. Also, there shall be no\nexclusions under the product other than the suicide exclusion. Saral Jeevan Bima is\nto be offered to individuals without restrictions on gender, place of residence,\ntravel, occupation or educational qualifications.**a)** **Purpose**A Term Life insurance plan fulfils the main and basic idea behind life insurance,\nwhich is to provide an assured sum of money to the dependents of the insured\non his/ her death.**The policy works as an income replacement plan also.** Here the payment of a\nlump-sum amount is replaced by a series of monthly, quarterly or similar\nperiodical payments to the dependent beneficiaries.**b)** **Disability**\nNormally a Term insurance policy covers only death. However, it is possible to\nbuy a Disability Protection Rider on the main policy. In such a case, if the insured\nsuffers from a specified disability during the term of the contract, a disability135benefit would be paid to the beneficiaries/ insured person. The benefits will", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "p134", "section": "Suitability Information", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_071", "metadata": {"file_size": 20690, "chunk_index": 71, "chunk_tokens": 1003, "has_examples": false, "has_tables": false, "key_concepts": ["Riders in Life Insurance Products", "Disability", "Purpose", "Diagram 1:", "Test Yourself 1"]}}
{"chunk": "benefits/ options/ variants are allowed to be offered. Also, there shall be no\nexclusions under the product other than the suicide exclusion. Saral Jeevan Bima is\nto be offered to individuals without restrictions on gender, place of residence,\ntravel, occupation or educational qualifications.**a)** **Purpose**A Term Life insurance plan fulfils the main and basic idea behind life insurance,\nwhich is to provide an assured sum of money to the dependents of the insured\non his/ her death.**The policy works as an income replacement plan also.** Here the payment of a\nlump-sum amount is replaced by a series of monthly, quarterly or similar\nperiodical payments to the dependent beneficiaries.**b)** **Disability**\nNormally a Term insurance policy covers only death. However, it is possible to\nbuy a Disability Protection Rider on the main policy. In such a case, if the insured\nsuffers from a specified disability during the term of the contract, a disability135benefit would be paid to the beneficiaries/ insured person. The benefits will\ncontinue till the death of the insured person.**Diagram 2:** **Disability****c)** **Term insurance as a rider**Protection under Term Life is usually provided as a stand-alone policy but it\ncould also be provided through a rider in a policy.**Example**A rider to a pension plan provides for a death benefit to be payable if one dies\nbefore the date when pension is to start.**d)** **Convertibility**Convertible term insurance policies allow a policyholder to change or convert a\nterm insurance policy into a permanent plan like “Whole Life” without providing\nfresh evidence of insurability. This privilege helps those who wish to have\npermanent cash value insurance but are unable to afford its high premiums.\nWhen the term policy is converted into permanent insurance the new premium\nrate would be higher.**e)** **Unique Selling Proposition** ( **USP)**The unique selling proposition (USP) of term assurance is its low price, enabling\none to buy relatively large amounts of life insurance on a limited budget.**f)** **Variants**A number of variants of term assurance are possible.**Diagram 3:** **Variants of Term Assurance****i.** **Decreasing Term Assurance**\nThese plans typically consist of decreasing term insurance which provides an\namount of death benefit that is equal to the balance that is due on a loan, if the\nborrower dies before the loan is paid. These are often marketed as Mortgage\nRedemption (discussed in Chapter 15) or Credit Life Insurance. The plans are136usually sold to lending institutions as group insurance to cover the lives of their\nborrowers. Purchase of mortgage redemption insurance is often a condition of\nthe mortgage loan. Such plans may also be available for automobile or other\npersonal loans.**ii.** **Increasing term assurance**\nAs the name suggests, the plan provides a death benefit, which increases along\nwith the term of the policy. Premium generally increases as the amount of\ncoverage increases.**iii.** **Term insurance with return of premiums**\nAnother type of policy (quite popular in India) is term assurance with return of\npremiums. Though the premium paid would be much higher than for a similar\nterm insurance plan without return of premiums, some customers may need such\npolicies.**g)** **Relevant scenarios**Term insurance may have relevance in the following situations:\ni. Where the need for insurance protection is purely temporary, as in case ofmortgage redemption\nii. As an additional supplement to a savings plan.\niii. As part of a “buy term and invest the rest” philosophy, where one seeks onlycheap term insurance protection from the insurance company and wants to\ninvest the difference of premiums in other attractive investments.**Important****Limitations of term plans:** Term Insurance plans are available only for specific\nperiods and one may not be able to continue the coverage beyond a certain age,\nsay 65 or 70.**2.** **Whole life insurance**Whole life insurance is an example of a permanent life insurance policy. Here, the\nlife insurer offers to pay the agreed death benefit when the insured dies, no matter\nwhen the death might occur. The premiums can be paid throughout one’s life or for\na limited time as specified.Whole life premiums are much higher than term premiums as whole life policies are\ndesigned to remain in force until the death of the insured, and pay the death benefit\nanytime. The Plan also provides for a cash value in the policy holder’s account. He/\nshe can withdraw cash in the form of a policy loan from this cash value or even\nredeem it by surrendering the policy for its cash value.In case of outstanding loans, the amount of loan and interest get deducted from the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y135", "section": "Purpose", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_072", "metadata": {"file_size": 20690, "chunk_index": 72, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Disability", "Whole life insurance", "Convertibility", "Variants", "Term insurance as a rider"]}}
{"chunk": "iii. As part of a “buy term and invest the rest” philosophy, where one seeks onlycheap term insurance protection from the insurance company and wants to\ninvest the difference of premiums in other attractive investments.**Important****Limitations of term plans:** Term Insurance plans are available only for specific\nperiods and one may not be able to continue the coverage beyond a certain age,\nsay 65 or 70.**2.** **Whole life insurance**Whole life insurance is an example of a permanent life insurance policy. Here, the\nlife insurer offers to pay the agreed death benefit when the insured dies, no matter\nwhen the death might occur. The premiums can be paid throughout one’s life or for\na limited time as specified.Whole life premiums are much higher than term premiums as whole life policies are\ndesigned to remain in force until the death of the insured, and pay the death benefit\nanytime. The Plan also provides for a cash value in the policy holder’s account. He/\nshe can withdraw cash in the form of a policy loan from this cash value or even\nredeem it by surrendering the policy for its cash value.In case of outstanding loans, the amount of loan and interest get deducted from the\npay-out to the beneficiaries upon death.**A whole life policy is a good plan for the main earner of the family who wishes**\n**to protect his/ her loved ones in the event of premature death and preserve his/**\n**her capital against erosion from various events like terminal illness.** One can also\nuse the cash value of the whole life insurance policy for retirement needs, if137required. Whole life insurance thus plays an important role in household saving and\ncreating wealth to be passed on to the next generation.**3.** **Endowment Assurance**It is a contract in which the sum assured is payable to the nominees of the insured\nin case of the death of the insured during the term of the policy. If the insured\nsurvives the term the sum assured is paid to the insured.**The product has both death and survival benefit components.** Endowment\nAssurance links one’s insurance and savings programmes by offering a safe and\ncompulsory method of savings accumulation.People buy endowment plans as a sure method of providing against old age or for\nmeeting specific purposes like having a fund for (a) educational purposes, (b)\nmeeting children’s marriage expenses or(c) paying a mortgage (housing) loan.**Government usually offers tax benefits on the premiums paid, which make it**\n**attractive.** Many endowment policies mature at ages 55 to 65, when the insured is\nplanning for his/ her retirement. In such cases such policies can supplement\nretirement savings.**Variants:** Endowment assurance has certain variants - discussed below.**4.** **Money Back Policy**\nThe Money Back policy is a popular endowment plan in India. It has a provision for\nreturning some part of the sum assured in instalments during the term and the\nbalance sum assured at the end of the term.**Example**A Money Back policy for 20 years may provide for paying survival benefits of 20% of\nthe sum assured each at the end of the 5 [th], 10 [th] and 15 [th] years and the balance 40%\nat the end of the full term of 20 years. If the life assured dies at the end of, say 18\nyears, the full sum assured and bonuses (explained in the next section) accrued are\npaid as death benefit, even though the insured would have been paid a benefit of\n60% of the face value already, as money back.Money Back plans have been popular because of their liquidity (cash back) element,\nwhich make them attractive for meeting short and medium term needs. Such plans\nprovide full death protection also, if the individual dies at any point during the term\nof the policy.**5.** **Participating (Par) and Non-Participating (Non-Par)Plans**The Life Insurance products can also be classified as Participating (Par) and Nonparticipating (Non-Par) products. The term “Par” implies policies which are\nparticipating in the profits of the life insurer. “Non–Par”, on the other hand,\nrepresents policies which do not participate in the profits. Both kinds are present\nin traditional life insurance. Under all traditional plans, the pooled life funds, which\nare derived from policyholders’ premiums, are invested as per regulatory norms.\nPolicy holders who opt for ‘par products’ are eligible to receive, in addition to a138guaranteed sum assured, a share in the surpluses( bonuses) that are generated by", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "f137", "section": "Important", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_073", "metadata": {"file_size": 20690, "chunk_index": 73, "chunk_tokens": 980, "has_examples": true, "has_tables": false, "key_concepts": ["Whole life insurance", "Variants:", "Limitations of term plans:", "Example", "Important"]}}
{"chunk": "paid as death benefit, even though the insured would have been paid a benefit of\n60% of the face value already, as money back.Money Back plans have been popular because of their liquidity (cash back) element,\nwhich make them attractive for meeting short and medium term needs. Such plans\nprovide full death protection also, if the individual dies at any point during the term\nof the policy.**5.** **Participating (Par) and Non-Participating (Non-Par)Plans**The Life Insurance products can also be classified as Participating (Par) and Nonparticipating (Non-Par) products. The term “Par” implies policies which are\nparticipating in the profits of the life insurer. “Non–Par”, on the other hand,\nrepresents policies which do not participate in the profits. Both kinds are present\nin traditional life insurance. Under all traditional plans, the pooled life funds, which\nare derived from policyholders’ premiums, are invested as per regulatory norms.\nPolicy holders who opt for ‘par products’ are eligible to receive, in addition to a138guaranteed sum assured, a share in the surpluses( bonuses) that are generated by\nthe insurer. These are known as ‘With Profit’ plans.**6.** **Non-participating products**The Policy holders who buy non-linked without profit [non par] plans are paid a\nbenefit that is fixed and guaranteed at the beginning of the contract and nothing\nmore. Non-participating products may be offered either under a ‘linked platform’\nor a ‘non-linked platform’. These are known as ‘Without Profits’ plans.**Example**One may have an endowment policy of twenty years providing a guaranteed addition\nof 2% of sum assured for each year of term, so that the maturity benefit is sum\nassured plus a total addition of 40% of the sum assured.Under the IRDAI’s guidelines on traditional non-par policies, the benefits to be paid\non the happening of a specified event, have to be explicitly stated at the outset and\nnot linked to an index or benchmark. The same applies to additional benefits that\nare accrued at regular intervals. This means that the return on these policies must\nbe disclosed at the time of taking the policy.**Important**Death benefits are subject to regulations of IRDAI issued from time to time. At\npresent, as per the new Regulation 9 of IRDAI (Non-linked) Products Regulation,\n2019 pertaining to traditional products, the minimum death cover is as follows:For all non-linked individual life insurance products, the minimum Sum Assured on\ndeath during the entire term of the policy shall not be less than 7 times the\nannualized premium, for limited or regular premium products, and 1.25 times the\nsingle premium for single premium products.For participating products, in addition to the sum assured on death, the bonus and\nadditional benefits as stated in the policy and accrued till the date of death shall\nbecome payable on death as part of the death benefit, if not paid earlier. In\nessence, there are **two variants**, participating and non-participating plans.i. For **participating polices** the bonus is linked to the investment performanceof the fund and is not declared or guaranteed before. The **bonus, once it is**\n**announced, becomes a guarantee** . It is usually paid in case of death of the\npolicyholder or maturity benefit. This bonus is also called **reversionary**\n**bonus** .\nii. In case of **non-participating policies**, the return on the policy is disclosed inthe beginning of the policy itself.**7.** **Pension Plans and Annuities**A pension plan is typically a fund into which money is paid during a person’s\nemployment years and from which money is drawn to support the person after his\n[retirement from work in the form of periodic payments.](https://en.wikipedia.org/wiki/Retirement)139Pension plans are designed on group (usually employer driven) or individual basis. A\ngroup pension may be a \"defined benefit plan\", where a fixed sum is paid regularly\nto a person, or a \"defined contribution plan\", under which a fixed sum is invested\n[which becomes available at retirement age. Pensions are essentially guaranteed life](https://en.wikipedia.org/wiki/Life_annuity)\n[annuities, thus insuring against the risk of longevity. A pension created by an](https://en.wikipedia.org/wiki/Life_annuity)\nemployer for the benefit of an employee is commonly referred to as an occupational\nor employer pension.On retirement, the money in the member's account is used to provide retirement\nbenefits, typically by purchasing an annuity which then provides a regular income.\nAn annuity is a long-term investment issued by an insurance company designed to", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "a138", "section": "Participating (Par) and Non-Participating (Non-Par)Plans", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_074", "metadata": {"file_size": 20690, "chunk_index": 74, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Non-participating products", "Pension Plans and Annuities", "Example", "Important"]}}
{"chunk": "employment years and from which money is drawn to support the person after his\n[retirement from work in the form of periodic payments.](https://en.wikipedia.org/wiki/Retirement)139Pension plans are designed on group (usually employer driven) or individual basis. A\ngroup pension may be a \"defined benefit plan\", where a fixed sum is paid regularly\nto a person, or a \"defined contribution plan\", under which a fixed sum is invested\n[which becomes available at retirement age. Pensions are essentially guaranteed life](https://en.wikipedia.org/wiki/Life_annuity)\n[annuities, thus insuring against the risk of longevity. A pension created by an](https://en.wikipedia.org/wiki/Life_annuity)\nemployer for the benefit of an employee is commonly referred to as an occupational\nor employer pension.On retirement, the money in the member's account is used to provide retirement\nbenefits, typically by purchasing an annuity which then provides a regular income.\nAn annuity is a long-term investment issued by an insurance company designed to\nhelp protect one from the risk of outliving one’s income. Through annuitization,\none’s contributions are converted into periodic payments that can last for life.Individuals can avail of pension benefits by purchasing pension plans from insurance\ncompanies. Pension plans can be **on accumulation or deferred** **basis** which allows\na person to contribute in two ways, (i) in lump sum, or (ii) over a period of time; so\nthat he/ she can get a pension from the desired age/ date (called as the ‘vesting’\ndate). One can opt to receive pensions/ annuities on monthly, quarterly, half-yearly\nor annual modes. Pension plans are available on an **immediate basis** also, from the\nvery next month of purchase, on payment of a lump sum amount, called as\nimmediate annuity.The Indian insurance industry has several deferred and immediate annuity products\nmarketed by Life Insurers. Each product has its own features, terms, conditions and\nannuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly\nmeet the needs of an average customer, in January 2021, IRDAI mandated all Life\nInsurers to introduce a standard, immediate annuity product, with simple features\nand standard terms and conditions on an individual (not group) basis. Such a\nstandard product will make it easier for the customers to make an informed choice,\nenhance the trust between the Insurers and the insured, and reduce mis-selling as\nwell as potential disputes.The standard individual immediate annuity product is called, “Saral Pension”,\nprefixed by the Insurer’s name. The product offer two (and only two) annuity\noptions as follows:a) Life annuity with 100% Return of Purchase Price; andb) Joint Life annuity with a provision of 100% annuity to the secondary annuitant\non death of the primary annuitant and return of 100% Purchase Price on death\nof last survivor.Mode of Annuity payment would be Monthly, Quarterly, Half-Yearly and Yearly.\nDetails are available on IRDAI’s website at the following link\n=\n[https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1) PageNo43\n[53&flag=1](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1)140**Test Yourself 2**The premium paid for whole life insurance is _____________ than the premium paid\nfor term assurance.I. Higher\nII. Lower\nIII. Equal\nIV. Substantially higher**Summary**Life insurance products offer protection against the loss of economic value of\nan individual’s productive abilities, which is available to his/ her dependents or\nto the self.A life insurance policy, at its core, provides peace of mind and protection to the\nnear and dear ones of the individual in case something unfortunate happens to\nhim or her.Term insurance provides valid cover only during a certain time period that has\nbeen specified in the contract.The unique selling proposition (USP) of term assurance is its low price, enabling\none to buy relatively large amounts of life insurance on a limited budget.While term assurance policies are examples of temporary assurance, where\nprotection is available for a temporary period of time, whole life insurance is an- example of a permanent life insurance policy.**Key Terms**1. Term insurance2. Whole life insurance3. Endowment assurance\n4. Money back policy", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "o4353", "section": "Saral Pension:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_075", "metadata": {"file_size": 20690, "chunk_index": 75, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Key Terms", "Test Yourself 2", "Saral Pension:"]}}
{"chunk": "for term assurance.I. Higher\nII. Lower\nIII. Equal\nIV. Substantially higher**Summary**Life insurance products offer protection against the loss of economic value of\nan individual’s productive abilities, which is available to his/ her dependents or\nto the self.A life insurance policy, at its core, provides peace of mind and protection to the\nnear and dear ones of the individual in case something unfortunate happens to\nhim or her.Term insurance provides valid cover only during a certain time period that has\nbeen specified in the contract.The unique selling proposition (USP) of term assurance is its low price, enabling\none to buy relatively large amounts of life insurance on a limited budget.While term assurance policies are examples of temporary assurance, where\nprotection is available for a temporary period of time, whole life insurance is an- example of a permanent life insurance policy.**Key Terms**1. Term insurance2. Whole life insurance3. Endowment assurance\n4. Money back policy\n5. Par and non-par schemes\n6. Reversionary bonus**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is I.141## CHAPTER L-04## LIFE INSURANCE PRODUCTS: NON-TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of non-traditional life insurance products.\nWe start by examining the limitations of traditional life insurance products and then\nhave a look at the appeal of non-traditional life insurance products. Finally we look\nat some of the different types of non-traditional life insurance products available\nin the market.**Learning Outcomes**142**A.** **Overview of non-traditional life insurance products****1.** **Non-traditional life insurance products – Purpose and need**In the previous chapters we have considered some of the traditional life insurance\nproducts which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to\nprovide a rate of return comparable to other assets in the financial market. Issues\nhave also been raised about the way they are structured into a single package of\nbenefits and premiums.**2.** **Limitations of traditional products**a) A critical examination would reveal the following areas of concern:b) **Cash value component:** The savings or cash value component in traditional policies\nis not well defined. This makes it less transparent about mortality, interest rates,\nexpenses and other parameters that are made.c) **Rate of return:** It is not easy to ascertain the rate of return on traditional policies\nbecause the value of the benefits under “With Profit policies” can be known only\nwhen the contract ends. This makes it difficult to compare these policies with other\nfinancial instruments.d)e)f) **Surrender value:** The method of arriving at the cash and surrender values (at any\npoint of time), are set by the life insurer and not transparent.**Yield:** The yield on these policies are much lower than those from other\ninvestments.**3.** **Features of Non-Traditional Policies:** Life insurance companies starteddesigning policies with certain innovative features, some of which are given\nbelow:a) **Direct linkage with investment gains:** Policies with direct linkage with thecapital market were designed in an attempt to make investment gains.\nb) **Policies that can beat inflation:** Policies were designed to give returnscloser to the inflation rates. The change was that insurers started thinking\nthat life policies need to match if not beat inflation.\nc) **Policies with Flexibility:** Policies which allowed customers to decide (withincertain limits) the amount of premium they wanted to pay; and the amount\nof death benefits and cash values they wanted, got designed.\nd) **Surrender value:** Policies that gave better surrender values available undertraditional policies were also designed by insurers.These policies became very popular and even began to replace traditional products\nin many countries, including India.143**Test Yourself 1**Which among the following is a non-traditional life insurance product?I. Term assuranceII. Universal life insuranceIII. Endowment insuranceIV. Whole life insurance**B.** **Non-traditional life insurance products****Some non-traditional products**We shall discuss some of the non-traditional products which have emerged in the\nIndian market and elsewhere.**1.** **Universal Life and Variable Life**Universal Life policy was introduced in the United States in 1979 and quickly became\nvery popular. Its features are **flexible premiums, flexible face amount and death**\n**benefit amounts.** Unlike traditional policies, where fixed premiums have to be paid\nperiodically to keep the contract in force, universal life policies allow the\npolicyholder (within limits) to decide the amount of premiums he or she wants to", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e2", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_076", "metadata": {"file_size": 20690, "chunk_index": 76, "chunk_tokens": 996, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Key Terms", "Limitations of traditional products", "Some non-traditional products", "Yield:"]}}
{"chunk": "of death benefits and cash values they wanted, got designed.\nd) **Surrender value:** Policies that gave better surrender values available undertraditional policies were also designed by insurers.These policies became very popular and even began to replace traditional products\nin many countries, including India.143**Test Yourself 1**Which among the following is a non-traditional life insurance product?I. Term assuranceII. Universal life insuranceIII. Endowment insuranceIV. Whole life insurance**B.** **Non-traditional life insurance products****Some non-traditional products**We shall discuss some of the non-traditional products which have emerged in the\nIndian market and elsewhere.**1.** **Universal Life and Variable Life**Universal Life policy was introduced in the United States in 1979 and quickly became\nvery popular. Its features are **flexible premiums, flexible face amount and death**\n**benefit amounts.** Unlike traditional policies, where fixed premiums have to be paid\nperiodically to keep the contract in force, universal life policies allow the\npolicyholder (within limits) to decide the amount of premiums he or she wants to\npay for the coverage.Variable Life was introduced in the United States in 1977.It is a typeof “Whole Life”\npolicy where the death benefit and cash value of the policy fluctuates according to\nthe investment performance of a special investment account into which premiums\nare credited.The design and sale of the above two kinds of products, both of which were called\nVariable Insurance Products, have been discontinued and are not allowed in India\nsince2019,further to the issue of IRDAI (ULIP) Regulations, 2019.**2.** **Unit linked insurance**Unit Linked Plans, also known as ULIPs were first introduced in UK during the\n1960s.They have today emerged as one of the most popular and significant products,\ndisplacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.\nThe premium paid by the policyholder gets divided into two major portionsthe first portion which is utilised for providing insurance cover, andthe second portion that gets invested into the fund opted by the insured.The benefits under such contracts are wholly or partially determined by the value\nof units credited to the policyholder’s account at the date when payment is due.144In many markets these policies were positioned and sold as investment vehicles with\nan attached insurance component.Unlike traditional savings policies that are bundled, Unit linked contracts are\nunbundled. Their structure is transparent with the charges to pay for the insurance\nand expenses component being clearly specified.**Diagram 1:** **Premium break-up**After deducting the charges from the premium, the balance of the account and\nincome are invested in **units** .**The Value of Units**The value of units is defined by a rule or formula, which is outlined in advance.\nTypically the value of the units is given by the Net Asset Value (NAV), which reflects\nthe market value of the assets in which the fund is invested. Different persons could\narrive at the same benefits payable by following the formula.The Formula is as follows:Net Asset Value [NAV] = Market Value of Assets of the fund/ Number of units of the\nfundsThus, Policyholder benefits do not depend on the assumptions of the life insurancecompany.Unit linked policies allow policy holders to choose between different kinds of funds.\nEach fund would have a different portfolio mix. The investor gets to choose between\na broad option of debt, balanced and equity funds, defined below. Even within these\nbroad categories there may be other types of options.|Equity Fund|Debt Fund|Balanced Fund|Money Market Fund|\n|---|---|---|---|\n|~~This fund invests~~<br>the major portion of<br>the money in equity<br>and equity related<br>instruments.<br>|~~This fund invests~~<br>major portion of the<br>money in Govt.<br>Bonds, Corporate<br>Bonds, Fixed<br>Deposits etc.<br>|~~This fund~~<br>invests in a mix<br>of equity and<br>debt<br>instruments<br>|~~This fund invests~~<br>money mainly in<br>instruments such as<br>Treasury Bills,<br>Certificates of Deposit,<br>Commercial Paper etc.<br>|There is also provision to switch from one kind of fund to another if performance of\none or more funds is not found to be up to the mark.145Some of the specific features of ULIP Policies are given below:**i.** **Unitising**Benefits under ULIP policies are determined by the value of units credited to the\npolicyholder’s account at the date when the claim payment is due to be made. A", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e2019", "section": "Surrender value:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_077", "metadata": {"file_size": 20690, "chunk_index": 77, "chunk_tokens": 992, "has_examples": false, "has_tables": true, "key_concepts": ["Test Yourself 1", "Universal Life and Variable Life", "Diagram 1:", "Unitising", "The Value of Units"]}}
{"chunk": "|---|---|---|---|\n|~~This fund invests~~<br>the major portion of<br>the money in equity<br>and equity related<br>instruments.<br>|~~This fund invests~~<br>major portion of the<br>money in Govt.<br>Bonds, Corporate<br>Bonds, Fixed<br>Deposits etc.<br>|~~This fund~~<br>invests in a mix<br>of equity and<br>debt<br>instruments<br>|~~This fund invests~~<br>money mainly in<br>instruments such as<br>Treasury Bills,<br>Certificates of Deposit,<br>Commercial Paper etc.<br>|There is also provision to switch from one kind of fund to another if performance of\none or more funds is not found to be up to the mark.145Some of the specific features of ULIP Policies are given below:**i.** **Unitising**Benefits under ULIP policies are determined by the value of units credited to the\npolicyholder’s account at the date when the claim payment is due to be made. A\nunit is created by dividing an investment fund into a number of equal parts.**ii.** **Transparent structure**The charges for insurance cover and expenses in ULIPs are clearly specified. Once\nthese charges are deducted from the premium, the balance of the account and\nincome from it are invested in units.**iii.** **Pricing**Under ULIPs, the insured decides the amount of premium that he/ she can\ncontribute at regular intervals.In all Life Insurance policies, the initial costs are very high. Under traditional\npolicies, the premium charges for meeting these costs are spread throughout the\npolicy term.In the case of ULIPs, they are deducted from the initial premiums itself. This\nsignificantly reduces the amount allocated for investment. This is why the value of\nthe benefits, vis-à-vis the premiums paid, would be very low and even less than the\npremiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy, the\nbeneficiary would be paid the higher of the Sum Assured [which is a multiple of the\npremium] or the Fund Value (unit price multiplied by the number of units) standing\nto his or her account.**v.** **The bearing of investment risk**The value of the units depends on the value of the life insurer’s investments, which\nare not guaranteed.The life insurer, though expected to manage the portfolio efficiently, does not give\nany guarantee about unit values. Hence, the investment risk is borne by the\npolicyholder/ unit holder.146**Test Yourself 2**Which of the following statements is/ are incorrect?I. Variable life insurance is a temporary life insurance policy\nII. Variable life insurance is a permanent life insurance policy\nIII. The policy has a cash value account\nIV. The policy provides a minimum death benefit guarantee**Summary**A critical concern with respect to life insurance policies was giving a competitive\nrate of return comparable to other assets in the financial marketplace.Some of the trends that led to the increase in non-traditional life products\ninclude unbundling, investment linkage and transparency.Universal life insurance is a form of permanent life insurance characterised by\nits flexible premiums, flexible face amount and death benefit amounts, and the\nunbundling of its pricing factors.ULIPs became one of the most popular and significant products, replacing\ntraditional plans in many markets.ULIPs provide the means for directly and immediately cashing on the benefits of\na Life Insurer’s investment performance.**Key Terms**1. Universal life insurance2. Variable life insurance3. Unit linked insurance4. Net asset value**Answers to Test Yourself****Answer 1** -The correct option is II.**Answer 2** - The correct option is I.147## CHAPTER L-05## APPLICATIONS OF LIFE INSURANCE**Chapter Introduction**Life insurance does not merely seek to protect individuals from premature death. It\nhas other applications as well. It can be applied to the creation of trusts with\nresultant insurance benefits; it can be applied for creating a policy covering key\npersonnel of industries and also for redeeming mortgages. We shall briefly describe\nthese various applications of life insurance.**Learning Outcomes**148N’s\n**A.** **Applications of Life insurance****1.** **Married Women’s Property Act**Section 6 of the Married Women’s Property Act, 1874 tries to ensure that the\nbenefits under a life insurance policy will pass on in a secure manner to the wife", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e2", "section": "Unitising", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_078", "metadata": {"file_size": 20690, "chunk_index": 78, "chunk_tokens": 994, "has_examples": false, "has_tables": true, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Transparent structure", "Unitising"]}}
{"chunk": "traditional plans in many markets.ULIPs provide the means for directly and immediately cashing on the benefits of\na Life Insurer’s investment performance.**Key Terms**1. Universal life insurance2. Variable life insurance3. Unit linked insurance4. Net asset value**Answers to Test Yourself****Answer 1** -The correct option is II.**Answer 2** - The correct option is I.147## CHAPTER L-05## APPLICATIONS OF LIFE INSURANCE**Chapter Introduction**Life insurance does not merely seek to protect individuals from premature death. It\nhas other applications as well. It can be applied to the creation of trusts with\nresultant insurance benefits; it can be applied for creating a policy covering key\npersonnel of industries and also for redeeming mortgages. We shall briefly describe\nthese various applications of life insurance.**Learning Outcomes**148N’s\n**A.** **Applications of Life insurance****1.** **Married Women’s Property Act**Section 6 of the Married Women’s Property Act, 1874 tries to ensure that the\nbenefits under a life insurance policy will pass on in a secure manner to the wife\nand children through creation of a trust for the purpose.**Diagram 1:** **Beneficiaries under MWP Act**The section provides that when a married man takes a policy on his own life and\nclearly expresses on the face of such policy that it is for the benefit of his wife or\nhis wife and children, and to be held in a trust for their benefit only, the proceeds\nof such a policy shall not, so long as the objects of the trust remains, be subject to\nthe control of the husband or to his creditors or form part of his estate.**Features of a policy under the MWP Act**i. Each policy will remain a separate Trust. Either the wife or child (over 18years of age) can be a trustee.ii. The policy shall be beyond the control of court attachments, creditors andeven the life assured.iii. The claim money shall be paid to the trustees.iv. The policy cannot be surrendered and neither nomination nor assignment isallowed.v. If the policyholder does not appoint a special trustee to receive andadminister the benefits under the policy, the sum secured under the policy\nbecomes payable to the Official Trustee of the State in which the office at\nwhich the insurance was effected is situated.149**Benefits**The Trust is set up under a deed that cannot be revoked or amended. It can contain\none or more insurance policies. It is important to appoint a trustee who would be\nresponsible for administering the trust property, including investing the insurance\nproceeds, on behalf of the beneficiaries. These benefits are secured from passing\nto future creditors**2.** **Key-man Insurance**Keyman insurance is an important form of business insurance.**Definition**Key-man Insurance can be described as an insurance policy taken out by a business\nto compensate that business for financial losses that would arise from the death or\nextended incapacity of an important member of the business.Many businesses have key persons responsible for a major part of its profits or has\nknowledge and skills that are vital to the organisation and difficult to replace. Key\nman insurance is taken by employers on the life of such key persons to facilitate\nbusiness continuity and offset the costs and losses which are likely to be suffered in\nthe event of the loss of a key person. Keyman insurance does not indemnify the\nactual losses incurred but compensates with a fixed monetary sum as specified on\nthe insurance policy.Keyman insurance is allowed as a term insurance policy where the sum assured is\nlinked to the profitability of the company rather than the key person’s own income.\nThe premium is paid by the company. In case the key person dies, the benefit is\npaid to the company. The proceeds of Keyman insurance is taxable at the hands of\nthe company.**a)** **Who can be a key-man?**A key person can be anyone directly associated with the business whose loss can\ncause financial strain to the business. For example, the person could be a\ndirector of the company, a partner, a key sales person, key project manager, or\nsomeone with specific skills or knowledge which is especially valuable to thecompany.**b)** **Insurable losses**The following are the losses for which key person insurance can provide\ncompensation:i. Losses related to the extended period when a key person is unable to work,to provide temporary personnel and, if necessary to finance the recruitment\nand training of a replacement150ii. Insurance to protect profits. For example, offsetting lost income from lostsales, losses resulting from the delay or cancellation of any business project\nthat the key person was involved in, loss of opportunity to expand, loss of", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e2", "section": "Key Terms", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_079", "metadata": {"file_size": 20690, "chunk_index": 79, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Diagram 1:", "Married Women’s Property Act", "Chapter Introduction"]}}
{"chunk": "linked to the profitability of the company rather than the key person’s own income.\nThe premium is paid by the company. In case the key person dies, the benefit is\npaid to the company. The proceeds of Keyman insurance is taxable at the hands of\nthe company.**a)** **Who can be a key-man?**A key person can be anyone directly associated with the business whose loss can\ncause financial strain to the business. For example, the person could be a\ndirector of the company, a partner, a key sales person, key project manager, or\nsomeone with specific skills or knowledge which is especially valuable to thecompany.**b)** **Insurable losses**The following are the losses for which key person insurance can provide\ncompensation:i. Losses related to the extended period when a key person is unable to work,to provide temporary personnel and, if necessary to finance the recruitment\nand training of a replacement150ii. Insurance to protect profits. For example, offsetting lost income from lostsales, losses resulting from the delay or cancellation of any business project\nthat the key person was involved in, loss of opportunity to expand, loss of\nspecialised skills or knowledge**3.** **Mortgage Redemption Insurance (MRI)**A person taking a loan to buy a property, may be required to pay for mortgage\nredemption insurance by the bank, as part of the loan arrangement. “Mortgage\nRedemption Insurance” is popularly referred to “Credit Life Insurance policy”.**a)** **What is MRI?**It is an insurance policy that provides financial protection for home loan\nborrowers. It is basically a decreasing term life insurance policy taken by\nmortgagor to repay the balance on a mortgage loan if he/ she dies before its full\nrepayment. It can be called a loan protector policy. This plan is suitable for\npeople whose dependents may need assistance in clearing their debts in case of\nthe unexpected demise of the policyholder.**b)** **Features**The insurance cover under this policy decreases each year unlike a term\ninsurance policy where insurance cover is constant during the policy period.**Test Yourself 1**What is the objective behind Mortgage Redemption Insurance?I. Facilitate cheaper mortgage rates\nII. Provide financial protection for home loan borrowers\nIII. Protect value of the mortgaged property\nIV. Evade eviction in case of default**Summary**Section 6 of the Married Women’s Property Act, 1874 provides for security of\nbenefits under a life insurance policy to the wife and children.The policy effected under MWP Act shall be beyond the control of court\nattachments, creditors and even the life assured.Keyman insurance is an important form of business insurance. It can be\ndescribed as an insurance policy taken out by a business to compensate at for\nfinancial losses that would arise from the death or extended capacity of an\nimportant member of the business.151Mortgage redemption insurance is basically a decreasing term life insurance\npolicy taken by a mortgagor to repay the balance on a mortgage loan if he/ she\ndies before its full repayment.**Key Terms**1. Married Women’s Property Act\n2. Keyman insurance\n3. Mortgage Redemption Insurance**Answers to Test Yourself****Answer 1** - The correct option is II.152## CHAPTER L-06## PRICING AND VALUATION IN LIFE INSURANCE**Chapter Introduction**The objective of this chapter is to introduce to the learner the basic elements that\nare involved in the pricing and benefits of life insurance contracts. We shall first\ndiscuss the elements that constitute the premium and then discuss the concept of\nsurplus and bonus.**Learning Outcomes**153**A.** **Insurance pricing – Basic elements****1.** **Premium**In ordinary language, the term premium denotes the price that is paid by an insured\nfor purchasing an insurance policy. It is normally expressed as a rate of premium\nper thousand rupees of sum assured. The premium rates depend on the age of the\nprospect and the plan.These premium rates are available in the form of tables of rates that are available\nwith insurance companies.**Diagram 1:** PremiumThe rates printed in these tables are known as “Office Premiums”. They are in most\ncases the same throughout the term and are expressed as an annual rate.**Example**If the premium for a twenty year endowment policy for a given age is Rs. 4,800, it\nmeans that Rs. 4,800 has to be paid each year for twenty years.However it is possible to have some policies in which the premiums are payable only\nin the first few years. Companies also have single premium contracts in which only\none premium is payable at the beginning of the contract. These policies are usually\ninvestment oriented.**2.** **Rebates**Life insurance companies may also offer certain types of rebates on the premium", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "t150", "section": "Who can be a key-man?", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_080", "metadata": {"file_size": 20690, "chunk_index": 80, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Mortgage Redemption Insurance (MRI)", "Rebates", "Test Yourself 1", "Insurance pricing – Basic elements"]}}
{"chunk": "for purchasing an insurance policy. It is normally expressed as a rate of premium\nper thousand rupees of sum assured. The premium rates depend on the age of the\nprospect and the plan.These premium rates are available in the form of tables of rates that are available\nwith insurance companies.**Diagram 1:** PremiumThe rates printed in these tables are known as “Office Premiums”. They are in most\ncases the same throughout the term and are expressed as an annual rate.**Example**If the premium for a twenty year endowment policy for a given age is Rs. 4,800, it\nmeans that Rs. 4,800 has to be paid each year for twenty years.However it is possible to have some policies in which the premiums are payable only\nin the first few years. Companies also have single premium contracts in which only\none premium is payable at the beginning of the contract. These policies are usually\ninvestment oriented.**2.** **Rebates**Life insurance companies may also offer certain types of rebates on the premium\nthat is payable. Two such rebates are: For sum assured\n For mode of premum154**Rebate for sum assured**The rebate **for sum assured** is offered to those who buy policies with higher\namounts of sum assured. It is offered as a way of passing on to the customer,\nthe gains that the insurer may make when servicing higher value policies. The\nlogic is that the effort and cost required to process a policy of Rs 50,000 or\n5,00,000 remains the same. But higher sum assured policies yield more premium\nand so more profits.**Rebate for mode of premium**Similarly a rebate may be offered **for the mode of premium** . Life insurance\ncompanies may allow premiums to be paid on annual, half yearly, quarterly or\nmonthly basis. More frequent the mode, more the administrative costs for\ncollecting and accounting the premium. Again, in the yearly mode, the insurer\ncan utilise this amount during the entire year and earn interest on it. Insurers\nwould hence encourage payment via yearly and half yearly modes by allowing a\nrebate on these. They may also charge a little extra for monthly mode of\npayments, to cover additional administrative expenses involved.**3.** **Extra charges**The tabular premium is charged for those individuals who are not subject to any\nsignificant factors that would pose an extra risk. They are known as **standard**\n**lives** and the rates charged are known as ordinary rates.If a person proposing for insurance suffers from certain health problems like\nheart ailments or diabetes that can pose a hazard to his life, he or she is\nconsidered to be sub-standard. The insurer may decide to impose an extra\npremium by way of a health extra. Similarly an occupational extra may be\nimposed on those engaged in a hazardous occupation, like a circus acrobat.\nThese extras would result in the premium being more than the tabular premium.Again, an insurer may offer certain extra benefits under a policy, which are\navailable on payment of an extra premium.**Example**A life insurer may offer a Double Accident Benefit or DAB (where double the sum\nassured is payable as a claim if death is a result of accident). For this it may\ncharge an extra premium of one rupee per thousand sum assured.Similarly a benefit known as Permanent Disability Benefit (PDB) may be availed\nby paying an extra per thousand sum assured.**4.** **Determining the premium**Let us now examine how life insurers arrive at the rates that are presented in\nthe premium tables. This task is performed by an actuary. The process of setting155the premium in case of traditional life insurance policies like term insurance,\nwhole life and endowment considers following elements: Mortality\n Interest\n Expenses of management\n Reserves\n Bonus loading**Diagram 2:** **Components of Premium**The first two elements give us the Net premium. By adding [also called ‘loading’]\nthe other elements to the net premium we get the gross or office premium**a)** **Mortality and Interest**Mortality is the first element in premiums. It is the chance or likelihood that a\nperson of a certain age would die during a given year. To find out the expected\nMortality of a person, “Mortality Tables” are used.**Example**If the mortality rate for age 35 is 0.0035 it implies that out of every 1000 people\nwho are alive as on age 35, 3.5 (or 35 out of 10,000) are expected to die between\nage 35 and 36.The table may be used to calculate mortality cost for different ages. For", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "m154", "section": "Diagram 1:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_081", "metadata": {"file_size": 20690, "chunk_index": 81, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Extra charges", "Rebates", "Diagram 1:", "Example", "Rebate for sum assured"]}}
{"chunk": "the premium tables. This task is performed by an actuary. The process of setting155the premium in case of traditional life insurance policies like term insurance,\nwhole life and endowment considers following elements: Mortality\n Interest\n Expenses of management\n Reserves\n Bonus loading**Diagram 2:** **Components of Premium**The first two elements give us the Net premium. By adding [also called ‘loading’]\nthe other elements to the net premium we get the gross or office premium**a)** **Mortality and Interest**Mortality is the first element in premiums. It is the chance or likelihood that a\nperson of a certain age would die during a given year. To find out the expected\nMortality of a person, “Mortality Tables” are used.**Example**If the mortality rate for age 35 is 0.0035 it implies that out of every 1000 people\nwho are alive as on age 35, 3.5 (or 35 out of 10,000) are expected to die between\nage 35 and 36.The table may be used to calculate mortality cost for different ages. For\nexample the rate of 0.0035 for age 35 implies a cost of insurance of 0.0035 x\n1000 (sum assured) = Rs. 3.50 per thousand sum assured.The above cost may be also called the “Risk Premium”. For higher ages the risk\npremium would be higher.156**Example**If we need to have Rs. 5 per thousand to meet the cost of insurance after five\nyears and if we assume a rate of interest of 6%, the present value of Rs. 5 payable\nafter five years would be 5 x 1/ (1.06) [5 ] = 3.74.If instead of 6% we were to assume 10%, the present value would be only 3.10.\nIn other words the higher the rate of interest assumed, the lower the present\nvalue.From our study of mortality and interest there are two major conclusions we can\nderive Higher the mortality rate in the mortality table, higher the premiumswould be\n Higher the interest rate assumed, lower the premium**Net premium**\nThe estimates of mortality and interest give the “Net Premium”**Gross premium**\nGross premium is the net premium plus an amount called loading. There are\nthree considerations or guiding principles that needs to be borne in mind when\ndetermining the amount of loading:**b)** **Expenses and reserves**Life insurers have to incur various types of operating expenses including: Agents training and recruitment,\n Commissions of agents,\n Staff salaries,\n Office accommodation,\n Office stationery,\n Electricity charges,\n Other miscellaneous etc.All these have to be paid from premiums that are collected by insurers.\nThese expenses are suitably loaded to the net premium.**c)** **Lapses and contingencies**In addition to expenses, there are other factors that can make the calculations\nof life insurers go wrong.One source of risk is that of lapses and withdrawals. A lapse means that the\npolicyholder discontinues payment of premiums. In case of withdrawals, the\npolicyholder surrenders the policy and receives an amount from the policy’s\nacquired cash value.157Lapses usually happen within the first three years, especially in the first year of\nthe contract.**d)** **With Profit (participating) policies and Bonus loading**The concept of ‘With Profit’ policies originated when Life insurers started the\npractice of charging a high loading in advance to create a buffer to keep them\nsolvent even in adverse situations. If subsequent experience proved to be more\nfavourable, the life insurer would share some of the profits it made as a result\nwith policy holders by way of bonus.In sum we can say that:**Gross premium = Net premium + Loading for expenses + Loading for**\n**contingencies + Bonus loading****Test Yourself 1**What does a policy lapse mean?I. Policyholder completes premium payment for a policy\nII. Policyholder discontinues premium payment for a policy\nIII. Policy attains maturity\nIV. Policy is withdrawn from the market**B.** **Surplus and bonus****1.** **Determination of surplus and bonus**Every life insurance company is expected to undertake a periodic valuation of its\nassets and liabilities. Such a valuation has two purposes:i. To assess the financial state of the life insurer and determine if it is solventor insolvent\nii. To determine the surplus available for distribution among policyholders/share holders**Definition**Surplus is the excess of value of assets over value of liabilities. If it is negative, it is", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "g155", "section": "Diagram 2:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_082", "metadata": {"file_size": 20690, "chunk_index": 82, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Surplus and bonus", "Net premium", "Test Yourself 1", "Example", "Lapses and contingencies"]}}
{"chunk": "practice of charging a high loading in advance to create a buffer to keep them\nsolvent even in adverse situations. If subsequent experience proved to be more\nfavourable, the life insurer would share some of the profits it made as a result\nwith policy holders by way of bonus.In sum we can say that:**Gross premium = Net premium + Loading for expenses + Loading for**\n**contingencies + Bonus loading****Test Yourself 1**What does a policy lapse mean?I. Policyholder completes premium payment for a policy\nII. Policyholder discontinues premium payment for a policy\nIII. Policy attains maturity\nIV. Policy is withdrawn from the market**B.** **Surplus and bonus****1.** **Determination of surplus and bonus**Every life insurance company is expected to undertake a periodic valuation of its\nassets and liabilities. Such a valuation has two purposes:i. To assess the financial state of the life insurer and determine if it is solventor insolvent\nii. To determine the surplus available for distribution among policyholders/share holders**Definition**Surplus is the excess of value of assets over value of liabilities. If it is negative, it is\nknown as a strain.Let us now see how the concept of surplus in life insurance is different from that of\nprofit of a firm.158Firms in general look at profits in two ways. Firstly, profit is the **excess of income**\n**over outgo** for a given accounting period, as it appears in the profit and loss\naccount. Profit also forms part of the balance sheet of a firm - it may be defined as\nthe **excess of assets over liabilities** . In both instances, profits are determined at\nthe end of the accounting period.**Surplus = Assets - Liabilities**Let us understand what liabilities mean in life insurance. For a given block of life\ninsurance policies, the life insurer has to make provision for meeting future claims,\nexpenses and other expected pay-outs that may arise. The insurer also expects to\nreceive premiums in future for these policies.Liabilities are thus the present value of all payments that have to be made less the\npresent value of premiums expected to be received on these policies. The present\nvalue is arrived at by applying a suitable rate of discount [the interest rate]\nSurplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed. Life insurers are obliged to share the benefits arising as a\nresult with holders of it’s with profit policies.**Example**The profits of XYZ firm as on 31 [st] March 2013, is given as its income less expenses or\nits assets less liabilities as on that date.In both instances, the profit is clearly defined and is known.**2.** **Bonus**Insurers have to declare and distribute its divisible surplus among the policy holders\nand shareholders of the company [if any] in the form of a bonus. In India, the United\nKingdom and many other countries, distribution of surplus is popular.Bonus is paid as an addition to the basic benefit payable under a contract. Typically\nit may appear as an addition to basic sum assured or basic pension per annum. It is\nexpressed, for example, as Rs. 60 per thousand sum assuredThe most common form of bonus is the **reversionary bonus** . Once declared these\nbonus additions, made each year, get attached to the policy and cannot be taken\naway. They are called ‘Reversionary’ bonuses because they are received only at the\ntime of a claim by death or maturity. Bonuses may also be payable on surrender\nprovided the contract is eligible through having run for a minimum term [say 5 years]159**Types of reversionary bonuses****Diagram 3:** **Types of Reversionary Bonuses****i.** **Simple Reversionary Bonus**This is a bonus expressed as a percentage of the basic cash benefit under the\ncontract. In India for example, it is declared as amount per thousand sum\nassured.**ii.** **Compound Bonus**Here the company expresses a bonus as a percentage of basic benefit and\nalready attached bonuses. It is thus a bonus on a bonus. A way to express it may\nbe as @ 8% of basic sum assured plus attached bonus.**iii.** **Terminal Bonus**As the name suggests, this bonus attaches to the contract only at the time of its\ntermination [by death or maturity]. It is applicable only for the claims arising in\nthe ensuing year. Thus terminal bonus declared for 2013 would only apply to\nclaims that have arisen during 2013-14 and not for subsequent years. Terminal\nbonuses depend on the time duration of the contract and increase with it. A\ncontract that has run for 25 years would have higher terminal bonus than one", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Gross premium = Net premium + Loading for expenses + Loading for", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_083", "metadata": {"file_size": 20690, "chunk_index": 83, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Compound Bonus", "Surplus and bonus", "Simple Reversionary Bonus", "Test Yourself 1", "Example"]}}
{"chunk": "provided the contract is eligible through having run for a minimum term [say 5 years]159**Types of reversionary bonuses****Diagram 3:** **Types of Reversionary Bonuses****i.** **Simple Reversionary Bonus**This is a bonus expressed as a percentage of the basic cash benefit under the\ncontract. In India for example, it is declared as amount per thousand sum\nassured.**ii.** **Compound Bonus**Here the company expresses a bonus as a percentage of basic benefit and\nalready attached bonuses. It is thus a bonus on a bonus. A way to express it may\nbe as @ 8% of basic sum assured plus attached bonus.**iii.** **Terminal Bonus**As the name suggests, this bonus attaches to the contract only at the time of its\ntermination [by death or maturity]. It is applicable only for the claims arising in\nthe ensuing year. Thus terminal bonus declared for 2013 would only apply to\nclaims that have arisen during 2013-14 and not for subsequent years. Terminal\nbonuses depend on the time duration of the contract and increase with it. A\ncontract that has run for 25 years would have higher terminal bonus than one\nwhich has run for 15 years.**3.** **The Contribution Method**Another method of distribution of surplus adopted in North America is the\n“Contribution” method. Here, the surplus, i.e. the difference between what was\nexpected to happen and what actually happened over the year with respect to\nmortality, interest and expenses is declared and distributed as dividends.The dividends can be paid in cash, by way of adjustments/ reductions in future\npremiums, by allowing purchase of non-forfeitable paid up additions to the policy\nor as accumulations to the credit of the policy.160**4.** **Unit Linked Policies**The Principles of Pricing and other features of ULIP Policies have already been\ncovered in an earlier chapter.**Summary**In ordinary language, the term premium denotes the price that is paid by an\ninsured for purchasing an insurance policy.The process of setting the premium for life insurance policies involves\nconsideration of mortality, interests, expense management and reserves.Gross premium is the net premium plus an amount called loading.A lapse means that the policyholder discontinues payment of premiums. In case\nof withdrawals, the policyholder surrenders the policy and receives an amount\nfrom the policy’s acquired cash value.Surplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed.Surplus allocation could be towards maintaining solvency requirements,\nincreasing free assets etc.The most common form of bonus is the reversionary bonus.**Key Terms**1. Premium2. Rebate3. Bonus\n4. Surplus\n5. Reserve\n6. Loading\n7. Reversionary bonus**Answers to Test Yourself****Answer 1** - The correct option is II.161## CHAPTER L-07## LIFE INSURANCE DOCUMENTATION**Chapter Introduction**We have seen that the insurance industry deals with a large number of forms and\ndocuments in Chapter 7. There are some documents specific to life insurance, which\nare discussed in this chapter. Here, we are also discussing the main provisions\nincorporated in a policy document. Provisions related to grace period, policy lapse\nand non-forfeiture and certain other privileges are also discussed.**Learning Outcomes**162**A. Proposal stage documentation**Further to the common points discussed about the Prospectus and the Proposal Form\nin Chapter 7, there are some additional points that Life Insurers need to understand.**Prospectus:** In insurance, ‘Prospectus’ means a document in physical, electronic or\nany other format issued by the insurer to sell or promote the insurance product.\nThe prospectus of an insurance product shall clearly state(a) the Unique Identification Number (UIN) allotted by the Authority for theconcerned insurance product:\n(b) the scope of benefits;\n(c) the extent of insurance cover;\n(d) the warranties, exclusions/exceptions and conditions of the insurance coveralong with explanations.\nThe prospectus should also provide:(a) a description of the contingency or contingencies to be covered by insurance;\n(b) the class or classes of lives or property eligible for insurance under the termsof such prospectus.\nIn Life insurance, the prospectus should also mention about the Riders (also called\nAdd-on covers in Health and General Insurance) allowable on the product and their\nbenefits.**Proposal Form:** In respect of Life insurance, the details of the proposers’ family\nmembers (including parents) indicating their longevity, status of health and\nailments suffered by any of them, are collected through the Proposal form.\nDepending on the product, the medical details of the life proposed for insurance,\nhis/ her personal history of disease and personal characteristics may also be asked", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "m2", "section": "Types of reversionary bonuses", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_084", "metadata": {"file_size": 20690, "chunk_index": 84, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Unit Linked Policies", "Answers to Test Yourself", "Compound Bonus", "Simple Reversionary Bonus", "Prospectus:"]}}
{"chunk": "any other format issued by the insurer to sell or promote the insurance product.\nThe prospectus of an insurance product shall clearly state(a) the Unique Identification Number (UIN) allotted by the Authority for theconcerned insurance product:\n(b) the scope of benefits;\n(c) the extent of insurance cover;\n(d) the warranties, exclusions/exceptions and conditions of the insurance coveralong with explanations.\nThe prospectus should also provide:(a) a description of the contingency or contingencies to be covered by insurance;\n(b) the class or classes of lives or property eligible for insurance under the termsof such prospectus.\nIn Life insurance, the prospectus should also mention about the Riders (also called\nAdd-on covers in Health and General Insurance) allowable on the product and their\nbenefits.**Proposal Form:** In respect of Life insurance, the details of the proposers’ family\nmembers (including parents) indicating their longevity, status of health and\nailments suffered by any of them, are collected through the Proposal form.\nDepending on the product, the medical details of the life proposed for insurance,\nhis/ her personal history of disease and personal characteristics may also be asked\nfor. The Proposal Form is the document by which insurers get all the information\nthat they need from the prospect.Section 45 of the Insurance Act, provides that the Policy shall not be called in\nquestion on the ground of mis-statement after three years. Agents have an\nimportant role in guiding the prospect to give answers to all the questions in the\nProposal Form/ Medical Forms etc. truthfully and advising them of the implications\nof not doing so in terms of Section 45.Proposal Forms for Life Insurance should state the requirements of Section 45 of the\nAct. While answering the questions in the Proposal Form for obtaining life insurance\ncover, the prospect is to be guided by the provisions of Section 45 of the Act.Similarly, Section 39 of the Act is about the provision of nomination. Wherever the\nfacility of Nomination is available to the proposer, the Agent shall inform him/ her\nof the provisions of Section 39 of the Act and encourage the proposer to avail the\nfacility.Aspects related to the personal financial planning of the life proposed including his/\nher work span, projected income and expenses, as well as needs for savings and\ninvestment, health, retirement and insurance may also be asked in the Life\nInsurance Proposal Form.163**Age Proof:** Age being an important factor for assessing the risk profile of the life to\nbe insured, Life insurers collect documentary evidence to verify correct age. Valid\nage proofs may be standard or non-standard, as discussed in Chapter 7.Life insurers look into the following documents as well.**a)** **Agent’s Confidential Report**The agent is the primary underwriter. All material facts and particulars about the\npolicyholder, relevant to risk assessment, need to be revealed by the agent in his/\nher report. This means that matters of health, habits, occupation, income and\nfamily details need to be mentioned in the report.**b)** **Medical Examiner’s report**In many cases, the life to be insured has to be medically examined by a doctor who\nis empanelled by the insurance company. Details of physical features like height,\nweight, blood pressure, cardiac status etc. are recorded and mentioned by the\ndoctor in his report called the medical examiner’s report. The underwriter of the\ninsurance company thereby gets an account of the current health position of the\nlife to be insured.Many proposals are underwritten and accepted for insurance without calling for a\nmedical examination. They are known as non–medical cases. The medical\nexaminer’s report is required typically when the proposal cannot be considered\nunder non-medical underwriting because the sum proposed or the age of the\nproposed life is high or there are certain characteristics which are revealed in the\nproposal, which call for examination and report by a medical examiner.**c)** **Moral Hazard report**Moral Hazard is the likelihood that a client's behaviour might change as a result of\npurchasing a life insurance policy and such a change would increase the chance of\na loss. This is one factor that Life insurance underwriters take into account seriously\nwhen assessing the risk.Life insurance companies seek to guard against the possibility of individuals seeking\nto make a profit from the purchase of life insurance through actions like ending\none’s own life or the life of another. Life insurance underwriters would thus look\nfor any factors which might suggest such hazard. For this purpose, the company may\nrequire that a Moral Hazard Report has to be submitted by an official of the\ninsurance company.**Example**Vikas recently purchased a life insurance policy. He then decided to go on a skiing\nexpedition at a site which was touted to be one of the most dangerous skiing places", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Proposal Form:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_085", "metadata": {"file_size": 20690, "chunk_index": 85, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Proposal Form:", "Example", "Medical Examiner’s report", "Agent’s Confidential Report"]}}
{"chunk": "examiner’s report is required typically when the proposal cannot be considered\nunder non-medical underwriting because the sum proposed or the age of the\nproposed life is high or there are certain characteristics which are revealed in the\nproposal, which call for examination and report by a medical examiner.**c)** **Moral Hazard report**Moral Hazard is the likelihood that a client's behaviour might change as a result of\npurchasing a life insurance policy and such a change would increase the chance of\na loss. This is one factor that Life insurance underwriters take into account seriously\nwhen assessing the risk.Life insurance companies seek to guard against the possibility of individuals seeking\nto make a profit from the purchase of life insurance through actions like ending\none’s own life or the life of another. Life insurance underwriters would thus look\nfor any factors which might suggest such hazard. For this purpose, the company may\nrequire that a Moral Hazard Report has to be submitted by an official of the\ninsurance company.**Example**Vikas recently purchased a life insurance policy. He then decided to go on a skiing\nexpedition at a site which was touted to be one of the most dangerous skiing places\non earth. In the past he had refused to undertake such expeditions.164**B. Policy Stage Documentation****1.** **First Premium Receipt**An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR).\n**The FPR is the evidence that the policy contract has begun.** The first premium\nreceipt contains the following information:i. Name and address of the life assured\nii. Policy number\niii. Premium amount paid\niv. Method and frequency of premium payment\nv. Next due date of premium payment\nvi. Date of commencement of the risk\nvii. Date of final maturity of the policy\nviii.Date of payment of the last premium\nix. Sum assuredAfter the issue of the FPR, the insurance company will issue subsequent premium\nreceipts when it receives further premiums from the proposer. These receipts are\nknown as renewal premium receipts (RPR). The RPRs act as proof of payment in the\nevent of any disputes related to premium payment.**2.** **Policy Document**The policy document is the most important document associated with insurance. **It**\n**is evidence of the contract between the assured and the insurance company.** It\nis not the contract itself. If the policy document is lost by the policy holder, it does\nnot affect the insurance contract. The insurance company will issue a duplicate\npolicy without making any changes to the contract. The policy document has to be\nsigned by a competent authority and should be stamped according to the Indian\nStamp Act. Life insurers are very careful while designing the policy document\nbecause they bear onus of responsibility for any ambiguity or confusion that may\narise in the interpretation of its wordings.The standard policy document typically has three parts:**a)** **Policy Schedule**The policy schedule forms the first part. It is usually found on the face page of\nthe policy. The schedules of life insurance contracts would be generally similar.\nThey would normally contain the following information:165**Diagram 1:** **Policy document components**i. Name of the insurance companyii. Some common details of a policy are: Policy owner’s name and address\n Date of birth and age last birthday\n Plan and term of policy contract\n Sum assured\n Amount of premium\n Premium paying term\n Date of commencement, date of maturity and due date of last premium\n Whether policy is with or without profits\n Name of nominee\n Mode of premium payment – yearly; half yearly; quarterly; monthly; viadeduction from salary\n The policy number – which is the unique identity number of the policycontractiii. The insurer’s promise to pay. The events on the happening of which and theamounts that are promised to be paid. This forms the heart of the insurance\ncontractiv. The signature of the authorised signatory and policy stampv. The address of the local Insurance Ombudsman.**b)** **Standard Provisions**The second component of the policy document is made up of standard policy\nprovisions, such as relating to proof of age, premium payment grace period etc.\nwhich are normally present in all life insurance contracts. Some of these\nprovisions may not be applicable in the case of certain kinds of contracts, like\nterm, single premium or non-participating (with profits) policies. These standard\nprovisions define the rights and privileges and other conditions, which are\napplicable under the contract.**c)** **Specific Policy Provisions**The third part of the policy document consists of specific policy provisions that\nare specific to the individual policy contract. These may be printed on the face", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Moral Hazard report", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_086", "metadata": {"file_size": 20690, "chunk_index": 86, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Standard Provisions", "Policy Schedule", "Diagram 1:", "Specific Policy Provisions"]}}
{"chunk": " Name of nominee\n Mode of premium payment – yearly; half yearly; quarterly; monthly; viadeduction from salary\n The policy number – which is the unique identity number of the policycontractiii. The insurer’s promise to pay. The events on the happening of which and theamounts that are promised to be paid. This forms the heart of the insurance\ncontractiv. The signature of the authorised signatory and policy stampv. The address of the local Insurance Ombudsman.**b)** **Standard Provisions**The second component of the policy document is made up of standard policy\nprovisions, such as relating to proof of age, premium payment grace period etc.\nwhich are normally present in all life insurance contracts. Some of these\nprovisions may not be applicable in the case of certain kinds of contracts, like\nterm, single premium or non-participating (with profits) policies. These standard\nprovisions define the rights and privileges and other conditions, which are\napplicable under the contract.**c)** **Specific Policy Provisions**The third part of the policy document consists of specific policy provisions that\nare specific to the individual policy contract. These may be printed on the face\nof the document or inserted separately in the form of an attachment.166While standard policy provisions, like days of grace or non-forfeiture in case of\nlapse, are often statutorily provided under the contract, specific provisions are\ngenerally linked to the particular contract between the insurer and the insured.**Example**A clause precluding death due to pregnancy for a lady who is expecting at the time\nof writing the contract.**Test Yourself 1**What does a first premium receipt (FPR) signify? Choose the most appropriate\noption.I. Free-look period has ended\nII. It is evidence that the policy contract has begun\nIII. Policy cannot be cancelled now\nIV. Policy has acquired a certain cash value.**C. Policy conditions and privileges****Grace Period**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period. Every life insurance contract undertakes to pay the death benefit on\nthe condition that the premiums have been paid up to date and the policy is in\nforce. The “Grace Period” clause grants the policyholder an additional period of\ntime to pay the premium after it has become due.The premium however remains due and if the policyholder dies during this period,\nthe insurer deducts the premium from the death benefit. If premiums remain unpaid\neven after the grace period is over, the policy would then be considered lapsed and\nthe company is not under obligation to pay the death benefit. The only amount\npayable would be whatever is applicable under the non-forfeiture provisions.**Important****Lapse and Reinstatement/ Revival**We have already seen that a policy may be said to be in lapse condition if premium\nhas not been paid even during the days of grace. The good news is that most lapsed\nlife insurance policies can be reinstated [revived]. As per IRDAI Product Regulations,\na Non-Linked Policy can be revived within 5 years from the date of unpaid premium,\nwhereas a Linked Policy can be revived within 3 years.**Definition**Reinstatement is the process by which a life insurance company puts back into force\na policy that has either been terminated because of non-payment of premiums or\nhas been continued under one of the non-forfeiture provisions.A revival of the policy cannot however be an unconditional right of the insured. It\ncan be accomplished only under certain conditions:167**i.** **Revival application within specific time period:** The policy owner must\ncomplete the revival application within the time frame stated in the\nprovision for such reinstatement, say five years from the date of lapsation.**ii.** **Satisfactory evidence of continued insurability:** The insured must presentto the insurance company satisfactory evidence of continued insurability of\nthe insured. Not only must her health be satisfactory but other factors such\nas financial income and morals must not have deteriorated substantially.**iii.** **Payment of overdue premiums with interest:** The policy owner is requiredto make payment of all overdue premiums with interest from due date of\neach premium.**iv.** After having evaluated the evidence of continued insurability the insurermay decide to revive the policy as per existing terms and premium or even\noffer revival with increase in premium or reduced risk cover or both.**Perhaps the most significant of the above conditions is that which requires**\n**evidence of insurability at revival.** The type of evidence called for would depend\non the circumstances of each individual policy. If the policy has been in a lapsed", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Standard Provisions", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_087", "metadata": {"file_size": 20690, "chunk_index": 87, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Grace Period", "Specific Policy Provisions", "Test Yourself 1", "Example", "Payment of overdue premiums with interest:"]}}
{"chunk": "can be accomplished only under certain conditions:167**i.** **Revival application within specific time period:** The policy owner must\ncomplete the revival application within the time frame stated in the\nprovision for such reinstatement, say five years from the date of lapsation.**ii.** **Satisfactory evidence of continued insurability:** The insured must presentto the insurance company satisfactory evidence of continued insurability of\nthe insured. Not only must her health be satisfactory but other factors such\nas financial income and morals must not have deteriorated substantially.**iii.** **Payment of overdue premiums with interest:** The policy owner is requiredto make payment of all overdue premiums with interest from due date of\neach premium.**iv.** After having evaluated the evidence of continued insurability the insurermay decide to revive the policy as per existing terms and premium or even\noffer revival with increase in premium or reduced risk cover or both.**Perhaps the most significant of the above conditions is that which requires**\n**evidence of insurability at revival.** The type of evidence called for would depend\non the circumstances of each individual policy. If the policy has been in a lapsed\nstate for a very short period of time, the insurer may reinstate the policy without\nany evidence of insurability or may only require a simple statement from the insured\ncertifying that he is in good health.The company may however require a medical examination or other evidence of\ninsurability under certain circumstances:i. If the grace period has expired since long and the policy is in a lapsedcondition for say, nearly a year.ii. If the insurer has reason to suspect that a health or other problem may bepresent. Fresh medical examination may also be required if the sum assured\nor face amount of the policy is large.**Important**Revival of lapsed policies is an important service function that life insurers seek to\nactively encourage since policies in lapsed state may do little good to either insurer\nor policyholder.**Non-forfeiture provisions**The Insurance Act, 1938 (Section 113) protects policies (which have acquired\nsurrender value), from lapsation, by keeping them alive to the extent of paid-up\nsum assured even without payment of further premiums. This is because the\npolicyholder has a claim to the cash value accumulated under the policy.**a)** **Surrender values**Surrender value is the amount you stand to get when you decide to make a\npremature exit from the plan, i.e. when you have decided to completely withdraw\nor terminate the policy before its maturity.Life insurers normally have a chart that lists the surrender values at various times\nand also the method that will be used for calculating the surrender values. The168formula takes into account the type and plan of insurance, age of the policy and\nthe length of the policy premium-paying period.The actual amount of cash one gets in hand on surrender may be different from the\nsurrender value amount prescribed in the policy. The actual amount may differ on\naccount of any accrued bonuses, recoveries etc.**Guaranteed Surrender Value [GSV]:** The law in India as per IRDAI Guidelines\n(revised in 2019) provides for a Guaranteed Surrender Value [GSV] to be payable if\nall premiums have been paid for at least two consecutive years. This Value arrived\nas a percentage (say 30%) of premiums paid is called Guaranteed Surrender Value.\nThe value depends on the duration of premium paid. The GSV is required to be\nmentioned in the policy document.**b)** **Policy loans**Life insurance policies that accumulate a cash value also have a provision to grant\nthe policyholder the right to borrow money from the insurer by using the cash value\nof the policy as a security for the loan. The policy loan is usually limited to a\npercentage of the policy’s surrender value (say 90%). Note that the policyholder\nborrows from his own account. He or she would have been eligible to get the amount\nif the policy had been surrendered. In that case the insurance would have been\nterminated.Insurers charge interest on policy loans, which are payable semi-annually or\nannually. Although loan and interest are repayable periodically, If the loan has not\nbeen repaid, the insurer deducts the amount of outstanding (unpaid) loan and\ninterest from the policy benefit that is payable. A loan provides relief to\npolicyholder in case of financial emergencies while keeping the insurance alive.Since the loan is granted on the policy being kept as security, the policy has to be\nassigned (explained in later para) in favour of the insurer. Where the policyholder\nhas nominated (explained in later para) someone to receive the money in the event\nof death of the insured, this nomination shall not be cancelled but the nominee’s", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e168", "section": "Revival application within specific time period:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_088", "metadata": {"file_size": 20690, "chunk_index": 88, "chunk_tokens": 1011, "has_examples": false, "has_tables": false, "key_concepts": ["Policy loans", "Non-forfeiture provisions", "Payment of overdue premiums with interest:", "Important", "Satisfactory evidence of continued insurability:"]}}
{"chunk": "the policyholder the right to borrow money from the insurer by using the cash value\nof the policy as a security for the loan. The policy loan is usually limited to a\npercentage of the policy’s surrender value (say 90%). Note that the policyholder\nborrows from his own account. He or she would have been eligible to get the amount\nif the policy had been surrendered. In that case the insurance would have been\nterminated.Insurers charge interest on policy loans, which are payable semi-annually or\nannually. Although loan and interest are repayable periodically, If the loan has not\nbeen repaid, the insurer deducts the amount of outstanding (unpaid) loan and\ninterest from the policy benefit that is payable. A loan provides relief to\npolicyholder in case of financial emergencies while keeping the insurance alive.Since the loan is granted on the policy being kept as security, the policy has to be\nassigned (explained in later para) in favour of the insurer. Where the policyholder\nhas nominated (explained in later para) someone to receive the money in the event\nof death of the insured, this nomination shall not be cancelled but the nominee’s\nright will be affected to the extent of the insurer’s interest in the policy.**Example**Arjun bought a life insurance policy wherein the total death claim payable under\nthe policy was Rs. 2.5 lakhs. Arjun’s total outstanding loan and interest under the\npolicy amounts to Rs. 1.5 lakhs. Hence in the event of Arjun’s death, the nominee\nwill be eligible to get the balance of Rs. 1 lakh.**Special policy provisions and endorsements****a)** **Nomination**i. Under Section 39 of the Insurance Act 1938, the holder of a policy on his/her own life may nominate the person or persons to whom the money secured\nby the policy shall be paid in the event of his/her death.\nii. The life assured can **nominate one or more than one person** as nominees.\niii. Nominees are entitled for **valid discharge** and have to **hold the money as a****trustee** on behalf of those entitled to it.\niv. Nomination can be done either **at the time the policy is bought or later** atany time before the maturity of the Policy.169v. Nomination may be incorporated in the text of the Policy itself or by anendorsement on the Policy. Nominations need be communicated to the\ninsurer and registered by the insurer in the records relating to the Policy.\nvi. Nomination can be cancelled or changed at any time before Policy matures,by an endorsement or a further endorsement or a will as the case may be.**Important**Nomination only gives the nominee the right to receive the policy monies from\nthe insurer in the event of the death of the life assured. However, the money\nwould be belonging to the legal heir only. **A nominee does not have any right**\n**to the whole (or part) of the claim.** However vide Section 39(7) of Insurance\nAct,1938, in respect of all policies maturing for payment after 26 [th] December,\n2014, nomination in favour of parents, spouse, children or spouse and children\nby the owner of the policy on his/ own life makes the nominees beneficially\nentitled to the amount payable by the insurance company.Where the nominee is a minor, the policy holder needs to appoint an appointee.\nThe appointee needs to sign the policy document to show his or her consent to\nacting as an appointee. The appointees lose their status when the nominee\nreaches majority age. The policy holder can change the appointee at any time.\nIf no appointee is given, and the nominee is a minor, then on the death of the\nlife assured, the death claim is paid to the legal heirs of the policyholder.Where more than one nominee is appointed, the death claim will be payable to\nthem jointly, or to the survivor or survivors. Nominations made after the\ncommencement of the policy have to be intimated to the insurers to be\neffective.Section 39(11) of the Insurance Act says that where a policyholder dies after the\nmaturity of the policy but the proceeds and benefit of his policy has not been\nmade to him because of his death, his nominee shall be entitled to the proceeds\nand benefit of his policy.**Diagram 2:** **Provisions related to nomination****b)** **Assignment**Since life insurance policy carries a promise or a debt that the insurance\ncompany owes the insured, it is considered a security for money or property.170We have seen that loan is advanced against by the insurers against the surrender\nvalue of the policy. Similarly, many financial institutions including banks\nadvance loan against the security of the insurance policy by having it assigned", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_089", "metadata": {"file_size": 20690, "chunk_index": 89, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Special policy provisions and endorsements", "Example", "Provisions related to nomination", "Important", "A nominee does not have any right"]}}
{"chunk": "reaches majority age. The policy holder can change the appointee at any time.\nIf no appointee is given, and the nominee is a minor, then on the death of the\nlife assured, the death claim is paid to the legal heirs of the policyholder.Where more than one nominee is appointed, the death claim will be payable to\nthem jointly, or to the survivor or survivors. Nominations made after the\ncommencement of the policy have to be intimated to the insurers to be\neffective.Section 39(11) of the Insurance Act says that where a policyholder dies after the\nmaturity of the policy but the proceeds and benefit of his policy has not been\nmade to him because of his death, his nominee shall be entitled to the proceeds\nand benefit of his policy.**Diagram 2:** **Provisions related to nomination****b)** **Assignment**Since life insurance policy carries a promise or a debt that the insurance\ncompany owes the insured, it is considered a security for money or property.170We have seen that loan is advanced against by the insurers against the surrender\nvalue of the policy. Similarly, many financial institutions including banks\nadvance loan against the security of the insurance policy by having it assigned\nit in their favour.The term assignment ordinarily refers to transfer of property by writing in favour\nof another person.The assignment of a life insurance policy implies the act of transferring the\nrights, title and interest in the policy (as property) from one person to another.\nThe person who transfers the rights is called **assignor** and the person to whom\nproperty is transferred is called **assignee** . On assignment, the ownership of the\npolicy changes and hence nomination is cancelled, except when assignment is\nmade to the insurance company for a policy loan.There are two types of assignments.**Diagram 3:** **Types of Assignment**|Conditional Assignment|Absolute Assignment|\n|---|---|\n|Conditional assignment<br>provides that the policy<br>shall revert back to the<br>life assured on his or<br>her surviving the date of<br>maturity or on death of<br>the assignee.| Absolute assignment provides that all rights, title and<br>interest which the assignor has in the policy are<br>transferred to the assignee without reversion to the<br>former or his/ her estate in any event.<br> The policy thus vests absolutely with the assignee. The<br>latter can deal with the policy in whatever manner he or<br>she likes without the consent of the assignor.|Absolute assignment is more commonly seen in many commercial situations\nwhere the policy is typically mortgaged against a debt assumed by the\npolicyholder, like a housing loan.**Conditions for valid assignment**Let us now look at the conditions that are necessary for a valid assignment.i. The assignor must have **absolute right and title or assignable interest** tothe policy being assigned.ii. The assignment should **not be opposed to any law in force** .iii. Assignee can do another assignment, but cannot do nomination becauseassignee is not the life assured.**Important** : A life insurance policy can be assigned wholly or partially The assignment must be signed by the transferor or assignor or dulyauthorized agent and attested by at least one witness.171 The transfer of title has to be specifically set forth in the form of anendorsement on the policy or a separate instrument.\n The policyholder must give notice of the assignment to the insurer,without which the assignment will not be valid. Section 38(2) specifies that an insurer may accept the assignment, ordecline the same, if it has sufficient reason to believe that such\nassignment is not bona fide or is not in the interest of the policyholder\nor in public interest or is for the purpose of trading of insurance policy. However, the insurer shall, before refusing to act upon the endorsement,record in writing the reasons for such refusal and communicate the same\nto the policyholder not later than thirty days from the date of the\npolicyholder giving notice of such transfer or assignment.**Diagram 4:** **Provisions related to assignment of insurance policies****Commonly extended privileges to policyholders**a) **Duplicate Policy:**A life insurance policy document is only an evidence of a promise. Loss or\ndestruction of the policy document does not in any way absolve the company of\nits liability under the contract. Life insurance companies generally have\nstandard procedures to be followed in case of loss of the policy document.Normally the office would examine the case to see if there is any reason to doubt\nthe alleged loss. Satisfactory proof may need to be produced that the policy has\nbeen lost and not dealt with in any manner. Generally the claim may be settled", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_090", "metadata": {"file_size": 20690, "chunk_index": 90, "chunk_tokens": 1002, "has_examples": true, "has_tables": true, "key_concepts": ["Commonly extended privileges to policyholders", "Types of Assignment", "Provisions related to nomination", "Conditions for valid assignment", "Important"]}}
{"chunk": "assignment is not bona fide or is not in the interest of the policyholder\nor in public interest or is for the purpose of trading of insurance policy. However, the insurer shall, before refusing to act upon the endorsement,record in writing the reasons for such refusal and communicate the same\nto the policyholder not later than thirty days from the date of the\npolicyholder giving notice of such transfer or assignment.**Diagram 4:** **Provisions related to assignment of insurance policies****Commonly extended privileges to policyholders**a) **Duplicate Policy:**A life insurance policy document is only an evidence of a promise. Loss or\ndestruction of the policy document does not in any way absolve the company of\nits liability under the contract. Life insurance companies generally have\nstandard procedures to be followed in case of loss of the policy document.Normally the office would examine the case to see if there is any reason to doubt\nthe alleged loss. Satisfactory proof may need to be produced that the policy has\nbeen lost and not dealt with in any manner. Generally the claim may be settled\non the claimant furnishing an indemnity bond with or without surety.If payment is shortly due and the amount to be paid is high, the office may also\ninsist that an advertisement be placed in a national paper with wide circulation,\nreporting the loss. A duplicate policy may be issued on being sure that there is\nno objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year of172the policy, except for change in the mode of premium or alterations which are\nof a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a separate\npaper. Other alterations, which require a material change in policy conditions,\nmay require the cancellation of existing policies and issue of new policies.Some of the main types of alterations that are permitted arei. Change in certain classes of insurance or term [where risk is not increased]\nii. Reduction in the sum assured\niii. Change in the mode of payment of premium\niv. Change in the date of commencement of the policy\nv. Splitting up of the policy into two or more policies\nvi. Removal of an extra premium or restrictive clause\nvii. Change from without profits to with profits plan\nviii. Correction in name\nix. Settlement option for payment of claim and grant of double accident benefitThese alterations generally do not involve an increase in the risk. There are\nother alterations in policies that are not allowed. These may be alterations that\nhave the effect of lowering the premium. Examples are extension of the\npremium paying term; change from with profit to without profit plans; change\nfrom one class of insurance to another, where it increases the risk: and increase\nin the sum assured.**Test Yourself 2**Under what circumstances would the policyholder need to appoint an appointee?I. Insured is minorII. Nominee is a minor\nIII. Policyholder is not of sound mind\nIV. Policyholder is not married**Summary**Matters of health, habits and occupation, income and family details need to be\nmentioned by the agent in the agent’s report.Details pertaining to physical features like height, weight, blood pressure,\ncardiac status etc. are recorded and mentioned by the doctor in his/ her report\ncalled the medical examiner’s report.Moral hazard is the likelihood that a client's behaviour might change as a result\nof purchasing a life insurance policy and such a change would increase the\nchance of a loss.An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR). The FPR is the evidence that the policy contract has\nbegun.173The policy document is the most important document associated with insurance.\nIt is the evidence of the contract between the assured and the insurancecompany.The standard policy document typically has three parts which are the policy\nschedule, standard provisions and the policy’s specific provisions.The grace period clause grants the policyholder an additional period of time to\npay the premium after it has become due.Reinstatement is the process by which a life insurance company puts back into\nforce a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A policy loan is different from an ordinary commercial loan in two respects,\nfirstly the policy owner is not legally obligated to repay the loan and the insurer", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "f172", "section": "Diagram 4:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_091", "metadata": {"file_size": 20690, "chunk_index": 91, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Commonly extended privileges to policyholders", "Alteration", "Duplicate Policy:", "Test Yourself 2"]}}
{"chunk": "cardiac status etc. are recorded and mentioned by the doctor in his/ her report\ncalled the medical examiner’s report.Moral hazard is the likelihood that a client's behaviour might change as a result\nof purchasing a life insurance policy and such a change would increase the\nchance of a loss.An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR). The FPR is the evidence that the policy contract has\nbegun.173The policy document is the most important document associated with insurance.\nIt is the evidence of the contract between the assured and the insurancecompany.The standard policy document typically has three parts which are the policy\nschedule, standard provisions and the policy’s specific provisions.The grace period clause grants the policyholder an additional period of time to\npay the premium after it has become due.Reinstatement is the process by which a life insurance company puts back into\nforce a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A policy loan is different from an ordinary commercial loan in two respects,\nfirstly the policy owner is not legally obligated to repay the loan and the insurer\nneed not perform a credit check on the insured.Nomination is where the life assured proposes the name of the person(s) to\nwhich the sum assured should be paid by the insurance company after their\ndeath.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except for\nsome simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period\n10. Policy lapse\n11. Policy revival\n12. Surrender value13. Nomination\n14. Assignment**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.174## CHAPTER L-08## LIFE INSURANCE UNDERWRITING**Chapter Introduction**A life insurance agent’s work does not stop once a proposal is secured from a\nprospective customer. The proposal must also be accepted by the insurance\ncompany and result in a policy.Every life insurance proposal has to pass through a gateway where the life insurer\ndecides whether to accept the proposal and if so, on what terms. In this chapter we\nshall know more about the process of underwriting and the elements involved in theprocess.**Learning Outcomes**175**A.** **Underwriting – Basic concepts****1.** **Underwriting purpose**Underwriting has two purposesi. To assess the risk, classify the risk and decide the terms of acceptance or todecline the risk.\nii. To prevent anti-selection against the insurer**Definition**The term **underwriting** refers to the process of evaluating each proposal for life\ninsurance in terms of the degree of risk it represents and then deciding whether or\nnot to grant insurance and on what terms.**Anti-selection** is the tendency of people, who suspect or know that their chance of\nexperiencing a loss is high, to seek out insurance with a view to gain in the process.**Example**If life insurers were to be not selective about whom they offered insurance, there\nis a chance that people with serious ailments like heart problems or cancer, who\ndid not expect to live long, would seek to buy insurance.In other words, if an insurer did not exercise underwriting discretion, it would be\nselected against and may suffer losses in the process.**2.** **Equity among risks**The term “Equity” means that applicants who are exposed to similar degrees of risk\nmust be placed in the same premium class. The Mortality table, used to determine\npremiums, represents the mortality experience of standard lives or average risks.\nThey include the vast majority of individuals who propose to take life insurance.**a)** **Risk classification**To usher equity, the underwriter engages in a process known as **risk classification**\ni.e. individual lives are categorised and assigned to different risk classes depending\non the degree of risks they pose. There are four such risk classes.**Diagram 1:** **Risk classification**176**i.** **Standard lives**\nThese consist of those whose anticipated mortality corresponds to the standard\nlives represented by the mortality table.**ii.** **Preferred risks**\nThese are the ones whose anticipated mortality is significantly lower than", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e13", "section": "Key Terms", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_092", "metadata": {"file_size": 20690, "chunk_index": 92, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Underwriting purpose", "Answer 2", "Equity among risks", "Standard lives"]}}
{"chunk": "is a chance that people with serious ailments like heart problems or cancer, who\ndid not expect to live long, would seek to buy insurance.In other words, if an insurer did not exercise underwriting discretion, it would be\nselected against and may suffer losses in the process.**2.** **Equity among risks**The term “Equity” means that applicants who are exposed to similar degrees of risk\nmust be placed in the same premium class. The Mortality table, used to determine\npremiums, represents the mortality experience of standard lives or average risks.\nThey include the vast majority of individuals who propose to take life insurance.**a)** **Risk classification**To usher equity, the underwriter engages in a process known as **risk classification**\ni.e. individual lives are categorised and assigned to different risk classes depending\non the degree of risks they pose. There are four such risk classes.**Diagram 1:** **Risk classification**176**i.** **Standard lives**\nThese consist of those whose anticipated mortality corresponds to the standard\nlives represented by the mortality table.**ii.** **Preferred risks**\nThese are the ones whose anticipated mortality is significantly lower than\nstandard lives and hence could be charged a lower premium.**iii.** **Substandard lives**\nThese are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable cost.\nSometimes an individual’s proposal may also be temporarily declined if he or\nshe has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes\ninformation gathering by an agent or company representative to decide whether\nan applicant is suitable for granting insurance coverage. The agent plays a\ncritical role as primary underwriter. He is in the best position to know the life\nto be insured.Many insurance companies may require that agents complete a statement or a\nconfidential report, asking for specific information, opinion and\nrecommendations to be provided by the agent with respect to the proposed life.**Fraud monitoring and role of agent as primary underwriter**Much of the decision with regard to acceptance of a risk depends on the facts\nthat have been disclosed by the proposer in the proposal form. It may be difficult\nfor an underwriter who is sitting in the underwriting department to know\nwhether these facts are untrue and have been fraudulently misrepresented with\ndeliberate intent to deceive.The agent plays a significant role here. He or she is in the best position to ensure\nthat the facts that have been represented are true, due to his/ her direct and\npersonal contact with the proposed life.177**b)** **Underwriting at the Department level**The main level of Underwriting is at the Department or Office level. It involves\nspecialists and persons who consider all the relevant data on the case to decide\nwhether to accept a proposal for Life insurance and on what terms.**4.** **Methods of underwriting****Diagram 2:** **Methods of Underwriting**Underwriters may use two types of methods for the purpose:|Judgment Method|Numerical Method|\n|---|---|\n|~~Under~~<br>~~this~~<br>~~method~~<br>subjective judgment is used,<br>especially when deciding on<br>a case that is complex.<br>|~~Under this method underwriters assign positive~~<br>rating points for all negative or adverse factors<br>(negative points for any positive or favourable<br>factors).<br>|\n|~~**Example:**Deciding whether~~<br>life insurance can be given to<br>a <br>person<br>staying<br>in<br>a <br>disturbed country/ area.<br>|~~**Example:** A person with history of cardiac~~<br>ailments and/ or early deaths in the family may<br>be assigned positive points. The total number of<br>points so assigned will help an underwriter in<br>deciding the extent of risk involved.<br>|", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Equity among risks", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_093", "metadata": {"file_size": 20690, "chunk_index": 93, "chunk_tokens": 932, "has_examples": true, "has_tables": true, "key_concepts": ["Equity among risks", "Underwriting at the Department level", "Methods of Underwriting", "Standard lives", "Methods of underwriting"]}}
{"chunk": "whether to accept a proposal for Life insurance and on what terms.**4.** **Methods of underwriting****Diagram 2:** **Methods of Underwriting**Underwriters may use two types of methods for the purpose:|Judgment Method|Numerical Method|\n|---|---|\n|~~Under~~<br>~~this~~<br>~~method~~<br>subjective judgment is used,<br>especially when deciding on<br>a case that is complex.<br>|~~Under this method underwriters assign positive~~<br>rating points for all negative or adverse factors<br>(negative points for any positive or favourable<br>factors).<br>|\n|~~**Example:**Deciding whether~~<br>life insurance can be given to<br>a <br>person<br>staying<br>in<br>a <br>disturbed country/ area.<br>|~~**Example:** A person with history of cardiac~~<br>ailments and/ or early deaths in the family may<br>be assigned positive points. The total number of<br>points so assigned will help an underwriter in<br>deciding the extent of risk involved.<br>|\n|~~In such situations, the~~<br>department may get the<br>expert opinion of a medical<br>doctor who is also called a<br>medical referee.|~~The sum total of these positive/negative points,~~<br>and/or is referred to as Extra Mortality Rating<br>(EMR). Higher EMR indicates that the life is<br>substandard.<br>If<br>the<br>EMR<br>is<br>very<br>high,<br>underwriters may decline insurance.|**Underwriting Decisions**Let us now consider the various kinds of decisions that underwriters may take with\nregard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. This ratingindicates that the risk is accepted at the same rate of premium as would\napply to an ordinary or standard life.178**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing with thelarge majority of sub-standard risks. It involves charging an extra over the\ntabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount of\nbenefit it has to pay in the event of a claim.\n**Example: Consider the case of an insured who** has suffered and recovered\nfrom a certain disease like TB. Imposition of Lien would imply that if this\nperson were to die from a relapse of the TB, within a given period, only a\ndecreased amount of death benefit may be payable.**d)** **Acceptance with a restrictive clause:** For certain kinds of hazards arestrictive clause may be applied which limits death benefit in the event of\ndeath under certain circumstances.**Example** is a pregnancy clause imposed on pregnant ladies that limits\ninsurance payable in the event of pregnancy related deaths occurring within\nsay three months of delivery.\n**e)** **Decline or postpone:** Finally, a life insurance underwriter may decide todecline or reject a proposal for insurance. This would happen when there\nare certain health/ other features which are so adverse that they\nconsiderably increase the risk.\n**Example:** An individual who suffers from cancer and has little chance of\nremission, would be a candidate for rejection,Similarly in some cases it may be prudent to postpone acceptance of the risk\nuntil such time as the situation has improved and become more favourable.179**Example**A lady who has just had a hysterectomy operation may be asked to wait for a few\nmonths before insurance on her life is allowed, to allow any post operation\ncomplications that may have arisen to disappear.**Test Yourself 1**Which of the following cases is likely to be declined or postponed by a life insurer?I. A healthy 18 year old\nII. A sports person\nIII. A person suffering from AIDS\nIV. A housewife with no income of her own**B.** **Non-medical underwriting****1.** **Non-medical underwriting**A large number of life insurance proposals may typically get selected for insurance\nwithout conducting a medical examination to check the insurability of a life to be\ninsured. Such cases are termed as **non-medical proposals** .In view of multiple reasons including the costs involved, in some types of policies,\nLife insurers grant insurance without insisting on a medical examination**2.** **Conditions for non-medical underwriting**However non-medical underwriting calls for conditions like applicability to certain\nclass of lives, certain plans of insurance, certain upper limits of sum insured, entry", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Methods of underwriting", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_094", "metadata": {"file_size": 20690, "chunk_index": 94, "chunk_tokens": 1006, "has_examples": true, "has_tables": true, "key_concepts": ["Example: Consider the case of an insured who", "Methods of Underwriting", "Acceptance with a restrictive clause:", "Methods of underwriting", "Acceptance with a lien on the sum assured:"]}}
{"chunk": "months before insurance on her life is allowed, to allow any post operation\ncomplications that may have arisen to disappear.**Test Yourself 1**Which of the following cases is likely to be declined or postponed by a life insurer?I. A healthy 18 year old\nII. A sports person\nIII. A person suffering from AIDS\nIV. A housewife with no income of her own**B.** **Non-medical underwriting****1.** **Non-medical underwriting**A large number of life insurance proposals may typically get selected for insurance\nwithout conducting a medical examination to check the insurability of a life to be\ninsured. Such cases are termed as **non-medical proposals** .In view of multiple reasons including the costs involved, in some types of policies,\nLife insurers grant insurance without insisting on a medical examination**2.** **Conditions for non-medical underwriting**However non-medical underwriting calls for conditions like applicability to certain\nclass of lives, certain plans of insurance, certain upper limits of sum insured, entry\nage limits, maximum term of insurance etc.to be followed.\n**3.** **Rating factors in underwriting**Rating factors refer to various aspects related to financial situation, life style,\nhabits, family history, personal history of health and other personal circumstances\nin the prospective insured’s life that may pose a hazard and increase the risk.\nUnderwriting involves identifying these hazards and their likely impact and\nclassifying the risk accordingly.Rating factors may be broadly divided into two – those which contribute to moral\nhazard and those which contribute to physical [medical] hazards. Life insurance\ncompanies often divide their underwriting into categories accordingly. Factors like\nincome, occupation, lifestyle and habits, which contribute to moral hazard, are\nassessed as part of **financial underwriting**, while medical aspects of health fall\nunder **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face some\nproblems with respect to moral hazard. This is because many women in Indian\nsociety are victims of male domination and social exploitation. Evils like dowry\ndeaths exist even today. Longevity of women can also be affected from problems\nconnected with pregnancy.180Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only to\nthose who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**\nMinors have no contracting power of their own. Hence a proposal on the life of\na minor has to be submitted by another person who is related to the minor in\nthe capacity of a parent or legal guardian. It would also be necessary to ascertain\nthe need for insurance, since minors usually have no earned income of their\nown. Three conditions would generally be sought when considering insurance for\nminors:**i.** **Whether they have a properly developed physique**Poor physique can be a result of malnutrition or other health problems posing\ngrave risks.\n**ii.** **Proper family history and personal history**If there are adverse indicators here, it may pose risks.\n**iii.** **Whether the family is adequately insured**It is necessary to check if the family has a culture of insurance. One must be\non guard if no other member of the minor’s family has been insured. Amount\nof insurance is generally linked to that of parents.\n**c)** **Large sums assured**\nAn underwriter needs to be wary when the amount of insurance is very large\nrelative to annual income of the proposed insured. Generally sum assured may\nbe assumed to be around ten to twelve times one’s annual income. If the ratio\nis much higher than this, it raises the possibility of selection against the insurer.**Example**\nIf an individual has an annual income of Rs. 5 lakhs and proposes for a life\ninsurance cover of Rs. 3 crores, it raises a cause for concern.Typically concerns can arise in such instances because of the possibility that\nsuch a large amount of insurance is being proposed in anticipation of suicide or\nas a result of expected deterioration in health. A third reason for such large\nsums could be excessive misselling by the sales person.Large sums assured would also mean premiums increasing in proportion and raise\nthe question of whether the payment of such premiums would be continued. In\ngeneral, the premium payable should be within one third of an individual’s\nannual income**d)** **Age**\nMortality risk is closely related to age. The underwriter needs to be careful when\nconsidering insurance for people of advanced ages.**Example**\nIf the insurance is being proposed for the first time after age 50, there is a need\nto suspect moral hazard and enquire about why such insurance was not taken", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Test Yourself 1", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_095", "metadata": {"file_size": 20690, "chunk_index": 95, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Minors", "Test Yourself 1", "Non-medical underwriting", "Example", "Female insurance"]}}
{"chunk": "be assumed to be around ten to twelve times one’s annual income. If the ratio\nis much higher than this, it raises the possibility of selection against the insurer.**Example**\nIf an individual has an annual income of Rs. 5 lakhs and proposes for a life\ninsurance cover of Rs. 3 crores, it raises a cause for concern.Typically concerns can arise in such instances because of the possibility that\nsuch a large amount of insurance is being proposed in anticipation of suicide or\nas a result of expected deterioration in health. A third reason for such large\nsums could be excessive misselling by the sales person.Large sums assured would also mean premiums increasing in proportion and raise\nthe question of whether the payment of such premiums would be continued. In\ngeneral, the premium payable should be within one third of an individual’s\nannual income**d)** **Age**\nMortality risk is closely related to age. The underwriter needs to be careful when\nconsidering insurance for people of advanced ages.**Example**\nIf the insurance is being proposed for the first time after age 50, there is a need\nto suspect moral hazard and enquire about why such insurance was not taken\nearlier.181We must also note that chances of occurrence of degenerative diseases like\ndiseases of the heart and kidney failure increase with age and become higher at\nolder ages. Life insurers may also seek for some special reports when proposals\nare submitted for high sums assured/ advanced ages or a combination of both.**Example**\nExamples of such reports are ECG; EEG; X-Ray of the chest and Blood Sugar test.\nThese tests may reveal deeper insights about the health of the proposed life\nthan the answers given in the proposal or an ordinary medical examination can\nprovide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of the\nlife proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus\nartistes, scaffolding workers, demolition experts and film stunt artistes.**ii.** **Health hazards** arise when the nature of the job is such as to give rise to\npossibility of medical impairment. There are various kinds of health hazards.182 Some jobs like that of **rickshaw pullers** involve a lot of physical strain andimpact the respiratory system. Situations where one may be exposed to **toxic substances** like mining dustor carcinogenic substances (that cause cancer) like chemicals and nuclear\nradiation. Working in **high pressure environments** like underground tunnels or deepsea, can cause acute decompression sickness. Finally, **overexposure** to certain job situations (like sitting crampedbefore a computer or working in a high noise setting) can impair\nfunctioning of certain body parts in the longer run.**iii.** **Moral hazard** can arise when a job involves proximity or can cause\npredisposition towards criminal elements or to drugs and alcohol. An example\nis that of a dancer in a nightclub or an enforcer in a liquor bar or the\n‘bodyguard’ of a businessman with suspected criminal links. Again the job\nprofiles of certain individuals like superstar entertainers may lead them to\nintoxicating lifestyles, which sometimes come to tragic ends.When an occupation falls under any such hazardous category, the applicant for\ninsurance may need to complete an occupational questionnaire that asks for\nspecific details of the job, duties involved and risks exposed to. A rating may\nalso be imposed for occupation in the form of a flat extra (for example Rupees\ntwo per thousand sums assured.) Such extra may be reduced or removed when\nthe insured’s occupation changes.**f)** **Lifestyle and habits**Lifestyle and habits are terms, covering a wide range of individual lifestyle\ncharacteristics, which may be brought out in the agent’s confidential reports\nand moral hazard reports, suggesting an exposure to risk. In particular three\nfeatures are important:**Smoking and tobacco use** : Use of tobacco is not only a risk in itself but also\ncontributes to increasing other medical risks. Companies charge differential", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_096", "metadata": {"file_size": 20690, "chunk_index": 96, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Moral hazard", "Health hazards", "Occupation", "Accidental hazards"]}}
{"chunk": "predisposition towards criminal elements or to drugs and alcohol. An example\nis that of a dancer in a nightclub or an enforcer in a liquor bar or the\n‘bodyguard’ of a businessman with suspected criminal links. Again the job\nprofiles of certain individuals like superstar entertainers may lead them to\nintoxicating lifestyles, which sometimes come to tragic ends.When an occupation falls under any such hazardous category, the applicant for\ninsurance may need to complete an occupational questionnaire that asks for\nspecific details of the job, duties involved and risks exposed to. A rating may\nalso be imposed for occupation in the form of a flat extra (for example Rupees\ntwo per thousand sums assured.) Such extra may be reduced or removed when\nthe insured’s occupation changes.**f)** **Lifestyle and habits**Lifestyle and habits are terms, covering a wide range of individual lifestyle\ncharacteristics, which may be brought out in the agent’s confidential reports\nand moral hazard reports, suggesting an exposure to risk. In particular three\nfeatures are important:**Smoking and tobacco use** : Use of tobacco is not only a risk in itself but also\ncontributes to increasing other medical risks. Companies charge differential\nrates today for smokers and non-smokers and users of other forms of tobacco\nusage like _gutkha_ and _paan masala_ .**Alcohol:** Drinking alcohol occasionally or in modest quantities is not considered\na hazard. However, long term heavy drinking can impair liver functioning, affect\nthe digestive system and lead to mental disorders. Alcoholism is also linked with\naccidents, violence, family abuse, depression and suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants. Some\nof these are even illegal and their use indicates criminal disposition and moral\nhazard.183**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical underwriting.\nThey may often call for a medical examiner’s report. Let us look at some of the\nfactors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision****a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to\nanother, say from parents to children.**ii.** **Average longevity of the family** : When the parents have died early onaccount of certain diseases like heart trouble or cancer, it may be a pointer\nthat the offspring may also not live long.**iii.** **Family environment** : Thirdly, the environment in which the family lives cancause exposure to infection and other risks.Life insurers have thus to be careful when entertaining cases of individuals with\nadverse family history. They may call for other reports and may impose an extra\nmortality rating in such cases.184**b)** **Personal history**Personal history refers to past impairments of various systems of the human body\nwhich the life to be insured has suffered from. The proposal form for life\ninsurance typically contains a set of questions which enquire whether the life to\nbe insured has been under treatment for any of these.The major kinds of ailments that are considered by the underwriters include\nCardiovascular diseases, diseases of the respiratory system, malignant tumours/\ncancer, ailments of the renal system, impairments of the endocrine system,\ndiseases of the digestive system like gastric ulcers and cirrhosis of the liver and\ndiseases of the nervous system.**c)** **Personal characteristics**These can also be significant indicators of the tendency to disease.**i.** **Build**A person’s build consists of his height, weight, chest and girth of the abdomen.\nFor given age and height, there is a standard weight that has been defined and\nif the weight is too high or low in relation to this standard weight, we can say\nthat the person is overweight or underweight.Similarly, it is expected that the chest should be expanded at least by four\ncentimetres in a normal person and that the abdominal girth should not be more\nthan one’s expanded chest.**ii.** **Blood pressure**Another indicator is a person’s blood pressure. There are two measures of this Systolic DiastolicWhen the actual readings are much higher than the normal values, we say that", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Lifestyle and habits", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_097", "metadata": {"file_size": 20690, "chunk_index": 97, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Substance abuse", "Alcohol:", "Average longevity of the family", "Lifestyle and habits", "Blood pressure"]}}
{"chunk": "Cardiovascular diseases, diseases of the respiratory system, malignant tumours/\ncancer, ailments of the renal system, impairments of the endocrine system,\ndiseases of the digestive system like gastric ulcers and cirrhosis of the liver and\ndiseases of the nervous system.**c)** **Personal characteristics**These can also be significant indicators of the tendency to disease.**i.** **Build**A person’s build consists of his height, weight, chest and girth of the abdomen.\nFor given age and height, there is a standard weight that has been defined and\nif the weight is too high or low in relation to this standard weight, we can say\nthat the person is overweight or underweight.Similarly, it is expected that the chest should be expanded at least by four\ncentimetres in a normal person and that the abdominal girth should not be more\nthan one’s expanded chest.**ii.** **Blood pressure**Another indicator is a person’s blood pressure. There are two measures of this Systolic DiastolicWhen the actual readings are much higher than the normal values, we say that\nthe person has high blood pressure or hypertension. When it is too low, it is\ntermed as hypotension. The former can have serious consequences.**iii.** **Urine – Specific gravity**Finally, a reading of the specific gravity of one’s urine can indicate the balance\namong various salts in the urinary system. It can indicate any malfunctioning of\nthe system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought it\nin April 2013. You and your insurance company agree to change the policy to\nofficially start it from April, 2013. In this case, you have backdated the policy.\nUsually, no interest is charged if the policy is backdated by less than a month.Backdating is done for the following purposes:185(i) **Getting a lower premium based on age:** While issuing the policy, insurersconsider the nearest age of the policyholder. It means if you are 32 years\nand 7 months old, the insurer will consider your age as 33 years. This nearest\nage may put you in a higher premium slab. However, if you backdate the\npolicy by 2 months, the insurer will consider your age as 32 years and 5\nmonths only. Now you will be paying lower premiums based on a plan for a\n32-year old.(ii) **Set the timing of payment:** There are specific professions where theincome flow is not steady. In such a scenario if an individual accidently buys\na life insurance policy in its off-season then the policy can be backdated to\nthe period of maximum earnings. For instance, a farmer may have a\nseasonal income. He would prefer to make insurance payments only after\nhe has received his crop proceedings. In this case, a farmer could backdate\nthe policy to start it in the harvest season.(iii) **To coincide with special dates:** You can backdate the policy to coincidewith your important dates, such as birthday and anniversary. It keeps easy\nfor you to remember your premium due date.(iv) **Early maturity claims** : Backdating reduces the tenure of a policy andfacilitates early maturity. For instance, if a 30-year life insurance cover\nbought on March 2000 is backdated to April 1999, the policy would mature\non April, 2029 instead of March 2030. In case of endowment policies, this\ncould be beneficial as maturity benefits accrue earlier.**Test Yourself 3**Why is heredity history of importance in medical underwriting?I. Rich parents have healthy kids\nII. Certain diseases can be passed on from parents to children\nIII. Poor parents have malnourished kids\nIV. Family environment is a critical factor**Summary**To bring equity, the underwriter engages in risk classification where individual\nlives are categorised and assigned to different risk classes depending on the\ndegree of risks they pose.Underwriting process may be said to take place at two levels: At field level and At underwriting department levelUnderwriting decisions made by underwriters include acceptance of standard\nrisk at standard rates or charging extra for sub-standard risks. Sometimes there\nis acceptance with lien on sum assured or acceptance is based on restrictive\nclauses. Where the risk is large the proposal is declined or postponed.186A large number of life insurance proposals may typically get selected for\ninsurance without conducting a medical examination. Such cases are termed as", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Personal characteristics", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_098", "metadata": {"file_size": 20690, "chunk_index": 98, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Set the timing of payment:", "To coincide with special dates:", "Backdating:", "Blood pressure", "Personal characteristics"]}}
{"chunk": "on April, 2029 instead of March 2030. In case of endowment policies, this\ncould be beneficial as maturity benefits accrue earlier.**Test Yourself 3**Why is heredity history of importance in medical underwriting?I. Rich parents have healthy kids\nII. Certain diseases can be passed on from parents to children\nIII. Poor parents have malnourished kids\nIV. Family environment is a critical factor**Summary**To bring equity, the underwriter engages in risk classification where individual\nlives are categorised and assigned to different risk classes depending on the\ndegree of risks they pose.Underwriting process may be said to take place at two levels: At field level and At underwriting department levelUnderwriting decisions made by underwriters include acceptance of standard\nrisk at standard rates or charging extra for sub-standard risks. Sometimes there\nis acceptance with lien on sum assured or acceptance is based on restrictive\nclauses. Where the risk is large the proposal is declined or postponed.186A large number of life insurance proposals may typically get selected for\ninsurance without conducting a medical examination. Such cases are termed as\nnon-medical proposals.Some of the rating factors for non-medical underwriting include Age Large sum assured Moral hazard etc.Some of the factors considered in medical underwriting include Family history, Heredity and personal history etc.**Key Terms**1. Underwriting\n2. Standard life\n3. Non-medical underwriting\n4. Rating factor\n5. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.187## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the forms\nto be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**188**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a policy\nresults into a claim. The true value of life insurance is judged by the way a claim is\nsettled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that life\ninsurers, shall process death claims without delay and call for all requirements\ntogether, within 15 days of the receipt of the death intimation.A death claim shall be paid, rejected or repudiated giving all the relevant reasons,\nwithin 30 days from the date of receipt of all relevant papers/ clarifications.If, in the opinion of the insurer, the claim warrants investigation, it shall complete\nthe same expeditiously, within 90 days from the date of intimation and settle the\nclaim within 30 days thereafter.IRDAI specifies that in respect of Maturity clams, Survival Benefit claims and\nAnnuities, the Life Insurer shall initiate the claim process by sending advance\nintimation, by sending post-dated cheque or by giving direct credit to the bank\naccount of the claimant through any electronic mode approved by RBI, so as to pay\nthe claim on or before the due date.**Definition**A claim is a demand that the insurer should make good the promise specified in the\ncontract.A claim under a life insurance contract is triggered by the happening of one or more\nof the events covered under the insurance contract. While in some claims, the\ncontract continues, in others, the contract is terminated.Claims can be of two types:**i.** survival claims payable when the life assured is alive and**ii.** death claim**Diagram 1:** **Types of claims**While a **death claim** arises only upon the death of the life assured, **survival claims**\nare payable on happening of events specified in the policy.189**Important**In all claims situations, the insurer has to ensure that the identity of the claimant\nis proven and well documented as per KYC norms.**Example**Such specified events where the claims are paid to the insured.i. The insured reaching the maturity period of the policy;\nii. The insured reaching the pre-decided duration(s) under a money-backpolicy, when instalment(s) become payable; or under annuity plans.\niii. Occurrences of Critical illnesses covered under the policy (as a rider benefitor otherwise);", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "L-09", "section": "Test Yourself 3", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_099", "metadata": {"file_size": 20690, "chunk_index": 99, "chunk_tokens": 985, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Diagram 1:", "Example"]}}
{"chunk": "contract.A claim under a life insurance contract is triggered by the happening of one or more\nof the events covered under the insurance contract. While in some claims, the\ncontract continues, in others, the contract is terminated.Claims can be of two types:**i.** survival claims payable when the life assured is alive and**ii.** death claim**Diagram 1:** **Types of claims**While a **death claim** arises only upon the death of the life assured, **survival claims**\nare payable on happening of events specified in the policy.189**Important**In all claims situations, the insurer has to ensure that the identity of the claimant\nis proven and well documented as per KYC norms.**Example**Such specified events where the claims are paid to the insured.i. The insured reaching the maturity period of the policy;\nii. The insured reaching the pre-decided duration(s) under a money-backpolicy, when instalment(s) become payable; or under annuity plans.\niii. Occurrences of Critical illnesses covered under the policy (as a rider benefitor otherwise);\niv. Surrender of the policy either by the policyholder or assignee;**B.** **Ascertaining whether a claim situation has occurred****i.** **Survival claim** is payable to the insured on reaching the period of maturityor fulfilling conditions stipulated in the policy.**ii.** **Maturity claims and money-back instalment claims** are easily establishedas they are based on dates which are determined at the beginning of the\ncontract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy are\nclearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments. Here,unlike other claims, the event is triggered by the decision of the policy\nholder or assignee to cancel the contract and withdraw what is due to him\nor her under the contract. There is typically a penalty for premature\nwithdrawal. The amount paid would be less than what would be due under\na full claim and hence would be less than what would have been due if the\nfull claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned, all\nthe benefits would be payable to the assignee and it would not meet the intended\npurpose of the critical illness benefit. To avoid this situation, policy holders need\nto be educated about the extent of benefits they may assign by way of a conditional\nassignment.A **maturity or death claim** or a surrender leads to termination of the insurance\ncover under the contract and no further insurance cover is available.190**Types of claims:** The following payments may occur during the policy term:\n**a)** **Survival Benefit Payments**Periodical payments are made by the insurer to the insured at specified times\nduring the term of the policy.**I.** **Surrender of Policy**Surrender value reflects the value of investments and depends on various factors\nsuch as sum assured, bonuses, policy term and premiums paid. Premature closing\nof a life insurance policy is a voluntary termination of the policy contract. A\npolicy can be surrendered only if it has acquired paid-up value. The amount\npayable to the insured is the **surrender value** which is usually a percentage of\nthe premiums paid. The actual surrender value paid to the insured is more than\nthe Guaranteed Surrender Value (GSV).**II.** **Rider Benefit**A payment under a rider is made by an insurance company on the occurrence of\na specified event according to the terms and conditions.\nUnder a **critical illness rider**, in the event of diagnosis of a critical illness, a\nspecified amount is paid as per terms. The illness should have been covered in\nthe list of critical illnesses specified by the insurance company.Under **hospital care rider**, the insurer pays the treatment costs in the event of\nhospitalisation of the insured, subject to terms and conditions.The policy contract continues even after the rider payments are made.The following claim payments are made at the end of the policy term specified\nin the insurance contract.**III.** **Maturity Claim**In such claims, the insurer promises to pay the insured a specified amount at\nthe end of the term, if the insured survives the plan’s entire term. This is known", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Diagram 1:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_100", "metadata": {"file_size": 20690, "chunk_index": 100, "chunk_tokens": 994, "has_examples": true, "has_tables": false, "key_concepts": ["Maturity Claim", "Rider Benefit", "Survival claim", "Diagram 1:", "III."]}}
{"chunk": "policy can be surrendered only if it has acquired paid-up value. The amount\npayable to the insured is the **surrender value** which is usually a percentage of\nthe premiums paid. The actual surrender value paid to the insured is more than\nthe Guaranteed Surrender Value (GSV).**II.** **Rider Benefit**A payment under a rider is made by an insurance company on the occurrence of\na specified event according to the terms and conditions.\nUnder a **critical illness rider**, in the event of diagnosis of a critical illness, a\nspecified amount is paid as per terms. The illness should have been covered in\nthe list of critical illnesses specified by the insurance company.Under **hospital care rider**, the insurer pays the treatment costs in the event of\nhospitalisation of the insured, subject to terms and conditions.The policy contract continues even after the rider payments are made.The following claim payments are made at the end of the policy term specified\nin the insurance contract.**III.** **Maturity Claim**In such claims, the insurer promises to pay the insured a specified amount at\nthe end of the term, if the insured survives the plan’s entire term. This is known\nas a **maturity claim.****i.** **Participating Plan:** The maturity claim amount payable under a participatingplan is the sum assured plus accumulated bonuses less dues such as\noutstanding premium and policy loans and interests thereon.\n**ii.** **Return of Premium (ROP) Plan:** In some cases premiums paid over the termperiod are returned when the policy matures.\n**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which is191paid to the nominee or assignee or legal heir whatever the situation may be. A\ndeath claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,\ndate and place of death.**i.** **Forms to be submitted for death claim**Usually, the following forms are to be submitted by the beneficiary to the insurer\nto facilitate processing of the claim: Claim form by nominee\n Certificate of burial or cremation\n Treating physician’s certificate\n Hospital’s certificate\n Employer’s certificate\n Death certificate issued by municipal authorities etc., as proof of death\n Certified court copies of police reports like First Information Report(FIR), Inquest Report, Post-Mortem Report, and Final Report - these\nreports are required in case of death by accident.**Diagram 2:** **Forms to be submitted for Death Claim****ii.** **Repudiation of death claim**The death claim may be paid or repudiated. If, while processing the claim, the\ninsurer detects that the proposer had made any incorrect statements or had\nsuppressed material facts relevant to the policy, the contract would be declared\nas void. All benefits under the policy are forfeited.**iii.** **Section 45: Indisputability Clause**However this penalty is subject to **Section 45** of the Insurance Act, 1938.192**Important****Section 45 states:**“No policy of life insurance shall be called in question on any ground whatsoever\nafter the expiry of three years from the date of the policy, i.e. from the date of\nissuance of the policy or the date of commencement of risk or the date of revival\nof the policy or the date of the rider to the policy, whichever is later”.**C.** **Claim Procedure for Life Insurance Policy****Although there is no laid down standard claims procedure for all insurers,**\n**the IRDAI has laid down guidelines for insurers in the matter of claim**", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s191", "section": "II.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_101", "metadata": {"file_size": 20690, "chunk_index": 101, "chunk_tokens": 942, "has_examples": false, "has_tables": false, "key_concepts": ["Maturity Claim", "Participating Plan:", "Repudiation of death claim", "Rider Benefit", "III."]}}
{"chunk": "insurer detects that the proposer had made any incorrect statements or had\nsuppressed material facts relevant to the policy, the contract would be declared\nas void. All benefits under the policy are forfeited.**iii.** **Section 45: Indisputability Clause**However this penalty is subject to **Section 45** of the Insurance Act, 1938.192**Important****Section 45 states:**“No policy of life insurance shall be called in question on any ground whatsoever\nafter the expiry of three years from the date of the policy, i.e. from the date of\nissuance of the policy or the date of commencement of risk or the date of revival\nof the policy or the date of the rider to the policy, whichever is later”.**C.** **Claim Procedure for Life Insurance Policy****Although there is no laid down standard claims procedure for all insurers,**\n**the IRDAI has laid down guidelines for insurers in the matter of claim**\n**settlement.****Regulation 8: Claims procedure in respect of a life insurance policy**i. A life insurance policy shall state the **primary documents** which are normallyrequired to be submitted by a claimant in support of a claim.ii. A life insurance company, upon receiving a claim, shall process the claimwithout delay. Any queries or requirement of additional documents, to the\nextent possible, shall be raised all at once and not in a piece-meal manner,\nwithin a period of 15 days of the receipt of the claim.iii. As per the IRDAI (Protection of Policyholders’ Interests) Regulations, 2017, adeath claim under a life insurance policy shall be paid, rejected or\nrepudiated giving all the relevant reasons, within 30 days from the date of\nreceipt of all relevant papers and required clarifications. However, if the\ninsurer needs the claim to be investigated, it shall initiate and complete the\ninvestigation at the earliest, in any case not later than 90 days from the date\nof receipt of claim intimation. The claim should be settled within 30 days of\ncompleting the investigation.iv. Where a claim is ready for payment but the payment cannot be made due toany reasons of proper identification of the payee, the life insurer shall hold\nthe amount for the benefit of the payee and it shall earn interest at the rate\napplicable to a savings bank account with a scheduled bank (effective from\n30 days following the submission of all papers and information).v. Where there is a delay on the part of the insurer in processing a claim for areason other than the one covered by sub-regulation (iv), the life insurance\ncompany shall pay **interest on the claim amount at a rate which is 2%**\n**above the bank rate** prevalent at the beginning of the financial year in\nwhich the claim is reviewed by it.**Role of an agent**An agent shall render all possible service to the nominee/ legal heir or the\nbeneficiary in filling up of claim forms accurately and assisting in submission of\nthese at the insurer’s office.193Apart from discharging obligations, goodwill is generated from such a situation\nwhereby there exists ample opportunity for the agent to procure business or\nreferrals in future from the family of the deceased.**Test Yourself 1**Which of the below statement best describes the concept of claim? Choose the most\nappropriate option.I. A claim is a request that the insurer should make good the promise specified inthe contract\nII. A claim is a demand that the insurer should make good the promise specified inthe contract\nIII. A claim is a demand that the insured should make good the commitmentspecified in the agreement\nIV. A claim is a request that the insured should make good the promise specified inthe agreement**Summary**A claim is a demand that the insurer should make good the promise specified in\nthe contract.A claim can be survival claim or death claim. While a death claim arises only\nupon the death of the life assured, survival claims can be caused by one or more\neventsFor payment of a survival claim, the insurer has to ascertain that the event has\noccurred as per the conditions stipulated in the policy.The following payments may occur during the policy term:\n Survival Benefit Payments\n Surrender of Policy\n Rider Benefit\n Maturity Claim\n Death ClaimSection 45 (Indisputability Clause) of the Insurance Act offers protection against\nrejection of claim by the insurer on flimsy grounds provided and sets a time limit\nof 3 years for the Insurer for calling a policy into question.Under the IRDAI (Protection of Policyholders Interests) Regulations, 2017, the\nIRDAI has laid down regulations to safeguard/ protect the insured or beneficiary", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Section 45: Indisputability Clause", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_102", "metadata": {"file_size": 20690, "chunk_index": 102, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Section 45", "Test Yourself 1", "Section 45: Indisputability Clause", "Important", "Claim Procedure for Life Insurance Policy"]}}
{"chunk": "IV. A claim is a request that the insured should make good the promise specified inthe agreement**Summary**A claim is a demand that the insurer should make good the promise specified in\nthe contract.A claim can be survival claim or death claim. While a death claim arises only\nupon the death of the life assured, survival claims can be caused by one or more\neventsFor payment of a survival claim, the insurer has to ascertain that the event has\noccurred as per the conditions stipulated in the policy.The following payments may occur during the policy term:\n Survival Benefit Payments\n Surrender of Policy\n Rider Benefit\n Maturity Claim\n Death ClaimSection 45 (Indisputability Clause) of the Insurance Act offers protection against\nrejection of claim by the insurer on flimsy grounds provided and sets a time limit\nof 3 years for the Insurer for calling a policy into question.Under the IRDAI (Protection of Policyholders Interests) Regulations, 2017, the\nIRDAI has laid down regulations to safeguard/ protect the insured or beneficiary\nin case of claims.**Answers to Test Yourself****Answer 1** The correct option is II.194## SECTION## HEALTH SECTION195## CHAPTER H-01## INTRODUCTION TO HEALTH INSURANCE**Chapter Introduction**This chapter will tell you about how insurance evolved over time. It will also explain\nwhat healthcare is, levels of healthcare and types of healthcare. You will also learn\nabout the healthcare system in India and factors affecting it. Finally, it will explain\nhow health insurance evolved in India and also the various players in the health\ninsurance market in India.**Learning Outcomes**After studying this chapter, you should be able to:a) Understand how insurance evolved.\nb) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.196**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness of\nthe body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was\nHippocrates (460 to 370 BC) who came up with the reasons behind illness. According\nto him, illness is caused due to various factors relating to environment, sanitation,\npersonal hygiene and diets. Vedic texts of ancient India speak about _‘Arogyame_\n_Mahabhagyam’_ meaning ‘Health is great luck’ or in other words, ‘Health is Wealth’.\nMany treatises of ancient India like _Atharva Veda, Charaka Samhita, Sushruta_\n_Samhita, Ashtangahrdayam, Ashtangasamgraha, Bhela Samhita_, and _Kashyapa_\n_Samhita_ discuss healing traditions practiced in India in olden times.**Definition**A widely accepted definition of health was given by World Health Organization\n(WHO) _–‘Health is a state of complete physical, mental and social wellbeing and_\n_not merely the absence of disease or infirmity.’_**Determinants of health**It is generally believed that the following factors determine the health of any\nindividual:**a)** **Lifestyle factors**Lifestyle factors are those which are mostly in the control of the individual\nconcerned e.g. exercising and eating within limits, avoiding worry and the like\nleading to good health; leading to diseases such as cancer, aids, hypertension\nand diabetes, to name a few.**b)** **Environmental factors**Communicable diseases like Influenza and Chickenpox etc. are spread due to\nbad hygiene, diseases like Malaria and Dengue are spread due to bad\nenvironmental sanitation, while certain diseases are also caused due to\nenvironmental factors.**c)** **Genetic factors**Diseases may be passed on from parents to children through genes. Such genetic\nfactors result in differing health trends amongst the population spread across\nthe globe based on race, geographical location and even communities.It is quite obvious that a country’s social and economic progress depends on the\nhealth of its people. This poses a question as to whether different types of\nhealthcare are required for different situations.197**Test Yourself 1**Which of the following diseases is not attributed to Lifestyle factors (i.e. not in the\ncontrol of the individual)?I. CancerII. AidsIII. Malaria\nIV. Hypertension**B.** **Levels of Healthcare**Healthcare is nothing but a set of services provided by various agencies and", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "N195", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_103", "metadata": {"file_size": 20690, "chunk_index": 103, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Environmental factors", "Determinants of health", "Genetic factors", "Test Yourself 1"]}}
{"chunk": "leading to good health; leading to diseases such as cancer, aids, hypertension\nand diabetes, to name a few.**b)** **Environmental factors**Communicable diseases like Influenza and Chickenpox etc. are spread due to\nbad hygiene, diseases like Malaria and Dengue are spread due to bad\nenvironmental sanitation, while certain diseases are also caused due to\nenvironmental factors.**c)** **Genetic factors**Diseases may be passed on from parents to children through genes. Such genetic\nfactors result in differing health trends amongst the population spread across\nthe globe based on race, geographical location and even communities.It is quite obvious that a country’s social and economic progress depends on the\nhealth of its people. This poses a question as to whether different types of\nhealthcare are required for different situations.197**Test Yourself 1**Which of the following diseases is not attributed to Lifestyle factors (i.e. not in the\ncontrol of the individual)?I. CancerII. AidsIII. Malaria\nIV. Hypertension**B.** **Levels of Healthcare**Healthcare is nothing but a set of services provided by various agencies and\nproviders including the government, to promote, maintain, monitor or restore\nhealth of people. Health care to be effective must be:Appropriate to the needs of the peopleComprehensiveAdequateEasily available- Affordable\nThe health care facilities should be based upon the probability of the incidence of\ndisease for the population. For example, a person may get fever, cold, cough, skin\nallergies etc. many times a year, but the probability of him/ her suffering from\nHepatitis B is less as compared to cold and cough.Hence, the need to set up the healthcare facilities in any area whether a village or\na district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres for\nprimary, secondary and tertiary health care and takes other measures to make\nappropriate healthcare affordable and accessible to the population.198**C.** **Types of Healthcare**Healthcare is broadly categorized as follows:**1.** **Primary healthcare**Primary health care refers to the services offered by the doctors, nurses and other\nsmall clinics which are contacted first by the patient for any sickness, that is to say\nthat primary healthcare provider is the first point of contact for all patients within\na health system.For example, if a person visits a doctor for fever and the first diagnosis is indicative\nof Dengue fever, the primary health care provider will prescribe some medicines\nbut also direct the patient to get admitted in a hospital for specialized treatment.At a country level, Primary Health care centres are set up both by Government and\nprivate players. Government primary health care centres are established depending\nupon the population size and are present right up to the village level in some form\nor the other.**2.** **Secondary healthcare**Secondary health care refers to the healthcare services provided by medical\nspecialists and other health professionals who generally do not have first contact\nwith patient. It includes acute care requiring treatment for a short period for a\nserious illness, often (but not necessarily) as an in-patient, including Intensive Care\nservices, ambulance facilities, pathology, diagnostic and other relevant medical\nservices.**3.** **Tertiary healthcare**Tertiary Health care is specialized consultative healthcare, usually for inpatients\nand on referral from primary/ secondary care providers.Examples of Tertiary Health care providers are those who have advanced medical\nfacilities and medical professionals, beyond the scope of secondary health care\nproviders e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk\npregnancy specialists etc.It is to be noted that as the level of care increases, the expenses associated with\nthe care also increase. The infrastructure for different levels of care also varies\nfrom country to country, rural-urban areas, while socio-economic factors also\ninfluence the same.**Test Yourself 2**Which of the following are part of primary healthcare?I. FeverII. Cancer\nIII. Organ Transplant\nIV. High risk pregnancy199**D.** **Evolution of Health Insurance in India**While the government had been busy with its policy decisions on healthcare, it also", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y199", "section": "Environmental factors", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_104", "metadata": {"file_size": 20690, "chunk_index": 104, "chunk_tokens": 1022, "has_examples": true, "has_tables": false, "key_concepts": ["Environmental factors", "Secondary healthcare", "Genetic factors", "Test Yourself 1", "Evolution of Health Insurance in India"]}}
{"chunk": "with patient. It includes acute care requiring treatment for a short period for a\nserious illness, often (but not necessarily) as an in-patient, including Intensive Care\nservices, ambulance facilities, pathology, diagnostic and other relevant medical\nservices.**3.** **Tertiary healthcare**Tertiary Health care is specialized consultative healthcare, usually for inpatients\nand on referral from primary/ secondary care providers.Examples of Tertiary Health care providers are those who have advanced medical\nfacilities and medical professionals, beyond the scope of secondary health care\nproviders e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk\npregnancy specialists etc.It is to be noted that as the level of care increases, the expenses associated with\nthe care also increase. The infrastructure for different levels of care also varies\nfrom country to country, rural-urban areas, while socio-economic factors also\ninfluence the same.**Test Yourself 2**Which of the following are part of primary healthcare?I. FeverII. Cancer\nIII. Organ Transplant\nIV. High risk pregnancy199**D.** **Evolution of Health Insurance in India**While the government had been busy with its policy decisions on healthcare, it also\nput in place health insurance schemes. Insurance companies came with their health\ninsurance policies only later. Here is how health insurance developed in India:**1.** **Employees’ State Insurance Scheme**Health Insurance in India formally began with the beginning of the Employees’\nState Insurance Scheme, introduced vide the ESI Act, 1948, shortly after the\ncountry’s independence in 1947. This scheme was introduced for blue-collar\nworkers employed in the formal private sector and provides comprehensive\nhealth services through a network of its own dispensaries and hospitals.ESIC (Employees State Insurance Corporation) is the implementing agency which\nruns its own hospitals and dispensaries and also contracts public/ private\nproviders wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme (CGHS),\nwhich was introduced in 1954 for the central government employees including\npensioners and their family members working in civilian jobs. It aims to provide\ncomprehensive medical care to employees and their families and is partly\nfunded by the employees and largely by the employer (central government).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers before\nas well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and their\nfamilies was launched in the Indian market by all the four nationalized non-life\ninsurance companies (these were then the subsidiaries of the General Insurance\nCorporation of India). This product, **Mediclaim** was introduced to provide\ncoverage for the hospitalisation expenses up to a certain annual limit of\nindemnity with certain exclusions such as maternity, pre-existing diseases etc.\nThe hospitalization indemnity-based annual contract continues to be the most\npopular form of private health insurance in India today. With private players\ncoming into the insurance sector in 2001, health insurance has grown\ntremendously. However, there is a large untapped market even today.The Government has encouraged individuals to purchase Health Insurance\npolicies. Premiums paid by the individuals towards Health Insurance of self,\nspouse and family members are allowed to be deducted from taxable income\nunder Section 80 D of the Income Tax Act. The Section allows higher limits for\npaying premiums of parents/ parents in law above 60 years of age.Considerable variations in covers, exclusions and newer add-on covers have been\nintroduced which will be discussed in later chapters.200**Test Yourself 3**The first standardised health insurance product for individuals and their families\nwas launched in the Indian market by all the four nationalized non-life insurance\ncompanies in the year _____.I. 1948II. 1954III. 1986IV. 2001**E.** **Health Insurance Market**The health insurance market today consists of a number of players some providing\nthe health care facilities called providers, others the insurance services and also\nvarious intermediaries. Some form the basic infrastructure while others provide\nsupport facilities. Some are in the government sector while others are in the private\nsector.**1.** **Private sector Health Care providers**India has a very large private health sector providing all three types of healthcare\nservices - primary, secondary as well as tertiary. These range from voluntary, notfor-profit organisations and individuals to for-profit corporate, trusts, solo\npractitioners, stand-alone specialist services, diagnostic laboratories, pharmacy\nshops, and also the unqualified providers (quacks).India also has the largest number of qualified practitioners in other systems of", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y199", "section": "Tertiary healthcare", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_105", "metadata": {"file_size": 20690, "chunk_index": 105, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Health Insurance Market", "Employees’ State Insurance Scheme", "Central Government Health Scheme", "Private sector Health Care providers", "Evolution of Health Insurance in India"]}}
{"chunk": "introduced which will be discussed in later chapters.200**Test Yourself 3**The first standardised health insurance product for individuals and their families\nwas launched in the Indian market by all the four nationalized non-life insurance\ncompanies in the year _____.I. 1948II. 1954III. 1986IV. 2001**E.** **Health Insurance Market**The health insurance market today consists of a number of players some providing\nthe health care facilities called providers, others the insurance services and also\nvarious intermediaries. Some form the basic infrastructure while others provide\nsupport facilities. Some are in the government sector while others are in the private\nsector.**1.** **Private sector Health Care providers**India has a very large private health sector providing all three types of healthcare\nservices - primary, secondary as well as tertiary. These range from voluntary, notfor-profit organisations and individuals to for-profit corporate, trusts, solo\npractitioners, stand-alone specialist services, diagnostic laboratories, pharmacy\nshops, and also the unqualified providers (quacks).India also has the largest number of qualified practitioners in other systems of\nMedicine (Ayurveda/ Siddha/ Unani/ Homeopathy) which is over 7 lakh\npractitioners. These are located in the public as well as the private sector. Apart\nfrom the for-profit private providers of health care, the NGOs and the voluntary\nsector have also been engaged in providing health care services to the community.**Insurance Companies** in the general insurance sector provide the bulk of the health\ninsurance services. Stand Alone Health Insurance (SAHI) Companies are allowed to\ntransact all types of Health Insurances, while Life Insurance Companies are also\npermitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance brokers,\nreinsurance brokers, insurance consultants, surveyors and loss assessors as well as\nThird Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:201a. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or both,\nas per the underlying terms and conditions of the respective policy and within\nthe framework of the guidelines issued by the insurers for settlement of claims.\nb. Servicing of claims for Hospitalization cover, if any, under Personal AccidentPolicy and domestic travel policy.\nc. Facilitating carrying out of pre-insurance medical examinations in connectionwith underwriting of the health insurance policies.**Summary**a) Insurance in some form or other existed many centuries ago but its modern formis only a few centuries old. Insurance in India has passed through many stages\nwith government regulation.b) Health of its citizens being very important, governments play a major role increating a suitable healthcare system.c) Level of healthcare provided depends on many factors relating to a country’spopulation.d) The three type of healthcare are primary, secondary and tertiary depending onthe level of medical attention required. Cost of healthcare rises with each level\nwith tertiary care being the costliest.\ne) India has its own peculiar challenges such as population growth and urbanizationwhich require proper healthcare.f) The public sector insurance companies were the first to come up with schemesfor health insurance followed later by commercial insurance by private\ninsurance companies.g) The health insurance market is made up of many players some providing theinfrastructure, with others providing insurance services, intermediaries such as\nbrokers, agents and third party administrators servicing health insurance\nbusiness and also other regulatory, educational as well as legal entities playing\ntheir role.**Answers to Test Yourself****Answer 1** The correct option is III.\n**Answer 2** The correct option is I.\n**Answer 3** The correct option is III.**Key terms**\na) Healthcare\nb) Commercial insurance\nc) Nationalization\nd) Primary, Secondary and Tertiary Healthcare\ne) Third Party Administrator202## CHAPTER H-02## HEALTH INSURANCE DOCUMENTATION**Chapter Introduction**In the insurance industry, we deal with a large number of forms, documents etc.\nThis chapter takes us through the documents and their importance in a health\ninsurance contract.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of proposal form.\nb) Describe the importance of Prospectus\nc) Explain terms and wordings in insurance policy document.\nd) Discuss policy conditions and warranties.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "r202", "section": "Test Yourself 3", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_106", "metadata": {"file_size": 20690, "chunk_index": 106, "chunk_tokens": 1005, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Health Insurance Market", "Private sector Health Care providers", "Answer 3"]}}
{"chunk": "insurance companies.g) The health insurance market is made up of many players some providing theinfrastructure, with others providing insurance services, intermediaries such as\nbrokers, agents and third party administrators servicing health insurance\nbusiness and also other regulatory, educational as well as legal entities playing\ntheir role.**Answers to Test Yourself****Answer 1** The correct option is III.\n**Answer 2** The correct option is I.\n**Answer 3** The correct option is III.**Key terms**\na) Healthcare\nb) Commercial insurance\nc) Nationalization\nd) Primary, Secondary and Tertiary Healthcare\ne) Third Party Administrator202## CHAPTER H-02## HEALTH INSURANCE DOCUMENTATION**Chapter Introduction**In the insurance industry, we deal with a large number of forms, documents etc.\nThis chapter takes us through the documents and their importance in a health\ninsurance contract.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of proposal form.\nb) Describe the importance of Prospectus\nc) Explain terms and wordings in insurance policy document.\nd) Discuss policy conditions and warranties.\ne) Appreciate why endorsements are issued.\nf) Understand the premium receipt.\ng) Appreciate why renewal notices are issued.203**A.** **Proposal forms****1.** **Health Insurance Proposal forms**As discussed in the common chapters, the Proposal Form contains information which\nis useful for the insurance company to accept the risk offered for insurance. Given\nbelow are some of the details of the proposal form for a health insurance policy:1. The proposal form incorporates a prospectus which gives details of the cover, suchas coverage, exclusions, provisions etc. The prospectus forms part of the proposal\nform and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address, occupation,date of birth, sex, and relationship of each insured person with the proposer,\naverage monthly income and income tax PAN No., name and address of the Medical\nPractitioner, his qualifications and registration number. Bank details of the insured\nare also now a days collected to make payment of claim money directly through\nbank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment\nb. Date of first treatment\nc. Name and address of attending Doctor\nd. Whether fully recovered\n6. The proposer as to state any additional facts which should be disclosed to insurersand if he has any knowledge of any positive existence or presence of any illness or\ninjury which may require medical attention.\n7. The form also includes questions relating to past insurance and claims history andadditional present insurance with any other insurer.\n8. The special features of the declaration to be signed by the proposer must be noted.\n9. The insured person agrees and authorises the insurer to seek medical informationfrom any hospital/ medical practitioner who has at any time attended or may\nattend concerning any illness which affects his physical or mental health.\n10. The insured person confirms that he has read the prospectus forming part of theform and is willing to accept the terms and conditions.\n11. The declaration includes the usual warranty regarding the truth of the statementsand the proposal form as the basis of the contract.**2.** **Medical Questionnaire**In case of adverse medical history in the proposal form, the insured person has to\ncomplete a detailed questionnaire relating to diseases such as Diabetes, Hypertension,\nChest pain or Coronary Insufficiency or Myocardial Infarction.These have to be supported by a form completed by a consulting physician. This form\nis scrutinised by company’s panel doctor, based on whose opinion, acceptance,\nexclusion, etc. are decided.204**Standard form of Declaration**The IRDAI has specified the format of the standard declaration in the health\ninsurance proposal as under:1. I/ We hereby declare, on my behalf and on behalf of all persons proposed to beinsured, that the above statements, answers and/ or particulars given by me are\ntrue and complete in all respects to the best of my knowledge and that I/ We\nam/ are authorized to propose on behalf of these other persons.2. I understand that the information provided by me will form the basis of theinsurance policy, is subject to the Board approved underwriting policy of the\ninsurance company and that the policy will come into force only after full receipt", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "r202", "section": "Answers to Test Yourself", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_107", "metadata": {"file_size": 20690, "chunk_index": 107, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Standard form of Declaration", "Proposal forms", "Answer 3"]}}
{"chunk": "complete a detailed questionnaire relating to diseases such as Diabetes, Hypertension,\nChest pain or Coronary Insufficiency or Myocardial Infarction.These have to be supported by a form completed by a consulting physician. This form\nis scrutinised by company’s panel doctor, based on whose opinion, acceptance,\nexclusion, etc. are decided.204**Standard form of Declaration**The IRDAI has specified the format of the standard declaration in the health\ninsurance proposal as under:1. I/ We hereby declare, on my behalf and on behalf of all persons proposed to beinsured, that the above statements, answers and/ or particulars given by me are\ntrue and complete in all respects to the best of my knowledge and that I/ We\nam/ are authorized to propose on behalf of these other persons.2. I understand that the information provided by me will form the basis of theinsurance policy, is subject to the Board approved underwriting policy of the\ninsurance company and that the policy will come into force only after full receipt\nof the premium chargeable.3. I/ We further declare that I/ we will notify in writing any change occurring in theoccupation or general health of the life to be insured/ proposer after the proposal\nhas been submitted but before communication of the risk acceptance by thecompany.4. I/ We declare and consent to the company seeking medical information from anydoctor or from a hospital who at any time has attended on the life to be insured/\nproposer or from any past or present employer concerning anything which affects\nthe physical or mental health of the life to be assured/ proposer and seeking\ninformation from any insurance company to which an application for insurance\non the life to be assured/ proposer has been made for the purpose of underwriting\nthe proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting and/\nor claims settlement and with any Governmental and/ or Regulatory Authority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal forms\nare designed to get information about the proposer’s health, way of life and habits,\npre-existing health conditions, medical history, hereditary traits, past healthinsurance experience etc. along with the proposer’s profession, occupation or\nbusiness which important as they could have a material bearing on the risk.**Example 1** A delivery man of a fast-food restaurant, who has to frequently travel on motorbikes at a high speed to deliver food to his customers, may be more exposed to\naccidents than the accountant of the same restaurant. A person working in a coal mine or a cement plant may be exposed to dustparticles leading to lung ailments.205**Example 2** For the purpose of overseas travel insurance, the proposer is required to state(who is travelling, when, to which country, for what purpose) or For the purpose of health insurance, the proposer is asked about his/ her health\n(with person’s name, address and identification) etc. depending on the case.**Example 3** In case of health insurance, it could be the cost of hospital treatment, while forpersonal accident insurance this could be a fixed amount for loss of life, loss of\na limb, or loss of sight due to an accident.**a)** **Previous and Present insurance**The proposer is required to inform the details about his previous insurances to the\ninsurer. This is to understand his insurance history. In some markets there are\nsystems by which insurers confidentially share data about the insured.The proposer is also required to state whether any insurer had declined his proposal,\nimposed special conditions, required an increased premium at renewal or refused\nto renew or cancelled the policy. Details of current insurance with any other insurer\nincluding the names of the insurers are also required to be disclosed. Further, in\npersonal accident insurance an insurer would like to restrict the amount of coverage\n(sum insured) depending on the sum insured under other PA policies taken by the\nsame insured.**b)** **Claim Experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about the\nsubject matter of insurance and how the insured has managed the risk in the past.\nIt means the insurance company has a duty to record all the information received", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Standard form of Declaration", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_108", "metadata": {"file_size": 20690, "chunk_index": 108, "chunk_tokens": 984, "has_examples": true, "has_tables": false, "key_concepts": ["Example 3", "Previous and Present insurance", "Standard form of Declaration", "Nature of questions in a proposal form", "Example 2"]}}
{"chunk": "a limb, or loss of sight due to an accident.**a)** **Previous and Present insurance**The proposer is required to inform the details about his previous insurances to the\ninsurer. This is to understand his insurance history. In some markets there are\nsystems by which insurers confidentially share data about the insured.The proposer is also required to state whether any insurer had declined his proposal,\nimposed special conditions, required an increased premium at renewal or refused\nto renew or cancelled the policy. Details of current insurance with any other insurer\nincluding the names of the insurers are also required to be disclosed. Further, in\npersonal accident insurance an insurer would like to restrict the amount of coverage\n(sum insured) depending on the sum insured under other PA policies taken by the\nsame insured.**b)** **Claim Experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about the\nsubject matter of insurance and how the insured has managed the risk in the past.\nIt means the insurance company has a duty to record all the information received\neven orally, which the agent has to keep in mind by way of follow up.**B.** **Acceptance of the proposal (underwriting)**A completed proposal form broadly gives the following information: Details of the insured\n Details of the subject matter\n Type of cover required\n Details of the physical features both positive and negative\n Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the prospective\ncustomer e.g. above 45 years of age to a doctor and/ or for medical check-up. Based\non the information available in the proposal and, where medical check-up has been\nadvised, based on the medical report and the recommendation of the doctor, the\ninsurer takes the decision. Sometimes, where the medical history is not satisfactory,\nan additional questionnaire to get more information is also required to be obtained\nfrom the prospective client. The insurer then decides about the rate to be applied\nto the risk factor and calculates the premium based on various factors, which is\nthen conveyed to the insured.206**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the prospective\nbuyers of insurance. It is usually in the form of a brochure or leaflet or it can be in\nelectronic form also and serves the purpose of introducing a product to such\nprospective buyers. Issue of prospectus is governed by the Insurance Act, 1938 as\nwell as by Protection of Policyholders’ Interest Regulations 2017 and the Health\nInsurance Regulations 2016 of the IRDAI. Insurers of Health policies usually publish\nProspectuses about their Health insurance products. The proposal form in such cases\nwould contain a declaration that the customer has read the Prospectus and agrees\nto it.As discussed in Chapter 4, Section 64 VB of the Insurance Act 1938 stipulates that\nPremiums have to be collected in advance. However, considering the need for\neasing the payment of health insurance premiums in view of conditions owing to\nCOVID-19 outbreak, IRDAI allowed insurers to collect premiums of individual health\ninsurance products in instalments. It was also mandated that Insurance companies\nwould announce the availability of the facility of payment of premiums in\ninstalments, and the conditions thereof, on their websites. This facility would be\noffered to all policyholders without any discrimination.**D.** **Policy Document**IRDAI Regulations for protecting policy holder’s interest act 2017 specified that a Health\nInsurance Policy document should contain:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter\nb) Full description of the persons or interest insured\nc) The sum insured under the policy person and/ or peril wise\nd) UIN of the product, name, code number, contact details of the personinvolved in sales process;\ne) Date of birth of the insured and corresponding age in completed years;\nf) The period of insurance and the date from which the policyholder has beencontinuously obtaining health insurance cover in India from any of the\ninsurers without break\ng) The sub-limits, Proportionate Deductions and the existence of Package ratesif any, with cross reference to the concerned policy section;\nh) Co-pay limits if any;\ni) The pre-existing disease (PED) waiting period, if applicable;\nj) Specific waiting periods as applicable;\nk) Deductible as applicable – general and specific, if any Perils covered andexclusions\nl) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium along with periodicity of", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "D-19", "section": "Previous and Present insurance", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_109", "metadata": {"file_size": 20690, "chunk_index": 109, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Prospectus", "Previous and Present insurance", "Acceptance of the proposal (underwriting)", "Policy Document", "Claim Experience"]}}
{"chunk": "Insurance Policy document should contain:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter\nb) Full description of the persons or interest insured\nc) The sum insured under the policy person and/ or peril wise\nd) UIN of the product, name, code number, contact details of the personinvolved in sales process;\ne) Date of birth of the insured and corresponding age in completed years;\nf) The period of insurance and the date from which the policyholder has beencontinuously obtaining health insurance cover in India from any of the\ninsurers without break\ng) The sub-limits, Proportionate Deductions and the existence of Package ratesif any, with cross reference to the concerned policy section;\nh) Co-pay limits if any;\ni) The pre-existing disease (PED) waiting period, if applicable;\nj) Specific waiting periods as applicable;\nk) Deductible as applicable – general and specific, if any Perils covered andexclusions\nl) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium along with periodicity of\ninstalments if any\nm) Policy terms, conditions and warranties\nn) Action to be taken by the insured upon occurrence of a contingency likely togive rise to a claim under the policy207o) The obligations of the insured in relation to the subject-matter of insuranceupon occurrence of an event giving rise to a claim and the rights of the\ninsurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings. These\nare called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made or\nused in support thereof or if any fraudulent means or devices are used by the\nInsured or any one acting on his behalf to obtain any benefit under the policy or\nif the loss or damage be occasioned by the wilful act, or with the connivance of\nthe Insured, all benefits under this policy shall be forfeited.**b.** **The Claim Intimation condition in a Health policy may state:**Claim must be filed within certain days from date of discharge from the Hospital.\nHowever, waiver of this Condition may be considered in extreme cases of\nhardship.A breach of condition makes the policy voidable at the option of the insurer.2. **Warranties:** A warranty is an agreement between insurer and insured that must\nbe carried out fully. It forms a part of the policy document. For example, the Insurer\nmay be covering the risk of a particular disease on the condition that the insured\nshall do a quarterly consultations with a specialist. In the above example, failure of\nthe insured to fulfil his part of the agreement shall either negate or reduce the\nliability in respect of that particular section/ warranty.Warranties must be observed and complied with strictly and literally, whether it is\nmaterial to the risk or not.**Test Yourself 1**Which of the below statement is correct with regards to a warranty?I. A warranty is a condition which is implied without being stated in the policy\nII. A warranty forms part of a policy document208III. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.**Endorsements in Health Insurance**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be changed at the time of issuance,\nit is done by setting out the amendments/ changes through a document called\nendorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nmake up the contract. Endorsements may also be issued during the currency of the policy\nto record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y207", "section": "E.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_110", "metadata": {"file_size": 20690, "chunk_index": 110, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Warranties:", "EXAMPLES:", "Test Yourself 1", "Conditions:"]}}
{"chunk": "material to the risk or not.**Test Yourself 1**Which of the below statement is correct with regards to a warranty?I. A warranty is a condition which is implied without being stated in the policy\nII. A warranty forms part of a policy document208III. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.**Endorsements in Health Insurance**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be changed at the time of issuance,\nit is done by setting out the amendments/ changes through a document called\nendorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nmake up the contract. Endorsements may also be issued during the currency of the policy\nto record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy relate to:a) Variations/ changes in sum insured\nb) Addition and deletion of insured family members\nc) Change of insurable interest by way of taking of a loan and mortgaging thepolicy to a bank.\nd) Extension of insurance to cover additional perils/ extension of policy period\ne) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of issuance,\nit is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.209## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product – Mediclaim\nto hundreds of products of different kinds, the customer has a wide range to choose\nappropriate cover. The chapter explains the features of various health products that\ncan cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance\nb) Describe the IRDAI guidelines on standardization in health insurance\nc) Discuss the various types of health products available in the Indian market today\nd) Explain Personal Accident insurance\ne) Discuss overseas travel insurance\nf) Understand key terms and clauses in health policies210**A.** **Classification of health insurance products****1.** **Introduction to health insurance products**“Health insurance business” is defined under Section 2(6C) of the Insurance Act,\n1938 as _“the effecting of contracts which provide for sickness benefits or medical,_\n_surgical or hospital expense benefits, whether in-patient or out-patient travel_\n_cover and personal accident cover.”_ IRDAI follows this definition of Health insurance\nbusiness.Health insurance products available in the Indian market are mostly in the nature\nof **hospitalization products.** These products cover the expenses incurred by an\nindividual during hospitalization.Therefore, health insurance is important mainly for two reasons: **Providing financial assistance to pay for medical facilities** in case of anyillness. **Preserving the savings of an individual** which may otherwise be wiped out dueto illness.Today, the health insurance segment has developed to a large extent, with hundreds\nof products offered by almost all general Insurance companies, standalone health\ninsurers and life insurers. However, the basic benefit structure of the Mediclaim\npolicy i.e. cover against hospitalization expenses still remains the most popular form\nof insurance.**2.** **Broad classification of health insurance products**Whatever be the product design, health insurance products can be broadly classified\ninto two categories:**a)** **Indemnity covers**These products constitute the bulk of the health insurance market and pay for\nactual medical expenses incurred due to hospitalization.**b)** **Fixed benefit covers**Also called as ‘hospital cash’, these products pay for a fixed sum per day for the\nperiod of hospitalization. Some products also provide for a pre-decided amount\nfor different surgeries.**3.** **Classification based on customer segment**Products can also be classified on the basis of the target customer segment.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "t208", "section": "Test Yourself 1", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_111", "metadata": {"file_size": 20690, "chunk_index": 111, "chunk_tokens": 980, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Preserving the savings of an individual", "Answer 2", "Introduction to health insurance products", "Fixed benefit covers"]}}
{"chunk": "of products offered by almost all general Insurance companies, standalone health\ninsurers and life insurers. However, the basic benefit structure of the Mediclaim\npolicy i.e. cover against hospitalization expenses still remains the most popular form\nof insurance.**2.** **Broad classification of health insurance products**Whatever be the product design, health insurance products can be broadly classified\ninto two categories:**a)** **Indemnity covers**These products constitute the bulk of the health insurance market and pay for\nactual medical expenses incurred due to hospitalization.**b)** **Fixed benefit covers**Also called as ‘hospital cash’, these products pay for a fixed sum per day for the\nperiod of hospitalization. Some products also provide for a pre-decided amount\nfor different surgeries.**3.** **Classification based on customer segment**Products can also be classified on the basis of the target customer segment.\nProducts classified based on customer segments are:a) **Individual cover** offered to retail customers and their family membersb) **Group cover** offered to corporate clients, covering employees and groups,covering their members211c) **Mass policies** for government schemes like/ Pradhan Mantri Jan Arogya Yojana/various State health insurance schemes covering very poor sections of the\npopulation.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought in\nHealth Regulations, 2016 regarding Health Products, some of which have been given\nbelow:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General-Insurersand Health-Insurers, can offer these products for policy tenure of 1 Year, but\nnot exceeding 5 Years. Group Health Policies can be offered by any insurer\nfor a term of one year except credit linked products where the term can be\nextended up to the loan period not exceeding five years.4. No Group Health Insurance Policy shall be issued where a Group is formedwith the main purpose of availing itself of insurance. The Group shall have a\nsize as determined by the Insurer which shall be applicable for all its group\npolicies, subject to a minimum of 7.5. General Insurers and Health Insurers may also offer Credit Linked GroupPersonal Accident policies for a term extended up to the loan period not\nexceeding five years.6. Multiple policies –In case insured has taken health policies from more thanone insurance company which provide fixed benefits, each insurer shall make\nthe claim payment, on occurrence of an insured event, independent of\npayments received from other similar policies in accordance with the terms\nand conditions of the policies.If two or more policies are taken by an insured during a period from one or\nmore insurers to indemnify treatment costs, the policyholder shall have the\nright to ask for a settlement of his/ her claim in terms of any of his/ her\npolicies. The insurer on whom the claim is made shall make the claim\npayment and balance claim or claims disallowed under the earlier chosen\npolicy/ policies may be made from the other policy/ policies even if the sum\ninsured is not exhausted in the earlier chosen policy/ policies.212**B.** **IRDA Guidelines on Standardization in health insurance**With so many insurers providing numerous varied products and with different\ndefinitions of various terms and exclusions, confusion arose in the market. It became\ndifficult for the customer to compare products and take a considered decision.\nMoreover, in critical illness policies, there is no clear understanding as to what is\nmeant by critical illness and what is not.To remove the confusion among insurers, service providers, TPAs and hospitals and\nthe grievances of the insuring public, the regulator tried to provide some kind of\nstandardization in health insurance. Based on a common understanding, IRDA issued\nGuidelines on standardization in health insurance in 2016 which was further\namended in 2020. These are applicable to all General and Health Insurers offering\nindemnity based Health insurance (excluding PA and Domestic/ Overseas Travel)\nproducts (both Individual and Group)The guidelines now provide for standardization of:1. definitions of commonly used insurance terms\n2. definitions of critical illnesses\n3. list of optional items of expenses in hospitalization indemnity policies\n4. claim forms and pre-authorization forms\n5. billing formats\n6. discharge summary of hospitals\n7. standard contracts between TPAs, insurers and hospitals", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s211", "section": "Broad classification of health insurance products", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_112", "metadata": {"file_size": 20690, "chunk_index": 112, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Mass policies", "Fixed benefit covers", "Classification based on customer segment", "Indemnity covers", "Broad classification of health insurance products"]}}
{"chunk": "definitions of various terms and exclusions, confusion arose in the market. It became\ndifficult for the customer to compare products and take a considered decision.\nMoreover, in critical illness policies, there is no clear understanding as to what is\nmeant by critical illness and what is not.To remove the confusion among insurers, service providers, TPAs and hospitals and\nthe grievances of the insuring public, the regulator tried to provide some kind of\nstandardization in health insurance. Based on a common understanding, IRDA issued\nGuidelines on standardization in health insurance in 2016 which was further\namended in 2020. These are applicable to all General and Health Insurers offering\nindemnity based Health insurance (excluding PA and Domestic/ Overseas Travel)\nproducts (both Individual and Group)The guidelines now provide for standardization of:1. definitions of commonly used insurance terms\n2. definitions of critical illnesses\n3. list of optional items of expenses in hospitalization indemnity policies\n4. claim forms and pre-authorization forms\n5. billing formats\n6. discharge summary of hospitals\n7. standard contracts between TPAs, insurers and hospitals\n8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get recovery\nof medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical bill\nraised was Rs. 1.25 lakhs. The insurance company paid Rs 1 lakh according to the\nplan coverage and Raghu had to pay the remaining amount of Rs. 25,000 from his\nown pocket213The main features of the indemnity based Mediclaim policy are detailed below,\n**though variations in limits of cover, additional exclusions or benefits or some**\n**add-ons may apply to products marketed by each insurer** .**1.** **Inpatient hospitalization expenses**The policy pays the insured the cost of hospitalization expenses incurred on\naccount of illness/ accident. The policy has a minimum prescribed period of\nhospitalization (generally 24 hours) after which the policy provisions come into\nforce. However once this period is reached then the expenses for the entire\nperiod become payable.Most of the expenses related with the treatment are paid, yet certain expenses that\nincludes items of personal comfort, cosmetic surgeries are not. It is therefore\nimportant for the customer to be made aware of the excluded items of expenses\nthat are not covered under the policy.i. Room, boarding and nursing expenses as provided by the hospital/ nursinghome. This includes nursing care, RMO charges, IV fluids/ blood transfusion/\ninjection administration charges and similar expensesii. Intensive Care Unit (ICU) expensesiii. Surgeon, anaesthetist, medical practitioner, consultants, specialists feesiv. Anaesthetic, blood, oxygen, operation theatre charges, surgical appliances,v. Medicines and drugs,vi. Dialysis, chemotherapy, radiotherapyvii. Cost of prosthetic devices implanted during surgical procedure likepacemaker, orthopaedic implants, infra cardiac valve replacements,\nvascular stentsviii.Relevant laboratory/ diagnostic tests and other medical expenses related tothe treatmentix. Hospitalization expenses (excluding cost of organ) incurred on donor inrespect of organ transplant to the insured.**2.** **Day Care Procedures**There are many surgeries that do not require can be conducted at specialized\nhospitals. Treatments such as eye surgeries, chemotherapy; dialysis etc. can be\nclassified under day-care surgeries and the list is ever growing. These are also\ncovered under the policy.**3.** **OPD cover**Coverage of outpatient expenses is still very limited in India, with few such products\noffering OPD covers. However there are some plans that provide cover treatment\nas outpatient and also related health care expenses associated with doctor visits,", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s10", "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_113", "metadata": {"file_size": 20690, "chunk_index": 113, "chunk_tokens": 993, "has_examples": true, "has_tables": false, "key_concepts": ["Day Care Procedures", "Hospitalization indemnity", "Example", "Inpatient hospitalization expenses", "OPD cover"]}}
{"chunk": "injection administration charges and similar expensesii. Intensive Care Unit (ICU) expensesiii. Surgeon, anaesthetist, medical practitioner, consultants, specialists feesiv. Anaesthetic, blood, oxygen, operation theatre charges, surgical appliances,v. Medicines and drugs,vi. Dialysis, chemotherapy, radiotherapyvii. Cost of prosthetic devices implanted during surgical procedure likepacemaker, orthopaedic implants, infra cardiac valve replacements,\nvascular stentsviii.Relevant laboratory/ diagnostic tests and other medical expenses related tothe treatmentix. Hospitalization expenses (excluding cost of organ) incurred on donor inrespect of organ transplant to the insured.**2.** **Day Care Procedures**There are many surgeries that do not require can be conducted at specialized\nhospitals. Treatments such as eye surgeries, chemotherapy; dialysis etc. can be\nclassified under day-care surgeries and the list is ever growing. These are also\ncovered under the policy.**3.** **OPD cover**Coverage of outpatient expenses is still very limited in India, with few such products\noffering OPD covers. However there are some plans that provide cover treatment\nas outpatient and also related health care expenses associated with doctor visits,\nregular medical tests, dental and pharmacy costs.214**4.** **Pre and post hospitalization expenses****i.** **Pre hospitalization expenses**Hospitalization could be either emergency hospitalization or planned. If a\npatient goes in for a planned surgery, there would be expenses incurred by him\nprior to the hospitalization. Such expenses are known as Pre hospitalisationexpenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized anda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissible bythe Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if\na) They are incurred for the same condition for which the Insured Person’sHospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissible bythe Insurance Company.\nPost hospitalization expenses would be relevant medical expenses incurred\nduring period up to the defined number of days after hospitalization and will be\nconsidered as part of claim.\nPost hospitalization expenses could be in the form of medicines, drugs, review\nby doctors etc. after discharge from hospital. Such expenses have to be related\nto the treatment taken in hospital and are covered under the health policies.Though the duration of cover for pre and post hospitalization expenses would\nvary from insurer to insurer and is defined in the policy, the most common cover\nis for **thirty days pre and sixty days post hospitalization** .Pre and post-hospitalization expenses form part of the overall sum insured for\nwhich cover is granted under the policy.**iii.** **Domiciliary Hospitalization**\n**iv.** There is also a benefit available for patients whose illness otherwise needshospitalisation but avail treatment at home either for accommodation in\nhospitals or in a position that they cannot be moved to a hospital.215To prevent misuse of the provision, this cover usually carries an **excess clause**\n**of three to five days** meaning that treatment costs for the first three to five\ndays have to be borne by the insured. The cover excludes domiciliary treatments\nfor certain chronic or common ailments such as Asthma, Bronchitis, Diabetes\nMellitus, Hypertension, Influenza Cough, Cold, and fevers etc.**Example**Mira had taken a health insurance policy for coverage of expenses in the event of\nhospitalisation. The policy had a clause for initial waiting period of 30 days.\nUnfortunately, 20 days after she took the policy, Mira contracted malaria and was\nhospitalised for 5 days. She had to pay heavy hospital bills.When she asked for reimbursement from the insurance company, they denied\npayment of the claim because the event of hospitalization occurred within the\nwaiting period of 30 days from taking the policy.**a)** **COVERAGE OPTIONS AVAILABLE****i.** **Individual coverage:** An individual insured can cover himself along with familymembers such as spouse, dependent children, dependent parents, dependent\nparents in law, dependent siblings etc. Some insurers do not have a restriction", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Day Care Procedures", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_114", "metadata": {"file_size": 20690, "chunk_index": 114, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Day Care Procedures", "COVERAGE OPTIONS AVAILABLE", "Example", "Individual coverage:", "Domiciliary Hospitalization"]}}
{"chunk": "**of three to five days** meaning that treatment costs for the first three to five\ndays have to be borne by the insured. The cover excludes domiciliary treatments\nfor certain chronic or common ailments such as Asthma, Bronchitis, Diabetes\nMellitus, Hypertension, Influenza Cough, Cold, and fevers etc.**Example**Mira had taken a health insurance policy for coverage of expenses in the event of\nhospitalisation. The policy had a clause for initial waiting period of 30 days.\nUnfortunately, 20 days after she took the policy, Mira contracted malaria and was\nhospitalised for 5 days. She had to pay heavy hospital bills.When she asked for reimbursement from the insurance company, they denied\npayment of the claim because the event of hospitalization occurred within the\nwaiting period of 30 days from taking the policy.**a)** **COVERAGE OPTIONS AVAILABLE****i.** **Individual coverage:** An individual insured can cover himself along with familymembers such as spouse, dependent children, dependent parents, dependent\nparents in law, dependent siblings etc. Some insurers do not have a restriction\non the dependents who can be covered. It is possible to cover each of such\ndependent insured’s under a single policy with a separate sum insured chosen\nfor each insured person. In such covers, each person insured under the policy\ncan claim up to the maximum amount of his sum insured during the currency of\nthe policy. Premium will be charged for each individual insured according to his\nage and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered a\nsingle sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during the\npolicy period, it will pay for claims related to more than one family member or\nmultiple claims of a single member of the family. All these together cannot exceed\nthe total coverage of Rs. 5 lacs. Premium will normally be charged based on the age\nof the oldest member of the family proposed for insuranceThe covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets coverage\nfor an overall sum insured which can be chosen at a higher level at a reasonable\npremium.**Pre-Existing diseases**\nInsurance is designed to cover accidents/ diseases etc. that happen unexpectedly.\nCovering the costs of treating existing medical conditions is not part of insurance,\nas it is unfair to healthy people who would have to pay for the existing illnesses of216some others. It goes against the principle of creating risk pools covering similarly\nplaced risks. So, it is very important to collect details of the existing ailments/\ninjuries of each insured person before issuing a health policy. This will enable the\ninsurer to decide on accepting the proposal for insurance, charging proper premiums\nand/ or providing additional conditions for those who are more likely to make\nclaims.**What is a pre-existing disease?**\nDiseases suffered by an insured person within 48 months prior to commencement of\nthe policy are regarded as pre-existing diseases. Based on the same logic, insurers\nare not allowed to exclude pre-existing diseases after a person is covered for\ninsurance continuously for 48 months.**Renewability:** Although Healthcare policies have a contract life of one year, and a\nfresh policy is to be issued every year, Lifelong renewability has been made\ncompulsory by IRDAI for all policies.**SPECIAL FEATURES**In order to provide new features in the product as also to maintain the pricing,\ninsurance companies have come out innovative modifications in the products. For\nexample, the Mediclaim Policy, which was the most popular policy before 2000, has\nundergone many changes and new special features have been added to the\ncoverage. Some features have been added to the basic indemnity cover. These\nfeatures may vary from insurer to insurer and product to product and may not be\navailable uniformly for all products.**i.** **Sub limits and Disease specific capping**Some of the products have disease specific capping e.g. cataract. A few also have\nsub limits on room rent linked to sum insured e.g. per day room rent restricted to\n1% of sum insured and ICU charges to 2% of sum insured. As expenses under other\nheads such as ICU charges, OT charges and even surgeon’s fees are linked to the\ntype of room opted for, room rent capping helps in restricting expenses under other", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "f216", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_115", "metadata": {"file_size": 20690, "chunk_index": 115, "chunk_tokens": 975, "has_examples": true, "has_tables": false, "key_concepts": ["COVERAGE OPTIONS AVAILABLE", "What is a pre-existing disease?", "Example", "Sub limits and Disease specific capping", "Individual coverage:"]}}
{"chunk": "fresh policy is to be issued every year, Lifelong renewability has been made\ncompulsory by IRDAI for all policies.**SPECIAL FEATURES**In order to provide new features in the product as also to maintain the pricing,\ninsurance companies have come out innovative modifications in the products. For\nexample, the Mediclaim Policy, which was the most popular policy before 2000, has\nundergone many changes and new special features have been added to the\ncoverage. Some features have been added to the basic indemnity cover. These\nfeatures may vary from insurer to insurer and product to product and may not be\navailable uniformly for all products.**i.** **Sub limits and Disease specific capping**Some of the products have disease specific capping e.g. cataract. A few also have\nsub limits on room rent linked to sum insured e.g. per day room rent restricted to\n1% of sum insured and ICU charges to 2% of sum insured. As expenses under other\nheads such as ICU charges, OT charges and even surgeon’s fees are linked to the\ntype of room opted for, room rent capping helps in restricting expenses under other\nheads also and hence the overall hospitalization expenses.**ii.** **Co-payment (popularly called Co-pay)**Co-payment is defined by IRDAI as a cost sharing requirement under a health\ninsurance policy that provides that the policyholder/ insured will bear a specified\npercentage of the admissible claims amount. A co-payment does not reduce the Sum\nInsured.\nCo-payment is the concept of the insured bearing a portion of each and every claim\nunder a health policy. These could be compulsory or voluntary depending on the\nproduct. Co-payment brings in a certain discipline among the insured to avoid\nunnecessary hospitalizations. This ensures that the insured exercises caution in\nselecting his healthcare options and avoids luxurious ones.217When an insured event occurs, many health policies require the insured to share a\npart of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay amount\nis 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a specified\nnumber of days/ hours in case of hospital cash policies which will apply before any\nbenefits are payable by the insurer. In Health policies, it is the fixed amount of\nmoney the insured is required to pay initially before the claim is paid by insurer, for\ne.g. if the deductible in a policy is Rs. 10,000, the insured pays first Rs. 10,000 in\neach insured loss claimed for. To illustrate, if the claim is for Rs. 80,000, the insured\nbears the first Rs. 10,000 and the insurer pays Rs. 70,000. A deductible does not\nreduce the Sum Insured.Deductible may also be a specified number of days/ hours in case of hospital cash\npolicies which will apply before any benefits are payable by the insurer.An agent must examine and inform the insured whether the deductible is applicable\nper year, per life or per event and the specific deductible to be applied.**iv.** **Waiting Period**A waiting period of 30 days from inception of policy is normally applicable in most\npolicies for making any claim. This however will not be applied for hospitalization\ndue to an accident.**v.** **Waiting periods for specific diseases**This is applicable for diseases for which treatment can be delayed and planned.\nDepending on the product waiting periods of one/ two/ four years are imposed by\nthe insurance companies and claims are paid for these ailments only after expiry of\nthis period. Some of the diseases are Cataract, Benign Prostatic Hypertrophy,\nHysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele, Congenital\ninternal disease, Fistula in anus, piles, Sinusitis and related disorders etc.**vi.** **Coverage for Day care procedure**Advancement of medical science has seen inclusion of large number of procedures\nunder day care category as already discussed earlier**vii.** **Cost of pre policy check up**Cost of medical examination was earlier borne by prospective clients. Now insurer\nreimburses the cost, provided the proposal is accepted for underwriting, the\nreimbursement varying from 50% to 100%.Now this has also been mandated by IRDAI", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "SPECIAL FEATURES", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_116", "metadata": {"file_size": 20690, "chunk_index": 116, "chunk_tokens": 986, "has_examples": true, "has_tables": false, "key_concepts": ["Co-payment (popularly called Co-pay)", "Coverage for Day care procedure", "Sub limits and Disease specific capping", "Deductible/ Excess", "Cost of pre policy check up"]}}
{"chunk": "policies for making any claim. This however will not be applied for hospitalization\ndue to an accident.**v.** **Waiting periods for specific diseases**This is applicable for diseases for which treatment can be delayed and planned.\nDepending on the product waiting periods of one/ two/ four years are imposed by\nthe insurance companies and claims are paid for these ailments only after expiry of\nthis period. Some of the diseases are Cataract, Benign Prostatic Hypertrophy,\nHysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele, Congenital\ninternal disease, Fistula in anus, piles, Sinusitis and related disorders etc.**vi.** **Coverage for Day care procedure**Advancement of medical science has seen inclusion of large number of procedures\nunder day care category as already discussed earlier**vii.** **Cost of pre policy check up**Cost of medical examination was earlier borne by prospective clients. Now insurer\nreimburses the cost, provided the proposal is accepted for underwriting, the\nreimbursement varying from 50% to 100%.Now this has also been mandated by IRDAI\nthat insurer would bear at least 50% of health check-up expenses.**viii.** **Add on covers**Various new additional covers called Add-on covers have been introduced by some\nof the insurers. Some of them are:218 **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end version productsfor certain ailments which are life threatening and entail expensive treatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured (whichgets reduced on payment of a claim) can be restored to the original limit by\npaying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage of\nthe hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in\npatient hospitalization expenses. Few companies now offer limited cover for outpatient expenses under some of the high-end plans. **Hospital cash:** This provides for fixed lump sum payment for each day ofhospitalization for a specified period. Normally the period is granted for 7 days\nexcluding the policies deductible of 2/ 3 days. Thus, the benefit would trigger\nonly if hospitalization period is beyond the deductible period. This is in addition\nto the hospitalization claim but within the overall sum insured of the policy or\nmay be with a separate sub-limit. **Recovery benefit:** Lump sum benefit is paid if the total period of stay in hospitaldue to sickness and/ or accident is not less than 10 days. **Donor’s expenses:** The policy provides for reimbursement of expenses towardsdonor in case of major organ transplant as per the terms and condition defined\nin the policy. **Reimbursement of ambulance:** Expenses incurred towards ambulance byInsured/ insured person are reimbursed up to a certain limit specified in the\nschedule of the policy. **Expenses for accompanying person:** This is intended to cover the expensesincurred by accompanying person towards food, transportation whilst attending\nto insured patient during the period of hospitalization. Lump sum payment or\nreimbursement payment as per the policy terms is paid, up to the limit specified\nin the schedule of the policy. **Family definition:** Definition of family has undergone changes in few healthproducts. Earlier, primary insured, spouse, dependent children were granted219cover. Now there are policies where parents and in-laws can also be granted\ncover under the same policy.**x.** **Failure to seek or follow medical advice or failure to follow treatment**Initially the health insurance cover was denied to persons suffering from pre-existing\ndiseases. Such cases are now being offered cover by excluding such diseases.**Standard Health Product** **– Arogya Sanjeevani** : In the background of the Covid-19\npandemic, IRDAI asked all Insurance Companies to come out with a standard health\nproduct called Arogya Sanjeevani with no variations in terms and conditions to make\nit easy to understand. The premium may however vary according to the pricing\npolicy of each company. This is to ensure better penetration of Health Insurance in", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d219", "section": "Waiting periods for specific diseases", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_117", "metadata": {"file_size": 20690, "chunk_index": 117, "chunk_tokens": 1004, "has_examples": false, "has_tables": false, "key_concepts": ["Coverage for Day care procedure", "Hospital cash:", "Standard Health Product", "Recovery benefit:", "Reinstatement of sum insured:"]}}
{"chunk": "to insured patient during the period of hospitalization. Lump sum payment or\nreimbursement payment as per the policy terms is paid, up to the limit specified\nin the schedule of the policy. **Family definition:** Definition of family has undergone changes in few healthproducts. Earlier, primary insured, spouse, dependent children were granted219cover. Now there are policies where parents and in-laws can also be granted\ncover under the same policy.**x.** **Failure to seek or follow medical advice or failure to follow treatment**Initially the health insurance cover was denied to persons suffering from pre-existing\ndiseases. Such cases are now being offered cover by excluding such diseases.**Standard Health Product** **– Arogya Sanjeevani** : In the background of the Covid-19\npandemic, IRDAI asked all Insurance Companies to come out with a standard health\nproduct called Arogya Sanjeevani with no variations in terms and conditions to make\nit easy to understand. The premium may however vary according to the pricing\npolicy of each company. This is to ensure better penetration of Health Insurance in\nmarket. All Insurers are required to offer this product called Arogya Sanjeevani.[The context for this move was that there were different Health Insurances available\nin the market and customers were not able to compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder can becomethe beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by insurers,\nprovide cover for high sums insured over and above a specified amount (called\nthreshold).This policy works along with a basic health cover having a low sum\ninsured and comes at a comparatively reasonable premium. For example, Individuals\ncovered by their employers can also opt for a top-up cover for additional protection\n(keeping the sum insured of the first policy as the threshold).To be eligible to receive a claim under the top-up policy, the medical costs must be\ngreater than the deductible (or threshold) level chosen under the plan and the\nreimbursement under the high deductible plan would be the amount of expense\nincurred i.e. greater than the deductible.**Example**An individual is covered for a sum insured of Rs. 3 lacs by his employer. He could\nopt for a top-up policy of Rs. 10 lacs in excess of Rs. Three lacs. If the cost of a\nsingle hospitalization is Rs. 5 lacs, the basic policy would cover up to Rs. Three lacs\nonly. With the top-up cover, the balance sum of Rs. Two lacs would be paid out by\nthe top-up policy.220Top-up policies come cheap and the cost of a single Rs. 10 lacs policy would be far\nhigher than the top-up policy of Rs. 10 lacs in excess of Rs. Three lacs.These covers are available on individual basis and family basis the top-up plan\nrequires the deductible amount to be crossed at every single event of\nhospitalization. However some top-up plans that allow the deductible to be crossed\npost a series of hospitalizations during the policy period are known as Aggregate\nbased high deductible plans or Super top-up cover as known in the Indian market. A\nsuper top-up plan covers the total of all hospitalisation bills (up to the super top-up\nplan limit) above the deductible amount, that is, the deductible is applied to the\ntotal claims in one year. Hence, once the deductible is paid, the plan becomes\nactive for subsequent claims.**E.** **Senior Citizen Policy**These plans are designed to offer cover to elderly people who often were denied\ncoverage after certain age (e.g. people over 60 years of age). The structure of the\ncoverage and exclusions are much like a hospitalization policy.Special attention is paid to diseases of the elderly in setting coverage and waiting\nperiod. Entry age is mostly after 60 years and renewable lifelong. Sum insured range\nfrom Rs. 50,000 to Rs. 5,00,000. There is variation of waiting period applicable to\ncertain ailments.Example: Cataract may have 1 year waiting for one insurer and 2 year waiting period\nfor some other insurer.Example: Sinusitis does not fall in waiting period clause of some insurers but few", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d219", "section": "Family definition:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_118", "metadata": {"file_size": 20690, "chunk_index": 118, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Senior Citizen Policy", "Standard Health Product", "Example", "Family Floater Plan"]}}
{"chunk": "based high deductible plans or Super top-up cover as known in the Indian market. A\nsuper top-up plan covers the total of all hospitalisation bills (up to the super top-up\nplan limit) above the deductible amount, that is, the deductible is applied to the\ntotal claims in one year. Hence, once the deductible is paid, the plan becomes\nactive for subsequent claims.**E.** **Senior Citizen Policy**These plans are designed to offer cover to elderly people who often were denied\ncoverage after certain age (e.g. people over 60 years of age). The structure of the\ncoverage and exclusions are much like a hospitalization policy.Special attention is paid to diseases of the elderly in setting coverage and waiting\nperiod. Entry age is mostly after 60 years and renewable lifelong. Sum insured range\nfrom Rs. 50,000 to Rs. 5,00,000. There is variation of waiting period applicable to\ncertain ailments.Example: Cataract may have 1 year waiting for one insurer and 2 year waiting period\nfor some other insurer.Example: Sinusitis does not fall in waiting period clause of some insurers but few\nothers include it in their waiting period clause.Some policies have waiting periods or capping in respect of Pre-existing diseases.\nPre-post hospital expenses are either paid as a percentage of hospital claims or a\nsub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90 days.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of the\namount spent by him for the named treatment. In this product, commonly occurring\ntreatments are listed under segments such as ENT, Ophthalmology, Obstetrics and\nGynaecology, etc. and the maximum pay out for each of these is spelt out in the\npolicy.221These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a daily\ncash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find a\nplace in the list named in the policy. Multiple claims for different treatments are\npossible during the policy period. However the claims are finally limited by the sum\ninsured chosen under the policy.Some of the fixed benefit insurance plans are: Hospital daily cash insurance plans\n Critical illness insurance plans**1.** **HOSPITAL DAILY CASH POLICY****a)** **Per day amount limit**\nHospital cash coverage provides a fixed sum to the insured person for each day\nof hospitalization. Per day cash coverage could vary from (for example) Rs. 1,500\nper day to Rs. 5,000 or even more per day. An upper limit is provided on the\ndaily cash pay-out per illness as well as for the duration of the policy, which is\nusually an annual policy.**b)** **Number of payment days**\nIn some of the variants of this policy, the number of days of daily cash allowed\nis linked to the disease for which treatment is being taken. A detailed list of\ntreatments and duration of stay for each is stipulated which limits the daily cash\nbenefit allowed for each type of procedure/ illness.**c)** **Standalone cover or add-on cover**\nThe hospital daily cash policy is available as a standalone policy as offered by\nsome insurers while, in other cases, it is an add-on cover to a regular indemnity\npolicy. These policies help the insured to cover incidental expenses as the payout is a fixed sum and not related to the actual cost of treatment. This also\nallows the pay out under the policy to be provided in addition to any cover\nreceived under an indemnity based health insurance plan.**d)** **Supplementary cover**\nThese policies could supplement a regular hospital expenses policy as it is cost\neffective and provides compensation for incidental expenses and also expenses\nnot payable under the indemnity policy such as exclusions, co-pay etc.**e)** **Other advantages of the cover**From the insurer’s point of view, this plan has several advantages as it is easy\nto explain to a customer and hence can be sold more easily. It beats medical\ninflation as a fixed sum per day is paid for the duration of hospitalization\nwhatever may be the actual expense. Also, acceptance of such insurance covers\nand claims settlements are really simplified.222**2.** **CRITICAL ILLNESS POLICY**With advancement in medical science, people are surviving some of the major", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "E.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_119", "metadata": {"file_size": 20690, "chunk_index": 119, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Per day amount limit", "Senior Citizen Policy", "CRITICAL ILLNESS POLICY", "HOSPITAL DAILY CASH POLICY", "Standalone cover or add-on cover"]}}
{"chunk": "The hospital daily cash policy is available as a standalone policy as offered by\nsome insurers while, in other cases, it is an add-on cover to a regular indemnity\npolicy. These policies help the insured to cover incidental expenses as the payout is a fixed sum and not related to the actual cost of treatment. This also\nallows the pay out under the policy to be provided in addition to any cover\nreceived under an indemnity based health insurance plan.**d)** **Supplementary cover**\nThese policies could supplement a regular hospital expenses policy as it is cost\neffective and provides compensation for incidental expenses and also expenses\nnot payable under the indemnity policy such as exclusions, co-pay etc.**e)** **Other advantages of the cover**From the insurer’s point of view, this plan has several advantages as it is easy\nto explain to a customer and hence can be sold more easily. It beats medical\ninflation as a fixed sum per day is paid for the duration of hospitalization\nwhatever may be the actual expense. Also, acceptance of such insurance covers\nand claims settlements are really simplified.222**2.** **CRITICAL ILLNESS POLICY**With advancement in medical science, people are surviving some of the major\ndiseases like cancer, strokes and heart attack etc., which in earlier times would\nhave resulted in death. However surviving a major illness entails huge expense for\ntreatment as well as for living expenses post treatment. Onset of critical illness\nthreatens the financial security of a person. A basic health insurance policy may not\nbe sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of large expenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated CI\nbenefit plan and standalone CI benefit plan. To avoid confusion, the definitions of\n22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.The critical illnesses covered vary across insurers and products. Generally 100% of\nthe sum insured is paid on diagnosis of a critical illness. In some cases compensation\ncould vary from 25% to 100% of sum insured depending on the policy terms and\nconditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to\nbecome payable under the policy and the survival clause of 30 days after diagnosis\nof the illness. Rigorous medical examinations are to be undergone for persons\nespecially over 45 years of age.The policy terminates, once compensation is paid under the policy in respect of any\nof the insured person. This policy is also offered to groups especially corporates who\ntake policies for their employees.**Disease Specific Products** - **Corona Kavach**In June 2020, when the country was facing many cases of Corona Virus infection\n(Covid-19), the market saw the introduction of many benefit based products\nproviding lump sum payment on the diagnosis of Covid-19 positive. Later some\ncompanies introduced indemnity based products too. However, there were many\nconsumables like PPE kits, Oximeter etc. and quarantine expenses that were not\ntaken care of in these products.IRDAI came up with two standard Health Insurance Policies called _Corona Kavach_\nand _Corona Rakshak (discussed separately under Life insurance section)_ . While it is\nmandatory for general and health insurers to provide _Corona Kavach_ as an\nindemnity-based standard COVID-19 product, _Corona Rakshak,_ offering the benefitbased product, is optional for all insurers. Both products have a waiting period of\n15 days.223_Corona Rakshak_ is a standard benefit based health insurance designed for providing\nlump sum benefit to insured individuals affected by COVID-19 and require\nhospitalisation for a minimum continuous period of 72 hours. The plan offers\ncoverage on individual basis for people between the age of 18 years and 65 years,\nwith different policy terms of 3.5months, 6.5 months and 9.5 months as a one-time\nbenefit policy and terminates upon the payment of benefit. _Corona Rakshak_ offers\nsum insured options ranging from Rs. 50,000 to Rs. 2.5 lakh, in multiples of\n50,000.The policy provides (i) complete sum insured benefit, (ii) economical\npremium, (iii) lump-sum amount of claim, (iv) a short waiting period of 15 days and\n(v) tax benefits.**Corona Kavach** offers the following coverage vide Guidelines issued by IRDAI in June", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d-19", "section": "Supplementary cover", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_120", "metadata": {"file_size": 20690, "chunk_index": 120, "chunk_tokens": 1000, "has_examples": false, "has_tables": false, "key_concepts": ["Corona Kavach", "CRITICAL ILLNESS POLICY", "Supplementary cover", "Other advantages of the cover", "Disease Specific Products"]}}
{"chunk": "indemnity-based standard COVID-19 product, _Corona Rakshak,_ offering the benefitbased product, is optional for all insurers. Both products have a waiting period of\n15 days.223_Corona Rakshak_ is a standard benefit based health insurance designed for providing\nlump sum benefit to insured individuals affected by COVID-19 and require\nhospitalisation for a minimum continuous period of 72 hours. The plan offers\ncoverage on individual basis for people between the age of 18 years and 65 years,\nwith different policy terms of 3.5months, 6.5 months and 9.5 months as a one-time\nbenefit policy and terminates upon the payment of benefit. _Corona Rakshak_ offers\nsum insured options ranging from Rs. 50,000 to Rs. 2.5 lakh, in multiples of\n50,000.The policy provides (i) complete sum insured benefit, (ii) economical\npremium, (iii) lump-sum amount of claim, (iv) a short waiting period of 15 days and\n(v) tax benefits.**Corona Kavach** offers the following coverage vide Guidelines issued by IRDAI in June\n2020:1. Hospitalization Expenses incurred for the treatment of Covid-19 on Positivediagnosis of Covid-19 in a government authorized diagnostic centre covering the\nfollowing: (Expenses on Hospitalization for a minimum period of 24 hours are\nadmissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgical appliances,ventilator charges, medicines and drugs, costs towards diagnostics,\ndiagnostic imaging modalities, PPE Kit, gloves, mask and such other similarexpenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up to maximum14 days per incident subject to the conditions (not exhaustive) mentioned\nbelow:\na. The Medical practitioner advices the Insured person to undergo treatment athome.\nb. There is a continuous monitoring of the health status by a medicalpractitioner for each day, including records of treatment administered.3. Other Expenses covered if prescribed by the treating medical practitioner andrelated to treatment of COVID,\na. Diagnostic tests undergone at home or at diagnostics centre\nb. Medicines prescribed in writing\nc. Consultation charges of the medical practitioner\nd. Nursing charges related to medical staff\ne. Medical procedures limited to parenteral administration of medicines\nf. Cost of Pulse oximeter, Oxygen cylinder and Nebulizer224Additional Cover - Hospital Daily Cash: The Insurer will pay 0.5% of sum insured per\nday for each 24 hours of continuous hospitalization for treatment of Covid following\nan admissible hospitalization claim under this policy.**Standard Vector Borne Disease Health Policy:**IRDAI vide its Guidelines dated 3 February 2021 decided that Standard Products for\nvector borne diseases shall offer the following coverage:\n1. **Hospitalization Benefit:** Lump sum benefit equal to 100% of the Sum Insuredshall be payable on positive diagnosis of any of the following vector borne\ndisease (s) requiring hospitalization for a minimum continuous period of 72\nhours.\na) Dengue fever\nb) Malaria\nc) Filaria (Lymphatic Filariasis)\nd) Kala-azar\ne) Chikungunya\nf) Japanese Encephalitis\ng) Zika Virus2. **Diagnosis Cover:** 2% of the sum insured shall be payable on positive diagnosis(through laboratory examination and confirmed by the medical practitioner) of\nevery covered vector borne disease on the first diagnosis during the Cover\nPeriod, subject to policy terms and conditions. The Policyholder is entitled for\npayments under “diagnosis cover” payment for each disease only once in the\npolicy year.**G.** **Combo-products****Health plus Life Combo Products** offer the combination of a life insurance cover of\na Life Insurance Company and a health insurance cover offered by Non-Life and/ or\nStandalone Health Insurance Company.The product may be offered both as individual insurance policy and on group\ninsurance basis. However in respect of health insurance floater policies, the pure\nterm life insurance coverage is allowed on the life of one of the earning members\nof the family who is also the proposer on health insurance policy subject to insurable", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "D-19", "section": "Corona Kavach", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_121", "metadata": {"file_size": 20690, "chunk_index": 121, "chunk_tokens": 975, "has_examples": false, "has_tables": false, "key_concepts": ["Hospitalization Benefit:", "Diagnosis Cover:", "Health plus Life Combo Products", "Combo-products", "Corona Kavach"]}}
{"chunk": "hours.\na) Dengue fever\nb) Malaria\nc) Filaria (Lymphatic Filariasis)\nd) Kala-azar\ne) Chikungunya\nf) Japanese Encephalitis\ng) Zika Virus2. **Diagnosis Cover:** 2% of the sum insured shall be payable on positive diagnosis(through laboratory examination and confirmed by the medical practitioner) of\nevery covered vector borne disease on the first diagnosis during the Cover\nPeriod, subject to policy terms and conditions. The Policyholder is entitled for\npayments under “diagnosis cover” payment for each disease only once in the\npolicy year.**G.** **Combo-products****Health plus Life Combo Products** offer the combination of a life insurance cover of\na Life Insurance Company and a health insurance cover offered by Non-Life and/ or\nStandalone Health Insurance Company.The product may be offered both as individual insurance policy and on group\ninsurance basis. However in respect of health insurance floater policies, the pure\nterm life insurance coverage is allowed on the life of one of the earning members\nof the family who is also the proposer on health insurance policy subject to insurable\ninterest and other applicable underwriting norms of respective insurers.**Package policies**Package or umbrella covers give, under a single document, a combination of covers.Examples of package policy in health insurance include combining Critical illness\ncover benefits with indemnity policies and even life insurance policies and hospital\ndaily cash benefits with indemnity policies.225**Travel Insurance:**Travel insurance policy is also offered as a package policy covering not only health\ninsurance but also accidental death/ disability benefits along with Medical expenses\ndue to illness/ accident and the coverages like Loss of or delay in arrival of checked\nin baggage, Loss of passport and documents, Third party liability for property/\npersonal damages, Cancellation of trips and even Hijack cover traditionally provided\nunder travel policies. (Details of Travel Insurance are provided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of low\nincome people from rural and informal sectors. It is a low value product, with an\naffordable premium and benefit package. Micro insurance is governed by the IRDA\nMicro Insurance Regulations, 2005.Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of society\nare Jan Arogya Bima Policy and Universal Health Scheme. The private sector\ninsurance companies have also come out with many innovative micro insurance\nhealth products to cater to this target segment like Bima Kavach Yojana, Grameena\nJeevan Raksha Plan, Bhaghya Laxmi - the entire list can be found on IRDAI website.**I.** **Rashtriya Swasthya Bima Yojana**The government has also launched various health schemes, some of them applicable\nto particular states. It had implemented the Rashtriya Swasthya Bima Yojana (RSBY)\nin association with insurance companies to provide health insurance coverage for\nthe below poverty line (BPL) families. However RSBY provided a Sum Insured of only\nRs 30,000 which was not considered enough to cover major surgeries/\nhospitalisation expenses.**J.** **Pradhan Mantri Jan Arogya Yojana**To address the shortcomings of RSBY, as recommended by the National Health Policy\n2017, the Government of India launched ‘Ayushman Bharat Scheme’ in 2017, a\nflagship scheme of to achieve the vision of Universal Health Coverage (UHC). Also\nknown as Pradhan Mantri Jan Arogya Yojana (PMJAY) Ayushman Bharat came with a\nSum Insured of Rs. 5,00,000.It subsumed the then existing Rashtriya Swasthya Bima Yojana (RSBY). PM-JAY is\nfully funded by the Government and cost of implementation is shared between the\nCentral and State Governments.**K.** **Pradhan Mantri Suraksha Bima Yojana**Features of the recently announced PMSBY covering personal accident death and\ndisability cover are as follows:\n**Scope of coverage:** All savings bank account holders in the age 18 to 70 years in\nparticipating banks are entitled to join through one savings bank account only and\nif he enrols in more than one bank, he gets no extra benefit and the extra premium\npaid will stand forfeited. Aadhaar would be the primary KYC for the bank account.226**Enrolment Modality/ Period** : The cover shall be for the one year period from 1 [st]", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s2", "section": "Diagnosis Cover:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_122", "metadata": {"file_size": 20690, "chunk_index": 122, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Scope of coverage:", "Pradhan Mantri Jan Arogya Yojana", "Diagnosis Cover:", "Travel Insurance:", "Enrolment Modality/ Period"]}}
{"chunk": "flagship scheme of to achieve the vision of Universal Health Coverage (UHC). Also\nknown as Pradhan Mantri Jan Arogya Yojana (PMJAY) Ayushman Bharat came with a\nSum Insured of Rs. 5,00,000.It subsumed the then existing Rashtriya Swasthya Bima Yojana (RSBY). PM-JAY is\nfully funded by the Government and cost of implementation is shared between the\nCentral and State Governments.**K.** **Pradhan Mantri Suraksha Bima Yojana**Features of the recently announced PMSBY covering personal accident death and\ndisability cover are as follows:\n**Scope of coverage:** All savings bank account holders in the age 18 to 70 years in\nparticipating banks are entitled to join through one savings bank account only and\nif he enrols in more than one bank, he gets no extra benefit and the extra premium\npaid will stand forfeited. Aadhaar would be the primary KYC for the bank account.226**Enrolment Modality/ Period** : The cover shall be for the one year period from 1 [st]\nJune to 31 [st] May for which option to join/ pay by auto-debit from the designated\nsavings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from the\naccount holder’s savings bank account through ‘auto debit’ facility**Termination of cover** : The accident cover for the member shall terminate:1. On member attaining the age of 70 years (age nearest birth day) or2. Closure of account with the Bank or insufficiency of balance to keep theinsurance in force orIf the insurance cover is ceased due to any technical reasons such as insufficient\nbalance on due date or due to any administrative issues, the same can be reinstated\non receipt of full annual premium, subject to conditions that may be laid down.**L.** **Personal Accident and Disability cover**A **Personal Accident (PA) Cover** provides compensation due to death and disability\nin the event of unforeseen accident.In a PA policy,a) The death benefit is payment of 100% of the sum insured,b) In the event of disability, compensation varies from a fixed percentage of the\nsum insured in the case of permanent disabilityc) Weekly compensation for temporary disablement.Weekly compensation means payment of a fixed sum per week of disablement\nsubject to a maximum limit in terms of number of weeks for which the compensation\nwould be payable.**1.** **Types of disability covered**Types of disability which are normally covered under the policy are:**i.** **Permanent total disability (PTD):** means becoming totally disabled forlifetime viz. paralysis of all four limbs, comatose condition, loss of both\neyes/ both hands/ both limbs or one hand and one eye or one eye and one\nleg or one hand and one leg,227**ii.** **Permanent partial disability (PPD):** means becoming partially disabled forlifetime viz. loss of fingers, toes, phalanges etc.**iii.** **Temporary total disability (TTD):** means becoming totally disabled for atemporary period of time. This section of cover is intended to cover the loss\nof income during the disability period.The client has choice to select only death cover or death plus permanent\ndisablement of Or Death plus permanent disablement and also temporary total\ndisablement.**2.** **Sum insured**Sums insured for PA policies are usually decided on the basis of gross monthly\nincome. Typically, it is 60 times of the gross monthly income. However, some\ninsurers also offer on fixed plan basis without considering the income level. In such", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "r2", "section": "K.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_123", "metadata": {"file_size": 20690, "chunk_index": 123, "chunk_tokens": 993, "has_examples": true, "has_tables": true, "key_concepts": ["Scope of coverage:", "Personal Accident and Disability cover", "Sum insured", "Permanent partial disability (PPD):", "Termination of cover"]}}
{"chunk": "would be payable.**1.** **Types of disability covered**Types of disability which are normally covered under the policy are:**i.** **Permanent total disability (PTD):** means becoming totally disabled forlifetime viz. paralysis of all four limbs, comatose condition, loss of both\neyes/ both hands/ both limbs or one hand and one eye or one eye and one\nleg or one hand and one leg,227**ii.** **Permanent partial disability (PPD):** means becoming partially disabled forlifetime viz. loss of fingers, toes, phalanges etc.**iii.** **Temporary total disability (TTD):** means becoming totally disabled for atemporary period of time. This section of cover is intended to cover the loss\nof income during the disability period.The client has choice to select only death cover or death plus permanent\ndisablement of Or Death plus permanent disablement and also temporary total\ndisablement.**2.** **Sum insured**Sums insured for PA policies are usually decided on the basis of gross monthly\nincome. Typically, it is 60 times of the gross monthly income. However, some\ninsurers also offer on fixed plan basis without considering the income level. In such\npolicies sum insured for each section of cover varies as per the plan opted.**3.** **Personal Accident Insurance – a Benefit plan**Being a benefit plan, PA policies are not subject to the principle of ‘contribution’\nat the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on the\nbasis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out of\ndisability existing prior to the inception of policy, death or disability due to mental\ndisorders or any sickness, injury due to war, invasion, culpable homicide or murder,\nintentional self-injury, suicide, intake of drugs/ alcohol, injury while engaging in\ndefined extra hazardous activity like aviation or ballooning . This is an indicative\nlist and can vary from company to company.PA policies are offered to individuals, family and also to groups.**Group Personal Accident Policies**Group Personal Accident Policies are usually annual policies with renewals being\nallowed on the anniversary. However, non-life and standalone health insurers may\noffer group personal accident products with term less than one year also to provide\ncoverage to specific events.**Broken bone policy and compensation for loss of daily activities**This is a specialised PA policy. This policy is designed to provide cover against listed\nfractures. Fixed benefit or percentage of sum insured mentioned against each\nfracture is paid at the time of claim. Quantum of benefit depends on the type of\nbone covered and nature of fracture sustained.228**M.** **Overseas Travel insurance****Need for the policy:** To cover expenses of accidental injury or hospitalisation whilst\ntravelling outside India for business, holidays or studies., The cost of medical care,\nespecially in countries such as USA and Canada, is very high and could cause major\nfinancial problems.**Scope of coverage**Such policies are primarily meant for accident and sickness benefits, but most\nproducts available in the market package a range of covers within one product.The usual covers offered are:**a) Medical and sickness section:**i. Accidental death/ disability\nii. Medical expenses due to illness/ accident\n**b) Repatriation and evacuation**\n**c) Personal accident cover**\n**d) Personal liability**\n**e) Other non-medical covers:**i. Trip Cancellation\nii. Trip Delay\niii. Trip interruption\niv. Missed Connection\nv. Delay of Checked Baggage\nvi. Loss of Checked Baggage\nvii. Loss of Passport\nviii. Emergency Cash Advance\nix. Hijack Allowance\nx. Bail Bond insurance\nxi. Hijack cover\nxii. Sponsor Protection\nxiii. Compassionate Visit\nxiv. Study Interruption\nxv. Home burglary**1.** **Types of plans**The popular policies are the Business and Holiday Plans, the Study Plans and the\nEmployment Plans.**2.** **Who can take the policy**An Indian citizen travelling abroad on business, holiday or for studies can avail this", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Types of disability covered", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_124", "metadata": {"file_size": 20690, "chunk_index": 124, "chunk_tokens": 982, "has_examples": true, "has_tables": false, "key_concepts": ["Scope of cover", "Exclusions:", "Sum insured", "Permanent partial disability (PPD):", "Overseas Travel insurance"]}}
{"chunk": "financial problems.**Scope of coverage**Such policies are primarily meant for accident and sickness benefits, but most\nproducts available in the market package a range of covers within one product.The usual covers offered are:**a) Medical and sickness section:**i. Accidental death/ disability\nii. Medical expenses due to illness/ accident\n**b) Repatriation and evacuation**\n**c) Personal accident cover**\n**d) Personal liability**\n**e) Other non-medical covers:**i. Trip Cancellation\nii. Trip Delay\niii. Trip interruption\niv. Missed Connection\nv. Delay of Checked Baggage\nvi. Loss of Checked Baggage\nvii. Loss of Passport\nviii. Emergency Cash Advance\nix. Hijack Allowance\nx. Bail Bond insurance\nxi. Hijack cover\nxii. Sponsor Protection\nxiii. Compassionate Visit\nxiv. Study Interruption\nxv. Home burglary**1.** **Types of plans**The popular policies are the Business and Holiday Plans, the Study Plans and the\nEmployment Plans.**2.** **Who can take the policy**An Indian citizen travelling abroad on business, holiday or for studies can avail this\npolicy. Employees of Indian employers sent on contracts abroad can also be covered.**3.** **Sum insured and premiums**The cover is granted in US Dollars and generally varies from USD 100,000 to USD\n500,000 for the section covering medical expenses, evacuation and repatriation. For\nother sections the Sum Insured is lower, except for the liability cover. Premiums\ncan be paid in Indian rupees except in the case of the employment plan where\npremium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada229 World-wide including USA/ CanadaSome products provide cover for a group of countries. Examples are travel to Asian\ncountries only, European countries only or travel to a particular country only.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies for\nits executives who frequently make trips outside India. This cover can also be taken\nby individuals who fly overseas many times during a year. An advance premium is\npaid based on the estimated man days of travel in a year by a company’s employees.\nThe above policies are granted only for business and holiday travels. Pre-existing\ndiseases are usually excluded for Overseas Medical/ Travel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year\nrenewable contracts.**Features of group policies - Hospitalisation benefit covers.****1.** **Scope of coverage**The most common form of group health insurance is the policy taken by\nemployers covering employees and their families including dependent spouse,\nchildren and parents/ parents in law.**2.** **Tailor-made cover**Group policies are often tailor-made covers to suit the requirements of the\ngroup. Thus, in group policies, one will find several standard exclusions of the\nindividual policy being covered under the group policy.**3.** **Maternity cover**One of the most common extensions in a group policy is the maternity cover.\nMaternity cover would provide for the expenses incurred in hospitalization for\ndelivery of child and includes C- section delivery. This cover is generally\nrestricted to a certain amount within the overall sum insured of the family.**4.** **Child cover**Coverage is given to babies from day one, sometimes restricted to the\nmaternity cover limit and sometimes extended to include the full sum insured\nof the family.**5.** **Pre-existing diseases covered, waiting period waived off**Several of the usual exclusions, such as the pre-existing disease exclusion,\nthirty days waiting period, two years waiting period, congenital diseases may\nbe waived off, in tailor-made group policies.**6.** **Premium calculation**The premium charged for a group policy is based on the age profile of the\ngroup members, the size of the group and most importantly the claims\nexperience of the group.230**7.** **Non-employer employee groups**In India, regulatory provisions strictly prohibit formation of groups primarily\nfor the purpose of taking out a group insurance cover. When group policies\nare given to other than employers, it is important to determine the relation\nof the group owner to its members.**Example**A bank taking a policy for its saving bank account holders or credit card\nholders constitutes a homogenous group, whereby a large group is able to", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "a229", "section": "Scope of coverage", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_125", "metadata": {"file_size": 20690, "chunk_index": 125, "chunk_tokens": 993, "has_examples": true, "has_tables": false, "key_concepts": ["Non-employer employee groups", "Child cover", "Tailor-made cover", "Group Health cover", "Example"]}}
{"chunk": "restricted to a certain amount within the overall sum insured of the family.**4.** **Child cover**Coverage is given to babies from day one, sometimes restricted to the\nmaternity cover limit and sometimes extended to include the full sum insured\nof the family.**5.** **Pre-existing diseases covered, waiting period waived off**Several of the usual exclusions, such as the pre-existing disease exclusion,\nthirty days waiting period, two years waiting period, congenital diseases may\nbe waived off, in tailor-made group policies.**6.** **Premium calculation**The premium charged for a group policy is based on the age profile of the\ngroup members, the size of the group and most importantly the claims\nexperience of the group.230**7.** **Non-employer employee groups**In India, regulatory provisions strictly prohibit formation of groups primarily\nfor the purpose of taking out a group insurance cover. When group policies\nare given to other than employers, it is important to determine the relation\nof the group owner to its members.**Example**A bank taking a policy for its saving bank account holders or credit card\nholders constitutes a homogenous group, whereby a large group is able to\nbenefit by a tailor-made policy designed to suit their requirements.**8.** **Pricing**In group policies, there is provision for discount on premium based on size of\nthe group as also the claims experience of the group**2.** **CORPORATE BUFFER OR FLOATER COVER**In most group policies, each family is covered for a defined sum insured, varying\nfrom Rs. One lac to five lacs and sometimes more. There arise situations where the\nsum insured of the family is exhausted, especially in the case of major illness of a\nfamily member. In such situations, if the buffer cover is opted for it brings relief,\nwhereby the excess expenses over and above the family sum insured are met from\nthis buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health check-up\npaid for by the insurer. There is incentive for better control of factors like blood\nglucose, blood pressure etc. in the form of reduced premiums from second year of\npolicy onwards. On the other hand, a higher premium would be chargeable for poor\ncontrol.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up\nto 70 years. Sum Insured ranges from Rs. 50,000 to Rs. 5,00,000. Capping on Room\nrent is applicable. Product is aimed to cover hospitalization complications of\ndiabetes like diabetic retinopathy (eye), kidney, diabetic foot, kidney transplant\nincluding donor expenses.231**Test Yourself 1**Though the duration of cover for pre-hospitalization expenses would vary from\ninsurer to insurer and is defined in the policy, the most common cover is for\n________ pre-hospitalization.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty daysKey terms in health policies **(All the terms are as defined in IRDAI Master**\n**Circular on Standardization of Health Insurance Products dated 22.07.2020)****1.** **Network Provider**Network provider refers to a hospital/ nursing home/ day care centre which is under\ntie-up with an insurer/ TPA for providing cashless treatment to insured patients.\nPatients are free to go to out-of-network providers but there they are generally\ncharged much higher fees.**2.** **Preferred provider network (PPN)**An insurer has the option to create a preferred network of hospitals to ensure quality\ntreatment and at best rates. When this group is limited to only a select few by the\ninsurer based on experience, utilization and cost of providing care, preferred\nprovider networks get formed.**3.** **Cashless service**A cashless service enables the insured to avail of the treatment up to the limit of\ncover without any payment to the hospitals. All that the insured has to do is\napproach a network hospital and present his medical card as proof of insurance. The\ninsurer facilitates a cashless access to the health service and directly makes\npayment to the network provider for the admissible amount. However, the insured\nhas to make payment for amounts beyond the policy limits and for expenses not", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d-19", "section": "Child cover", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_126", "metadata": {"file_size": 20690, "chunk_index": 126, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Non-employer employee groups", "CORPORATE BUFFER OR FLOATER COVER", "Disease covers", "Child cover", "Network Provider"]}}
{"chunk": "tie-up with an insurer/ TPA for providing cashless treatment to insured patients.\nPatients are free to go to out-of-network providers but there they are generally\ncharged much higher fees.**2.** **Preferred provider network (PPN)**An insurer has the option to create a preferred network of hospitals to ensure quality\ntreatment and at best rates. When this group is limited to only a select few by the\ninsurer based on experience, utilization and cost of providing care, preferred\nprovider networks get formed.**3.** **Cashless service**A cashless service enables the insured to avail of the treatment up to the limit of\ncover without any payment to the hospitals. All that the insured has to do is\napproach a network hospital and present his medical card as proof of insurance. The\ninsurer facilitates a cashless access to the health service and directly makes\npayment to the network provider for the admissible amount. However, the insured\nhas to make payment for amounts beyond the policy limits and for expenses not\npayable as per policy conditions.**4.** **Third Party Administrator (TPA)**A major development in the field of health insurance is the introduction of the third\nparty administrator or TPA. Several insurers across the world utilize the services of\nindependent organizations for managing health insurance claims. These agencies\nare known as the TPAs. In India, a TPA is engaged by an insurer for provision of\nhealth services which includes among other things:i. Providing an identity card to the policyholder which is proof of his insurancepolicy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards for\nhospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals\nor health service providers and ensure that any person who undergoes treatment in\nthe network hospitals is given a cashless service. They are the intermediaries232between the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum\ncriteria as under:a) Has at least 10 inpatient beds in those towns having a population of less than10,00,000 and 15 inpatient beds in all other places;b) Has qualified nursing staff under its employment round the clock;c) Has qualified medical practitioner(s) in charge round the clock;d) Has a fully equipped operation theatre of its own where surgical proceduresare carried out;e) Maintains daily records of patients and will make these accessible to theInsurance Company’s authorized personnel.**6.** **Medical practitioner**A Medical practitioner is a person who holds a valid registration from the medical\ncouncil of any state of India or for homeopathy and is thereby entitled to practice\nmedicine within its jurisdiction; and is acting within the scope and jurisdiction of\nhis license. However, insurance companies are free to make a restriction that the\nregistered practitioner should not be the insured or any close family member. This\nis to ensure fraudulent claims are not lodged by taking treatment from relatives or\nby self or by hospitals owned by either.**Qualified nurse:** Qualified nurse means a person who holds a valid registration from\nthe Nursing Council of India or the Nursing Council of any state in India.**7.** **Reasonable and necessary expenses**A health insurance policy always contains this clause as the policy provides for\ncompensation of expenses that would be deemed to be reasonable for treatment of\na particular ailment and in a particular geographical area.**8.** **Notice of claim**Every insurance policy provides for immediate intimation of claim and specified\ntime limits for document submission. In health insurance policies, wherever cashless\nfacility is desired by the customer, intimations are given well before the\nhospitalization. However in cases of reimbursement claims the time limit for\nsubmission of claim documents is normally fixed at 15 days from the date of\ndischarge.**9.** **Free health check**In individual health policies, a provision is generally available to give some form of\nincentive to a claim free policyholder. Many policies provide for reimbursement of\nthe cost of health check-up at the end of four continuous, claim free policy periods.233**10.** **Cumulative bonus**A cumulative bonus is given on the sum insured for every claim free year. This means\nthat the sum insured gets increased on renewal by a fixed percentage say 5%\nannually and is allowed up to a maximum of 50% for ten claim-free renewals.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s232", "section": "Preferred provider network (PPN)", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_127", "metadata": {"file_size": 20690, "chunk_index": 127, "chunk_tokens": 1015, "has_examples": false, "has_tables": false, "key_concepts": ["Medical practitioner", "Reasonable and necessary expenses", "Hospital", "Notice of claim", "Cumulative bonus"]}}
{"chunk": "compensation of expenses that would be deemed to be reasonable for treatment of\na particular ailment and in a particular geographical area.**8.** **Notice of claim**Every insurance policy provides for immediate intimation of claim and specified\ntime limits for document submission. In health insurance policies, wherever cashless\nfacility is desired by the customer, intimations are given well before the\nhospitalization. However in cases of reimbursement claims the time limit for\nsubmission of claim documents is normally fixed at 15 days from the date of\ndischarge.**9.** **Free health check**In individual health policies, a provision is generally available to give some form of\nincentive to a claim free policyholder. Many policies provide for reimbursement of\nthe cost of health check-up at the end of four continuous, claim free policy periods.233**10.** **Cumulative bonus**A cumulative bonus is given on the sum insured for every claim free year. This means\nthat the sum insured gets increased on renewal by a fixed percentage say 5%\nannually and is allowed up to a maximum of 50% for ten claim-free renewals.\nMoreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second year,\nin case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs (5% more\nthan the previous year) at the same premium of Rs. 5,000. This could go up to Rs.\n4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or loading\nof premium is collected at renewal. However, in case of group policies, the malus\nis charged by way of loading the overall premium suitably to keep the claim ratio\nwithin reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year instead\nof a bonus on sum insured.**13.** **Room rent restrictions**Some health plans place a restriction on the category of room that an insured\nchooses by linking it to the sum insured. Hence a person with a sum insured of one\nlac would be entitled to a room of Rs 1,000 per day if the policy has a room rent\nrestriction of 1% of sum insured per day.**14.** **Renewability clause**The IRDAI guidelines on renewability of health insurance policies makes lifetime\nguaranteed renewal of the health policies compulsory, except on grounds of fraud\nand misrepresentation. In accordance to the provisions of IRDAI Health Insurance\nRegulation 2016, once a proposal is accepted in respect of a health insurance policy\n(except Personal Accident and Travel Policies) and a policy is issued which is\nthereafter renewed periodically without any break, further renewal shall not be\ndenied on the grounds of age of the Insured. Thus, health insurance policies are\nrenewable lifelong.**15.** **Cancellation clause**An insurance company may at any time cancel the policy only on grounds of\nmisrepresentation, fraud, and non-disclosure of material fact or non-cooperation by\nthe insured.When policies are cancelled by the insurer, a proportion of the premium\ncorresponding to the unexpired period of insurance, is returned to the insured\nprovided no claim has been paid under the policy. This is usually on pro-rata basis.When annual policies are cancelled by the insured, insurers usually charge premiums\nat Short period scales, instead of pro-rata premiums. This would prevent antiselection against the insurers and take care of the initial expenses of the insurer.234**16.** **Grace period for renewal**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period.Most of above key clauses, definitions, exclusions relating to grace period have been\nstandardized under Health Regulations and Health Insurance Standardization\nGuidelines issued by IRDAI and updated from time to time.**Test Yourself 2**As per IRDA guidelines, a ________ grace period is allowed for renewal of individual", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Notice of claim", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_128", "metadata": {"file_size": 20690, "chunk_index": 128, "chunk_tokens": 946, "has_examples": true, "has_tables": false, "key_concepts": ["Notice of claim", "Cumulative bonus", "Room rent restrictions", "Example", "Free health check"]}}
{"chunk": "misrepresentation, fraud, and non-disclosure of material fact or non-cooperation by\nthe insured.When policies are cancelled by the insurer, a proportion of the premium\ncorresponding to the unexpired period of insurance, is returned to the insured\nprovided no claim has been paid under the policy. This is usually on pro-rata basis.When annual policies are cancelled by the insured, insurers usually charge premiums\nat Short period scales, instead of pro-rata premiums. This would prevent antiselection against the insurers and take care of the initial expenses of the insurer.234**16.** **Grace period for renewal**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period.Most of above key clauses, definitions, exclusions relating to grace period have been\nstandardized under Health Regulations and Health Insurance Standardization\nGuidelines issued by IRDAI and updated from time to time.**Test Yourself 2**As per IRDA guidelines, a ________ grace period is allowed for renewal of individual\nhealth policies.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty days**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.235## CHAPTER H-04## HEALTH INSURANCE UNDERWRITING**Chapter Introduction**This chapter aims to provide you detailed knowledge about underwriting in health\ninsurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get an\nunderstanding about basic principles, tools, methods and process of underwriting.\nIt will also provide you the knowledge about group health insurance underwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten236**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his\nfamily health history, habits and so on.On receipt of his proposal form, he was also required to submit many documents\nsuch as identity and age proof, proof of address and previous medical records. Then\nthey told him to undergo a health check-up and some medical tests which frustrated\nhim.Manish, who considered himself a healthy person and with a good income level,\nstarted wondering why such a lengthy process was being followed by the insurance\ncompany in his case. Even after going through all this, the insurance company told\nhim that high cholesterol and high BP had been diagnosed in his medical tests, which\nincreased the chances of heart diseases later. Though they offered him a policy, the\npremium was much higher than what his friend had paid and so he refused to take\nthe policy.Here, the insurance company was following all these steps as part of their\nunderwriting process. While providing risk coverage, an insurer needs to evaluate\nrisks properly and also to make reasonable profit. If the risk is not assessed properly\nand there is a claim, it will result in a loss. Moreover, insurers collect premiums on\nbehalf of all insuring persons and have to handle these moneys like a trust.**A.** **What is underwriting?****1.** **Underwriting**\nInsurance companies try to insure people who are expected to pay adequate\npremium in proportion to the risk they bring to the insurance pool. This process of\ncollecting and analysing information from a proposer is known as underwriting. On\nthe basis of information collected through this process, they decide whether they\nwant to insure a proposer. If they decide to do so, then at what premium, terms\nand conditions so as to make a reasonable profit from taking such risk.**Definition****Underwriting** is the process of assessing the risk appropriately and deciding the\nterms on which the insurance cover is to be granted. Thus, it is a process of risk\nassessment and risk pricing.**2.** **Need for Underwriting**Underwriting is the backbone of an insurance company as acceptance of the risk\ncarelessly or for insufficient premiums will lead to insurer’s insolvency. On the other\nhand, being too selective or careful will prevent the insurance company from237creating a big pool so as to spread the risk uniformly. It is therefore critical to strike\nthe correct balance between risk and business, thereby being competitive and yet", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "H-04", "section": "Grace period for renewal", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_129", "metadata": {"file_size": 20690, "chunk_index": 129, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "What is underwriting?", "Answer 2", "Chapter Introduction", "Answer 1"]}}
{"chunk": "Insurance companies try to insure people who are expected to pay adequate\npremium in proportion to the risk they bring to the insurance pool. This process of\ncollecting and analysing information from a proposer is known as underwriting. On\nthe basis of information collected through this process, they decide whether they\nwant to insure a proposer. If they decide to do so, then at what premium, terms\nand conditions so as to make a reasonable profit from taking such risk.**Definition****Underwriting** is the process of assessing the risk appropriately and deciding the\nterms on which the insurance cover is to be granted. Thus, it is a process of risk\nassessment and risk pricing.**2.** **Need for Underwriting**Underwriting is the backbone of an insurance company as acceptance of the risk\ncarelessly or for insufficient premiums will lead to insurer’s insolvency. On the other\nhand, being too selective or careful will prevent the insurance company from237creating a big pool so as to spread the risk uniformly. It is therefore critical to strike\nthe correct balance between risk and business, thereby being competitive and yet\nprofitable for the organization.This process of balancing is done by the underwriter, in accordance with the\nphilosophy, policies and risk hunger of the insurance company concerned. Although\nage affects the chance of sickness as well as death, it must be remembered that\nsickness usually comes much before death and could be frequent. Hence, it is quite\nlogical that the underwriting norms and guidelines are much tighter for health\ncoverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored as\nthere has to be an insurable interest and financial underwriting is important to rule\nout any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A life\ninsurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered carefully\nwhile assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young adults\ndue to increased risk of infections and accidents. Similarly, for adults beyond\nthe age of 45 years, the premiums are higher, as the probability of an\nindividual suffering from a chronic ailment like diabetes, a sudden heart\nailment or other such morbidity is much higher.\n**b)** **Gender:** Women are exposed to additional risk of illness during child bearingperiod. However, men are more likely to get affected by heart attacks than\nwomen or suffer job related accidents than women as they may be more\ninvolved in hazardous employment.\n**c)** **Habits:** Consumption of tobacco, alcohol or narcotics in any form has a directbearing on the morbidity risk.\n**d)** **Occupation:** Extra risk to accidents is possible in certain occupations, e.g.driver, blaster, aviator etc. Likewise, certain occupations may have higher\nhealth risks, like an X-Ray machine operator, asbestos industry workers,\nminers etc.238**e)** **Family history:** This has greater relevance, as genetic factors influencediseases like asthma, diabetes and certain cancers. This does impact the\nmorbidity and should be taken into consideration while accepting risk.\n**f)** **Build:** Stout, thin or average build may also be linked to morbidity in certaingroups.\n**g)** **Past illness or surgery:** It has to be ascertained whether the past illness hasany possibility of causing increased physical weakness or even recur and\naccordingly the policy terms should be decided. For e.g. kidney stones are\nknown to recur and similarly, cataract in one eye increases possibility of\ncataract in the other eye.\n**h)** **Current health status and other factors or complaints:** This is important toascertain the degree of risk and insurability and can be established by proper\ndisclosure and medical examination.\n**i)** **Environment and residence:** These also have a bearing on morbidity rates.**Understanding Moral Hazard in Health Insurance**While factors like age, gender, habits etc. refer to the physical hazard of a health\nrisk, there is something else that needs to be closely watched. This is the moral\nhazard of the client which can prove very costly to the insurance company.An extreme example of bad moral hazard is that of an insured taking health", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "m237", "section": "Definition", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_130", "metadata": {"file_size": 20690, "chunk_index": 130, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Understanding Moral Hazard in Health Insurance", "Gender:", "Example", "Occupation:", "Factors which affect chance of illness"]}}
{"chunk": "morbidity and should be taken into consideration while accepting risk.\n**f)** **Build:** Stout, thin or average build may also be linked to morbidity in certaingroups.\n**g)** **Past illness or surgery:** It has to be ascertained whether the past illness hasany possibility of causing increased physical weakness or even recur and\naccordingly the policy terms should be decided. For e.g. kidney stones are\nknown to recur and similarly, cataract in one eye increases possibility of\ncataract in the other eye.\n**h)** **Current health status and other factors or complaints:** This is important toascertain the degree of risk and insurability and can be established by proper\ndisclosure and medical examination.\n**i)** **Environment and residence:** These also have a bearing on morbidity rates.**Understanding Moral Hazard in Health Insurance**While factors like age, gender, habits etc. refer to the physical hazard of a health\nrisk, there is something else that needs to be closely watched. This is the moral\nhazard of the client which can prove very costly to the insurance company.An extreme example of bad moral hazard is that of an insured taking health\ninsurance knowing that he will undergo a surgical operation within a short time but\nnot disclosing this to the insurer. There is thus a deliberate intention of taking\ninsurance just to collect a claim.**Test Yourself 1**Underwriting is the process of ___________.\nI. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks**Definition**The term **assessment of risks** refers to the process of evaluating each proposal for\nhealth insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.239**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance eagerly\nand to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there is\na chance that people with serious ailments like diabetes, high BP, heart problems\nor cancer, who knew that they would soon require hospitalization, would seek to\nbuy health insurance, create losses for the insurer. In other words, if an insurer does\nnot assess risk properly, it would be selected against and suffer losses in the process.**2.** **Equity among risks**\nLet us now consider equity among risks. “Equity” means that applicants who are\nexposed to similar types and degrees of risk be placed in the same premium class.\nInsurers would like to have some type of standardization to determine the premiums\nto be charged. The proposals that come to the underwriter are classified into\nfollowing risk types:**i.** **Standard risks**\nThese are the people whose expected morbidity (chance of falling ill) is average.**ii.** **Preferred risks**\nIn some cases, the expected morbidity is significantly lower than average and\nhence are preferred risks. These could be charged a lower premium.**iii.** **Substandard risks**\nIn some other cases, the expected morbidity may be higher than the average.\nThough these risks also may be insurable, insurers may charge higher premiums\nand/or accept them subject to certain conditions and restrictions.**iv.** **Declined risks**There are some persons who have certain medical or other conditions, which\nmake them highly prone to sicknesses and making claims. It is highly probable\nthat such persons fall sick and cause a disproportionate degree of liability on\nthe common pool. In other words, while others in the pool have a more or less\naverage chance of falling sick, these persons have a very high chance of falling\nsick making it difficult to insure them even at higher rates of premium.[Sometimes, such persons may be posing a Moral Hazard when they do not reveal\ntheir high probability of falling sick and try to get insured like other normal\npeople.] Most insurers decline such risks and create a database of such people\nfor future use.Being a ‘Declined Risk’ means only that a particular insurer does not wish to\ninsure a person for that type of insurance product, at that particular point in\ntime. However, it is possible that another insurer might insure him/ her at a\ndifferent premium and/or with different conditions. The same insurer might also240consider him/ her for another type of policy or even for the same policy at a", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "o240", "section": "Build:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_131", "metadata": {"file_size": 20690, "chunk_index": 131, "chunk_tokens": 992, "has_examples": true, "has_tables": false, "key_concepts": ["Equity among risks", "Purposes of Underwriting", "Understanding Moral Hazard in Health Insurance", "Substandard risks", "Test Yourself 1"]}}
{"chunk": "and/or accept them subject to certain conditions and restrictions.**iv.** **Declined risks**There are some persons who have certain medical or other conditions, which\nmake them highly prone to sicknesses and making claims. It is highly probable\nthat such persons fall sick and cause a disproportionate degree of liability on\nthe common pool. In other words, while others in the pool have a more or less\naverage chance of falling sick, these persons have a very high chance of falling\nsick making it difficult to insure them even at higher rates of premium.[Sometimes, such persons may be posing a Moral Hazard when they do not reveal\ntheir high probability of falling sick and try to get insured like other normal\npeople.] Most insurers decline such risks and create a database of such people\nfor future use.Being a ‘Declined Risk’ means only that a particular insurer does not wish to\ninsure a person for that type of insurance product, at that particular point in\ntime. However, it is possible that another insurer might insure him/ her at a\ndifferent premium and/or with different conditions. The same insurer might also240consider him/ her for another type of policy or even for the same policy at a\nlater date, when the conditions change.**3.** **Underwriting process**The underwriting process takes place at two levels: At the primary or field level or\n At the underwriting department level**a)** **Primary Underwriting**Primary underwriting (or Field level underwriting) includes information gathering\nby an agent or company representative to decide whether an applicant is suitable\nfor granting insurance coverage. The agent plays this critical role of **primary**\n**underwriting** . He is in the best position to know whether prospective client is\ninsurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may also\nbe sought from an official of the insurance company. These reports typically\ncover the occupation, income and financial standing and reputation of the person\nproposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts disclosed\nby the proposer in the Proposal Form. It would be difficult for an underwriter\nsitting in the office to know whether these facts are true or have been\nfraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the agent\nhas direct personal contact with the proposer, he or she is in the best position to\nfind out whether the information submitted is true and whether any wilful nondisclosure or misrepresentation has been made.**a)** **Role of the Underwriting department**The Underwriting department in the insurer’s office does the major part of the\nunderwriting. Here, specialists who are proficient in such work, consider and\nanalyse all the relevant data on the particular risk and even some demographical\ndata. They finally decide whether to accept the proposal for insurance, decide\nthe terms, and charge the appropriate premiums.241**C.** **Other Health Insurance regulations of IRDAI**\nThe regulator has also brought in some changes for benefit of the Insured as given\nbelow.a. The insured is to be informed of any underwriting loading charged over andabove the premium and the specific consent of the policyholder for such loadings\nshall be obtained before issuance of a policy.\nb. If an insurance company requires any further information, such as change ofoccupation, at any subsequent stage of a policy or at the time of its renewal, it\nhas prescribed standard forms to be filled up by the insured which forms part of\nthe policy document.\nc. Insurers have come out with various mechanisms to reward policyholders forearly entry, continued renewals, favourable claims experience etc. with the\nsame insurer and disclose upfront such mechanism or incentives in the\nprospectus and the policy document.**D.** **Portability of Health Insurance**Portability is defined by IRDAI as **the right** accorded to individual health insurance\npolicyholders (including all members under family cover), **to transfer** the credit\ngained for pre-existing conditions and time bound exclusions, **from one insurer to**\n**another insurer or from one plan to another plan of the same insurer**, provided\nthe previous policy has been maintained without any break.Portability is the provision by which an Insured can move from one insurer to another\ncarrying with him/ her all the benefits earned over a period of time. Students may\nplease read IRDAI’s Consolidated Guidelines on Product filing in Health Insurance\nBusiness dated 22 July 2020 lays down norms for standardising many of the practices", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "o240", "section": "Declined risks", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_132", "metadata": {"file_size": 20690, "chunk_index": 132, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Other Health Insurance regulations of IRDAI", "Underwriting process", "Primary Underwriting", "Role of the Underwriting department"]}}
{"chunk": "has prescribed standard forms to be filled up by the insured which forms part of\nthe policy document.\nc. Insurers have come out with various mechanisms to reward policyholders forearly entry, continued renewals, favourable claims experience etc. with the\nsame insurer and disclose upfront such mechanism or incentives in the\nprospectus and the policy document.**D.** **Portability of Health Insurance**Portability is defined by IRDAI as **the right** accorded to individual health insurance\npolicyholders (including all members under family cover), **to transfer** the credit\ngained for pre-existing conditions and time bound exclusions, **from one insurer to**\n**another insurer or from one plan to another plan of the same insurer**, provided\nthe previous policy has been maintained without any break.Portability is the provision by which an Insured can move from one insurer to another\ncarrying with him/ her all the benefits earned over a period of time. Students may\nplease read IRDAI’s Consolidated Guidelines on Product filing in Health Insurance\nBusiness dated 22 July 2020 lays down norms for standardising many of the practices\nincluding Portability.IRDAI mandates that Portability shall be allowed under all individual indemnity\nhealth insurance policies issued by General Insurers and Health Insurers including\nfamily floater policies.However, porting can be done only at the time of renewal. Apart from the waiting\nperiod credit, other terms of the new policy including the premium would be\ndecided by the new insurance company. Procedurally, the request for porting should\nbe made by the insured to the old insurer at least 45 days before the renewal,\nspecifying the company to which the policy has to be ported. The policy has to be\nrenewed without a break (there is a 30 day grace period if porting is under process).\nIRDA has created a web-based facility that maintains data about all health insurance\npolicies issued by insurance companies to individuals, to enable the new insurer to\naccess and obtain data on the porting policyholder’s health insurance history in a\nsmooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance policyholders\n(including all members under family cover and members of group health insurance242policy), **to transfer** the credit gained for pre-existing conditions and time bound\nexclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business dated\n22 July 2020 revised the guidelines on Migration of health insurance policies. It\nprovides that every individual policyholder (including members under family floater\npolicy) covered under an indemnity based individual health insurance policy shall\nbe provided an option of migration at the explicit option exercised by the\npolicyholder. Migration from group policies to individual policy will be subject to\nunderwriting.A policyholder desirous of migrating his/ her policy shall be allowed to apply to the\ninsurance company to migrate the policy along with all members of the family, if\nany, at least 30 days before the premium renewal date of his/her existing policy.\nHowever, if the insurer is willing to consider even less than 30 days period, then the\ninsurer may do so. Insurers shall not levy any charges exclusively for migration.**F.** **Basic principles of insurance and tools for underwriting****1.** **Basic principles relevant to underwriting**In any form of insurance, whether it is life insurance or general insurance, there are\ncertain legal principles which operate along with acceptance of risks. Health\ninsurance is equally governed by these principles and any violation of the principles\nmay result in the insurer deciding to avoid the liability. (These principles have been\ndiscussed in the common chapters.)**2.** **Tools for underwriting**These are the sources of information for the underwriter and the basis on which the\nrisk classification is done and premiums finally decided. The following are the key\ntools for underwriting:**a)** **Proposal form**This document is the base of the contract where all the critical information\npertaining to the health and personal details of the proposer (i.e. age,\noccupation, build, habits, health status, income, premium payment details etc.)\nare collected. Any breach or concealment of information by the insured shall\nrender the policy void. (This has been discussed in the common chapters.)**b)** **Age proof**Premiums are determined on the basis of the age of the insured. Hence it is\nimperative that the age disclosed at the time of enrolment is verified through\nsubmission of an age proof.243**Example**\nIn India, there are many documents which can be considered as age proof but all of\nthem are not legally acceptable. Mostly valid documents are divided into two broad", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e242", "section": "D.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_133", "metadata": {"file_size": 20690, "chunk_index": 133, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Portability of Health Insurance", "Basic principles relevant to underwriting", "Example", "Migration of Health Insurance", "Proposal form"]}}
{"chunk": "may result in the insurer deciding to avoid the liability. (These principles have been\ndiscussed in the common chapters.)**2.** **Tools for underwriting**These are the sources of information for the underwriter and the basis on which the\nrisk classification is done and premiums finally decided. The following are the key\ntools for underwriting:**a)** **Proposal form**This document is the base of the contract where all the critical information\npertaining to the health and personal details of the proposer (i.e. age,\noccupation, build, habits, health status, income, premium payment details etc.)\nare collected. Any breach or concealment of information by the insured shall\nrender the policy void. (This has been discussed in the common chapters.)**b)** **Age proof**Premiums are determined on the basis of the age of the insured. Hence it is\nimperative that the age disclosed at the time of enrolment is verified through\nsubmission of an age proof.243**Example**\nIn India, there are many documents which can be considered as age proof but all of\nthem are not legally acceptable. Mostly valid documents are divided into two broad\ncategories. They are as follows:a) Standard age proof: Some of these include school certificate, passport,domicile certificate, PAN card etc.\nb) Non-standard age proof: Some of these include ration card, voter ID, elder’sdeclaration, gram panchayat certificate etc.**Financial documents**\nKnowing the financial status of the proposer is particularly relevant for benefit\nproducts and to reduce the moral hazard. However, normally the financial\ndocuments are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and usually\ndepends upon the age of the insured and sometimes on the amount of cover\nopted. Some replies in the proposal form may also contain some information\nthat leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive to\ngenerate more business, there is a conflict of interest which has to be watched\nout for.**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.\nI. The insurerII. The insuredIII. Both the insurer and the insuredIV. The medical examiners**Test Yourself 3**Insurable interest refers to ____________.\nI. Financial interest of the person in the asset to be insured\nII. The asset which is already insured244III. Each insurer’s share of loss when more than one company covers the same loss\nIV. The amount of the loss that can be recovered from the insurer**G.** **Underwriting** **process**Once the required information is received, the underwriter decides the terms of the\npolicy. The common forms used for underwriting health insurance business are as\nbelow:**1.** **Medical underwriting**Medical underwriting is a process in which medical reports are called for from the\nproposer to determine the health status of an individual applying for health\ninsurance policy. The health information collected is then evaluated by the insurers\nto determine whether to offer coverage, up to what limit and on what conditions\nand exclusions. Thus medical underwriting can determine the acceptance or\ndeclining of a risk and also the terms of cover.**Example**Medical conditions like hypertension, overweight/ obesity and raised sugar levels\nhave a high probability of future hospitalization for diseases of the heart, kidney\nand the nervous system. So, these conditions should be carefully considered while\nassessing the risk for medical underwriting.Medical underwriting guidelines may also require a signed declaration of the\nproposer’s health status by his/ her family physician.Persons above the age of 45-50 years, enrolling for the first time are normally\nrequired to undergo specified pathological investigations to assess health risk profile\nand to obtain information on their current health status. Such investigations also\nprovide an indication of prevalence of any pre-existing medical conditions or\ndiseases.**2.** **Non-medical underwriting**Most of the proposers which apply for health insurance do not need medical\nexamination.Even, if the proposer were to disclose all material facts completely and truthfully\nand the same were checked by agent carefully, then also the need for medical\nexamination could be much less.**Example**\nIf an individual has to take health insurance coverage quickly without going through\na long process of medical examinations, waiting periods and processing delays, then", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d244", "section": "Tools for underwriting", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_134", "metadata": {"file_size": 20690, "chunk_index": 134, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Reports of sales personnel", "Financial documents", "Non-medical underwriting", "Example", "Test Yourself 3"]}}
{"chunk": "have a high probability of future hospitalization for diseases of the heart, kidney\nand the nervous system. So, these conditions should be carefully considered while\nassessing the risk for medical underwriting.Medical underwriting guidelines may also require a signed declaration of the\nproposer’s health status by his/ her family physician.Persons above the age of 45-50 years, enrolling for the first time are normally\nrequired to undergo specified pathological investigations to assess health risk profile\nand to obtain information on their current health status. Such investigations also\nprovide an indication of prevalence of any pre-existing medical conditions or\ndiseases.**2.** **Non-medical underwriting**Most of the proposers which apply for health insurance do not need medical\nexamination.Even, if the proposer were to disclose all material facts completely and truthfully\nand the same were checked by agent carefully, then also the need for medical\nexamination could be much less.**Example**\nIf an individual has to take health insurance coverage quickly without going through\na long process of medical examinations, waiting periods and processing delays, then\nhe can opt for a non-medical underwriting policy. In a non-medical underwriting245policy, premium rates and sum assured are usually decided on the basis of answers\nto a few health questions mostly based on age, gender, smoking class, build etc.\nThe process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practiced inall companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate. This\nbecomes an additional exclusion apart from the standard policy exclusion and shall\nform the part of the contract.**5.** **Use of general or standard exclusions**The majority of policies impose exclusions that apply to all their members. These\nare known as standard exclusions or sometimes referred to as general exclusions.\nInsurers limit their exposure by the implementation of standard exclusions. These\nhave been discussed in an earlier chapter.**6.** **Zone wise premium**Normally, the premium would depend on the age of the insured person and the sum\ninsured selected. Premium differential has been introduced in certain zones with\nhigher claims cost e.g. Delhi and Mumbai form part of highest premium zone for\ncertain products by some insurers. For e.g. Individual Policy for age group of 55-65\nyears would be rated higher in Metros and ‘A Class’ cities than a similar policy for\nthe same age bracket in a city like Indore or Jammu.246**Test Yourself 4**Which of the following statements about medical underwriting is incorrect?I. It involves high cost in collecting and assessing medical reports.\nII. Current health status and age are the key factors in medical underwriting forhealth insurance.\nIII. Proposers have to undergo medical and pathological investigations to assesstheir health risk profile.\nIV. Percentage assessment is made on each component of the risk.**H.** **Health Insurance at Group Level**While accepting a group for health insurance, the insurers take into consideration\nthe possibility of existence of a few members in the group who may have severe and\nfrequent health problems.**1.** **Group Health Insurance**Underwriting of group health insurance requires analysing the characteristics of the\ngroup to evaluate whether it falls within the insurance company’s underwriting\nguidelines as well as the guidelines laid down for group insurance by the insurance\nregulators.Standard underwriting process for group health insurance requires evaluating the\nproposed group on the following factors:a) Type of group\nb) Group size\nc) Type of industry\nd) Eligible persons for coverage\ne) Whether entire group is being covered or there is an option for members toopt out\nf) Level of coverage – whether uniform for all or differently\ng) Composition of the group in terms of sex, age, single or multiple locations,income levels of group members, employee turnover rate, whether premium", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "g245", "section": "Non-medical underwriting", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_135", "metadata": {"file_size": 20690, "chunk_index": 135, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Use of general or standard exclusions", "Non-medical underwriting", "Example", "Test Yourself 4", "Health Insurance at Group Level"]}}
{"chunk": "III. Proposers have to undergo medical and pathological investigations to assesstheir health risk profile.\nIV. Percentage assessment is made on each component of the risk.**H.** **Health Insurance at Group Level**While accepting a group for health insurance, the insurers take into consideration\nthe possibility of existence of a few members in the group who may have severe and\nfrequent health problems.**1.** **Group Health Insurance**Underwriting of group health insurance requires analysing the characteristics of the\ngroup to evaluate whether it falls within the insurance company’s underwriting\nguidelines as well as the guidelines laid down for group insurance by the insurance\nregulators.Standard underwriting process for group health insurance requires evaluating the\nproposed group on the following factors:a) Type of group\nb) Group size\nc) Type of industry\nd) Eligible persons for coverage\ne) Whether entire group is being covered or there is an option for members toopt out\nf) Level of coverage – whether uniform for all or differently\ng) Composition of the group in terms of sex, age, single or multiple locations,income levels of group members, employee turnover rate, whether premium\npaid entirely by the group holder or members are required to participate in\npremium payment\nh) Difference in healthcare costs across regions in case of multiple locationsspread in different geographical locations\ni) Preference of the group holder for administration of the group insurance bya third party administrator (of his choice or one selected by the insurer) or\nby the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore, the\ninsurer will price the group health insurance policy accordingly in both the cases.247Similarly to avoid adverse selection in case of groups with high turnover such as IT\ncompanies, insurers can introduce precautionary criteria requiring employees to\nserve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered group\nhealth insurance, the character of the group composition is one of the important\nconsideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be\nadopted by insurers in dealing with various groups. Such non-employer groups\ninclude:a) Employer welfare associations\nb) Holders of credit cards issued by a specific company\nc) Customers of a particular business where insurance is offered as an add-onbenefit\nd) Borrowers of a bank and professional associations or societies**I.** **Underwriting of Overseas Travel Insurance**Since the main cover under Overseas Travel Insurance policies is the health cover,\nthe underwriting would follow the pattern for health insurance in general.The premium rating and acceptance would as per individual company guidelines but\na few important considerations are given below:1. Premium rate would depend on the age of the proposer and the duration offoreign travel.\n2. As medical treatment is costly overseas, the premium rates are normallymuch higher compared to domestic health insurance policies.\n3. Even among the foreign countries, USA and Canada premium is the highest.\n4. Care should be taken to rule out the possibility of a Proposer using the policyto take medical treatment abroad and hence the existence of any preexisting disease must be carefully considered at the proposal stage.**J.** **Underwriting of Personal Accident Insurance**The underwriting considerations for Personal Accident Policies are discussed below:**Rating**In personal accident insurance, the main factor considered is the occupation of the\ninsured. The risks associated with profession or occupation varies in accordance\nwith the nature of work performed. For example, an office manager is less exposed\nto risk at work than a civil engineer working at a site where a building is being\nconstructed. To fix a rate, occupations are classified into groups, each group\nreflecting, more or less, similar risk exposure.248**Classification of Risk**On the basis of occupation, the risks associated with the insured person may be\nclassified into three groups:**Risk group I**\nAccountants, Doctors, Lawyers, Architects and persons engaged in\nadministration functions, persons primarily engaged in occupations of similar\nhazards.**Risk group II**\nBuilders, Contractors and Engineers engaged in superintending functions and\npersons engaged in occupation of similar hazards. All persons engaged in manual\nlabour (except those falling under Group III),**Risk group III**\nPersons working in underground mines or engaged in activities like racing on\nwheels and persons engaged in occupations/ activities of similar hazard.\nRisk groups are also known in the form of ‘Normal’, ‘Medium’ and ‘High’", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "H.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_136", "metadata": {"file_size": 20690, "chunk_index": 136, "chunk_tokens": 1014, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Underwriting other than employer- employee groups", "Risk group II", "Health Insurance at Group Level", "Example"]}}
{"chunk": "insured. The risks associated with profession or occupation varies in accordance\nwith the nature of work performed. For example, an office manager is less exposed\nto risk at work than a civil engineer working at a site where a building is being\nconstructed. To fix a rate, occupations are classified into groups, each group\nreflecting, more or less, similar risk exposure.248**Classification of Risk**On the basis of occupation, the risks associated with the insured person may be\nclassified into three groups:**Risk group I**\nAccountants, Doctors, Lawyers, Architects and persons engaged in\nadministration functions, persons primarily engaged in occupations of similar\nhazards.**Risk group II**\nBuilders, Contractors and Engineers engaged in superintending functions and\npersons engaged in occupation of similar hazards. All persons engaged in manual\nlabour (except those falling under Group III),**Risk group III**\nPersons working in underground mines or engaged in activities like racing on\nwheels and persons engaged in occupations/ activities of similar hazard.\nRisk groups are also known in the form of ‘Normal’, ‘Medium’ and ‘High’\nrespectively.**Age Limits**General age limits for the working population (employer employee) is 1870.However for students Minimum age could be 5 years too.\nThe minimum and maximum age for being covered and renewed varies from\ncompany to company.**Family Package Cover**The Personal accident policy also has a family package cover wherein Children and\nNon-earning spouse are covered for to death and permanent disablement (total or\npartial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the purpose\nof availing of group discount and other benefits, the proposed “Group” should fall\nclearly under one of the following categories, given below:Employer – employee relationship including dependents of the employeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above\ncategories, they may be deliberated and decided upon by the technical department\nof the respective insurers.249**Premium**Varying rates of premium are applicable to named employees as per the\nclassification of risks and the benefits selected.**On-duty cover**PA policies may have a cover for both on-duty and off-duty period or for either\nseparately. The premium is dependent on the Sum Assured, the number of hours of\nduty etc. Some employers may like to restrict themselves to cover the duty period\nonly.**Exclusion of death cover**It is possible to issue group P.A. policies excluding the death benefit, subject to\nindividual company guidelines.**Group discount and Bonus/ Malus**Rating under renewal of group policies is determined with reference to the claims\nexperience.Favourable experience is rewarded with a discount in the renewal premium\n(bonus)Adverse experience is penalised by loading of renewal premium (malus),\naccording to a scaleNormal rates will apply for renewal if the claims experience is, say, 70 percent**Test Yourself 5**1) In a group health insurance, any of the individual constituting the group couldanti-select against the insurer.\n2) Group health insurance provides coverage only to employer-employee groups.\nI. Statement 1 is true and statement 2 is falseII. Statement 2 is true and statement 1 is falseIII. Statement 1 and statement 2 are trueIV. Statement 1 and statement 2 are false**Answers to Test Yourself****Answer 1** **-** The correct option is III.\n**Answer 2** **-** The correct option is III.\n**Answer 3** **-** The correct option is I.\n**Answer 4** **-** The correct option is IV.\n**Answer 5** **-** The correct option is IV.250## CHAPTER H-05## HEALTH INSURANCE CLAIMS**Chapter Introduction**In this chapter we will discuss about claim management process in Health Insurance,\nclaims related procedures and documentation. Apart from this, we will also look\ninto claims management under Personal Accident Insurance and understand the role\nof TPAs.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various stakeholders in insurance claims\nb) Describe how health insurance claims are managed\nc) Discuss the various documents required for settlement of health insuranceclaims\nd) Explain how reserves for claims are provided for by insurers.\ne) Discuss personal accident claims", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "H-05", "section": "Classification of Risk", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_137", "metadata": {"file_size": 20690, "chunk_index": 137, "chunk_tokens": 988, "has_examples": true, "has_tables": false, "key_concepts": ["Exclusion of death cover", "Risk group II", "Group discount criteria", "Age Limits", "Answer 5"]}}
{"chunk": "**Answer 2** **-** The correct option is III.\n**Answer 3** **-** The correct option is I.\n**Answer 4** **-** The correct option is IV.\n**Answer 5** **-** The correct option is IV.250## CHAPTER H-05## HEALTH INSURANCE CLAIMS**Chapter Introduction**In this chapter we will discuss about claim management process in Health Insurance,\nclaims related procedures and documentation. Apart from this, we will also look\ninto claims management under Personal Accident Insurance and understand the role\nof TPAs.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various stakeholders in insurance claims\nb) Describe how health insurance claims are managed\nc) Discuss the various documents required for settlement of health insuranceclaims\nd) Explain how reserves for claims are provided for by insurers.\ne) Discuss personal accident claims\nf) Understand the concept and role of TPAs251**A.** **Claims Management in Insurance**It is very well understood that insurance is a ‘ **promise’** and the policy is a ‘ **witness’**\nto that promise. The occurrence of an insured event leading to a claim under the\npolicy is the true test of that promise. How well an insurer performs is evaluated by\nhow well it keeps its claims promises. One of the key rating factors in insurance is\nthe claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before looking\nat how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the ‘payers<br>of the claims’. Even if the claims are met from the policy<br>holders’ funds, in most cases, it is they who are liable to keep<br>the promise.|\n|**Underwriters**|Underwriters within an insurance company and across all<br>insurers have the responsibility to understand the claims and<br>design the products, decide policy terms, conditions and pricing<br>etc.|\n|**Regulator**|The regulator (Insurance Regulatory and Development Authority<br>of India) is a key stakeholder in its objective to:<br> Maintain order in the insurance environment<br> Protect policy holders’ interest<br> Ensure long term financial health of insurers.|252|Third Party<br>Administrators|Service intermediaries known as Third Party Administrators,<br>who process health insurance claims.|\n|---|---|\n|**Insurance**<br>**agents/**<br>**brokers**|Insurance agents/ brokers not only sell policies but are also<br>expected to service the customers in the event of a claim.<br>|\n|**Providers/**<br>**Hospitals**|~~They ensure that the customer gets a smooth claim experience,~~<br>especially when the hospital is on the panel of the TPA the<br>Insurer to provide cashless hospitalization.|Thus managing claims well means managing the objectives of the each of these\nstakeholders related to the claims. Of course, it may happen that some of these\nobjectives can conflict with each other.**Reserving:** In many cases, insurance companies may not be able to settle claims\ninstantly and may have to wait for information or the results of disputes, litigation\netc. So, they have to hold the claim amounts in reserve till the payments are due.\nReserves are usually are actuarial estimates of the amounts that will be paid on\noutstanding claims.Reserving refers to the amount of provision made for all claims in the books of the\ninsurer based on the status of the claims.**Test Yourself 1**Who among the following is not a stakeholder in Health insurance claim process?I. Customers\nII. Police Department\nIII. Regulator\nIV. TPA**B.** **Management of Health Insurance Claims****1.** **Claim process in health insurance**A claim may be serviced either by the insurance company itself or through the\nservices of a Third Party Administrator (TPA) authorized by the insurance company.From the time a claim is made known to the insurer/ TPA to the time the payment\nis made as per the policy terms, the health claim passes through a set of welldefined steps, each having its own relevance.The processes detailed below are in specific reference to health insurance\n(hospitalization) indemnity products which form the major part of health insurance\nbusiness.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "H-05", "section": "Answer 2", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_138", "metadata": {"file_size": 20690, "chunk_index": 138, "chunk_tokens": 1002, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Test Yourself 1", "Providers/", "Answer 5", "Insurance"]}}
{"chunk": "Reserves are usually are actuarial estimates of the amounts that will be paid on\noutstanding claims.Reserving refers to the amount of provision made for all claims in the books of the\ninsurer based on the status of the claims.**Test Yourself 1**Who among the following is not a stakeholder in Health insurance claim process?I. Customers\nII. Police Department\nIII. Regulator\nIV. TPA**B.** **Management of Health Insurance Claims****1.** **Claim process in health insurance**A claim may be serviced either by the insurance company itself or through the\nservices of a Third Party Administrator (TPA) authorized by the insurance company.From the time a claim is made known to the insurer/ TPA to the time the payment\nis made as per the policy terms, the health claim passes through a set of welldefined steps, each having its own relevance.The processes detailed below are in specific reference to health insurance\n(hospitalization) indemnity products which form the major part of health insurance\nbusiness.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.253**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)**a)** **Intimation**Claim intimation is the first instance of contact between the customer and theclaims team. The customer could inform the company that he is planning to avail\na hospitalization or the intimation would be made after the hospitalization has\ntaken place, especially in case of emergency admission to a hospital.254Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned\nadmission, and within 24 hours of hospitalization in case of an emergency.\nIntimation is now possible through Mobile Apps/ call centres run by insurers/\nTPAs open 24 hours as well as through the internet and e-mail.**b)** **Registration**Once the intimation is received by the company directly or through the TPA, the\ndetails thereof are matched for accuracy and a reference number or claim\ncontrol number generated and intimated to the claimant. The documents are\nthen scrutinized for prima facie coverage and pre-authorisation of likely\nexpenditure is given to the Hospital in case the intimation is of a planned surgery\nunder the Cash-less scheme (detailed in subsequent section).The claims that come for the final settlement on the reimbursement basis arescrutinized in detail about admissibility, sum assured, deductibles, sub-limits\netc. In case of deficiency in documents the same has to be communicated\ntogether, not in piecemeal. It is worth knowing that the claim processing\ninvolves not only ensuring that the terms of the contract have to be fulfilled,\nbut also in ensuring that the Hospitals do not indulge in overcharging, doublecharging etc.**Example**Hospitalization is typically associated with Allopathic method of treatment.\nHowever, the patient could undergo other modes of treatment such as: Unani\n Siddha\n Homeopathy\n Ayurveda\n Naturopathy etc.Most policies now include these treatments, however there could be sub-limits.**Telemedicine:** IRDAI has asked insurers to allow telemedicine wherever regular\nmedical consultation is allowed, in the terms and conditions of medical insurance\npolicies.This will help policy holders who may prefer to consult medical practitioners online\nor telephonically to avoid going out of their homes or if they are in quarantine\nthemselves due to the coronavirus infection.**Arriving at the final claim payable:** The factors that decide the claim amount\npayable are:a) Sum insured available for the member under the policyb) Balance sum insured available under the policy for the member after takinginto account any claim made already:255c) Sub-Limitsd) Check for any limits specific to illnesse) Check whether entitled or not to cumulative bonusf) Other expenses covered with limitation:What are finally paid are the Reasonable and Customary Charges meaning the\ncharges for services or supplies, which are the standard charges for the specific\nprovider and consistent with the prevailing charges in the geographical area for\nidentical or similar services, taking into account the nature of the illness/ injury\ninvolved.Earlier every TPA/ insurer had its own list of non-payable items, now the same", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Test Yourself 1", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_139", "metadata": {"file_size": 20690, "chunk_index": 139, "chunk_tokens": 993, "has_examples": true, "has_tables": false, "key_concepts": ["Arriving at the final claim payable:", "Claim process broadly comprises following steps", "Test Yourself 1", "Intimation", "Example"]}}
{"chunk": "medical consultation is allowed, in the terms and conditions of medical insurance\npolicies.This will help policy holders who may prefer to consult medical practitioners online\nor telephonically to avoid going out of their homes or if they are in quarantine\nthemselves due to the coronavirus infection.**Arriving at the final claim payable:** The factors that decide the claim amount\npayable are:a) Sum insured available for the member under the policyb) Balance sum insured available under the policy for the member after takinginto account any claim made already:255c) Sub-Limitsd) Check for any limits specific to illnesse) Check whether entitled or not to cumulative bonusf) Other expenses covered with limitation:What are finally paid are the Reasonable and Customary Charges meaning the\ncharges for services or supplies, which are the standard charges for the specific\nprovider and consistent with the prevailing charges in the geographical area for\nidentical or similar services, taking into account the nature of the illness/ injury\ninvolved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance Standardization Guidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by cheque\nor by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety of\nreasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs\nviii. Hospitalization is less than 24 hours.Denial or repudiation of a claim (due to whatever reason) has to be informed to\nthe customer in writing by the insurance company. Usually, such denial letter\nclearly states the reason for denial, narrating the policy term/ condition on which\nthe claim was denied.Apart from the representation to the insurer, the customer has the option to\napproach the following in case of denial of claim: Insurance Ombudsman or The Consumer Commissions or IRDAI or Law courts.**e)** **Suspect claims require more detailed investigation by the companies/****TPAs**\nWherever the insurance company suspects foul-play it can get claims\ninvestigated. A few examples of frauds committed in health insurance are:256i. Impersonation, the person insured is different from person treated.\nii. Fabrication of documents to make a claim where there is no hospitalization.\niii. Inflation of expenses, either with the help of the hospital or by addition ofexternal bills fraudulently created.\niv. Outpatient treatment converted to in-patient/ hospitalization to cover costof diagnosis, which could be high in some conditions.It is to be noted that in respect of claims that need to be investigated,\ninvestigations shall be initiated and completed at the earliest, in any case not\nlater than 90 days from the date of receipt of claim intimation. The claim should\nbe settled within 30 days of completing the investigation. (Pl refer to IRDAI\n(Protection of policyholder’s), 2017 Regulations and updated accordingly)**f)** **Cashless settlement process by TPA**How does the cashless facility work? At the heart of this is an agreement that\nthe TPA insurer enters into, with the hospital. There are agreements possible\nwith other medical service providers as well. The process used for providing\ncashless facility are discussed in this section:|ble 3.1|Col2|\n|---|---|\n|**Step 1**| A customer covered under health insurance suffers from an illness or<br>sustains an injury and so is advised admission into a hospital. He/ she (or<br>someone on his/ her behalf) approaches the hospital’s insurance desk<br>with the insurance details such as:<br>i. TPA name,<br>ii. Customer’s membership number,<br>iii. Insurer’s name, etc.|", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "l2", "section": "Arriving at the final claim payable:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_140", "metadata": {"file_size": 20690, "chunk_index": 140, "chunk_tokens": 957, "has_examples": true, "has_tables": true, "key_concepts": ["Denial of claims", "Arriving at the final claim payable:", "Payment of claim", "Step 1", "Cashless settlement process by TPA"]}}
{"chunk": "investigations shall be initiated and completed at the earliest, in any case not\nlater than 90 days from the date of receipt of claim intimation. The claim should\nbe settled within 30 days of completing the investigation. (Pl refer to IRDAI\n(Protection of policyholder’s), 2017 Regulations and updated accordingly)**f)** **Cashless settlement process by TPA**How does the cashless facility work? At the heart of this is an agreement that\nthe TPA insurer enters into, with the hospital. There are agreements possible\nwith other medical service providers as well. The process used for providing\ncashless facility are discussed in this section:|ble 3.1|Col2|\n|---|---|\n|**Step 1**| A customer covered under health insurance suffers from an illness or<br>sustains an injury and so is advised admission into a hospital. He/ she (or<br>someone on his/ her behalf) approaches the hospital’s insurance desk<br>with the insurance details such as:<br>i. TPA name,<br>ii. Customer’s membership number,<br>iii. Insurer’s name, etc.|\n|**Step 2**| The hospital compiles the necessary information such as:<br>i. Diagnosis of illness<br>ii. Treatment,<br>iii. Name of treating doctor,<br>iv. Number of days of proposed hospitalization and<br>v. The estimated cost<br> This is presented in a format, called the cashless authorization form.<br>|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could be<br>provided and if so, for how much amount it should be authorized and it<br>is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized by<br>the TPA as credit in the patient’s account. The member may be called on<br>to make a deposit payment to cover the non-treatment expenses and any<br>co-pay required under the policy.<br>|\n|**Step 5**|~~~~ When the patient is ready for discharge, the hospital checks the amount<br>of credit in the account of the patient approved by the TPA against the<br>actual treatment charges covered by insurance.<br> If the credit is less, the hospital requests for additional approval of credit<br>for the cashless treatment.<br> TPA analyses the same and approves the additional amount.<br>|\n|**Step 6**|~~~~ Patient pays the non-admissible charges and gets discharged. He will be<br>asked to sign the claim form and the bill, to complete the documentation.|257|Step 7| Hospital consolidates all the documents and presents to the TPA the<br>documents for processing of the bill|\n|---|---|\n|**Step 8**|~~~~ TPA will process the claim and recommend for payment to the hospital<br>after verifying details.|**g)** **Customer must make sure that he/ she has his/ her insurance details with****him/ her.**This includes his TPA card, Policy copy, Terms and conditions of cover etc.When these are not available, he can contact the TPA (through a 24 hour\nhelpline) and seek the details.i. Customer must check if the hospital suggested by his/ her consulting doctoris in the network of the TPA. If not, he needs to check with the TPA the\noptions available where cashless facility for such treatment is available.ii. He/ she needs to make sure that the correct details are entered into thepre-authorization form. This form has been standardized by IRDAI as per\nGuidelines on Standardization in Health Insurance issued in 2013. If the case\nis not clear, the TPA could deny the cashless facility or raise query.iii. He/ she needs to ensure that the hospital charges are consistent with thelimits such as room rent or caps on specified treatments such as cataract.iv. The customer must inform the TPA in advance of the discharge and requestthe hospital to send to the TPA any additional approval that may be required\nbefore discharge. This will ensure the patient does not wait unnecessarily at\nthe hospital.It is also possible that the customer requests and takes an approval for cashless\ntreatment at a hospital but decides to admit the patient elsewhere. In such\ncases, the customer must inform and ask the hospital to communicate to the\nTPA that the cashless approval is not being used.If this is not done, the amount approved could get blocked in the customer’s", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "l2", "section": "Cashless settlement process by TPA", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_141", "metadata": {"file_size": 20690, "chunk_index": 141, "chunk_tokens": 1001, "has_examples": false, "has_tables": true, "key_concepts": ["Step 2", "Step 6", "Step 5", "Step 3", "Step 1"]}}
{"chunk": "options available where cashless facility for such treatment is available.ii. He/ she needs to make sure that the correct details are entered into thepre-authorization form. This form has been standardized by IRDAI as per\nGuidelines on Standardization in Health Insurance issued in 2013. If the case\nis not clear, the TPA could deny the cashless facility or raise query.iii. He/ she needs to ensure that the hospital charges are consistent with thelimits such as room rent or caps on specified treatments such as cataract.iv. The customer must inform the TPA in advance of the discharge and requestthe hospital to send to the TPA any additional approval that may be required\nbefore discharge. This will ensure the patient does not wait unnecessarily at\nthe hospital.It is also possible that the customer requests and takes an approval for cashless\ntreatment at a hospital but decides to admit the patient elsewhere. In such\ncases, the customer must inform and ask the hospital to communicate to the\nTPA that the cashless approval is not being used.If this is not done, the amount approved could get blocked in the customer’s\npolicy and could prejudice the approval of the subsequent request.**C.** **Documentation in Health Insurance Claims**This section explains the need for and content of each of the documents required\nto be submitted by the customers:**1.** **Discharge summary**Discharge summary can be termed as the most important document that is required\nto process a health insurance claim. It details the complete information about the\ncondition of the patient and the line of treatment and helps the claim processing\nperson immensely to understand the illness/ injury and the line of treatment. Where\nthe patient unfortunately does not survive, the discharge summary is termed **Death**\n**Summary** in many hospitals. The discharge summary is always sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that258prompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the Xray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance policy.\nWhile the consolidated bill presents the overall picture, the detailed bill will provide\nthe break up, with reference codes. The bills have to be received in original.**4.** **Receipt for payment**The reimbursement of a health insurance claim will also require the formal receipt\nfrom the hospital of the amount paid which must correspond to the total of the bill.The receipt should be numbered and or stamped and be presented in original.**5.** **Claim form**Claim form is the formal and legal request for processing the claim and is submitted\nin original signed by the customer. The claim form has now been standardized by\nIRDAI.Besides information on disease, treatment etc., the declaration the insured person\nmakes in the claim form is the most important document in the legal sense.**6.** **Identity proof**With the increasing use of identity proof across various activities in our life, the\ngeneral Proof of identity helps in verifying whether the person covered and the\nperson treated are one and the same. Usually identification document which is\nsought could be voters’ identity card, driving license, PAN card, Aadhaar card etc.**7.** **Documents contingent to specific claims**There are certain types of claims that require additional documents apart from what\nhas been stated above. These are:a) Accident claims, where FIR or Medico-legal certificate issued by the hospitalto the registered police station, may be required.b) Case indoor papers in case of complicated or high value claims.c) Dialysis/ Chemotherapy/ Physiotherapy charts where applicable.d) Hospital registration certificate, where the compliance with the definitionof hospital needs to be checked**Test Yourself 2**Which of the following document is maintained at the hospital detailing all\ntreatment done to an in-patient?I. Investigation reportII. Discharge summaryIII. Case paperIV. Hospital registration certificate259**Test Yourself 3**The amount of provision made for all claims in the books of the insurer based on\nthe status of the claims is known as ________.I. Pooling\nII. Accounting\nIII. Reserving\nIV. Investing**D.** **Role of Third Party Administrators (TPA)**The Role of TPA has been discussed in earlier chapters too. It is important to know\nthe services offered by TPA so that the customer can be provided suitable services\nby the salesperson.The scope of TPA services starts after the sale and issue of the insurance policy. In", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "t258", "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_142", "metadata": {"file_size": 20690, "chunk_index": 142, "chunk_tokens": 991, "has_examples": false, "has_tables": false, "key_concepts": ["Death", "Discharge summary", "Documentation in Health Insurance Claims", "Investigation reports", "Claim form"]}}
{"chunk": "has been stated above. These are:a) Accident claims, where FIR or Medico-legal certificate issued by the hospitalto the registered police station, may be required.b) Case indoor papers in case of complicated or high value claims.c) Dialysis/ Chemotherapy/ Physiotherapy charts where applicable.d) Hospital registration certificate, where the compliance with the definitionof hospital needs to be checked**Test Yourself 2**Which of the following document is maintained at the hospital detailing all\ntreatment done to an in-patient?I. Investigation reportII. Discharge summaryIII. Case paperIV. Hospital registration certificate259**Test Yourself 3**The amount of provision made for all claims in the books of the insurer based on\nthe status of the claims is known as ________.I. Pooling\nII. Accounting\nIII. Reserving\nIV. Investing**D.** **Role of Third Party Administrators (TPA)**The Role of TPA has been discussed in earlier chapters too. It is important to know\nthe services offered by TPA so that the customer can be provided suitable services\nby the salesperson.The scope of TPA services starts after the sale and issue of the insurance policy. In\ncase of insurers not using TPAs, the services are performed by in-house team.**1.** **Post sale service of health insurance**a) Once the proposal (and the premium) is accepted, the coverage commences.\nb) If a TPA is to be used for servicing the policy, the insurer passes on theinformation about the customer and the policy to the TPA.\nc) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as well asprocessing of claims when the member requires the support of the policy for\na hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the services withinthe time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospital basedon the information provided for requesting the cashless facility.\nh) Where the information is not clear or not available, the TPA may reject thecashless request. In such cases the claim could be examined on\nreimbursement basis.**2.** **Customer relationship and contact management**Since TPAs are involved in claims servicing, they usually have a grievance redressal\nmechanism themselves.**E.** **Claims Management – Personal Accident**On receipt of the notification of the claim the following aspects should be looked\ninto:a) Person in respect of whom the claim is made is covered under the policy\nb) Policy is valid as on date of accident and premium has been received\nc) Loss is within the policy period260d) Loss has arisen out of “Accident” and not sickness\ne) Check for any fraud triggers and assign investigation if need be\nf) Register the claim and create reserve for the same\ng) Maintain the turnaround time (claim servicing time) and keep the customerinformed of the development of the claim.**1.** **Claims Investigation**Claims Investigation is about determining the validity of the claim and finding out\nthe real cause and extent of the loss. On receipt of the claim documents, if a claim\nappears suspicious, the claim may be assigned to an internal/ professional\ninvestigator for verification.**Example**Example of case guideline:\n**Road traffic accident**i. When did the incident take place – exact time and date place? Date and time\nii. Was the insured a pedestrian, traveling as passenger/ pillion rider or drivingthe vehicle involved in accident?**Some examples of possible fraud and leakage in personal accident claims:**i. Exaggeration in TTD period.\nii. Illness presented as accident e.g. backache due to pathological reasonsconverted into a PA claim after reported ‘fall/ slip’ at home\nDischarge voucher is an important document for settlement of personal accident\nclaim, especially those involving death claims. It is also important to obtain nominee\ndetails at the time of proposal and the same should form part of policy document.\n**2.** **Claim documentation- Each company gives a list**a) Duly completed Personal Accident claim form signed by the claimant’s\nnominee/ family member\nb) Original or Attested copy of First Information Report.\nc) Original or Attested copy of Death certificate.\nd) Attested copy of Post Mortem Report if conducted.\ne) Attested copy of AML documents (Anti-money laundering) - for name", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e259", "section": "Test Yourself 2", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_143", "metadata": {"file_size": 20690, "chunk_index": 143, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Customer relationship and contact management", "Role of Third Party Administrators (TPA)", "Example", "Post sale service of health insurance", "Test Yourself 3"]}}
{"chunk": "investigator for verification.**Example**Example of case guideline:\n**Road traffic accident**i. When did the incident take place – exact time and date place? Date and time\nii. Was the insured a pedestrian, traveling as passenger/ pillion rider or drivingthe vehicle involved in accident?**Some examples of possible fraud and leakage in personal accident claims:**i. Exaggeration in TTD period.\nii. Illness presented as accident e.g. backache due to pathological reasonsconverted into a PA claim after reported ‘fall/ slip’ at home\nDischarge voucher is an important document for settlement of personal accident\nclaim, especially those involving death claims. It is also important to obtain nominee\ndetails at the time of proposal and the same should form part of policy document.\n**2.** **Claim documentation- Each company gives a list**a) Duly completed Personal Accident claim form signed by the claimant’s\nnominee/ family member\nb) Original or Attested copy of First Information Report.\nc) Original or Attested copy of Death certificate.\nd) Attested copy of Post Mortem Report if conducted.\ne) Attested copy of AML documents (Anti-money laundering) - for name\nverification (passport/ PAN card/ Voter's ID/ Driving license) for address\nverification (Telephone bill/ Bank account statement, Electricity bill/ Ration\ncard).\nf) Legal heir certificate containing affidavit and indemnity bond both dulysigned by all legal heirs and notarized\ng) Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nh) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of exact\nleave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of the\ncase, especially the cases with suspected fraud angle to be investigated.261**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?\nI. Duly completed Personal Accident claim form signed by the claimant.\nII. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nIV. Fitness certificate from the treating doctor certifying that the insured is fit toperform his normal duties.**F.** **Claims Management- Overseas Travel Insurance**The coverage under this policy has already been discussed under the product\nchapter. This section tries to explain how the claims arising during overseas travel\nare handled.\n**Claims services essentially include:**a) Taking down the claim notification 24*7 basis;\nb) Sending the claim form and procedure;\nc) Guiding customer on what to do immediately after loss;\nd) Extending cashless services for medical and sickness claims;\ne) Arranging for repatriation and evacuation, emergency cash advance.\n**Assistance companies – Role in overseas claims**\nAssistance companies have their own offices and tie up arrangements with other\nsimilar service providers world over. These companies offer assistance to the\ncustomers of insurance companies in case of contingencies covered under the\npolicy.\nThese companies operate a 24*7 call centre including international toll free numbers\nfor claim registration and information. They also offer the following services and\ncharges for the services vary depending on agreement with the particular insurance\ncompany, benefits covered etc.a) Medical assistance services:\ni. Medical service provider referrals\nii. Arrangement of hospital admission\niii. Arrangement of Emergency Medical Evacuation\niv. Arrangement of Emergency Medical Repatriation\nv. Mortal remains repatriation\nvi. Compassionate visit arrangements\nvii. Minor children assistance/ escort\nb) Monitoring of Medical Condition during and after hospitalisation\nc) Delivery of Essential Medicines\nd) Guarantee of Medical Expenses Incurred during hospitalization subject to\nterms and condition of the policy and approval of insurance company.\ne) Pre-trip information services and other services:\ni. Visas and inoculation requirements\nii. Embassy referral services\niii. Lost passport and lost luggage assistance services\niv. Emergency message transmission services\nv. Bail bond arrangement\nvi. Financial Emergency Assistance262f) Interpreter Referral\ng) Legal Referral\nh) Appointment with lawyer\n**a)** **Hospitalization Procedures**i. Most hospitals accept Guarantee of Payments from all international insurancecompanies once the insured provides them with a valid health or overseas\ntravel insurance policy.ii. Hospitals start the treatment immediately. If there is insurance cover theinsurance policy pays or the patient person has to pay. The hospitals tend to", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e262", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_144", "metadata": {"file_size": 20690, "chunk_index": 144, "chunk_tokens": 968, "has_examples": true, "has_tables": false, "key_concepts": ["Assistance companies – Role in overseas claims", "Claims services essentially include:", "Test Yourself 4", "Example", "Hospitalization Procedures"]}}
{"chunk": "i. Medical service provider referrals\nii. Arrangement of hospital admission\niii. Arrangement of Emergency Medical Evacuation\niv. Arrangement of Emergency Medical Repatriation\nv. Mortal remains repatriation\nvi. Compassionate visit arrangements\nvii. Minor children assistance/ escort\nb) Monitoring of Medical Condition during and after hospitalisation\nc) Delivery of Essential Medicines\nd) Guarantee of Medical Expenses Incurred during hospitalization subject to\nterms and condition of the policy and approval of insurance company.\ne) Pre-trip information services and other services:\ni. Visas and inoculation requirements\nii. Embassy referral services\niii. Lost passport and lost luggage assistance services\niv. Emergency message transmission services\nv. Bail bond arrangement\nvi. Financial Emergency Assistance262f) Interpreter Referral\ng) Legal Referral\nh) Appointment with lawyer\n**a)** **Hospitalization Procedures**i. Most hospitals accept Guarantee of Payments from all international insurancecompanies once the insured provides them with a valid health or overseas\ntravel insurance policy.ii. Hospitals start the treatment immediately. If there is insurance cover theinsurance policy pays or the patient person has to pay. The hospitals tend to\ninflate charges since payments are delayed.iii. Information regarding network hospitals and the procedures is available tothe insured on the toll free numbers provided by the assistance companies.iv. In event of the necessity of a hospitalization the insured needs to intimatethe same at the call centre and proceed to a specified hospital with the valid\ntravel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officer inIndia: Past history, current treatment and further planned course in hospitaland request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee (INR),\nunlike in cashless claims where payment is made in foreign currency.While processing the reimbursement claims, currency conversion rate is\napplied as on date of loss to arrive at quantum of liability in INR. Then the\npayment is made though cheque or electronic transfer.**c)** **Claim documentation for Medical Accident and Sickness Expenses**i. Claim formii. Doctor’s reportiii. Original Admission/ discharge card263iv. Original Bills/ Receipts/ Prescriptionv. Original X-ray reports/ Pathological/ Investigative reportsvi. Copy of passport/ Visa with Entry and exit stampThe above list is only indicative. Additional information/ documents may be\nrequired depending on specific case details or depending upon claim settlement\npolicy/ procedure followed by particular insurer.**Test Yourself 5**Most hospitals accept Guarantee of Payments from all international insurance\ncompanies once the insured provides them with a valid __________ Insurance policy.I. Legal Liability\nII. Corona RakshakIII. Overseas TravelIV. Endowment**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.\n**Answer 4** - The correct option is IV.\n**Answer 5** - The correct option is III.**Summary**a) Insurance is a ‘promise’ and the policy is a ‘witness’ to that promise. Theoccurrence of insured event leading to a claim under the policy is the true test\nof that promise.b) One of the key rating parameter in insurance is the claims paying ability of theinsurance company.c) Customers, who buys insurance is the primary stakeholder as well as the receiverof the claim.d) In Cashless claim a network hospital provides the medical services based on apre-approval from the insurer/ TPA and later submits the documents for\nsettlement of the claim.e) In reimbursement claim, the customer pays the hospital from his own resourcesand then files claim with Insurer/ TPA for payment.f) Claim intimation is the first instance of contact between the customer and theclaims team.g) If a fraud is suspected by insurance company in case of insurance claim, it issent for investigation. Investigation of a claim could be done in-house by an", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e262", "section": "Hospitalization Procedures", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_145", "metadata": {"file_size": 20690, "chunk_index": 145, "chunk_tokens": 989, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Test Yourself 5", "Hospitalization Procedures"]}}
{"chunk": "**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.\n**Answer 4** - The correct option is IV.\n**Answer 5** - The correct option is III.**Summary**a) Insurance is a ‘promise’ and the policy is a ‘witness’ to that promise. Theoccurrence of insured event leading to a claim under the policy is the true test\nof that promise.b) One of the key rating parameter in insurance is the claims paying ability of theinsurance company.c) Customers, who buys insurance is the primary stakeholder as well as the receiverof the claim.d) In Cashless claim a network hospital provides the medical services based on apre-approval from the insurer/ TPA and later submits the documents for\nsettlement of the claim.e) In reimbursement claim, the customer pays the hospital from his own resourcesand then files claim with Insurer/ TPA for payment.f) Claim intimation is the first instance of contact between the customer and theclaims team.g) If a fraud is suspected by insurance company in case of insurance claim, it issent for investigation. Investigation of a claim could be done in-house by an\ninsurer/ TPA or be entrusted to a professional investigation agency.h) Reserving refers to the amount of provision made for all claims in the books ofthe insurer based on the status of the claims.264i) In case of a denial, the customer has the option, apart from the representationto the insurer, to approach the Insurance Ombudsman or the consumer\nCommissions or even the legal authorities.j) Frauds occur mostly in hospitalization indemnity policies but Personal accidentpolicies also are used to make fraud claims.k) The TPA provides many important services to the insurer and gets remuneratedin the form of fees.265## SECTION **GENERAL INSURANCE**266## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful for\nthe insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.267**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance company\nto accept the risk offered for insurance. The principle of utmost good faith and the\nduty of disclosure of material information begin with the proposal form forinsurance.**Example**If the insured was required to maintain an alarm or had stated that he has an\nautomatic alarm system in his gold jewellery showroom, then not only is he\nrequired to disclose it, he has to ensure the same remains in a working condition\nthroughout the policy period. The existence of the alarm is a material fact for the\ninsurer who will be accepting the proposal based on these facts and pricing the risk\naccordingly.**1.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the classof insurance concerned.**i.** **Fire insurance** proposal forms are usually used for relatively simple/ standardrisks like houses, shops etc. For large industrial risks, inspection of the risk is\narranged by insurer before acceptance of the risk. Special questionnaire are\nsometimes used in addition to the proposal form to gather specific information.Fire insurance proposal form seeks, among other things, the description of the\nproperty which would include the following information: Construction of external walls and roof, number of story\n Occupation of each portion of the building\n Presence of hazardous goods\n Process of manufacture including raw material and finished goods\n The sums proposed for insurance\n The period of insurance, etc.**ii.** **For motor insurance,** questions are asked about the vehicle, its operations,make and carrying capacity, how it is managed by the owner and related\ninsurance history.**iii.** **In personal lines** like health, personal accident and travel insurance, proposalforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits,", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "G-01", "section": "Answer 2", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_146", "metadata": {"file_size": 20690, "chunk_index": 146, "chunk_tokens": 963, "has_examples": true, "has_tables": false, "key_concepts": ["Answer 2", "Proposal forms", "Answer 3", "Example", "Nature of questions in a proposal form"]}}
{"chunk": "arranged by insurer before acceptance of the risk. Special questionnaire are\nsometimes used in addition to the proposal form to gather specific information.Fire insurance proposal form seeks, among other things, the description of the\nproperty which would include the following information: Construction of external walls and roof, number of story\n Occupation of each portion of the building\n Presence of hazardous goods\n Process of manufacture including raw material and finished goods\n The sums proposed for insurance\n The period of insurance, etc.**ii.** **For motor insurance,** questions are asked about the vehicle, its operations,make and carrying capacity, how it is managed by the owner and related\ninsurance history.**iii.** **In personal lines** like health, personal accident and travel insurance, proposalforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits,\npast insurance experience etc.**iv.** **In other miscellaneous insurances,** proposal forms are compulsory and theyincorporate a declaration which extends the common law duty of good faith.268**2.** **Elements of a proposal****i.** **Proposer’s name in full**The proposer should be able to identify himself/ herself unambiguously. It is\nimportant for the insurer to know with whom the contract has been entered, so\nthat the benefits under the policy would be received only by the insured.**ii.** **Proposer’s address and contact details**The reasons stated above are applicable for collecting the proposer’s address andcontact details as well.**iii.** **Proposer’s profession, occupation or business**In some cases like health and personal accident insurance, the proposer’s\nprofession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposed forinsurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose] or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to the\ninsurer.In property insurance, there is a chance that insured may take policies from\ndifferent insurers and when a loss happens, claim from more than one insurer.\nThis information is required to ensure that the principle of contribution is\napplied so that the insured is indemnified and does not gain/ profit due to\nmultiple insurance policies for the same risk.Further, in personal accident insurance an insurer would like to restrict the\namount of coverage (sum insured) depending on the sum insured under other\nPA policies taken by the same insured.269**vii.** **Loss experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about\nthe subject matter of insurance and how the insured has managed the risk in the\npast. Underwriters can understand the risk better from such answers and decide\non conducting risk inspections or collecting further details.**viii.** **Declaration by insured**As the purpose of the proposal form is to provide all material information to the\ninsurers, the form **includes a declaration by the insured that the answers are**\n**true and accurate and he agrees that the form shall be the basis of the**\n**insurance contract.** Any wrong answer will give the right to insurers to avoid the\ncontract. Other sections common to all proposal forms relate to **signature, date**\n**and in some cases agent’s recommendation.****B.** **Acceptance of the Proposal (underwriting)**As seen earlier, a completed proposal form broadly gives the following information: Details of the insured Details of the subject matter Type of cover required Details of the physical features both positive and negative - including typeand quality of construction, age, presence of fire-fighting equipment, the\ntype of security etc., Previous history of insurance and lossIn the case of property, motor or cargo insurance, the insurer may also arrange for", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "For motor insurance,", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_147", "metadata": {"file_size": 20690, "chunk_index": 147, "chunk_tokens": 990, "has_examples": true, "has_tables": false, "key_concepts": ["Declaration by insured", "Sum insured", "Elements of a proposal", "Example", "Acceptance of the Proposal (underwriting)"]}}
{"chunk": "past. Underwriters can understand the risk better from such answers and decide\non conducting risk inspections or collecting further details.**viii.** **Declaration by insured**As the purpose of the proposal form is to provide all material information to the\ninsurers, the form **includes a declaration by the insured that the answers are**\n**true and accurate and he agrees that the form shall be the basis of the**\n**insurance contract.** Any wrong answer will give the right to insurers to avoid the\ncontract. Other sections common to all proposal forms relate to **signature, date**\n**and in some cases agent’s recommendation.****B.** **Acceptance of the Proposal (underwriting)**As seen earlier, a completed proposal form broadly gives the following information: Details of the insured Details of the subject matter Type of cover required Details of the physical features both positive and negative - including typeand quality of construction, age, presence of fire-fighting equipment, the\ntype of security etc., Previous history of insurance and lossIn the case of property, motor or cargo insurance, the insurer may also arrange for\npre-inspection survey of the risk before acceptance, depending on the nature andvalue of the risk. Insurers take their decision based on the information available inthe proposal, the risk inspection report, answers to the additional questionnaire and\nother documents (as may be called for by the insurer). The insurer then decides\nabout the rate to be applied to the risk factor and calculates the premium based on\nvarious parameters, which is then conveyed to the insured. Proposals are processed\nby the insurer with speed and efficiency and all decisions thereof are communicated by it\nin writing within a reasonable period.**Definition****Underwriting:** As per Protection of Policyholders’ Interests) Regulations, 2017, the\ncompany has to process the proposal within 15 days’ time. The agent is expected to\nkeep track of these timelines, follow up internally and communicate with the\nprospect/ insured as and when required by way of customer service. This entire\nprocess of scrutinizing the proposal and deciding about acceptance is known as\nunderwriting.270**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As discussed\nin Chapter 4, the Agent should be always mindful that the **premium is to be paid**\n**in advance, before the inception date of the insurance contract** as per Section\n64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed to\nbe paid or a deposit is made in advance in the prescribed manner. Insurance\nRules 58 and 59 provide certain exceptions to this condition of advance payment\nof premium in some situations.b) Where an insurance agent collects a premium on a policy of insurance on behalfof an insurer, he shall deposit with or dispatch by post to the insurer the\npremium so collected in full without deduction of his commission within twentyfour hours of the collection excluding bank and postal holidays.c) It is also provided that the risk may be assumed only from the date on which thepremium has been paid in cash or by cheque.d) Where the premium is tendered by postal or money order or cheque sent bypost, the risk may be assumed on the date on which the money order is booked\nor the cheque is posted as the case may be.e) Any refund of premium which may become due to an insured on account of thecancellation of policy or alteration in its terms and conditions or otherwise, shall\nbe paid by the insurer directly to the insured by a crossed or order cheque or by\npostal/ money order or by Electronic Mode and a proper receipt shall be\nobtained by the insurer from the insured, and such refund shall in no case be\ncredited to the account of the agent.**D.** **Cover Notes/ Certificate of Insurance/ Policy Document**After underwriting is completed it may take some time before the policy is issued. **Pending**\n**the preparation of the policy or when the negotiations for insurance are in**\n**progress and it is necessary to provide cover on a provisional basis or when the**\n**premises are being inspected for determining the actual rate applicable,** a cover\nnote is issued to confirm protection under the policy. It gives description of cover.\nSometimes, insurers issue a letter confirming the provisional insurance cover instead of a", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "t-1938", "section": "Declaration by insured", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_148", "metadata": {"file_size": 20690, "chunk_index": 148, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Pending", "Premium Receipt", "Declaration by insured", "Test Yourself 1", "Acceptance of the Proposal (underwriting)"]}}
{"chunk": "or the cheque is posted as the case may be.e) Any refund of premium which may become due to an insured on account of thecancellation of policy or alteration in its terms and conditions or otherwise, shall\nbe paid by the insurer directly to the insured by a crossed or order cheque or by\npostal/ money order or by Electronic Mode and a proper receipt shall be\nobtained by the insurer from the insured, and such refund shall in no case be\ncredited to the account of the agent.**D.** **Cover Notes/ Certificate of Insurance/ Policy Document**After underwriting is completed it may take some time before the policy is issued. **Pending**\n**the preparation of the policy or when the negotiations for insurance are in**\n**progress and it is necessary to provide cover on a provisional basis or when the**\n**premises are being inspected for determining the actual rate applicable,** a cover\nnote is issued to confirm protection under the policy. It gives description of cover.\nSometimes, insurers issue a letter confirming the provisional insurance cover instead of a\ncover note.271Although the cover note is not stamped, the wording of the cover note makes it clear\nthat it is subject to the usual terms and conditions of the insurers' policy for the class of\ninsurance concerned. If the risk is governed by any warranties, then the cover note would\nstate that the insurance is subject to such warranties. The cover note is also made subject\nto special clauses, if applicable e.g. Agreed Bank Clause, Declaration Clause etc.**A cover note would incorporate the following:**a) Name and address of insuredb) Sum insuredc) Period of insuranced) Risk coverede) Rate and premium: if rate is not known, the provisional premiumf) **Description of the risk covered** : for example a fire cover note wouldindicate identification particulars of the building, its construction andoccupancy.g) Serial number of the cover noteh) Date of issuei) **Validity of cover note** is usually for a period of a fortnight and rarely up to60 days**Cover notes are used predominantly in marine and motor classes of business.****1.** **Marine Cover Notes**These are normally issued when details required for the issue of policy such as name\nof the steamer, number of packages, or exact value etc. are not known. Even in\nrespect of exports, a cover note may be issued e.g. a certain quantity of cargo\nmeant for shipment is sent by the exporter to the docks. It may happen that, owing\nto difficulty of securing adequate shipping space, shipment of the cargo by the\nintended vessel does not take place. The quantity therefore, that may be sent by a\nparticular vessel cannot be known. In the circumstances, a cover note may be\nrequired which is to be followed subsequently by the issue of regular policy when\nfull details are available and made known to the insurance company.Marine cover note may be worded along the following lines:i. Marine Cover Note Numberii. Date of issueiii. Name of the insurediv. Valid up to“As requested, you are hereby held covered subject to usual conditions of the\ncompany's policy to the extent of Rs. _____________.”**a)** **Clauses:** Institute Cargo Clauses A, B or C including War SRCC risks as per InstituteClauses, but subject to 7 days’ notice of cancellation.**b)** **Conditions:** Details of shipment to be supplied on receipt of shipping documentsfor issue of policy. In the event of loss or damage prior to declaration and/ or\nshipment on board the steamer, it is hereby agreed that the basis of valuation272shall be prime cost of the goods plus charges actually incurred and for which the\nassured is liable.With regard to inland transit normally all relevant data required for issue of policy\nare available and therefore a cover note is rarely required. There may however, be\nsome occasions when cover notes are issued and substituted later on by policies\ncontaining full description of the cargo, transit etc.**2.** **Motor Cover Notes**These are to be issued in the form prescribed by the respective companies the\noperative clause of a motor cover note may read as follows:“The insured described in the form, referred to below, having proposed for\ninsurance in respect of the Motor Vehicle(s) described therein and having paid the\nsum of Rs….as premium the risk is hereby held covered under the terms of the\ncompany’s usual form of……Policy applicable thereto (subject to any Special\nConditions mentioned below) unless the cover be terminated by the Company by\nnotice in writing in which case the insurance will thereupon cease and a\nproportionate part of the premium otherwise payable for such insurance will be", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "o60", "section": "D.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_149", "metadata": {"file_size": 20690, "chunk_index": 149, "chunk_tokens": 976, "has_examples": true, "has_tables": false, "key_concepts": ["A cover note would incorporate the following:", "Pending", "Description of the risk covered", "Clauses:", "Marine Cover Notes"]}}
{"chunk": "shipment on board the steamer, it is hereby agreed that the basis of valuation272shall be prime cost of the goods plus charges actually incurred and for which the\nassured is liable.With regard to inland transit normally all relevant data required for issue of policy\nare available and therefore a cover note is rarely required. There may however, be\nsome occasions when cover notes are issued and substituted later on by policies\ncontaining full description of the cargo, transit etc.**2.** **Motor Cover Notes**These are to be issued in the form prescribed by the respective companies the\noperative clause of a motor cover note may read as follows:“The insured described in the form, referred to below, having proposed for\ninsurance in respect of the Motor Vehicle(s) described therein and having paid the\nsum of Rs….as premium the risk is hereby held covered under the terms of the\ncompany’s usual form of……Policy applicable thereto (subject to any Special\nConditions mentioned below) unless the cover be terminated by the Company by\nnotice in writing in which case the insurance will thereupon cease and a\nproportionate part of the premium otherwise payable for such insurance will be\ncharged for the time the company had been on risk.”**The Motor Cover Note generally contains the following particulars:**a) Registration mark and number, or description of the vehicles insured/ cubiccapacity/ carrying capacity/ make/ year of manufacture, engine number,\nchassis number\nb) Name and address of the insured\nc) Effective date and time of commencement of insurance for the purpose of theAct. Time……, Date……\nd) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if anyThe Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act, 1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days at a\ntime, but in, but in no case the total period of validity of a Cover Note shall exceed\nsixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day technology\nfacilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof may\nbe required. For instance in motor insurance, in addition to the policy, a certificate\nof insurance is issued as required by the Motor Vehicles Act. **This certificate**273**provides evidence of insurance to the Police and Registration Authorities.** A\nspecimen certificate for private cars is reproduced below, showing salient features.**MOTOR VEHICLES ACT, 1988****CERTIFICATE OF INSURANCE**Certificate No. Policy No.1. Registration mark and Number, Place of registration, Engine No./Chassis No./ Make/Year of manufacture.2. Type of Body/ C.C/ Seating capacity/ Net Premium/ Name of Registration Authority,3. Geographical area – India. `4. Insured declared value (IDV)5. Name and address of the Insured, Business or profession.6. Effective date of commencement of Insurance for the purpose of the Act. From………. 'O'clock on ………7. Date of expiry of insurance: midnight on ……………8. Persons or classes of persons entitled to drive.Any of the following:(a) The insured:(b) Any other person who is driving on the insured's order or with his permissionProvided that the person driving holds an effective driving license at the time of the accident\nand is not disqualified from holding or obtaining such a license. Provided also that the person\nholding an effective learner's license may also drive the vehicle and such a person satisfies\nthe requirement of Rule 3 of Central Motor Vehicles Rules 1989.**LIMITATIONS AS TO USE**The policy covers use for any purpose other than:(a) Hire or reward;(b) Carriage of goods (other than personal luggage)(c) Organised racing,(d) Race making,(e) Speed testing(f) Reliability Trials(g) Any purpose in connection with Motor Trade.I/ we hereby certify that the Policy to which this Certificate relates as well as this Certificate of\nInsurance are issued in accordance with the provisions of Chapter X and Chapter XI of the Motor\nVehicles Act, 1988.Examined .........(Authorized Insurer)**Motor certificate of Insurance is required to be carried in the vehicle at all times for**\n**the scrutiny of the relevant authorities.****4.** **Policy Document****The policy is a formal document which provides an evidence of the contract of**", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "n272", "section": "Motor Cover Notes", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_150", "metadata": {"file_size": 20690, "chunk_index": 150, "chunk_tokens": 989, "has_examples": true, "has_tables": false, "key_concepts": ["Certificate of Insurance – Motor Insurance", "Note:", "CERTIFICATE OF INSURANCE", "Important", "Policy Document"]}}
{"chunk": "and is not disqualified from holding or obtaining such a license. Provided also that the person\nholding an effective learner's license may also drive the vehicle and such a person satisfies\nthe requirement of Rule 3 of Central Motor Vehicles Rules 1989.**LIMITATIONS AS TO USE**The policy covers use for any purpose other than:(a) Hire or reward;(b) Carriage of goods (other than personal luggage)(c) Organised racing,(d) Race making,(e) Speed testing(f) Reliability Trials(g) Any purpose in connection with Motor Trade.I/ we hereby certify that the Policy to which this Certificate relates as well as this Certificate of\nInsurance are issued in accordance with the provisions of Chapter X and Chapter XI of the Motor\nVehicles Act, 1988.Examined .........(Authorized Insurer)**Motor certificate of Insurance is required to be carried in the vehicle at all times for**\n**the scrutiny of the relevant authorities.****4.** **Policy Document****The policy is a formal document which provides an evidence of the contract of**\n**insurance.** This document has to be stamped in accordance with the provisions of the274Indian Stamp Act, 1899.A general insurance policy usually contains:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter;\nb) Full description of the property or interest insured;\nc) The location/ s of the property or interest insured under the policy andwhere appropriate, with respective insured values;\nd) Period of insurance;\ne) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likely togive rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter of insuranceupon occurrence of an event giving rise to a claim and the rights of the\ninsurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman**Test Yourself 2**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance\nII. Cover notes are predominantly used in all classes of general insurance\nIII. Cover notes are predominantly used in health insurance\nIV. Cover notes are predominantly used in marine and motor classes of generalinsurance**E.** **Warranties****A warranty is a condition expressly stated in the policy which has to be literally**\n**complied with for validity of the contract. Warranty is not a separate document.**\n**It is part of both cover notes and policy document.** It is a condition precedent to\nthe contract. It must be observed and complied with strictly and literally,\nirrespective of the fact whether it is material to the risk or not. If a warranty is\nbreached, the policy becomes voidable at the option of the insurers even when it is\nclearly established that the breach has not caused or contributed to a particular\nloss. However, in practice, if the breach of warranty is of a purely technical nature\nand does not, in any way, contribute to or aggravate the loss, insurers at their\ndiscretion may process the claims according to norms and guidelines as per company\npolicy.275**1.** **Fire Insurances warranties (some examples) are as given below**Warranted, that no hazards goods shall be stored in the insured premises during the\ncurrency of policy.**Silent Risk:** Warranted that no manufacturing activity is carried out in the insured\npremises for consecutive period of 30 days or more.**Cigarette Filter Manufacturing:** Warranted that no solvents having flash point\nbelow 30 [0] C are used/ stored in the premises**2.** In **Marine Insurance, a warranty** is defined as follows: “a promissory warranty,that is to say, a warranty by which the assured undertake that some particular\nthing shall or shall not be done, or that some condition will be fulfilled, or\nwhereby he affirms or negates the existence of a particular state of facts”In **Marine Cargo Insurance, a warranty** is inserted to the effect that goods (e.g.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e274", "section": "LIMITATIONS AS TO USE", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_151", "metadata": {"file_size": 20690, "chunk_index": 151, "chunk_tokens": 984, "has_examples": true, "has_tables": false, "key_concepts": ["Marine Cargo Insurance, a warranty", "Warranties", "Policy Document", "LIMITATIONS AS TO USE", "Silent Risk:"]}}
{"chunk": "and does not, in any way, contribute to or aggravate the loss, insurers at their\ndiscretion may process the claims according to norms and guidelines as per company\npolicy.275**1.** **Fire Insurances warranties (some examples) are as given below**Warranted, that no hazards goods shall be stored in the insured premises during the\ncurrency of policy.**Silent Risk:** Warranted that no manufacturing activity is carried out in the insured\npremises for consecutive period of 30 days or more.**Cigarette Filter Manufacturing:** Warranted that no solvents having flash point\nbelow 30 [0] C are used/ stored in the premises**2.** In **Marine Insurance, a warranty** is defined as follows: “a promissory warranty,that is to say, a warranty by which the assured undertake that some particular\nthing shall or shall not be done, or that some condition will be fulfilled, or\nwhereby he affirms or negates the existence of a particular state of facts”In **Marine Cargo Insurance, a warranty** is inserted to the effect that goods (e.g.\ntea) are packed in tin-lined cases. In **Marine Hull insurance by inserting a warranty**\nthat the insured vessel will not navigate in a certain area, gives an idea to the\ninsurer about the extent of risk he has agreed to provide cover for. If the warranty\nis breached, the risk agreed to initially is altered and the insurer is allowed to\ndischarge himself from further liability from the date of breach**3.** In **Burglary Insurance**, it is warranted that the property is guarded by awatchman for twenty four hours. The rates, terms and conditions of the policy\ncontinue to be the same only if the warranties attached to the policy are\ncomplied with.**Test Yourself 3**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.276**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through a\ndocument called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nconstitute the evidence of the contract. Endorsements may also be issued during the\ncurrency of the policy to record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy related to:a) Variations/ changes in sum insured\nb) Change of insurable interest by way of sale, mortgage, etc.\nc) Extension of insurance to cover additional perils/ extension of policy period\nd) Change in risk, e.g. change of construction, or occupancy of the building in fireinsurance\ne) Transfer of property to another location\nf) Cancellation of insurance\ng) Change in name or address etc.**Specimen**For the purpose of illustration, specimen wordings of some endorsements are\nreproduced below:**Cancellation**At the request of the insured the insurance by this Policy is hereby declared to be\ncancelled as from ………. The insurance having been in force for a period over ………….\nMonths, no refund is due to the Insured.277The total insurance now stands at Rs …….Subject otherwise to the terms, provisions and conditions of this policy.**Test Yourself 4**If certain terms and conditions of the policy need to be modified at the time of issuance, or\nduring the policy tenure it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**G.** **Interpretation of policies**Contracts of insurance are expressed in writing and the insurance policy wordings\nare drafted by insurers. These policies have to be interpreted according to certain\nwell-defined rules of construction or interpretation which have been established by\nvarious courts. **The most important rule of construction is that the intention of**\n**the parties must prevail and this intention is to be looked for in the policy itself.**\nIf the policy is issued in an ambiguous manner, it will be interpreted by the courts\nin favour of the insured and against the insurer on the general principle that the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Fire Insurances warranties (some examples) are as given below", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_152", "metadata": {"file_size": 20690, "chunk_index": 152, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Marine Cargo Insurance, a warranty", "Cancellation", "Burglary Insurance", "Specimen", "Endorsements"]}}
{"chunk": "cancelled as from ………. The insurance having been in force for a period over ………….\nMonths, no refund is due to the Insured.277The total insurance now stands at Rs …….Subject otherwise to the terms, provisions and conditions of this policy.**Test Yourself 4**If certain terms and conditions of the policy need to be modified at the time of issuance, or\nduring the policy tenure it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**G.** **Interpretation of policies**Contracts of insurance are expressed in writing and the insurance policy wordings\nare drafted by insurers. These policies have to be interpreted according to certain\nwell-defined rules of construction or interpretation which have been established by\nvarious courts. **The most important rule of construction is that the intention of**\n**the parties must prevail and this intention is to be looked for in the policy itself.**\nIf the policy is issued in an ambiguous manner, it will be interpreted by the courts\nin favour of the insured and against the insurer on the general principle that the\npolicy was drafted by the latter.**Policy wordings** are understood and interpreted as per the following rules:a) An express condition overrides an implied condition except where there isinconsistency in doing so.\nb) In the event of a contradiction in terms between the standard printed policyform and the typed or handwritten parts, the typed or handwritten part is\ndeemed to express the intention of the parties in the particular contract,\nand their meaning will overrule those of the original printed words.\nc) If an endorsement contradicts other parts of the contract the meaning of theendorsement will prevail as it is the later document.\nd) Clauses in italics over-ride the ordinary printed wording where they areinconsistent.278e) Clauses printed or typed in the margin of the policy are to be given moreimportance than the wording within the body of the policy.\nf) Clauses attached or pasted to the policy override both marginal clauses andthe clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wording impressedby an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts as\nin the case of other contracts.The principal rule of construction is that the intention of the parties of the contract\nmust prevail, that intention must be gathered from the policy document itself and\nthe proposal form, clauses, endorsements, warranties etc. attached to it and\nforming a part of the contract.**2.** **Meaning of wordings**\nThe words used are to be construed in their ordinary and popular sense. **The**\n**meaning to be used for words is the meaning that the ordinary man in the street**\n**would construe. Thus, “fire” means flame or actual burning.**On the other hand, **words which have a common business or trade meaning will**\n**be construed with that meaning unless the context of the sentence indicates**\n**otherwise** . Where words are defined by statute, the meaning of that definition will\nbe used, such as “theft” as in the Indian Penal Code.Many words used in insurance policies have been the subject of previous legal\ndecisions and those decisions of a higher court will be binding on a lower court\ndecision. Technical terms must always be given their technical meaning, unless\nthere is an indication to the contrary.**H.** **Renewal Notice****Most of the non-life insurance policies are insured on annual basis.**Although there is no legal obligation on the part of insurers to advise the insured\nthat his policy is due to expire on a particular date, yet as a matter of courtesy and\nhealthy business practice, insurers issue a renewal notice in advance of the date of\nexpiry, inviting renewal of the policy. The notice incorporates all the relevant\nparticulars of the policy such as sum insured, the annual premium, etc. It is also the279practice to include a note advising the insured that he should intimate any material\nalterations in the risk.**In motor renewal notice, for example, the insured’s attention is to be drawn to**\n**revise the sum insured (i.e. the Insured’s Declared Value of the vehicle) in the**\n**light of current requirements.**The insured’s attention is also to be invited to the statutory provision that no risk", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e279", "section": "Test Yourself 4", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_153", "metadata": {"file_size": 20690, "chunk_index": 153, "chunk_tokens": 978, "has_examples": true, "has_tables": false, "key_concepts": ["On the other hand,", "Meaning of wordings", "The", "Construction of policies", "Renewal Notice"]}}
{"chunk": "decisions and those decisions of a higher court will be binding on a lower court\ndecision. Technical terms must always be given their technical meaning, unless\nthere is an indication to the contrary.**H.** **Renewal Notice****Most of the non-life insurance policies are insured on annual basis.**Although there is no legal obligation on the part of insurers to advise the insured\nthat his policy is due to expire on a particular date, yet as a matter of courtesy and\nhealthy business practice, insurers issue a renewal notice in advance of the date of\nexpiry, inviting renewal of the policy. The notice incorporates all the relevant\nparticulars of the policy such as sum insured, the annual premium, etc. It is also the279practice to include a note advising the insured that he should intimate any material\nalterations in the risk.**In motor renewal notice, for example, the insured’s attention is to be drawn to**\n**revise the sum insured (i.e. the Insured’s Declared Value of the vehicle) in the**\n**light of current requirements.**The insured’s attention is also to be invited to the statutory provision that no risk\ncan be assumed unless the premium is paid in advance.**Test Yourself 5**Which of the following statements is correct with regards to renewal notice?I. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 30 days before the expiry of the policy\nII. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 15 days before the expiry of the policy\nIII. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 7 days before the expiry of the policy\nIV. As per regulations there is no legal obligation on insurers to send a renewalnotice to insured before the expiry of the policy**Summary**a) The first stage of documentation is essentially the proposal forms through whichthe insured informs about himself/ herself\nb) The duty of disclosure of material information arises prior to the inception ofthe policy, and continues even after the conclusion of the contract\nc) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance is knownas underwriting.\ng) Premium is the consideration or amount paid by the insured to the insurer forinsuring the subject matter of insurance, under a contract of insurance.280h) Payment of premium can be made by cash, any recognised banking negotiableinstrument, postal money order, credit or debit card, internet, e-transfer, direct\ncredit or any other method approved by IRDAI from time to time.\ni) A cover note is issued when preparation of policy is pending or when negotiationsfor insurance are in progress and it is necessary to provide insurance cover on\nprovisional basis.\nj) Cover notes are used predominantly in marine and motor classes of business.\nk) A certificate of insurance provides existence of insurance in cases where proofmay be required\nl) The policy is a formal document which provides an evidence of the contract ofinsurance.\nm) A warranty is a condition expressly stated in the policy which has to be literallycomplied with for validity of the contract.\nn) If certain terms and conditions of the policy need to be modified at the time ofissuance or during the policy tenure, it is done by setting out the amendments/\nchanges through a document called endorsement.\no) The most important rule of construction is that the intention of the parties mustprevail and this intention is to be looked for in the policy itself.**Key Terms**a) Policy form\nb) Advance payment of premium\nc) Cover note\nd) Certificate of Insurance\ne) Renewal notice\nf) Warranty**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is IV.281## CHAPTER G-02## UNDERWRITING AND RATE MAKING**Chapter Introduction**We have learnt various concepts and principles related to general insurance.\nUnderwriting is the process by which the Insurer decides whether to accept a risk", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e279", "section": "H.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_154", "metadata": {"file_size": 20690, "chunk_index": 154, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Renewal Notice", "Answer 3", "Chapter Introduction"]}}
{"chunk": "n) If certain terms and conditions of the policy need to be modified at the time ofissuance or during the policy tenure, it is done by setting out the amendments/\nchanges through a document called endorsement.\no) The most important rule of construction is that the intention of the parties mustprevail and this intention is to be looked for in the policy itself.**Key Terms**a) Policy form\nb) Advance payment of premium\nc) Cover note\nd) Certificate of Insurance\ne) Renewal notice\nf) Warranty**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is IV.281## CHAPTER G-02## UNDERWRITING AND RATE MAKING**Chapter Introduction**We have learnt various concepts and principles related to general insurance.\nUnderwriting is the process by which the Insurer decides whether to accept a risk\nor not. For this, the underwriters analyse the risk. They understand how risky the\nrisk is. Also, how much of money should be collected as premium. Again, sometimes\nthe risks can be accepted only subject to conditions to improve the risk. All these\nangles are discussed in this chapter.**Learning Outcomes**After studying this chapter, you should be able to:1. Understand Physical hazards\n2. Appreciate Underwriting as a function\n3. Methods used by underwriters to reduce the risk\n4. Understand how the Sum Insured is fixed.282**A.** **Physical Hazards**A thorough knowledge of various hazards to which property and persons are exposed\nis most essential for underwriting.Physical hazard can be ascertained from the information given in a proposal form.\nIt can be better ascertained by a survey or inspection of the risk. The following are\nsome examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in walls androof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors involve\nrisk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower floors\nthrough falling machinery or goods from upper floors.**iv.** **Occupancy:** The occupancy of a building, and the purpose for which it is used.Various types of hazards arise from occupancy.**v.** **Ignition hazard:** Buildings in which chemicals are produced or used in largequantity involve a considerable **ignition hazard** . A timber yard presents a **high**\n**combustibility hazard** because once a fire starts, timber burns quickly. The\ncontents may be highly susceptible to damage in the event of fire.For example, paper, clothing etc. are susceptible not only to fire damage but\nalso to damage by water, heat etc.**vi.** **The process of manufacture:** If work is carried during the night, the hazardis increased due to the use of artificial lights, continuous use of machinery\nleading to friction and the likely carelessness of workers due to fatigue.**vii.** **Situation/ location of risk:** Location in a congested area, exposure tohazardous adjacent premises and distance from the fire brigade is an example\nof physical hazard.**b)** **Marine****i.** **The age and condition of vessel: Older vessels are inferior risks.****ii.** **The voyage to be undertaken: The route of the voyage, loading and****unloading conditions and warehousing facilities at the ports are factors.****iii.** **The nature of the stocks: Articles of high value are exposed to theft;****machinery is liable to breakage in transit.****iv.** **The method of packing: Cargo packed in bales is considered to be better****than cargo in bags. Again, double bags are safer than single bags. Liquid**", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "G-02", "section": "Key Terms", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_155", "metadata": {"file_size": 20690, "chunk_index": 155, "chunk_tokens": 886, "has_examples": true, "has_tables": false, "key_concepts": ["Nature of flooring:", "The height:", "Key Terms", "Answer 5", "Construction:"]}}
{"chunk": "contents may be highly susceptible to damage in the event of fire.For example, paper, clothing etc. are susceptible not only to fire damage but\nalso to damage by water, heat etc.**vi.** **The process of manufacture:** If work is carried during the night, the hazardis increased due to the use of artificial lights, continuous use of machinery\nleading to friction and the likely carelessness of workers due to fatigue.**vii.** **Situation/ location of risk:** Location in a congested area, exposure tohazardous adjacent premises and distance from the fire brigade is an example\nof physical hazard.**b)** **Marine****i.** **The age and condition of vessel: Older vessels are inferior risks.****ii.** **The voyage to be undertaken: The route of the voyage, loading and****unloading conditions and warehousing facilities at the ports are factors.****iii.** **The nature of the stocks: Articles of high value are exposed to theft;****machinery is liable to breakage in transit.****iv.** **The method of packing: Cargo packed in bales is considered to be better****than cargo in bags. Again, double bags are safer than single bags. Liquid**\n**cargo in second-hand drums constitute bad physical hazard.**283**c)** **Motor****i.** **The age and condition of the vehicle:** Older vehicles are more prone toaccidents.**ii.** **The type of vehicle:** Sports cars involve greater physical hazard etc.**d)** **Burglary****i.** **The nature of the stocks:** Articles of high value in small bulk (e.g. Jewellery)and easily disposable are considered to be bad risks.**ii.** **Situation:** Ground floor risks are inferior to upper floor risks: privatedwellings situated in isolated areas are hazardous.**iii.** **Constructional hazard** : Too many doors and windows constitute bad physicalhazard.**e)** **Personal accident****i.** **The age of the person:** Very old persons are accident prone; besides theywill take longer to recover in the event of an accident.**ii.** **Nature of occupation:** Jockeys, mining engineers, manual workers areexamples of bad physical hazard.**iii.** **Health and physical condition:** A person suffering from Diabetes may notrespond to surgical treatment in the event of accidental bodily injury.**B.** **Physical Hazards – Importance of Risk Management, Clauses and Rating**Underwriters use the following methods to deal with physical hazards: Loading of premium Applying warranties on the policy Applying certain clauses Imposition of excess/ deductibles Restricting the cover granted Declinature of cover**a)** **Loading of premium**There may be some adverse features in a risk exposure for which the underwriters\nmay decide to charge an extra premium before acceptance of the same. By loading\nthe premium the higher probability of claims or occurrence of large claims is taken\ninto consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.In personal accident insurance if the insured is engaged in hazardous pursuits like\nmountaineering, racing on wheels, big game hunting etc. extra premium is charged.284Sometimes loading of premium is also done for adverse claims ratio, as in case of\nmotor insurance or health insurance policies.**b)** **Imposition of warranties**Insurers incorporate appropriate warranties to reduce the physical hazard. Some\nexamples are provided below.**Example****i.** **Marine cargo:** A warranty is inserted to the effect that goods (e.g. Tea) arepacked in tin lined cases.**ii.** **Burglary:** It is warranted that the property is guarded by a watchman for twentyfour hours.**iii.** **Fire:** In fire insurance, it is warranted the premises would not be used beyondnormal working hours.**iv.** **Motor:** It is warranted that the vehicle will not be used for speed testing orracing.**Example****Marine cargo:** Small damage to parts may cause costly machinery to be a\nconstructive total loss. Such machinery are subject to the Replacement Clause,\nwhich limits underwriter’s liability only to the cost of replacing, forwarding and\nrefitting any broken part.Cast pipes, hard board sometimes get damaged only at the edges. Marine policies\non cast pipes, hardboard etc., are subject to the cutting clause warranting that the\ndamaged portion should be cut off and the balance utilised.**c)** **Deciding on Excess/ Deductibles and Restricting the Cover**When the loss amount exceeds the deductible/ excess mentioned the balance is", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "The process of manufacture:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_156", "metadata": {"file_size": 20690, "chunk_index": 156, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "The type of vehicle:", "Situation:", "The age of the person:", "Imposition of warranties"]}}
{"chunk": "examples are provided below.**Example****i.** **Marine cargo:** A warranty is inserted to the effect that goods (e.g. Tea) arepacked in tin lined cases.**ii.** **Burglary:** It is warranted that the property is guarded by a watchman for twentyfour hours.**iii.** **Fire:** In fire insurance, it is warranted the premises would not be used beyondnormal working hours.**iv.** **Motor:** It is warranted that the vehicle will not be used for speed testing orracing.**Example****Marine cargo:** Small damage to parts may cause costly machinery to be a\nconstructive total loss. Such machinery are subject to the Replacement Clause,\nwhich limits underwriter’s liability only to the cost of replacing, forwarding and\nrefitting any broken part.Cast pipes, hard board sometimes get damaged only at the edges. Marine policies\non cast pipes, hardboard etc., are subject to the cutting clause warranting that the\ndamaged portion should be cut off and the balance utilised.**c)** **Deciding on Excess/ Deductibles and Restricting the Cover**When the loss amount exceeds the deductible/ excess mentioned the balance is\npaid under 'excess' clause. Loss below the limit is not payable.The object of these clauses is to eliminate small claims. As the insured is made to\npay part of a loss, he is encouraged to exercise more care and to practice loss\nprevention.**Example****i.** **Motor** : A proposal for an old motor vehicle will not be accepted oncomprehensive terms but insurers will offer a restricted cover i.e. against third\nparty risks only.**ii.** **Personal accident** : A personal accident proposer who has crossed themaximum acceptance age limit may be covered for death risk only instead of\non comprehensive terms i.e. including disablement benefits.285**d)** **Discounts**Lower rates are charged or a discount is given in the normal premium if the risk is\nfavourable. The following features are considered to contribute to improvement of\nrisk in fire insurance.i. Installation of sprinkler system within the premisesii. Installation of hydrant system in the compoundiii. Installation of hand appliances consisting of buckets, portable extinguishersand manual fire pumpsiv. Installation of automatic fire alarm**Example**Under **motor insurance** a discount in the premium is provided if the motor cycle is\nalways used with a side-car attached, as this feature contributes to improved risk\nbecause of the greater stability of the vehicle.In **marine insurance**, the insurer may consider giving discounts on premium for “Full\nLoad” container as this reduces the incidence of theft and shortage.Under a **group personal accident** cover, discounts would be given for coverage of a\nlarge group, which reduces the administrative work and expenses of the insurer.**e)** **No claim bonus (NCB)**A certain percentage is given as bonus for every claim free renewal year with a limit\nto the maximum bonus that can be availed. It is allowed by way of deduction on the\ntotal premium at renewal only, depending upon the incurred claim ratio for the\nentire group or to Motor vehicle Own damage policy holders for claim free years.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of moral\nhazard in the insured. It rewards the insured for not lodging claims either by\nadopting better driving skills as in motor insurance or taking better care of his health\nin Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.**C.** **Moral hazard**Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,\nan honest insured may be tempted to stage a loss, if he happens to be in financial\ndifficulties.286**b)** **Carelessness**Indifference towards loss is an example of carelessness. Because of the\nexistence of insurance, the insured may tend to adopt a careless attitude\ntowards the insured property.If the insured does not take the same care of the property as a prudent and\nreasonable man would if he were uninsured the moral hazard is unsatisfactory.**c)** **Industrial relations**Employer-employee relationship may involve an element of bad moral hazard.**d)** **Wrong claims**This kind of moral hazard arises when claims occur. An insured may not\ndeliberately bring about a loss but once a loss occurs, he would attempt to", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_157", "metadata": {"file_size": 20690, "chunk_index": 157, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Carelessness", "Personal accident", "Discounts", "Moral hazard", "Wrong claims"]}}
{"chunk": "and is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.**C.** **Moral hazard**Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,\nan honest insured may be tempted to stage a loss, if he happens to be in financial\ndifficulties.286**b)** **Carelessness**Indifference towards loss is an example of carelessness. Because of the\nexistence of insurance, the insured may tend to adopt a careless attitude\ntowards the insured property.If the insured does not take the same care of the property as a prudent and\nreasonable man would if he were uninsured the moral hazard is unsatisfactory.**c)** **Industrial relations**Employer-employee relationship may involve an element of bad moral hazard.**d)** **Wrong claims**This kind of moral hazard arises when claims occur. An insured may not\ndeliberately bring about a loss but once a loss occurs, he would attempt to\ndemand unreasonably high amount of compensation, in total disregard of the\nprinciple of indemnity.**Information****Sub-limits:** The insurer may impose a limit on the total pay-out separately each for\nroom expenses, surgical procedures or doctor fees to check the inflated bills.**Where the moral hazard of the insured is suspected, the agent should not**\n**entertain or bring such proposals to the insurance company. S/ he should also**\n**bring such issues before the insurance company officials.****1.** **Short period scales**Normally, premium rates are quoted for a period of twelve months. If a policy is\ntaken for a shorter period, the premium is charged according to a special scale,\nknown as short period scale. The premium chargeable for short period insurance is\nnot on proportionate basis.**Need for short period scales**a) These rates are applied because the expenses involved in the issue of the policywhether for a 12 months period or a shorter period, are almost the same.b) Further, an annual policy requires renewal procedure only once during a yearwhereas short period insurances involve more frequent renewals. If a\nproportionate premium is allowed, there would be a tendency on the part of the\ninsured to go on taking short period policies and thereby, in effect, pay\npremiums in instalments.c) Besides, some insurance are seasonal in character and the risk is greater duringthat season. Insurances are sometimes taken during such period when the risk is\ngreatest and thereby selection takes place against the insurers. Short period\nscales are evolved to prevent such selection against the insurers. They are also\napplicable when annual insurance is cancelled by the insured. In that case\nrefund is made keeping the premium on short period scale for the period Insurer\nwas in risk.287**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points\nwhich have to be borne in mind while deciding the sum insured:**a)** **Personal accident insurance** : The sum insured offered by a company can be afixed amount or it can also be based on the insured’s income. Some insurance\ncompanies may give a benefit equal to 60 times or 100 times of the insured’s\nmonthly income for a particular disability. There could be an upper limit or ‘cap’\non the maximum amount. Compensations can vary from company to company. In\ngroup personal accident policies the sum insured may be fixed separately for", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_158", "metadata": {"file_size": 20690, "chunk_index": 158, "chunk_tokens": 971, "has_examples": true, "has_tables": false, "key_concepts": ["Carelessness", "Sub-limits:", "Information", "Moral hazard", "Need for short period scales"]}}
{"chunk": "condition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points\nwhich have to be borne in mind while deciding the sum insured:**a)** **Personal accident insurance** : The sum insured offered by a company can be afixed amount or it can also be based on the insured’s income. Some insurance\ncompanies may give a benefit equal to 60 times or 100 times of the insured’s\nmonthly income for a particular disability. There could be an upper limit or ‘cap’\non the maximum amount. Compensations can vary from company to company. In\ngroup personal accident policies the sum insured may be fixed separately for\neach insured person or may be linked to emoluments payable to the insuredperson.**b)** **Motor insurance** : In case of motor insurance the sum insured is the insured'sdeclared value [IDV]. It is the value of the vehicle, which is arrived at by adjusting\nthe current manufacture's listed selling price of the vehicle with depreciation\npercentage as prescribed in the erstwhile India Motor Tariff. Manufacturer's listed\nselling price will include local duties/ taxes excluding registration and insurance.IDV = (Manufacturer’s listed selling price – depreciation) + (Accessories that are\nnot included in listed selling price-depreciation) and excludes registration and\ninsurance costs.The IDV of vehicles that are obsolete or aged over 5 years is calculated by mutual\nagreement between insurer and the insured. Instead of depreciation, IDV of old288cars is arrived at by assessment of vehicle’s condition done by surveyors, car\ndealers etc.IDV is the amount of compensation given in case a vehicle is stolen or suffers\ntotal loss. It is highly recommended to get IDV which is near the market value of\nthe car. Insurers provide a range of 5% to 10% to decrease IDV to the insured.\nLess IDV would mean lesser premium.**c)** **Fire insurance:** In fire insurance the sum insured may be fixed on the basis ofindemnity or reinstatement value for buildings/ plant and machinery and\nfixtures. Contents are covered on the basis of their market value which is cost of\nthe item less depreciation. (Reinstatement value is explained in detail in Chapter\n28 - Commercial Insurance)**d)** **Stocks insurance:** In case of stocks, sum insured is their market value. Theinsured will be reimbursed at the cost at which these stocks can be purchased in\nthe market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured is asper the agreement between insurer and insured at the time of contract. Normally\nit would consist of the sum of cost of the commodity plus Insurance + freight i.e.\nCIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of\nnegligence against him.I. Personal accident insuranceII. Professional Liability insuranceIII. Marine hull insuranceIV. Health insurance289**Summary**a) Process of classifying risks and deciding into which category they fall isimportant for rate making.b) Underwriting is the process of determining whether a risk offered for insuranceis acceptable, and if so, at what rate, terms and conditions the insurance cover\nwill be accepted.c) A rate is the price of a given unit of insurance.d) The basic objective of rate making is to ensure that price of insurance should beadequate and reasonable.e) ‘Pure premium’ is suitably loaded or increased by adding percentages to providefor expenses, reserves and profits.f) The term hazard in insurance language refers to those conditions or features orcharacteristics which create or increase the chance of loss arising from a given", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d288", "section": "Deciding the sum insured", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_159", "metadata": {"file_size": 20690, "chunk_index": 159, "chunk_tokens": 1000, "has_examples": false, "has_tables": false, "key_concepts": ["Summary", "Fire insurance:", "Marine cargo insurance:", "Motor insurance", "Liability insurance:"]}}
{"chunk": "spread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of\nnegligence against him.I. Personal accident insuranceII. Professional Liability insuranceIII. Marine hull insuranceIV. Health insurance289**Summary**a) Process of classifying risks and deciding into which category they fall isimportant for rate making.b) Underwriting is the process of determining whether a risk offered for insuranceis acceptable, and if so, at what rate, terms and conditions the insurance cover\nwill be accepted.c) A rate is the price of a given unit of insurance.d) The basic objective of rate making is to ensure that price of insurance should beadequate and reasonable.e) ‘Pure premium’ is suitably loaded or increased by adding percentages to providefor expenses, reserves and profits.f) The term hazard in insurance language refers to those conditions or features orcharacteristics which create or increase the chance of loss arising from a given\nperil.g) The objective of imposing deductible/ excess clauses is to eliminate smallclaims.h) No claim bonus is a powerful strategy to improve underwriting experience andforms an integral part of rating systems.i) Sum insured is the maximum amount that an insurance company will indemnifyas per policy condition.**Key terms**a) Underwritingb) Rate makingc) Physical hazardsd) Moral hazardse) Indemnityf) Loading of premiumg) Warrantiesh) Deductiblesi) Excess**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.290## CHAPTER G-03## PERSONAL AND RETAIL INSURANCE**Chapter Introduction**In the previous chapters we have learnt various concepts and principles related to\ngeneral insurance. General insurance products are classified differently in different\nmarkets. Some classify them as property, casualty and liability. Elsewhere, they are\ngrouped as fire, marine, motor and miscellaneous. In this chapter, common products\nsuch as personal accident, travel, home and shop keepers and motor insurance that\nare bought by such retail customers are discussed.**Learning Outcomes**After studying this chapter, you should be able to:1. Explain householder’s insurance\n2. Prepare shop insurance cover\n3. Discuss motor insurance291**A.** **Retail Insurance Products**There are some insurance products that are purchased for individuals for covering\ncertain interests. Though small commercial or business interests could be there for\nsuch insurances, these are generally sold to individuals. In some markets these are\ncalled ‘small ticket’ policies or ‘retail policies’ or ‘retail products’. Insurances of\nthe home, motor cars, two-wheelers, small businesses like shops etc. fall under this\ncategory. These products are usually sold by the same agents/ distribution channels\nthat deal with personal lines of insurance as the buyers also are essentially from the\nsame consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’s Policy,Office Package Policy etc. that, under one policy, seek to cover various physical\nassets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.\niv. Package covers could have common terms and conditions for all sections as alsospecific terms for specific sections of the policy.I.**D.** **Shopkeeper’s Insurance**A shop owner is not a corporate house that has large reserves of money to restart\nbusiness. A single mishap may lead to closure of her/ his shop and could probably\nruin her/ his family. There may be bank loans also to repay. There is always the\npossibility that a member of the public suffers a personal injury or damage to her/\nhis property, caused by the shop owner’s operations and a court holds the shop\nowner liable to pay the damages. Such situations can also ruin a shopkeeper.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e289", "section": "Test Yourself 2", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_160", "metadata": {"file_size": 20690, "chunk_index": 160, "chunk_tokens": 994, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Retail Insurance Products", "Answer 2", "Shopkeeper’s Insurance", "Chapter Introduction"]}}
{"chunk": "ii. For instance there are covers such as Householder’s Policy, Shopkeeper’s Policy,Office Package Policy etc. that, under one policy, seek to cover various physical\nassets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.\niv. Package covers could have common terms and conditions for all sections as alsospecific terms for specific sections of the policy.I.**D.** **Shopkeeper’s Insurance**A shop owner is not a corporate house that has large reserves of money to restart\nbusiness. A single mishap may lead to closure of her/ his shop and could probably\nruin her/ his family. There may be bank loans also to repay. There is always the\npossibility that a member of the public suffers a personal injury or damage to her/\nhis property, caused by the shop owner’s operations and a court holds the shop\nowner liable to pay the damages. Such situations can also ruin a shopkeeper.\nTherefore, it's very essential to secure this means of livelihood.292**Shopkeeper’s Insurance policies are devised to cover many of such aspects of**\n**commercial shop/ retail business.** There are policies that are customised to cover\nspecific interests of many types of shops such as antique shop, barbershop, beauty\nparlour, bookstore, department store, dry cleaners, gift shop, pharmacy, stationery\nshop, toy shop, apparel store etc.**1.** **What does shopkeeper’s insurance cover?**The policy can be tailored to provide cover to protect the specific areas of retail\nbusiness. It usually covers damage to the shop structure and contents due to fire,\nearthquake, flooding or malicious damage; and burglary. Shop insurance can also\ninclude business interruption protection. This will cover any loss of income or\nadditional expenditure in the event of operation of unexpected peril causing\ninterruption of business operation. The coverage can be selected by the insured\ndepending on her/ his range of activities.The additional covers the insured can opt may vary from insurer to insurer and can\nbe verified from the respective websites of the non-life insurance companies. These\ncould be:**i.** **Burglary and Housebreaking:** Cover for housebreaking, theft, and larceny of\noffice content\n**ii.** **Machinery Breakdown:** Cover for breakdown of electrical/ mechanicalappliances\n**iii.** **Electronic Equipment and Appliances:** Provides all-risk cover for electronic appliances\n Cover for loss of electronic installations\n**iv.** **Money Insurance** : Provides coverage against loss of money due to an accidentwhile it is in: Transit from the business premises to bank and vice versa\n A safe at the business premises\n A till (box/ drawer/ counter) at the business premises\n**v.** **Baggage** : Compensates for loss of baggage while on travel for official purposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course of employment\n Provides cover for legal liability to third parties\nFire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be taken\nseparately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.293**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is usually\na package of all the needs of a Householder.Losses normally covered include fire, lightning, explosion and aircraft fall/ impact\ndamage (commonly known as FLEXA); storm, tempest, flood and inundation\n(commonly known as STFI); and burglary. Coverage differs from company to\ncompany and from policy to policy.Apart from the structure, it covers the contents of the house against burglary,\nhousebreaking, larceny and theft. Jewellery whilst being worn or kept in locked safe\ncan also be insured under Householder’s Insurance. Cover is also given for electrical\nand mechanical failure of domestic and electronic appliances.Similarly, Householder’s insurance Package also provides coverage for loss of\npersonal baggage, lost during travel, or liabilities to neighbours/ visitors may also\nbe part of Householders’ insurance package. Some insurers also provide coverage", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "D.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_161", "metadata": {"file_size": 20690, "chunk_index": 161, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Machinery Breakdown:", "Personal Accident", "Shopkeeper’s Insurance", "Baggage", "What does shopkeeper’s insurance cover?"]}}
{"chunk": "Compensation and Public Liability Polices (dealt with next chapter) can be taken\nseparately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.293**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is usually\na package of all the needs of a Householder.Losses normally covered include fire, lightning, explosion and aircraft fall/ impact\ndamage (commonly known as FLEXA); storm, tempest, flood and inundation\n(commonly known as STFI); and burglary. Coverage differs from company to\ncompany and from policy to policy.Apart from the structure, it covers the contents of the house against burglary,\nhousebreaking, larceny and theft. Jewellery whilst being worn or kept in locked safe\ncan also be insured under Householder’s Insurance. Cover is also given for electrical\nand mechanical failure of domestic and electronic appliances.Similarly, Householder’s insurance Package also provides coverage for loss of\npersonal baggage, lost during travel, or liabilities to neighbours/ visitors may also\nbe part of Householders’ insurance package. Some insurers also provide coverage\nfor pedal cycle, personal accident and workmen’s compensation.IRDAI has introduced a standard product with effect from 1st April, 2021 – Bharat\nGriha Raksha policy with a tenure of upto 10 years, which shall be mandatorily\noffered by all general insurers carrying on Fire and allied perils insurance business.**Bharat Griha Raksha (meant for Home Building and Home Contents) policy** offers\ncover against a wide range of perils, namely Fire, Natural Catastrophe, Forest,\nJungle and Bush fires, Impact Damage of any kind, Riot, Strike, Malicious Damages,\nActs of terrorism, Bursting and overflowing of water tanks, apparatus and pipes,\nLeakage from automatic sprinkler installations and Theft within 7 days from the\noccurrence of any of the aforesaid events. This policy can be for a period of 1 to 10years.In addition to the Home Building, the policy covers General Home Contents\nautomatically (without any need for declaration of details) for 20% of the Sum\nInsured of the Building subject to a maximum of Rs.10 lakhs. One can also opt for a\nhigher Sum Insured for general contents by declaring the details.The policy offers two optional covers, namely (i) Insurance for Valuable Contents\nlike jewellery and curios; and (ii) Personal Accident of the insured and spouse due\nto an insured peril under the policy.The policy gives complete waiver of underinsurance. That is, if the Sum Insured\ndeclared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.294**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value of\nassets, therefore, it may not be difficult to arrive at the sum insured. In the case of\nshop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two methods\nof fixing the sum insured, viz. market value and reinstatement/ replacement value.For additional coverage like money, baggage, personal accident the premium would\ndepend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the case\nof M.V., in the event of a loss, depreciation is levied on the asset depending on\nits age. Under this method, the insured is not paid amount sufficient to replace\nthe property.ii. In the RIV method, the insurance company will pay the cost of replacementsubject to ceiling of sum insured. Under this method, no depreciation is levied.\nOne condition is that the damaged asset should be repaired/ replaced in order\nto get the claim. It may be noted that RIV method is allowed only for fixed assets\nand not for other assets like stocks and stocks in process.Most policies insure the structure of the home for its reconstruction, which is called\n‘reinstatement value’ (and not on ‘market value’). Reinstatement value is the cost\nincurred to reconstruct the home if it is damaged. On the other hand, market value\ndepends on factors like age of the property, depreciation, etc.Sum insured is generally calculated by multiplying the built up area of insured's", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "E.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_162", "metadata": {"file_size": 20690, "chunk_index": 162, "chunk_tokens": 992, "has_examples": false, "has_tables": false, "key_concepts": ["Householder’s Insurance", "Sum Insured and Premium", "How does one fix the Sum Insured?"]}}
{"chunk": "of M.V., in the event of a loss, depreciation is levied on the asset depending on\nits age. Under this method, the insured is not paid amount sufficient to replace\nthe property.ii. In the RIV method, the insurance company will pay the cost of replacementsubject to ceiling of sum insured. Under this method, no depreciation is levied.\nOne condition is that the damaged asset should be repaired/ replaced in order\nto get the claim. It may be noted that RIV method is allowed only for fixed assets\nand not for other assets like stocks and stocks in process.Most policies insure the structure of the home for its reconstruction, which is called\n‘reinstatement value’ (and not on ‘market value’). Reinstatement value is the cost\nincurred to reconstruct the home if it is damaged. On the other hand, market value\ndepends on factors like age of the property, depreciation, etc.Sum insured is generally calculated by multiplying the built up area of insured's\nhome with the construction rate per square foot. The contents of the home furniture, durables, clothes, utensils, etc. - are valued on market value basis i.e.\nthe current market value of similar items after depreciation.Premium would depend on the value insured and the coverage taken.**Test Yourself 1**Which of the below statements is correct with regards to a package policy?I. Package Policy provide a combination of covers under a single document\nII. Package Policy can cover only physical assets like buildings\nIII. A named peril policy or package policy comes at the same price.\nIV. Only named peril policies can be bought and package policies are not available.V.295**Definition****Some important definitions****a)** **Burglary** means the unforeseen and unauthorised entry to or exit from theinsured premises by aggressive and detectable means with the intent to steal\ncontents there from.**b)** **Housebreaking** is said to have taken place when a house trespass has beencommitted by entering it for the purpose of committing an offence.**c)** **Robbery** means the theft of contents at the insured’s premises using aggressiveand violent means against the Insured and/ or insured’s employees.**d)** **Safe** means a strong cabinet within the insured’s premises designed for the safeand secure storage of valuable items, and access to which is restricted.**e)** **Theft** is a generic term for all crimes in which a person intentionally andfraudulently takes the property of another without permission or consent and\nwith the intent to convert it to the taker’s use or potential sale. Theft is\nsynonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed plate\nglass and sanitary fittings’ cover. This will cover accidental loss of damage to which of the\nfollowing?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and taken\nit for a drive. Out of nowhere, a dog comes in the way and to avoid hitting it, Revathi\nswerves sharply, breaks and goes over the divider, hits another car and injures a\nperson walking on the road. The outcome of a single incident has resulted in damage\nto Revathi’s own car, public property, another car and also caused injury to anotherperson.In this scenario, if Revathi does not have a car insurance, she may end up paying far\nmore than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?\n What if they don't have insurance?296That is why the laws of the land make it mandatory to have third-party liability\ninsurance. While motor insurance does not prevent these things from happening, it\nprovides a financial security blanket for the owner.Apart from an accident, the car can also be stolen, damaged by an accident or\ndestroyed by fire and the owner would suffer financially.Motor insurance must be taken by a vehicle owner (i.e. the person in whose name\nthe vehicle is registered with the Regional Transport Authority in India.)**Important****Mandatory Third Party Insurance**As per the Motor Vehicles Act, 1988, it is mandatory for every owner of a vehicle\nplying on public roads, to take an insurance policy, to cover the amount, which the\nowner becomes legally liable to pay as damages to third parties as a result of\naccidental death, bodily injury or damage to property. A Certificate of Insurance", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Test Yourself 1", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_163", "metadata": {"file_size": 20690, "chunk_index": 163, "chunk_tokens": 985, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Housebreaking", "Burglary", "Motor Insurance", "Theft"]}}
{"chunk": "more than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?\n What if they don't have insurance?296That is why the laws of the land make it mandatory to have third-party liability\ninsurance. While motor insurance does not prevent these things from happening, it\nprovides a financial security blanket for the owner.Apart from an accident, the car can also be stolen, damaged by an accident or\ndestroyed by fire and the owner would suffer financially.Motor insurance must be taken by a vehicle owner (i.e. the person in whose name\nthe vehicle is registered with the Regional Transport Authority in India.)**Important****Mandatory Third Party Insurance**As per the Motor Vehicles Act, 1988, it is mandatory for every owner of a vehicle\nplying on public roads, to take an insurance policy, to cover the amount, which the\nowner becomes legally liable to pay as damages to third parties as a result of\naccidental death, bodily injury or damage to property. A Certificate of Insurance\nmust be carried in the vehicle as a proof of such insurance.**1.** **Motor insurance coverage**The country has a large vehicle population. A number of new vehicles keep coming\non to the road every day. Many of them are very costly as well. People say that in\nIndia, vehicles do not get junked, but only keep changing hands. This means that\nold vehicles continue to be on the road and new vehicles get added. The area of the\nroads (the space for driving) is not growing correspondingly with the number of\nvehicles. The number of people walking on the road is also increasing. Police and\nhospital statistics say that the number of road accidents in the country is increasing.\nThe amount of compensations awarded to accident victims by Courts of Law are\nincreasing. Even vehicle repair costs are going up. **All these show the importance**\n**of motor insurance in the country.**Motor insurance covers the loss of vehicles and the damages to them due to\naccidents and some other reasons. Motor insurance also covers the legal liability of\nvehicle owners to compensate the victims of the accidents caused by their vehicles.Despite, the government mandate, all the vehicles in the country are not insured.**Motor Insurance covers all types of vehicles plying on public roads such as:** Two wheelers\n Private cars\n All types of commercial vehicles: Goods carrying and passenger carrying\n Miscellaneous type of vehicles e.g. cranes,\n Motor Trade (Vehicles in Showrooms and Garages)297**‘Third-Party Insurance’**An insurance policy purchased for protection against the legal actions of another\nparty. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any vehicle\nplying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury caused\nby a motor accident are to be filed by the complainant in Motor Accident Claim\nTribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident cover\nfor Owner-Driver effective 1st January, 2019. The Cover is provided to the OwnerDriver whilst driving the vehicle including mounting into/ dismounting from or\ntraveling in the insured vehicle as a co-driver. However, the policyholder can choose\nto opt for the CPA cover as part of the Liability Only policy or the Package policy.\nIn the event the policyholder chooses to take a stand-alone CPA policy, the CPA\ncover offered as part of Liability only or Package policy shall be deleted.**Package/ Comprehensive Policy: (Own Damage + Third Party Liability)**In addition to the above, the loss or damage to the vehicle insured by specified\nperils (known as own damage to motor vehicles) is also covered subject to the value\ndeclared (called IDV – discussed above) other terms and conditions in the policy.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Important", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_164", "metadata": {"file_size": 20690, "chunk_index": 164, "chunk_tokens": 984, "has_examples": false, "has_tables": false, "key_concepts": ["All these show the importance", "Motor insurance coverage", "Important", "Mandatory Third Party Insurance", "Act [Liability] Only Policy:"]}}
{"chunk": "damage.\nThe claims for compensation to third party victims in case of death or injury caused\nby a motor accident are to be filed by the complainant in Motor Accident Claim\nTribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident cover\nfor Owner-Driver effective 1st January, 2019. The Cover is provided to the OwnerDriver whilst driving the vehicle including mounting into/ dismounting from or\ntraveling in the insured vehicle as a co-driver. However, the policyholder can choose\nto opt for the CPA cover as part of the Liability Only policy or the Package policy.\nIn the event the policyholder chooses to take a stand-alone CPA policy, the CPA\ncover offered as part of Liability only or Package policy shall be deleted.**Package/ Comprehensive Policy: (Own Damage + Third Party Liability)**In addition to the above, the loss or damage to the vehicle insured by specified\nperils (known as own damage to motor vehicles) is also covered subject to the value\ndeclared (called IDV – discussed above) other terms and conditions in the policy.\nSome of these perils are fire, theft, riot and strike, earthquake, flood, accident etc.Some insurers may also pay for towing charges from the place of accident to the\nworkshop. A restricted cover is also available covering the risk of fire and/ or theft\nonly, in addition to the compulsory cover granted under Act (Liability) Only Policy.The policy can also cover loss or damage to accessories fitted in the vehicle,\npersonal accident cover under private car policies for passengers, paid driver; legal\nliability to employees and non-fare paying passengers in commercial vehicles.\nInsurers also provide free emergency services or use of alternative car in case of\nbreakdown.298**2.** **Exclusions**Some of the important exclusions under the policies are wear and tear, breakdowns,\nconsequential loss, and loss due to driving with invalid driving license or under the\ninfluence of alcohol. Use of vehicle not in accordance with `limitations as to use '\n(e.g. private car being used as a taxi) is not covered.**3.** **Sum Insured and Premium**The sum insured of a vehicle in a Motor Policy is referred to as Insured's Declared\nValue (IDV).In case of theft of vehicle or total damage beyond repairs in an accident, the claim\namount will be determined on the basis of the IDV.Rating/ premium calculation depends on factors like the Insured's Declared Value,\ncubic capacity, geographical zone, age of the vehicle etc.**Test Yourself 3**Motor insurance should be taken in whose name?I. In the name of the vehicle owner whose name is registered with RegionalTransport Authority\nII. If the person who will be driving the vehicle is different from the owner, thenin the name of the person who will be driving the vehicle, subject to approval\nfrom Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primary policyshould be in the name of the vehicle owner and additional policies should be\npurchased in the names of all the people who will be driving the vehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred to aninsured property from hazards or events named in the policy. The perils covered\nwill be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire, riots,bursting of pipes, earthquakes etc. Apart from the structure, it covers the\ncontents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).\ne) Shopkeeper’s insurance usually covers damage to the shop structure andcontents due to fire, earthquake, flooding or malicious damage; and burglary.\nShop insurance can also include business interruption protection.\nf) Motor insurance covers the loss of vehicles and the damages to them due toaccidents and some other reasons. Motor insurance also covers the legal liability299of vehicle owners to compensate the victims of the accidents caused by their\nvehicles. Compulsory Personal Accident cover for Owner-Driver is provided to\nwhilst driving the vehicle including mounting into/ dismounting from or traveling\nin the insured vehicle as a co-driver.**Key terms**a) Householder’s insurance\nb) Shopkeeper’s insurance\nc) Motor insurance**Answers to Test Yourself****Answer 1** - The correct option is I.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y299", "section": "Package/ Comprehensive Policy: (Own Damage + Third Party Liability)", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_165", "metadata": {"file_size": 20690, "chunk_index": 165, "chunk_tokens": 1005, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Exclusions", "Test Yourself 3", "Answer 1", "Sum Insured and Premium"]}}
{"chunk": "contents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).\ne) Shopkeeper’s insurance usually covers damage to the shop structure andcontents due to fire, earthquake, flooding or malicious damage; and burglary.\nShop insurance can also include business interruption protection.\nf) Motor insurance covers the loss of vehicles and the damages to them due toaccidents and some other reasons. Motor insurance also covers the legal liability299of vehicle owners to compensate the victims of the accidents caused by their\nvehicles. Compulsory Personal Accident cover for Owner-Driver is provided to\nwhilst driving the vehicle including mounting into/ dismounting from or traveling\nin the insured vehicle as a co-driver.**Key terms**a) Householder’s insurance\nb) Shopkeeper’s insurance\nc) Motor insurance**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is I.300## CHAPTER G-04## COMMERCIAL INSURANCE**Chapter Introduction**In the previous chapter we considered various kinds of insurance products that cover\nthe risks faced by individuals and households. There is another set of customers who\nhave other needs for protection. These are the commercial or business enterprises\nor firms, who are engaged in or deal with of various kinds of goods and services. In\nthis chapter we shall consider the insurance products available to cover the risks\nfaced by this segment.**Learning Outcomes**After studying this chapter, you should be able to understand the importance and\nbasic purposes of the 11 types of insurances discussed.301**A.** **Property/ Fire Insurance**Commercial enterprises are broadly divided into two types: Small and Medium Enterprises [SMEs]Bharat Sookshma PolicyBharat Laghu Policy Large Business Enterprises-Standard fire and Special Perils Policy (SFSP), IAR etc.Historically, general insurance sector has largely developed by catering to the needs\nof these customers.Selling general insurance products to commercial enterprises calls for a careful\nmatching of insurance products with their needs. Agents must have a proper\nunderstanding of the products available. Let us briefly consider some of these\ngeneral insurance products.**1. Standard Fire and Special Perils Policy (SFSP)**Fire insurance policy is suitable for commercial establishments as well as for the\nowner of property, one who holds property in trust or in commission and for,\nindividuals/ financial institutions who have financial interest in the property.All immovable and movable property located at a particular premises such as\nbuildings, plant and machinery, furniture, fixtures, fittings and other contents,\nstocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild and\nrenew the property damaged to bring back the business to its normal course. It is\nhere that fire insurance plays its role.**2.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile All\nIndia Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood and inundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation\n Bush fire302There are two important features which differentiate commercial insurance from\nindividual and retail lines.a) The insurance needs of firms or business enterprises are much larger than thatof individuals. The reason is that the value of the assets of a commercial\nenterprise is much larger than that of an individual’s assets. Their loss or damage\ncould adversely impact the very survival and future of the company.b) The demand for insurance of commercial enterprise is often mandated or madenecessary by legal or other requirements. For instance, when plants and assets\nare set up through a bank loan, their insurance may be a condition of the loan.\nMany corporate enterprises in India are professionally run companies and a\nnumber of them are multinationals.They are required to maintain global quality standards, including the adoption\nof appropriate risk management strategies and insurance for protecting their", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y299", "section": "Key terms", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_166", "metadata": {"file_size": 20690, "chunk_index": 166, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Answer 1"]}}
{"chunk": " Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood and inundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation\n Bush fire302There are two important features which differentiate commercial insurance from\nindividual and retail lines.a) The insurance needs of firms or business enterprises are much larger than thatof individuals. The reason is that the value of the assets of a commercial\nenterprise is much larger than that of an individual’s assets. Their loss or damage\ncould adversely impact the very survival and future of the company.b) The demand for insurance of commercial enterprise is often mandated or madenecessary by legal or other requirements. For instance, when plants and assets\nare set up through a bank loan, their insurance may be a condition of the loan.\nMany corporate enterprises in India are professionally run companies and a\nnumber of them are multinationals.They are required to maintain global quality standards, including the adoption\nof appropriate risk management strategies and insurance for protecting their\nassets.Any loss arising out of the above perils is covered by the policy subject to some\nexclusion.**2.2.** **Revised Standard Fire and Special Perils (SFSP) Policies:**IRDAI has issued guidelines with effect from 1st April, 2021 whereby the Standard\nFire and Special Perils (SFSP) Policy will be replaced by the following two standard\nproducts **for the risks** given **below** that shall be mandatorily offered by all general\ninsurers carrying on Fire and allied perils insurance business.**i.** **Bharat Sookshma Udyam Suraksha (meant for enterprises where the total****value at risk is upto Rs. 5 Crore)** - designed for financial protection of MSMEsThis policy provides cover for the Building/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value at risk across all insurable\nasset classes at one location is up to Rs. 5 Crore. This policy also offers cover against\na wide range of perils, quite similar to the policy meant for Dwellings.The policy has many in-built covers in addition to the basic coverage — Cover for\nalterations, additions or extensions, Cover for stocks on a floater basis, Cover for\ntemporary removal of stocks, Cover for Specific Contents, Cover for start-up\nexpenses (following a loss), Cover for payment of professional fees for Architects,\nSurveyors and Consulting Engineers, Cost for removal of debris and Costs compelled\nby Municipal Regulations.The policy can be taken by micro level enterprises such as offices, hotels, industries,\nstorage risks and so on. The policy underinsurance to the extent of 15% is waived.\nBharat Sookshma Udyam Policies allow increase in Sum Insurer during the policy\ntenure by endorsement.303**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total value****at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for financial\nprotection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value of risk across all insurable\nasset classes at one location exceeds Rs.5 Crore but does not exceed Rs. 50 Crore\nat the policy commencement date. This policy also has all the in-built covers offered\nby the policy for micro level enterprises mentioned above. The perils against which\ninsurance is offered are also similar to the policy meant for micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in\nSum Insurer during the policy tenure by endorsement.**iii.** **Exclusions under Fire Policies**Insurers traditionally exclude the following from the scope of Fire policies.**Losses due to excepted perils like**i. War and war like activities.\nii. Nuclear perils\niii. Ionisation and radiationiv. Pollution and contamination losses**Perils that are covered by other policies in General Insurance**i. Machinery Breakdown,\nii. Business Interruptioniv. **Add-on Covers**However some perils can be covered by payment of additional premium like earth\nquake, fire and shock; deterioration of stock in the cold storages following power\nfailure as a result of insured peril, additional expenditure involved in removal of\ndebris, architect, consulting engineers’ fee over and above the amount covered by\nthe policy, forest fire, spontaneous combustion and impact damage due to own", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e302", "section": "Revised Standard Fire and Special Perils (SFSP) Policies:", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_167", "metadata": {"file_size": 20690, "chunk_index": 167, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Exclusions under Fire Policies", "Losses due to excepted perils like", "Add-on Covers"]}}
{"chunk": "by the policy for micro level enterprises mentioned above. The perils against which\ninsurance is offered are also similar to the policy meant for micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in\nSum Insurer during the policy tenure by endorsement.**iii.** **Exclusions under Fire Policies**Insurers traditionally exclude the following from the scope of Fire policies.**Losses due to excepted perils like**i. War and war like activities.\nii. Nuclear perils\niii. Ionisation and radiationiv. Pollution and contamination losses**Perils that are covered by other policies in General Insurance**i. Machinery Breakdown,\nii. Business Interruptioniv. **Add-on Covers**However some perils can be covered by payment of additional premium like earth\nquake, fire and shock; deterioration of stock in the cold storages following power\nfailure as a result of insured peril, additional expenditure involved in removal of\ndebris, architect, consulting engineers’ fee over and above the amount covered by\nthe policy, forest fire, spontaneous combustion and impact damage due to own\nvehicles; terrorism.v. **Variants of Fire policy**Fire policies are generally issued for a period of 12 months. Only for dwellings,\ninsurance companies offer long term policies, i.e. for a period over 12 months. In\nsome cases short period policies are also issued, to which the short period scales\nare applicable.a. **Market Value and Reinstatement Value Policies:** In the event of a loss, theinsurer would normally pay the market value [which is the depreciated value].\nUnder Reinstatement Value Policy, however, the insurers would pay cost of\nreplacement of the damaged property, by new property of the same kind.304Reinstatement value policies are issued for covering buildings, plant,\nmachinery and furniture, fixture, fittings. Reinstatement value policies are not\nissued to cover stocks, which are usually covered on market value basis.b. **Declaration Policy:** To take care of frequent fluctuations in stocks values inwarehouse, Declaration Policy is granted subject to certain conditions. The sum\ninsured should be the highest value that is expected to be stored in the godown\nduring the period of policy. On this value a provisional premium is charged. The\ninsured has to declare the value of his stocks at agreed intervals, during the\ncurrency of policy. This is adjustable along with the premium at the end of the\npolicy period.c. **Floater Policies:** Floater policies may be issued for stocks of goods which arestored at various specified locations under one sum insured. Unspecified\nlocations are not covered. The premium rate is the highest rate applicable to\ninsured’s stocks at any one location with a loading of 10%. These are also called\nfire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on the natureof occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and flood groupperils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or\nLoss of Profit Insurance.Fire insurance provides indemnity against material or property damage or loss\nsuffered to building, plant, machinery fixtures, fittings, merchandise goods, etc. by305insured perils. **This may result in total or partial interruption of the insured’s**\n**business**, resulting in various economic losses, during the period of interruption.**Coverage under Business Interruption Policy**Consequential Loss (CL) Policy [Business Interruption (BI)] provides indemnity for\nloss of what is termed as gross profit – which includes Net Profit plus Standing\nCharges along with the increased cost of working incurred by the insured to get the\nbusiness back to normalcy, as soon as possible to reduce the final loss. The perils", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y305", "section": "Exclusions under Fire Policies", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_168", "metadata": {"file_size": 20690, "chunk_index": 168, "chunk_tokens": 987, "has_examples": false, "has_tables": false, "key_concepts": ["Market Value and Reinstatement Value Policies:", "Premium rating depends on:", "Test Yourself 1", "Losses due to excepted perils like", "Declaration Policy:"]}}
{"chunk": "II. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or\nLoss of Profit Insurance.Fire insurance provides indemnity against material or property damage or loss\nsuffered to building, plant, machinery fixtures, fittings, merchandise goods, etc. by305insured perils. **This may result in total or partial interruption of the insured’s**\n**business**, resulting in various economic losses, during the period of interruption.**Coverage under Business Interruption Policy**Consequential Loss (CL) Policy [Business Interruption (BI)] provides indemnity for\nloss of what is termed as gross profit – which includes Net Profit plus Standing\nCharges along with the increased cost of working incurred by the insured to get the\nbusiness back to normalcy, as soon as possible to reduce the final loss. The perils\ncovered and conditions are the same as those covered under the fire policy.**Example**If a Fire results in damage to the car manufacturer's plant, the production loss will\nresult in loss of income to the manufacturer. This loss of income along with extra\nexpenses incurred can be insured provided it has resulted from a peril insured.This policy can be taken only in conjunction with standard fire and special perils\npolicy as claims under this policy are admissible only if there is a claim under\nstandard fire and special perils policy.**Test Yourself 2**A business interruption insurance policy can be taken only in conjunction with____________.I. Standard fire and special perils insurance policy\nII. Standard marine insurance policy\nIII. Standard motor insurance policy\nIV. Standard health insurance policy**C.** **Burglary Insurance**The policy is meant for business premises like factories, shops, offices, warehouses\nand godowns which may contain stocks, goods, furniture fixtures and cash in a\nlocked safe which can be stolen. The scope of cover is clearly expressed in the\npolicy.**Risks covered under burglary insurance**a) Loss of property following actual forcible and violent entry into the premises orloss followed by actual, forcible and violent exit from the premises or hold up.b) Damage to insured property or premises by burglars. Property insured is coveredonly when it is lost from the insured premises and not from any other premises.**Cash cover:** An important part of burglary cover is cash cover. It operates only when\nthe cash is secured in a safe, which is burglar proof and is of an approved make and\ndesign. The common conditions applicable for granting cash cover are given below:a) Cash lost from the safe following the use of the original key to open, it is coveredonly where such key has been obtained by violence or threats of violence or\nthrough means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some place otherthan the safe. The liability of the insurer is limited to the amount actually shown\nby such records.306**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales, grain,\nsugar etc.) the risk of losing the entire stock on a single occasion is considered\nremote. The value that can be burgled is ascertained as probable maximum loss\n(PML) and the full premium is charged for this maximum probable loss and\ncertain percentage of full premium is charged on rest amount of stock as PML\nfloats over the entire stock. It is assumed that a second burglary may not follow\nimmediately or the insured may take additional security measures from itsrecurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other persons\nwho are lawfully on the premises, nor does it cover larceny or ordinary theft. It\nalso excludes losses that are covered by a fire or plate glass policy.**4.** **Extensions**The policy can be extended to cover riot, strikes and terrorism risks at extra\npremium.**5.** **Premium**Rates of premium for burglary policy depend upon the nature of insured\nproperty, the moral hazard of the insured himself, construction and location of\npremises, safety measures ( _e.g. watchmen, burglar alarm)_, previous claims\nexperience etc.In addition to details given in the proposal form, a pre-acceptance inspection is\ndone by insurers where high values are involved.**Test Yourself 3**The premium for burglary policy depends on ______________.I. Nature of insured property\nII. Moral hazard of the insured himself\nIII. Construction and location of the premises", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y305", "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_169", "metadata": {"file_size": 20690, "chunk_index": 169, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Burglary Insurance", "Exclusions", "Extensions", "Example", "First Loss Insurance"]}}
{"chunk": "immediately or the insured may take additional security measures from itsrecurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other persons\nwho are lawfully on the premises, nor does it cover larceny or ordinary theft. It\nalso excludes losses that are covered by a fire or plate glass policy.**4.** **Extensions**The policy can be extended to cover riot, strikes and terrorism risks at extra\npremium.**5.** **Premium**Rates of premium for burglary policy depend upon the nature of insured\nproperty, the moral hazard of the insured himself, construction and location of\npremises, safety measures ( _e.g. watchmen, burglar alarm)_, previous claims\nexperience etc.In addition to details given in the proposal form, a pre-acceptance inspection is\ndone by insurers where high values are involved.**Test Yourself 3**The premium for burglary policy depends on ______________.I. Nature of insured property\nII. Moral hazard of the insured himself\nIII. Construction and location of the premises\nIV. All of the above**D.** **Money Insurance**Handling of cash is an integral part of any business. The Money Insurance policy is\nintended to protect banks and industrial business establishments against loss of\nmoney. Money is at risk in the premises as well as outside. It can be unlawfully taken\naway while withdrawing, depositing, making payments or collections.**1.** **Coverage of Money Insurance**Money insurance policy is designed to cover the losses that may occur while cash,\ncheques/ postal orders/ postal stamps are being handled. The policy normally\nprovides cover under two sections307**a)** **Transit section:** It covers loss of money as a result of robbery or theft or otherfortuitous cause whilst it is carried outside by the insured or her authorised\nemployees.The transit section specifies two amounts:**i.** **Limit per carrying** : This is the maximum amount that insurers may berequired to pay in respect of each loss.**ii.** **Estimated amount in transit during the policy period:** It represents theamount to which the rate of premium is to be applied to arrive at the amount\nof premium.Policies can be issued on “ **declaration basis”**, similar to the practice in fire\ninsurance. Insurers thus charge a provisional premium on the estimated amount\nin transit and adjust this premium at the time of expiry of the policy, based on\nactual amount in transit during the policy period, as declared by the insured.**b)** **Premises section:** This section covers loss of cash from one’s premises/ lockedsafe due to burglary, housebreaking, hold up etc. Other features of the policy\nare normally the same as of burglary insurance (of business premises) that this\nwas discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized person andc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risksc) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried\nthroughout the year based on declaration made within 30 days of expiry of the\npolicy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission\nII. Loss of cash from one’s premises due to burglary\nIII. Loss of money that has been entrusted to other than authorized person\nIV. Riot, strike and terrorism308**E.** **Fidelity Guarantee Insurance**Companies suffer financial loss due to what are termed as white collar crimes like\nfraud or dishonesty of their employees. Fidelity guarantee insurance indemnifies\nemployers against the financial loss suffered by them due to fraud or dishonesty of\ntheir employees by forgery, embezzlement, larceny, misappropriation and default.**1.** **Coverage under Fidelity Guarantee Insurance**Cover is granted against a direct pecuniary loss and does not include consequential", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s307", "section": "Declaration cover and floater cover is also possible in respect of stocks,", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_170", "metadata": {"file_size": 20690, "chunk_index": 170, "chunk_tokens": 950, "has_examples": false, "has_tables": false, "key_concepts": ["Fidelity Guarantee Insurance", "Exclusions", "Extensions", "Test Yourself 4", "Coverage under Fidelity Guarantee Insurance"]}}
{"chunk": "company at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried\nthroughout the year based on declaration made within 30 days of expiry of the\npolicy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission\nII. Loss of cash from one’s premises due to burglary\nIII. Loss of money that has been entrusted to other than authorized person\nIV. Riot, strike and terrorism308**E.** **Fidelity Guarantee Insurance**Companies suffer financial loss due to what are termed as white collar crimes like\nfraud or dishonesty of their employees. Fidelity guarantee insurance indemnifies\nemployers against the financial loss suffered by them due to fraud or dishonesty of\ntheir employees by forgery, embezzlement, larceny, misappropriation and default.**1.** **Coverage under Fidelity Guarantee Insurance**Cover is granted against a direct pecuniary loss and does not include consequential\nlosses.a) The loss should be in respect of moneys, securities or goodsb) The act should be committed in the course of the duties specified;c) The loss has be discovered within 12 months of expiry of the policy or deathretirement resignation or dismissal of the employee, whichever is earlierd) No cover is provided in respect of a dishonest employee who has been re\nemployed**2.** **Types of Fidelity Guarantee Policy**There are various types of fidelity guarantee policies, as discussed below:**a)** **Individual policy:** This type of policy is used where only one individual is tobe guaranteed. Name, designation of the employee and amount of guarantee\nhas to be specified.**b)** **Collective policy:** This policy comprises a schedule listing out the names ofthose employees to whom the guarantee applies, along with a note on the\nduties of each employee and separate individual sums insured.**c)** **Floating policy or floater:** In this policy, the names and duties of theindividuals to be covered are inserted in a schedule, but instead of individual\namounts of guarantee, a specified amount of guarantee is “floated” over the\nwhole group. A claim in respect of any one employee will, therefore, reduce\nthe floated guarantee, unless the original sum is reinstated by payment of an\nextra premium.**d)** **Positions policy:** This is similar to a collective policy with the difference thatonly the schedule lists out \"positions’ (say, Cashier, Account Officer Etc.) that\nare to be guaranteed for a specified amount and the name are not mentioned.**e)** **Blanket policy:** This policy covers the entire staff without showing names orpositions. No enquiries about the employees are made by the insurers. Such\npolicies are only suitable for an employer with a large staff and the\norganization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers in\nthe event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.309**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud or dishonestyof their employees\nII. Employees against the financial loss suffered by them due to fraud or dishonestyof their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate\nIV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions\nwho deal with operations involving money, considering the special risks faced by\nthem regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**\nThere are different variations to this policy based on the requirement of banker.a) Money securities lost or damaged whilst within the premises due to fire,burglary, riot and strike.b) Loss suffered due to any cause whatsoever including negligence of theemployees, when the property is carried outside the premises in the hands\nof authorized employees.c) Forgery or alteration of cheques, drafts, fixed deposit receipts etc.d) Dishonesty of employees with reference to money/ securities or in respectof goods pledged.e) Dispatches by registered post parcels.f) Dishonesty of appraisers.g) Money lost while in the hands of agents of the bank like ‘Janata Agents’,‘Chhoti Bachat Yojana Agents’.The cover is issued on discovery basis, this means the policy will respond to a period\nduring which a loss is discovered and not necessarily the period when it occurred.", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "m308", "section": "Test Yourself 4", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_171", "metadata": {"file_size": 20690, "chunk_index": 171, "chunk_tokens": 1021, "has_examples": true, "has_tables": false, "key_concepts": ["Fidelity Guarantee Insurance", "Bankers Indemnity Insurance", "Test Yourself 4", "Coverage under Fidelity Guarantee Insurance", "Test Yourself 5"]}}
{"chunk": "who deal with operations involving money, considering the special risks faced by\nthem regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**\nThere are different variations to this policy based on the requirement of banker.a) Money securities lost or damaged whilst within the premises due to fire,burglary, riot and strike.b) Loss suffered due to any cause whatsoever including negligence of theemployees, when the property is carried outside the premises in the hands\nof authorized employees.c) Forgery or alteration of cheques, drafts, fixed deposit receipts etc.d) Dishonesty of employees with reference to money/ securities or in respectof goods pledged.e) Dispatches by registered post parcels.f) Dishonesty of appraisers.g) Money lost while in the hands of agents of the bank like ‘Janata Agents’,‘Chhoti Bachat Yojana Agents’.The cover is issued on discovery basis, this means the policy will respond to a period\nduring which a loss is discovered and not necessarily the period when it occurred.\nBut a cover should have been in existence when the loss actually occurred.Conventionally losses within a period of 2 years prior to date of discovery only are\npayable, subject to the cover having been continuous, from a date earlier than that\nwhen the loss has occurred.**2.** **Important exclusions**\nMajor exclusions are Trading losses, Negligence, Software crimes and dishonesty of\nthe partners/ directors310**3.** **Scope**\nThe policy comprises of 7 sections viz.:1. On Premises2. In Transit\n3. Forgery or Alteration\n4. Dishonesty\n5. Hypothecated Goods\n6. Registered Postal Service\n7. Appraisers\n8. Janata Agents**4.** **Sum insured**The bank has to fix the **sum insured** which would usually float over the first 5\nsections. This is termed as ‘basic sum insured’. Additional sum insured can be\npurchased for section (1) and (2) if the basic sum insured is not sufficient. The policy\nalso allows one compulsory and automatic reinstatement of sum insured by payment\nof an extra premium**5.** **Rating**The premium calculation is based on:a) Basic sum insured\nb) Additional sum insured\nc) Number of staff\nd) Number of branches.**Test Yourself 6**Which of the below can be covered under a bankers indemnity insurance policy?I. Money securities lost or damaged whilst within the premises due to fire\nII. Forgery or alteration of cheques\nIII. Dishonesty of employees with reference to money\nIV. All of the above**G.** **Jewelers’ Block Policy**In recent years India has emerged as a leading centre in world trade for jewellery,\nespecially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in large\nquantity and moving them between different premises.311**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are allowed\nto avail of other sections at their option. It is also the market practice to include\nsome more sections to cover other assets like Electronic equipment, Plate glass,\nSignage etc. and liabilities like Employees Compensation, Infidelity of employees.Fidelity guarantee cover should also be taken by the insured for full protection if\nthere is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for each\nsection with discounts for exclusive round the clock watchman, close circuit TV/\nalarm system, exclusive strong room and for any other safety expedient etc.**Test Yourself 7**In case of a Jeweller’s Block Policy, there are traditionally multiple sections, of\nwhich one is usually compulsory while the remaining sections are ____________.I. Mandatory\nII. Retrospective\nIII. Optional\nIV. Compensatory**H.** **Engineering Insurance**Engineering insurance is a branch of general insurance that developed parallel with\nthe growth of fire insurance. Its origins can be traced to the development of\nindustrialization, which highlighted the need for a separate cover for plant and\nmachinery. Concept of **All Risks** cover was also developed with regard to\nengineering projects - covering damage due to any cause except those specifically\nexcluded. The products covered various stages – from construction to testing till the\nplant became operational. The customers for this insurance are both large and small\nindustrial units. This also includes units having electronic equipment and", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s310", "section": "Coverage under Bankers Indemnity Insurance", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_172", "metadata": {"file_size": 20690, "chunk_index": 172, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 7", "Rating", "Jewelers’ Block Policy", "All Risks", "Sum insured"]}}
{"chunk": "there is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for each\nsection with discounts for exclusive round the clock watchman, close circuit TV/\nalarm system, exclusive strong room and for any other safety expedient etc.**Test Yourself 7**In case of a Jeweller’s Block Policy, there are traditionally multiple sections, of\nwhich one is usually compulsory while the remaining sections are ____________.I. Mandatory\nII. Retrospective\nIII. Optional\nIV. Compensatory**H.** **Engineering Insurance**Engineering insurance is a branch of general insurance that developed parallel with\nthe growth of fire insurance. Its origins can be traced to the development of\nindustrialization, which highlighted the need for a separate cover for plant and\nmachinery. Concept of **All Risks** cover was also developed with regard to\nengineering projects - covering damage due to any cause except those specifically\nexcluded. The products covered various stages – from construction to testing till the\nplant became operational. The customers for this insurance are both large and small\nindustrial units. This also includes units having electronic equipment and\ncontractors doing big projects. There are two types of engineering insurance\npolicies:1) Annual Policies-Generally of one year duration\na. Machinery Breakdown Policy\nb. Boiler Pressure Plant policy\nc. Electronic Equipment Policy\nd. Contractor’s Plant & Machinery Policy\ne. Deterioration of Stock Policy\nf. Civil Engineering Completed Risk\n2) Project Policies with variable duration based on project period\na) Contractors All Risk Policy\nb) Erection All Risk Policy312There are two “Consequential Loss” policies associated with Engineering Policies:a) Machinery Breakdown Loss of Profit Policy (MBLOP) taken with Machinery\nBreakdown Policy or with Boiler and Pressure Plant policy andb) Advance loss of Profit (ALOP) or Delay in Startup (DSU) Policy taken with\nproject policy.Let us briefly consider the policies:\n**A.** **Annual Policies****1.** **Machinery Breakdown Policy (MB):** This policy is suitable for every industrywhich operates on machines and for whom breakdown of plant and machinery is\nof serious consequence. This policy covers machines like generators,\ntransformer and other electrical, mechanical and lifting equipment.The policy covers unforeseen and sudden physical damage by mechanical or\nelectrical breakdown by any cause (subject to excepted risks) to the insured\nproperty:a) While it is at work or at rest.\nb) While being dismantled for cleaning or overhauling\nc) During cleaning or overhauling operations and during reassembly thereafter.\nd) When being shifted within the premise.Premium is charged on the reinstatement/ replacement value of individual\nmachinery. The machine as a whole should be insured. Rates depend on the type of\nmachine; the industry in which it is used and its value. Discounts are offered based\non factors such as stand-by facilities, spares available and claims experience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plant andto surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for adequate**\n**cover, both the policies need to be taken. Sum insured under all Engineering**\n**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronic equipment,which includes the entire computer system consisting of CPU, keyboards,\nmonitors, printers, UPS, system software etc. Auxiliary equipment such as airconditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and burglary\npolicy. The policy covers the contingencies such as defective design (not covered\nunder a warranty), effects of natural phenomena; defective functioning due to313voltage fluctuations, impact shock etc., burglary, housebreaking & theft are also\ncovered.The policy is available to the owner, lessor or hirer, depending upon the\nresponsibility or liability in each case. It has usually three sections that cover various\ntypes of losses:**a)** **Section 1:** Loss and damage to equipment\n**b)** **Section 2:** Loss and damage to external data media like computer externalhard disks", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "y312", "section": "Test Yourself 7", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_173", "metadata": {"file_size": 20690, "chunk_index": 173, "chunk_tokens": 951, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 7", "Boiler and Pressure Plant Policy:", "Annual Policies", "Engineering Insurance", "Electronic Equipment Policy:"]}}
{"chunk": "due to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for adequate**\n**cover, both the policies need to be taken. Sum insured under all Engineering**\n**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronic equipment,which includes the entire computer system consisting of CPU, keyboards,\nmonitors, printers, UPS, system software etc. Auxiliary equipment such as airconditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and burglary\npolicy. The policy covers the contingencies such as defective design (not covered\nunder a warranty), effects of natural phenomena; defective functioning due to313voltage fluctuations, impact shock etc., burglary, housebreaking & theft are also\ncovered.The policy is available to the owner, lessor or hirer, depending upon the\nresponsibility or liability in each case. It has usually three sections that cover various\ntypes of losses:**a)** **Section 1:** Loss and damage to equipment\n**b)** **Section 2:** Loss and damage to external data media like computer externalhard disks\n**c)** **Section 3:** Increased cost of working - to ensure continued data processingon substitute equipment up to 12, 26, 40 or 52 weeks.**4.** **Contractors Plant & Machinery (CPM) Policy:** Suitable for contractors involvedin construction business for covering all kinds of machinery like cranes,\nexcavators from unforeseen and sudden physical loss or damage from any cause\nincluding:a) Burglary, Theft, Riot, Storm, Malicious Damage, Tempest\nb) Fire and lightning, external explosion, earthquake and other Acts of Godperils\nc) Accidental damage while at work due to faulty manhandling, dropping orfalling, collapse, collision and impact; can be extended for third party\ndamage.The Premium to be charged depends on the type of equipment and the location\nat which it operates.**The cover is operative whilst the equipment is at work or at rest or being**\n**dismantled for cleaning or overhauling or re-assembling thereafter. The**\n**cover also applies while the same are lying at contractors own premises.**\n**However floater policy covering the equipment “Anywhere in India basis” is**\n**also available by charging 10% extra premium and with certain conditions.****5.** **Deterioration of Stock Policy:** This policy is suitable for the owner of the coldstorage (individual or a cooperative society) or those who take the cold storage\non lease or hire for storage of perishable commodities. The cover is against the\nrisk of deterioration and contamination following breakdown of the refrigeration\nplant and machinery and also due to rise in temperature and sudden and\nunforeseen escape of refrigerants into the cold storage rooms.**6.** **Civil Engineering Completed Risk:** It is generally taken by contractors who hasto maintain the civil projects after completion. The civil projects like – Bridges,\nDry docks, Harbours, Jetties Railway lines, Rock Filled dams, Concrete dams,\nEarthen dams, Canals, Irrigation system are considered under this policy. Risks\ncovered are –1. Fire\n2. Lightning\n3. Explosion/ Implosion3144. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami\n9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be on\nan annual basis.\n**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small\nbuildings to massive dams, buildings, bridges, tunnels, etc. The policy provides\nan “All Risk” cover – thus providing indemnity against any sudden and unforeseen\nloss or damage that occurs to property insured at the construction site. This can\nbe extended to cover third party liability and other exposures. Premium\nchargeable depends on the nature of the project, the project cost, the project\nperiod, geographic location and the period of testing.**2.** **Erection All Risks (EAR) Policy:** This policy is also known as Storage-cum\nErection (SCE) policy. It is suitable for the principal or contractors of a project\nwhereas plant and machinery is being erected as it is exposed to various external", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "o313", "section": "Since fire policy and boiler insurance policy are mutually exclusive, for adequate", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_174", "metadata": {"file_size": 20690, "chunk_index": 174, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Project Policies", "Section 1:", "Erection All Risks (EAR) Policy:", "Civil Engineering Completed Risk:", "Contractors Plant & Machinery (CPM) Policy:"]}}
{"chunk": "8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami\n9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be on\nan annual basis.\n**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small\nbuildings to massive dams, buildings, bridges, tunnels, etc. The policy provides\nan “All Risk” cover – thus providing indemnity against any sudden and unforeseen\nloss or damage that occurs to property insured at the construction site. This can\nbe extended to cover third party liability and other exposures. Premium\nchargeable depends on the nature of the project, the project cost, the project\nperiod, geographic location and the period of testing.**2.** **Erection All Risks (EAR) Policy:** This policy is also known as Storage-cum\nErection (SCE) policy. It is suitable for the principal or contractors of a project\nwhereas plant and machinery is being erected as it is exposed to various external\nrisks. This is a comprehensive insurance policy that covers any sort of\ncontingency right from the moment the materials are unloaded at the project\nsite and continues during the entire project period until the project is tested,\ncommissioned and handed over.Premium chargeable depends on the nature of the project, the cost, the project\nperiod, geographic location, and the period of testing.**If required a marine cover can be issued along with the erection policy for**\n**providing coverage to the equipment and materials during the transit phase**\n**till delivered at the project site.****C.** **Consequential Loss Policies**These type of policies are issued to cover losses consequential to other losses. These\nare also called ‘Business Interruption’ policies or ‘Loss of Profits’ policies.\n**3.** **Machinery Loss of Profits (MLOP) Policy**This policy is suitable for industries where interruptions or delays as a result of\nmachinery breakdown or boiler explosion result in huge consequential losses.Where the time lag between the breakdown or loss and the restoration is large, this\npolicy compensates for the loss of profits during the intervening period due to\nreduction in turnover and increase in cost of working. The terms and conditions and315coverage of business interruption policy is the same as the business interruption\npolicy following a fire policy loss, which has been discussed earlier in this chapter.**4.** **Advance Loss of Profit Cover (ALOP) or Delay in Start-up Policy (D.S.U.)**This covers financial consequences of a project being delayed because of accidental\ndamages during the project. It is suitable for the insured who is deprived of the\nanticipated earning and for the financial institutions to the extent of their interest\nin the project. It is issued as an extension to the MCE/ EAR/ CAR Policy before the\nactual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated\nnet profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are also\ncritical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both\nmanufacturing and storage facilities, anywhere in India under one policy. It provides\nindemnification against material damage and business interruption.\nUsually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,\nii. Burglary (except larceny)\niii. Machinery breakdown/ boiler explosion/ electronic equipment\niv. Business interruption following operation of perils mentioned above(Note: Business interruption following perils under (iii) above is usually not included\nin the package cover but available as optional cover) The policy offers widest range of cover compared to that provided byindividual operational policies.\n Premium rates for the policy depend on the cover opted, claims experience,and deductibles opted, risk assessment report for MLOP etc.316**Test Yourself 9**Which of the following is not covered under Industrial All Risks insurance?I. Fire and special perils as per fire insurance practice\nII. Larceny\nIII. Machinery breakdown", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "d315", "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_175", "metadata": {"file_size": 20690, "chunk_index": 175, "chunk_tokens": 994, "has_examples": false, "has_tables": false, "key_concepts": ["Project Policies", "Test Yourself 8", "Erection All Risks (EAR) Policy:", "Contractors All Risks (C.A.R.) Policy:", "Consequential Loss Policies"]}}
{"chunk": "II. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both\nmanufacturing and storage facilities, anywhere in India under one policy. It provides\nindemnification against material damage and business interruption.\nUsually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,\nii. Burglary (except larceny)\niii. Machinery breakdown/ boiler explosion/ electronic equipment\niv. Business interruption following operation of perils mentioned above(Note: Business interruption following perils under (iii) above is usually not included\nin the package cover but available as optional cover) The policy offers widest range of cover compared to that provided byindividual operational policies.\n Premium rates for the policy depend on the cover opted, claims experience,and deductibles opted, risk assessment report for MLOP etc.316**Test Yourself 9**Which of the following is not covered under Industrial All Risks insurance?I. Fire and special perils as per fire insurance practice\nII. Larceny\nIII. Machinery breakdown\nIV. Electronic equipment**J.** **Marine Insurance**Marine insurance is classified into two types: marine cargo and marine hull**1.** **Marine Cargo Insurance**Though the term ‘marine’ may indicate only losses due to sea (marine)\nmisadventures, **marine cargo insurance** covers much more. It provides indemnity\nin respect of loss of or damage to goods during transit by rail, road, sea, air or\nregistered post, within the country as well as abroad. Type of goods may range from\ndiamonds to household goods, bulk items like cement, grains, over dimensional\ncargoes for projects etc.Cargo insurance plays an important role in domestic trade as well as in international\ntrade. Most contracts of sale require that the goods must be covered, either by the\nseller or the buyer, against loss or damage.**Who effects the insurance:** The seller or the buyer of the goods [consignment] may\ninsure the cargo depending upon the contract of sale.Marine insurance contract needs to have provisions that apply internationally. This\nis because it covers goods that are in transit beyond any country’s borders. The\ncovers are accordingly governed by international conventions and certain clauses\nattached to the policy.While the basic policy document contains general conditions, the scope of cover and\nexceptions and special exclusions are attached by separate clauses known as\nInstitute cargo Clauses (ICC). These are drafted by the Institute of London\nUnderwriters.**a)** **Coverage under Marine Cargo Insurance**\nCargo policies are essentially voyage policies, i.e. they cover the subject matter\nwhilst in transit from one place to another. However, the insured is required to\nalways act with reasonable care in all circumstances within his control. The main\nfeature of this policy is that it's an Agreed Value Policy. The valuation is agreed\nbetween the insurer and insured and is not subject to revaluation later unless fraud\nis suspected. The convention for the Sum Insured is CIF + 10% (Cost Insurance &\nFreight + 10%). Another unique feature is that the policy is freely assignable.317The cover normally commences from the time the goods leave the warehouse at the\nplace named in the policy and terminates at the destination named in the policy,\ndepending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit\nii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due to\naccident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle\niii. Stranding, grounding or sinking of the vessel (in case of ship)\niv. Collision with an external object\nv. Discharge of cargo at a port of distress\nvi. General average sacrifice\nvii. Jettison.Institute Cargo Clause B is wider than C. Apart from the perils covered in C it also\ncovers loss or damage due to:i. Act of God (AOG) perils like earthquake, volcanic eruption and lightning\nii. Collapse of bridges in Inland transit\niii. Washing overboard and sling loss in case of ocean transit\niv. Entry of water into the vessel.Institute Cargo Clause A is the widest cover as it covers all perils of B and C and loss\nor damage due to any other risk except some exclusion specified such as:i. Loss or damage due to wilful conduct of the insured", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "I.", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_176", "metadata": {"file_size": 20690, "chunk_index": 176, "chunk_tokens": 1009, "has_examples": false, "has_tables": false, "key_concepts": ["Coverage under Marine Cargo Insurance", "Marine Insurance", "Test Yourself 9", "Industrial All Risks Insurance", "Who effects the insurance:"]}}
{"chunk": "iii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due to\naccident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle\niii. Stranding, grounding or sinking of the vessel (in case of ship)\niv. Collision with an external object\nv. Discharge of cargo at a port of distress\nvi. General average sacrifice\nvii. Jettison.Institute Cargo Clause B is wider than C. Apart from the perils covered in C it also\ncovers loss or damage due to:i. Act of God (AOG) perils like earthquake, volcanic eruption and lightning\nii. Collapse of bridges in Inland transit\niii. Washing overboard and sling loss in case of ocean transit\niv. Entry of water into the vessel.Institute Cargo Clause A is the widest cover as it covers all perils of B and C and loss\nor damage due to any other risk except some exclusion specified such as:i. Loss or damage due to wilful conduct of the insured\nii. Ordinary leakage, breakage, wear and tear or ordinary loss in weight/volume\niii. Insufficiency in packing\niv. Inherent vice\nv. Delays\nvi. Loss due to insolvency of owners\nvii. Nuclear perilsThese exclusions are common to all clauses of inland, air and sea. There are\nseparate clauses also for trading of specific commodities like coal, bulk oil and tea\netc. Marine cover can be extended by paying additional premium to cover War,\nStrikes, Riots, Civil Commotion and Terrorism. Marine and Aviation policies are the\nonly branches of insurance that offer cover against War perils.318**Important**Risks covered under a marine policy, under the standard policy form and under the\nvarious clauses attached to the policy broadly fall into three categories:i. Marine perils,\nii. Extraneous perils and\niii. War, strike riot, civil commotion and terrorism risks.**b)** **Different types of marine policies****i.** **Specific Policy**This policy covers a single shipment. It is valid for the particular voyage or\ntransit. Merchants who are engaged in regular import and export trade or\nwho are sending consignments regularly by inland transit would find it\nconvenient to arrange insurances under special arrangements like the open\npolicy.**ii.** **Open Policy**The carriage of goods within the country can be covered under an open\npolicy. The policy is valid for one year and all consignments during this period\nhave to be declared by the insured to the insurer as agreed between them\non a fortnightly, monthly or quarterly basis.**iii.** **Open Cover**The open cover is a contract for a year giving the Insured continuous\nprotection to cover a large number of shipments/ despatches. The premium\non the consignments would be adjusted from the respective cash deposit\naccount maintained by the Insured. Open covers are issued to large exporters\nand importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for transactions\nof marine dispatches for one-year. The open cover is not a policy and it is\nnot stamped. A certificate of insurance is issued for each declaration duly\nstamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is increased\ndue to payment of customs duty or increase in the market value of the goods\nat the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across different\ncountries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**\n**b)** **Covering a period of time: Usually one year. The set of clauses used here****are called Institute (Time) Clauses**319**c)** War risks are governed by special regulations and the premiums collected willbe credited to the Central Government.**Information**Hull insurance also includes the following insurances:i. Inland vessels such as barges, launches, passenger vessels etc.\nii. Dredgers (Mechanized or non-mechanized)\niii. Fishing Vessels (Mechanized or non-mechanized)\niv. Sailing Vessels (Mechanized or non-mechanized)\nv. Jetties and Wharvesvi. Vessels in the course of construction**The ship owner has insurable interest not only in the ship, but also in the freight**", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": null, "section": "Important", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_177", "metadata": {"file_size": 20690, "chunk_index": 177, "chunk_tokens": 1007, "has_examples": false, "has_tables": false, "key_concepts": ["Duty and increased value insurance", "Specific Policy", "Open Policy", "Information", "Institute Voyage Clauses"]}}
{"chunk": "countries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**\n**b)** **Covering a period of time: Usually one year. The set of clauses used here****are called Institute (Time) Clauses**319**c)** War risks are governed by special regulations and the premiums collected willbe credited to the Central Government.**Information**Hull insurance also includes the following insurances:i. Inland vessels such as barges, launches, passenger vessels etc.\nii. Dredgers (Mechanized or non-mechanized)\niii. Fishing Vessels (Mechanized or non-mechanized)\niv. Sailing Vessels (Mechanized or non-mechanized)\nv. Jetties and Wharvesvi. Vessels in the course of construction**The ship owner has insurable interest not only in the ship, but also in the freight**\n**to** be earned during the period of insurance. In addition to freight the ship owner\nhas insurable interest in the amount spent by him in fitting out the vessel, including\nprovisions and stores. **These expenses are termed disbursements and are insured**\n**concurrently with the hull policy for a period of time.****Important****Aviation insurance:** A comprehensive policy is also available for aircraft which\ncovers loss or damage to the aircraft as also the legal liability to third parties and\nto passengers arising out of the operation of the aircraft.**Test Yourself 10**Which branch of insurance offers cover against war perils?I. Marine policies\nII. Aviation policies\nIII. Both of the aboveIV. None of the above**K.** **Liability Policies**Accidents cannot be avoided altogether, however careful a person is. This could\nresult in injury to oneself and damage to one’s property and also may simultaneously\ncause injury to third parties and damage to their property. The persons thus\naffected would claim compensation for such loss.A liability could also arise from a defect in a product manufactured and sold, say\nchocolates or medicines, causing harm to the consumer. Similarly, liability could\narise from wrong diagnosis/ treatment of a patient or from a case improperly\nhandled by a lawyer for his client.In all such cases, where a third party, consumer or the patient would demand\ncompensation for the alleged wrong doing, it would raise a need for payment of\ncompensation or meeting expenses involved in defending the suits filed by the\nclaimants. In other words there is a financial loss arising from a liability to pay. The\nexistence of such a liability and the amount of compensation to be paid would be\ndecided by a civil court which would go into the aspect of alleged negligence/ fraud.\nLiability insurance policies provide coverage of such liabilities. Let us look at some\nof the liability policies.**Statutory liability**320There are certain laws or statutes which provide for the payment of compensation.\nThe laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010\nInsurance policies are available for protection in respect of such liabilities. Let us\nlook at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation payable\nper person is fixed as shown below.|Compensation payable|Col2|\n|---|---|\n|Fatal Accident|Rs. 25,000|\n|Permanent Total Disability|Rs. 25,000|\n|Permanent Partial Disability|% of Rs. 25,000 based on % of disability|\n|Temporary Partial Disablement|Rs. 1000 per month, maximum 3 months|\n|Actual Medical Expenses|Up to a maximum of Rs. 12,500|\n|Actual damage to property up to|Rs. 6,000|The premium is based on the AOA (Any One Accident) limit and the turnover of the\nclient. A special feature of this policy is that the insured has to pay compulsorily an\namount equal to the premium as contribution to Environment Relief Fund. If large\nnumbers of third parties are affected and the total amount of relief payable exceeds\nA.O.A. limit, the balance amount will be paid by the fund.**2.** **Public Liability Policy (Industrial/ Non-industrial Risks)**This type of policy covers liability arising out of fault/ negligence of the insured", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "l2", "section": "Covering a particular Voyage: The set of clauses used here are called", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_178", "metadata": {"file_size": 20690, "chunk_index": 178, "chunk_tokens": 981, "has_examples": false, "has_tables": true, "key_concepts": ["Test Yourself 10", "Information", "Institute Voyage Clauses", "Important", "Statutory liability"]}}
{"chunk": "per person is fixed as shown below.|Compensation payable|Col2|\n|---|---|\n|Fatal Accident|Rs. 25,000|\n|Permanent Total Disability|Rs. 25,000|\n|Permanent Partial Disability|% of Rs. 25,000 based on % of disability|\n|Temporary Partial Disablement|Rs. 1000 per month, maximum 3 months|\n|Actual Medical Expenses|Up to a maximum of Rs. 12,500|\n|Actual damage to property up to|Rs. 6,000|The premium is based on the AOA (Any One Accident) limit and the turnover of the\nclient. A special feature of this policy is that the insured has to pay compulsorily an\namount equal to the premium as contribution to Environment Relief Fund. If large\nnumbers of third parties are affected and the total amount of relief payable exceeds\nA.O.A. limit, the balance amount will be paid by the fund.**2.** **Public Liability Policy (Industrial/ Non-industrial Risks)**This type of policy covers liability arising out of fault/ negligence of the insured\ncausing third party personal injury or property destruction [TPPI OR TPPD].There are separate policies covering industrial risks as well as non-industrial risks\nlike those affecting hotels, cinema halls, auditoriums, residential premises, offices,\nstadiums, godowns and shops. It covers the legal liability to pay compensation\nincluding claimant’s costs, fees and expense according to Indian Law, in respect of\nTPPI/ TPPD **.**The policy does not cover:a) Products liabilityb) Pollution liabilityc) Transportation andd) Injuries to workmen/ employees**3.** **Products Liability Policy**The demand for products liability insurance has arisen because of the wide variety\nof products (e.g. canned food stuff, aerated waters, medicines and injections,321electrical appliances, mechanical equipment, chemicals etc.) that are today\nmanufactured and sold to the public. If a defect in the product causes death, bodily\ninjury or illness or even damage to the property of third parties, it could cause a\nclaim to arise. Product liability policies cover this liability of the insured.Cover is available for exports as well as domestic sales.4. **Lift (Third Party) Liability Insurance**The policy provides indemnity to owners of buildings in respect of liabilities arising\nout of the use and operation of lifts. It covers legal liabilities for:a) Death/ bodily injury of any person (excluding employees of the insured)b) Damage to property (excluding insured’s own or employee’s property)The premium rates depend upon the limit of indemnity, any one person, any one\naccident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are available\nfor doctors hospitals; engineers, architects; chartered accountants, financial\nconsultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility. They\nmay become liable to pay damages to shareholders, employees, creditors and other\nstakeholders of the company, for wrongful acts committed by them in the\nsupervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to pay\ncompensation to his employees who sustain personal injury by accident or disease\narising out of and in the course of his employment. This is also called **Workman’s**\n**Compensation Insurance.**Two forms of insurance are prevalent in the market:**a)** **Table A:** Indemnity against legal liability for accidents to employees underthe Employees Compensation Act, 1923, (Workman’s Compensation Act,\n1923), Fatal Accident Act, 1855 & Common Law.**b)** **Table B** : Indemnity against legal liability under Fatal Accidents Act, 1855and Common law.The premium rate is applied on the estimated wages of employees as declared in\nthe proposal form.The policy may be extended to cover:i. Medical and hospital expenses incurred by the insured for treatment ofemployee injuries, up to specific amounts322ii. Liability for occupational diseases listed in the Actiii. Liability towards employees of contractors**Test Yourself 11**Under the Public Liability Insurance Act, 1991, how much is the compensation\npayable for actual medical expenses for non-fatal accidents?I. Rs. 6,250\nII. Rs, 12,500\nIII. Rs. 25,000", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "l2", "section": "Public Liability Policy (Industrial/ Non-industrial Risks)", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_179", "metadata": {"file_size": 20690, "chunk_index": 179, "chunk_tokens": 1003, "has_examples": false, "has_tables": true, "key_concepts": ["Table A:", "Test Yourself 11", "Directors' and Officers' Liability Policy", "Lift (Third Party) Liability Insurance", "Table B"]}}
{"chunk": "compensation to his employees who sustain personal injury by accident or disease\narising out of and in the course of his employment. This is also called **Workman’s**\n**Compensation Insurance.**Two forms of insurance are prevalent in the market:**a)** **Table A:** Indemnity against legal liability for accidents to employees underthe Employees Compensation Act, 1923, (Workman’s Compensation Act,\n1923), Fatal Accident Act, 1855 & Common Law.**b)** **Table B** : Indemnity against legal liability under Fatal Accidents Act, 1855and Common law.The premium rate is applied on the estimated wages of employees as declared in\nthe proposal form.The policy may be extended to cover:i. Medical and hospital expenses incurred by the insured for treatment ofemployee injuries, up to specific amounts322ii. Liability for occupational diseases listed in the Actiii. Liability towards employees of contractors**Test Yourself 11**Under the Public Liability Insurance Act, 1991, how much is the compensation\npayable for actual medical expenses for non-fatal accidents?I. Rs. 6,250\nII. Rs, 12,500\nIII. Rs. 25,000\nIV. Rs. 50,000**Answers to Test Yourself****Answer 1** - The correct option is III.\n**Answer 2** - The correct option is I.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is I.\n**Answer 6** - The correct option is IV.\n**Answer 7** - The correct option is III.\n**Answer 8** - The correct option is II.\n**Answer 9** - The correct option is II.\n**Answer 10** - The correct option is III.\n**Answer 11** - The correct option is II.323## CHAPTER G-05## GENERAL INSURANCE CLAIMS**Chapter Introduction**At the core of any insurance contract is the promise made at the beginning i.e. to\nindemnify the insured in the event of a loss. This chapter talks about the procedures\nand documents involved, from the time loss takes place, making it easier to\ncomprehend the entire process of claims settlement. It also explains the method of\ndealing with disputed claims either by insured or insurer.After studying this chapter, you should be able to:1. Argue the importance of claim settlement functions2. Describe the procedures for intimation of loss3. Appraise claim investigation and assessment4. Explain the importance of surveyors and loss assessors5. Illustrate the contents of claim forms6. Define claims adjustment and settlement324**A.** **Claims settlement process****1.** **Importance of settling claims**The most important function of an insurance company is to settle claims of\npolicyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble business ofinsurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon as\nthe possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early\nas possible after the loss.b) **Professionalism**The insurance officials consider each and every claim on its merits and do not\napply prejudicial or pre-conceived notions to reject the claim without examining\nall the documents that would answer the following questions.i. Did the loss really happen?ii. If so, did the loss making event really cause the damage?iii. The extent of damage out of this event.iv. What was the reason for the loss?v. Was the loss covered under the policy?vi. Is the claim payable as per the contract/ policy conditions?vii. If so, how much is payable?The answers to all these questions need to be found out by the insurance company.Processing claims is an important activity. All claims forms, procedures and\nprocesses have been carefully designed by the company to ensure that all claims\n‘payable’ under the policy are promptly paid and those that are not payable are not\npaid.The agent, being the representative of the company known to the insured, has to", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s322", "section": "Workman’s", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_180", "metadata": {"file_size": 20690, "chunk_index": 180, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 11", "Answer 10", "Answer 6", "Answer 5", "Answer 7"]}}
{"chunk": "the possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early\nas possible after the loss.b) **Professionalism**The insurance officials consider each and every claim on its merits and do not\napply prejudicial or pre-conceived notions to reject the claim without examining\nall the documents that would answer the following questions.i. Did the loss really happen?ii. If so, did the loss making event really cause the damage?iii. The extent of damage out of this event.iv. What was the reason for the loss?v. Was the loss covered under the policy?vi. Is the claim payable as per the contract/ policy conditions?vii. If so, how much is payable?The answers to all these questions need to be found out by the insurance company.Processing claims is an important activity. All claims forms, procedures and\nprocesses have been carefully designed by the company to ensure that all claims\n‘payable’ under the policy are promptly paid and those that are not payable are not\npaid.The agent, being the representative of the company known to the insured, has to\nensure that all the relevant forms are properly filled up with correct information,325all documents evidencing the loss are attached and all prescribed procedures are\nfollowed in a timely manner and duly submitted to the company. The role of the\nagent at the time of loss has already been discussed earlier.2. **Intimation or Notice of Loss**Policy conditions provide that the loss be intimated to the insurer immediately. The\npurpose of an immediate notice is to allow the insurer to investigate a loss at its\nearly stages. Delays may result in loss of valuable information relating to the loss.\nIt would also enable the insurer to suggest measures to minimise the loss and to\ntake steps to protect salvage. The notice of loss is to be given as soon as reasonably\npossible.After this initial check/ scrutiny, the claim is allotted a number and entered in the\nclaims register, with details like policy number, name of insured, estimate of\namount of loss, date of loss, the claim is now ready to be processed.**Under certain types of policies (e.g. Burglary) notice is also to be given to police**\n**authorities. Under cargo rail transit policies, notice has to be served on the**\n**Railways.**3. **Investigation and assessment****a)** **Overview**On receipt of the claim form, from the insured, the insurers decide about\ninvestigation and assessment of the loss. If the claim amount is small, the\ninvestigation to determine the cause and extent of loss is done, by an officer of theinsurers.**The investigation** of other claims is entrusted to independent licensed professional\nsurveyors who are specialists in loss assessment. The assessment of loss by\nindependent surveyors is based on the principle that since both the insurers and\ninsured are interested parties, the unbiased opinion of an independent professional\nperson should be acceptable to both the parties as well as to a court of law in the\nevent of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with supporting\ndocuments. Where necessary Police report/ fire Brigade report, Investigator’s\nreport are also obtained. For personal accident claims, the insured is required to\nsubmit a report from the attending doctor specifying the cause of accident or the\nnature of illness as the case may be, and the duration of disablement.Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of the\nreport of a veterinary doctor.326**Information**On receipt of intimation of loss or damage insurers check whether:1. The insurance policy is in force on the date of occurrence of the loss or damage2. The loss or damage is caused by an insured peril3. The property (subject matter of insurance) affected by the loss is the same asinsured under the policy4. Notice of loss has been received without delay.Motor third party claims involving death and personal injuries are assessed on the\nbasis of doctor’s report. These claims are dealt by Motor Accident Claims Tribunal\nand the amount to be paid is decided by factors like the age and income of theclaimant.Claims involving third party property damage are assessed on the basis of a surveyreport. Motor own damage claim is assessed on the basis of surveyors report. It may require police report if third party damage is involved.**Information**Investigation is different from the assessment of loss. Investigation is done to ensure\nthat a valid claim has been made and verify the important details and doubts like", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e2", "section": "Professionalism", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_181", "metadata": {"file_size": 20690, "chunk_index": 181, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Railways.", "Professionalism", "Overview", "Investigation and assessment", "Information"]}}
{"chunk": "medical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of the\nreport of a veterinary doctor.326**Information**On receipt of intimation of loss or damage insurers check whether:1. The insurance policy is in force on the date of occurrence of the loss or damage2. The loss or damage is caused by an insured peril3. The property (subject matter of insurance) affected by the loss is the same asinsured under the policy4. Notice of loss has been received without delay.Motor third party claims involving death and personal injuries are assessed on the\nbasis of doctor’s report. These claims are dealt by Motor Accident Claims Tribunal\nand the amount to be paid is decided by factors like the age and income of theclaimant.Claims involving third party property damage are assessed on the basis of a surveyreport. Motor own damage claim is assessed on the basis of surveyors report. It may require police report if third party damage is involved.**Information**Investigation is different from the assessment of loss. Investigation is done to ensure\nthat a valid claim has been made and verify the important details and doubts like\nabsence of insurable interest, suppression or misrepresentation of material facts,\ndeliberately creating the loss, etc. are ruled out.Insurance surveyors undertake the work of investigation also. It helps if a surveyor\ngets on to the job as early as possible. Therefore, the practice is to appoint the\nsurveyor, as soon as possible after the intimation of the claim is received.**B.** **Role of Surveyors and Loss Assessors****a)** **Surveyors**Surveyors are professionals licensed by IRDAI. They are experts in inspecting and\nevaluating losses in specific areas. Surveyors are generally paid fees by the\ninsurance company, engaging them. Surveyors and loss assessors are hired by\ngeneral insurance companies normally, at the time of a claim. They inspect the\nproperty in question, examine and verify the causes and circumstances of the loss.\nThey also estimate the quantum of the loss and submit reports to the insurancecompany.They also advise insurers, regarding appropriate measures to prevent further\nlosses. Surveyors are governed by provisions of the Insurance Act, 1938, Insurance\nRules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open Cover’\nfor exports, are assessed by the claims settling agents abroad named in the policy.\nThese agents may assess the loss and make payment, which is reimbursed by the327insurers along with their settling fees. Alternatively, all the claims papers are\ncollected by the insurance claim settling agents and submitted to the insurers,\nalong with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons (not\nbeing a person disqualified for the time being for being employed as a surveyor or\nloss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other questions\nvary from one class of insurance to another.**Example**An example of information sought in a fire claim form is given here under:i. Name of the insured, policy number and addressii. Date, time, cause and circumstances of the fireiii. Details of damaged propertyiv. Sound value of the property at the time of fire. Where the insurance consists ofseveral items under which the claim is made. [The claim must be based on actual\nvalue of property at the place and time of occurrence after allowance for\ndepreciation, wear and tear (unless the policy in respect of building, plant and\nmachinery is on “reinstatement value” basis). It shall not include profit]v. Amount claimed after deduction of salvage valuevi. Situation and occupancy of the premises in which the fire occurredvii. Capacity in which the insured claims, whether as owner, mortgage or the likeviii. If any other person is interested in the property damagedix. If any other insurance is in force upon such property if so, details thereofThis is followed by the declaration as to the truth and accuracy of the statement of\nin the form and signature of the insured and the date.The issuance of claim form by the insurance company does not imply or mean that\nliability for the claim is admitted by insurers. Claim forms are issued with the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "e2", "section": "Information", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_182", "metadata": {"file_size": 20690, "chunk_index": 182, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Surveyors", "Information", "Example", "Section 64 UM of Insurance Act", "Important"]}}
{"chunk": "value of property at the place and time of occurrence after allowance for\ndepreciation, wear and tear (unless the policy in respect of building, plant and\nmachinery is on “reinstatement value” basis). It shall not include profit]v. Amount claimed after deduction of salvage valuevi. Situation and occupancy of the premises in which the fire occurredvii. Capacity in which the insured claims, whether as owner, mortgage or the likeviii. If any other person is interested in the property damagedix. If any other insurance is in force upon such property if so, details thereofThis is followed by the declaration as to the truth and accuracy of the statement of\nin the form and signature of the insured and the date.The issuance of claim form by the insurance company does not imply or mean that\nliability for the claim is admitted by insurers. Claim forms are issued with the\nremark ‘without prejudice’.328**Supporting documents**In addition to the claim form, certain documents are required to be submitted by\nthe claimant or secured by the insurers to substantiate the claim.i. For fire claims, a report from the Fire Brigade would be necessary.ii. For cyclone damage, a report from the Meteorological office may be called foriii. In burglary claims, a report from the Police may be necessary.iv. For fatal accident claims, reports may be necessary from the Coroner and thePolice.v. For motor claims, the insurer may like to examine driving license, registrationbook, police report etc.vi. In marine cargo claims, the nature of documents varies according to the type ofloss i.e. total loss, particular average, inland or overseas transit claims etc.**Test Yourself 1**Which of the following activities is not considered as professional in settlement ofclaims?I. Seeking information relating to the cause of the lossII. Approaching the claim with a prejudiceIII. Ascertaining whether the loss was a result of an insured perilIV. Quantifying the amount payable under the claim**Test Yourself 2**Raj is involved in a car accident. His car is insured under a motor insurance\ncomprehensive policy. Which among the following is most appropriate for Raj to do?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage**Test Yourself 3**Which of the following statements about claims investigation and claims assessmentis correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether there\nwas any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the loss329IV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while\nexamining a cyclone damage claim?I. Coroner’s reportII. Report from Fire BrigadeIII. Police reportIV. Report from Meteorological Department**Test Yourself 6**Under which principle can the insurer assume the rights of the insured in order to\nrecover from a third party the loss paid under a policy?I. ContributionII. DischargeIII. SubrogationIV. Indemnity**Test Yourself 7**If the insurer decides that a certain loss is not payable because it is not covered\nunder the policy then who decides on such matters?I. Insurer’s decision is finalII. UmpireIII. ArbitratorIV. Court of Law**Summary**a) Settling claims professionally is regarded as the biggest advertisement for aninsurance company.b) Policy conditions provide that the loss be intimated to the insurer immediately.330c) If the claim amount is small, the investigation to determine the cause and extentof loss is done by an officer of the insurer. But for other claims it is entrusted\nto independent licensed professional surveyors who are specialists in lossassessment.d) In general the claim form is designed to get full information regarding thecircumstances of the loss, such as date of loss, time, cause of loss, extent of\nloss, etc.e) Claims assessment is the process of determining whether the cause of the losssuffered by the insured was caused by an insured peril and whether there was\nany breach of warranty. The quantum of loss suffered by the insured and the", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "s329", "section": "Supporting documents", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_183", "metadata": {"file_size": 20690, "chunk_index": 183, "chunk_tokens": 977, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Test Yourself 7", "Test Yourself 1", "Test Yourself 4", "Test Yourself 5"]}}
{"chunk": "under the policy then who decides on such matters?I. Insurer’s decision is finalII. UmpireIII. ArbitratorIV. Court of Law**Summary**a) Settling claims professionally is regarded as the biggest advertisement for aninsurance company.b) Policy conditions provide that the loss be intimated to the insurer immediately.330c) If the claim amount is small, the investigation to determine the cause and extentof loss is done by an officer of the insurer. But for other claims it is entrusted\nto independent licensed professional surveyors who are specialists in lossassessment.d) In general the claim form is designed to get full information regarding thecircumstances of the loss, such as date of loss, time, cause of loss, extent of\nloss, etc.e) Claims assessment is the process of determining whether the cause of the losssuffered by the insured was caused by an insured peril and whether there was\nany breach of warranty. The quantum of loss suffered by the insured and the\ninsurer’s liability under the policy are assessed. This is done before payment ofthe claim.f) Settlement of the claim is made only after obtaining a discharge under thepolicy.**Key terms**a) Intimation of lossb) Investigation and Assessmentc) Surveyors and Loss Assessorsd) Claim formse) Adjustment and Settlement**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is I.**Answer 3** - The correct option is II.**Answer 4** - The correct option is III.**Answer 5** - The correct option is IV.**Answer 6** - The correct option is III.**Answer 7** - The correct option is IV.331## SECTION## ANNEXURES332## CHAPTER A-01## ANNEXURESThese annexures are provided so that the students get a better idea of proposal\nforms used in general insurance.333334**Proposal Forms of Bharat Griha Raksha, Bharat Sookshma & Bharat Laghu Udyam**For a better understanding of standard products and their respective proposal\nforms, i.e. Bharat Griha Raksha, Bharat Sookshma and Bharat Laghu Udyam, please\ncheck the following link to the IRDAI website.https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/StandardProducts/Annex\nure-I-BharatGrihaRaksha.pdf335", "source_file": "Final IC-38 - Corporate Agent _Composite _ English.md", "chapter": "S332", "section": "ANNEXURESThese annexures are provided so that the students get a better idea of proposal", "chunk_id": "Final IC-38 - Corporate Agent _Composite _ English_184", "metadata": {"file_size": 20690, "chunk_index": 184, "chunk_tokens": 518, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 7", "Answer 6", "Answer 3"]}}
{"chunk": "## IC - 38 **CORPORATE AGENTS** **SECTION-GENERAL****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## CORPORATE AGENTS **SECTION-GENERAL** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nInsurance Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**GENERAL INSURANCE **|**GENERAL INSURANCE **|\n|G-01|General Insurance Documentation|2|\n|G-02|Underwriting and Rate Making|17|\n|G-03|Personal and Retail Insurance|26|\n|G-04|Commercial Insurance|36|\n|G-05|General Insurance Claims|59|\n|**SECTION **|**ANNEXURES**|**ANNEXURES**|\n|A-1|Annexures – Specimen Proposal forms and Claims Forms for filling up<br>|68|iv## SECTION **GENERAL INSURANCE**1## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful for\nthe insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.2**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance company\nto accept the risk offered for insurance. The principle of utmost good faith and the", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "C-46", "section": "CORPORATE AGENTS", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_000", "metadata": {"file_size": 4549, "chunk_index": 0, "chunk_tokens": 1003, "has_examples": false, "has_tables": true, "key_concepts": ["SECTION-GENERAL", "IC - 38", "Proposal forms", "ANNEXURES", "Chapter Introduction"]}}
{"chunk": "|**SECTION **|**ANNEXURES**|**ANNEXURES**|\n|A-1|Annexures – Specimen Proposal forms and Claims Forms for filling up<br>|68|iv## SECTION **GENERAL INSURANCE**1## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful for\nthe insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.2**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance company\nto accept the risk offered for insurance. The principle of utmost good faith and the\nduty of disclosure of material information begin with the proposal form forinsurance.**Example**If the insured was required to maintain an alarm or had stated that he has an\nautomatic alarm system in his gold jewellery showroom, then not only is he\nrequired to disclose it, he has to ensure the same remains in a working condition\nthroughout the policy period. The existence of the alarm is a material fact for the\ninsurer who will be accepting the proposal based on these facts and pricing the risk\naccordingly.**1.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the classof insurance concerned.**i.** **Fire insurance** proposal forms are usually used for relatively simple/ standardrisks like houses, shops etc. For large industrial risks, inspection of the risk is\narranged by insurer before acceptance of the risk. Special questionnaire are\nsometimes used in addition to the proposal form to gather specific information.Fire insurance proposal form seeks, among other things, the description of the\nproperty which would include the following information: Construction of external walls and roof, number of story\n Occupation of each portion of the building\n Presence of hazardous goods\n Process of manufacture including raw material and finished goods\n The sums proposed for insurance\n The period of insurance, etc.**ii.** **For motor insurance,** questions are asked about the vehicle, its operations,make and carrying capacity, how it is managed by the owner and related\ninsurance history.**iii.** **In personal lines** like health, personal accident and travel insurance, proposalforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits,\npast insurance experience etc.**iv.** **In other miscellaneous insurances,** proposal forms are compulsory and theyincorporate a declaration which extends the common law duty of good faith.3**2.** **Elements of a proposal****i.** **Proposer’s name in full**The proposer should be able to identify himself/ herself unambiguously. It is\nimportant for the insurer to know with whom the contract has been entered, so\nthat the benefits under the policy would be received only by the insured.**ii.** **Proposer’s address and contact details**The reasons stated above are applicable for collecting the proposer’s address andcontact details as well.**iii.** **Proposer’s profession, occupation or business**In some cases like health and personal accident insurance, the proposer’s\nprofession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposed forinsurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose] or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to the", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "A-1", "section": "SECTION", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_001", "metadata": {"file_size": 4549, "chunk_index": 1, "chunk_tokens": 1006, "has_examples": true, "has_tables": true, "key_concepts": ["Proposal forms", "Sum insured", "Elements of a proposal", "ANNEXURES", "Example"]}}
{"chunk": "profession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposed forinsurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose] or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to the\ninsurer.In property insurance, there is a chance that insured may take policies from\ndifferent insurers and when a loss happens, claim from more than one insurer.\nThis information is required to ensure that the principle of contribution is\napplied so that the insured is indemnified and does not gain/ profit due to\nmultiple insurance policies for the same risk.Further, in personal accident insurance an insurer would like to restrict the\namount of coverage (sum insured) depending on the sum insured under other\nPA policies taken by the same insured.4**vii.** **Loss experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about\nthe subject matter of insurance and how the insured has managed the risk in the\npast. Underwriters can understand the risk better from such answers and decide\non conducting risk inspections or collecting further details.**viii.** **Declaration by insured**As the purpose of the proposal form is to provide all material information to the\ninsurers, the form **includes a declaration by the insured that the answers are**\n**true and accurate and he agrees that the form shall be the basis of the**\n**insurance contract.** Any wrong answer will give the right to insurers to avoid the\ncontract. Other sections common to all proposal forms relate to **signature, date**\n**and in some cases agent’s recommendation.****B.** **Acceptance of the Proposal (underwriting)**As seen earlier, a completed proposal form broadly gives the following information: Details of the insured Details of the subject matter Type of cover required Details of the physical features both positive and negative - including typeand quality of construction, age, presence of fire-fighting equipment, the\ntype of security etc., Previous history of insurance and lossIn the case of property, motor or cargo insurance, the insurer may also arrange for\npre-inspection survey of the risk before acceptance, depending on the nature andvalue of the risk. Insurers take their decision based on the information available inthe proposal, the risk inspection report, answers to the additional questionnaire and\nother documents (as may be called for by the insurer). The insurer then decides\nabout the rate to be applied to the risk factor and calculates the premium based on\nvarious parameters, which is then conveyed to the insured. Proposals are processed\nby the insurer with speed and efficiency and all decisions thereof are communicated by it\nin writing within a reasonable period.**Definition****Underwriting:** As per Protection of Policyholders’ Interests) Regulations, 2017, the\ncompany has to process the proposal within 15 days’ time. The agent is expected to\nkeep track of these timelines, follow up internally and communicate with the\nprospect/ insured as and when required by way of customer service. This entire\nprocess of scrutinizing the proposal and deciding about acceptance is known as\nunderwriting.5**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As discussed\nin Chapter 4, the Agent should be always mindful that the **premium is to be paid**\n**in advance, before the inception date of the insurance contract** as per Section\n64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed to", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "t-1938", "section": "Details and identity of the subject matter of insurance", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_002", "metadata": {"file_size": 4549, "chunk_index": 2, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Premium Receipt", "Declaration by insured", "Test Yourself 1", "Sum insured", "Example"]}}
{"chunk": "company has to process the proposal within 15 days’ time. The agent is expected to\nkeep track of these timelines, follow up internally and communicate with the\nprospect/ insured as and when required by way of customer service. This entire\nprocess of scrutinizing the proposal and deciding about acceptance is known as\nunderwriting.5**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As discussed\nin Chapter 4, the Agent should be always mindful that the **premium is to be paid**\n**in advance, before the inception date of the insurance contract** as per Section\n64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed to\nbe paid or a deposit is made in advance in the prescribed manner. Insurance\nRules 58 and 59 provide certain exceptions to this condition of advance payment\nof premium in some situations.b) Where an insurance agent collects a premium on a policy of insurance on behalfof an insurer, he shall deposit with or dispatch by post to the insurer the\npremium so collected in full without deduction of his commission within twentyfour hours of the collection excluding bank and postal holidays.c) It is also provided that the risk may be assumed only from the date on which thepremium has been paid in cash or by cheque.d) Where the premium is tendered by postal or money order or cheque sent bypost, the risk may be assumed on the date on which the money order is booked\nor the cheque is posted as the case may be.e) Any refund of premium which may become due to an insured on account of thecancellation of policy or alteration in its terms and conditions or otherwise, shall\nbe paid by the insurer directly to the insured by a crossed or order cheque or by\npostal/ money order or by Electronic Mode and a proper receipt shall be\nobtained by the insurer from the insured, and such refund shall in no case be\ncredited to the account of the agent.**D.** **Cover Notes/ Certificate of Insurance/ Policy Document**After underwriting is completed it may take some time before the policy is issued. **Pending**\n**the preparation of the policy or when the negotiations for insurance are in**\n**progress and it is necessary to provide cover on a provisional basis or when the**\n**premises are being inspected for determining the actual rate applicable,** a cover\nnote is issued to confirm protection under the policy. It gives description of cover.\nSometimes, insurers issue a letter confirming the provisional insurance cover instead of a\ncover note.6Although the cover note is not stamped, the wording of the cover note makes it clear\nthat it is subject to the usual terms and conditions of the insurers' policy for the class of\ninsurance concerned. If the risk is governed by any warranties, then the cover note would\nstate that the insurance is subject to such warranties. The cover note is also made subject\nto special clauses, if applicable e.g. Agreed Bank Clause, Declaration Clause etc.**A cover note would incorporate the following:**a) Name and address of insuredb) Sum insuredc) Period of insuranced) Risk coverede) Rate and premium: if rate is not known, the provisional premiumf) **Description of the risk covered** : for example a fire cover note wouldindicate identification particulars of the building, its construction andoccupancy.g) Serial number of the cover noteh) Date of issuei) **Validity of cover note** is usually for a period of a fortnight and rarely up to60 days**Cover notes are used predominantly in marine and motor classes of business.****1.** **Marine Cover Notes**These are normally issued when details required for the issue of policy such as name\nof the steamer, number of packages, or exact value etc. are not known. Even in\nrespect of exports, a cover note may be issued e.g. a certain quantity of cargo\nmeant for shipment is sent by the exporter to the docks. It may happen that, owing\nto difficulty of securing adequate shipping space, shipment of the cargo by the\nintended vessel does not take place. The quantity therefore, that may be sent by a\nparticular vessel cannot be known. In the circumstances, a cover note may be\nrequired which is to be followed subsequently by the issue of regular policy when", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "t-1938", "section": "Test Yourself 1", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_003", "metadata": {"file_size": 4549, "chunk_index": 3, "chunk_tokens": 994, "has_examples": true, "has_tables": false, "key_concepts": ["A cover note would incorporate the following:", "Pending", "Premium Receipt", "Description of the risk covered", "Test Yourself 1"]}}
{"chunk": "of the steamer, number of packages, or exact value etc. are not known. Even in\nrespect of exports, a cover note may be issued e.g. a certain quantity of cargo\nmeant for shipment is sent by the exporter to the docks. It may happen that, owing\nto difficulty of securing adequate shipping space, shipment of the cargo by the\nintended vessel does not take place. The quantity therefore, that may be sent by a\nparticular vessel cannot be known. In the circumstances, a cover note may be\nrequired which is to be followed subsequently by the issue of regular policy when\nfull details are available and made known to the insurance company.Marine cover note may be worded along the following lines:i. Marine Cover Note Numberii. Date of issueiii. Name of the insurediv. Valid up to“As requested, you are hereby held covered subject to usual conditions of the\ncompany's policy to the extent of Rs. _____________.”**a)** **Clauses:** Institute Cargo Clauses A, B or C including War SRCC risks as per InstituteClauses, but subject to 7 days’ notice of cancellation.**b)** **Conditions:** Details of shipment to be supplied on receipt of shipping documentsfor issue of policy. In the event of loss or damage prior to declaration and/ or\nshipment on board the steamer, it is hereby agreed that the basis of valuation7shall be prime cost of the goods plus charges actually incurred and for which the\nassured is liable.With regard to inland transit normally all relevant data required for issue of policy\nare available and therefore a cover note is rarely required. There may however, be\nsome occasions when cover notes are issued and substituted later on by policies\ncontaining full description of the cargo, transit etc.**2.** **Motor Cover Notes**These are to be issued in the form prescribed by the respective companies the\noperative clause of a motor cover note may read as follows:“The insured described in the form, referred to below, having proposed for\ninsurance in respect of the Motor Vehicle(s) described therein and having paid the\nsum of Rs….as premium the risk is hereby held covered under the terms of the\ncompany’s usual form of……Policy applicable thereto (subject to any Special\nConditions mentioned below) unless the cover be terminated by the Company by\nnotice in writing in which case the insurance will thereupon cease and a\nproportionate part of the premium otherwise payable for such insurance will be\ncharged for the time the company had been on risk.”**The Motor Cover Note generally contains the following particulars:**a) Registration mark and number, or description of the vehicles insured/ cubiccapacity/ carrying capacity/ make/ year of manufacture, engine number,\nchassis number\nb) Name and address of the insured\nc) Effective date and time of commencement of insurance for the purpose of theAct. Time……, Date……\nd) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if anyThe Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act, 1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days at a\ntime, but in, but in no case the total period of validity of a Cover Note shall exceed\nsixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day technology\nfacilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof may\nbe required. For instance in motor insurance, in addition to the policy, a certificate\nof insurance is issued as required by the Motor Vehicles Act. **This certificate**8**provides evidence of insurance to the Police and Registration Authorities.** A", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "n7", "section": "Clauses:", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_004", "metadata": {"file_size": 4549, "chunk_index": 4, "chunk_tokens": 835, "has_examples": true, "has_tables": false, "key_concepts": ["Certificate of Insurance – Motor Insurance", "Note:", "Important", "Clauses:", "Conditions:"]}}
{"chunk": "d) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if anyThe Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act, 1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days at a\ntime, but in, but in no case the total period of validity of a Cover Note shall exceed\nsixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day technology\nfacilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof may\nbe required. For instance in motor insurance, in addition to the policy, a certificate\nof insurance is issued as required by the Motor Vehicles Act. **This certificate**8**provides evidence of insurance to the Police and Registration Authorities.** A\nspecimen certificate for private cars is reproduced below, showing salient features.**MOTOR VEHICLES ACT, 1988****CERTIFICATE OF INSURANCE**Certificate No. Policy No.1. Registration mark and Number, Place of registration, Engine No./Chassis No./ Make/Year of manufacture.2. Type of Body/ C.C/ Seating capacity/ Net Premium/ Name of Registration Authority,3. Geographical area – India. `4. Insured declared value (IDV)5. Name and address of the Insured, Business or profession.6. Effective date of commencement of Insurance for the purpose of the Act. From………. 'O'clock on ………7. Date of expiry of insurance: midnight on ……………8. Persons or classes of persons entitled to drive.Any of the following:(a) The insured:(b) Any other person who is driving on the insured's order or with his permissionProvided that the person driving holds an effective driving license at the time of the accident\nand is not disqualified from holding or obtaining such a license. Provided also that the person\nholding an effective learner's license may also drive the vehicle and such a person satisfies\nthe requirement of Rule 3 of Central Motor Vehicles Rules 1989.**LIMITATIONS AS TO USE**The policy covers use for any purpose other than:(a) Hire or reward;(b) Carriage of goods (other than personal luggage)(c) Organised racing,(d) Race making,(e) Speed testing(f) Reliability Trials(g) Any purpose in connection with Motor Trade.I/ we hereby certify that the Policy to which this Certificate relates as well as this Certificate of\nInsurance are issued in accordance with the provisions of Chapter X and Chapter XI of the Motor\nVehicles Act, 1988.Examined .........(Authorized Insurer)**Motor certificate of Insurance is required to be carried in the vehicle at all times for**\n**the scrutiny of the relevant authorities.****4.** **Policy Document****The policy is a formal document which provides an evidence of the contract of**\n**insurance.** This document has to be stamped in accordance with the provisions of the9Indian Stamp Act, 1899.A general insurance policy usually contains:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter;\nb) Full description of the property or interest insured;\nc) The location/ s of the property or interest insured under the policy andwhere appropriate, with respective insured values;\nd) Period of insurance;\ne) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likely togive rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter of insuranceupon occurrence of an event giving rise to a claim and the rights of the\ninsurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman**Test Yourself 1**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "e9", "section": "Important", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_005", "metadata": {"file_size": 4549, "chunk_index": 5, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Certificate of Insurance – Motor Insurance", "Test Yourself 1", "Note:", "CERTIFICATE OF INSURANCE", "Important"]}}
{"chunk": "e) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likely togive rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter of insuranceupon occurrence of an event giving rise to a claim and the rights of the\ninsurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman**Test Yourself 1**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance\nII. Cover notes are predominantly used in all classes of general insurance\nIII. Cover notes are predominantly used in health insurance\nIV. Cover notes are predominantly used in marine and motor classes of generalinsurance**E.** **Warranties****A warranty is a condition expressly stated in the policy which has to be literally**\n**complied with for validity of the contract. Warranty is not a separate document.**\n**It is part of both cover notes and policy document.** It is a condition precedent to\nthe contract. It must be observed and complied with strictly and literally,\nirrespective of the fact whether it is material to the risk or not. If a warranty is\nbreached, the policy becomes voidable at the option of the insurers even when it is\nclearly established that the breach has not caused or contributed to a particular\nloss. However, in practice, if the breach of warranty is of a purely technical nature\nand does not, in any way, contribute to or aggravate the loss, insurers at their\ndiscretion may process the claims according to norms and guidelines as per company\npolicy.10**1.** **Fire Insurances warranties (some examples) are as given below**Warranted, that no hazards goods shall be stored in the insured premises during the\ncurrency of policy.**Silent Risk:** Warranted that no manufacturing activity is carried out in the insured\npremises for consecutive period of 30 days or more.**Cigarette Filter Manufacturing:** Warranted that no solvents having flash point\nbelow 30 [0] C are used/ stored in the premises**2.** In **Marine Insurance, a warranty** is defined as follows: “a promissory warranty,that is to say, a warranty by which the assured undertake that some particular\nthing shall or shall not be done, or that some condition will be fulfilled, or\nwhereby he affirms or negates the existence of a particular state of facts”In **Marine Cargo Insurance, a warranty** is inserted to the effect that goods (e.g.\ntea) are packed in tin-lined cases. In **Marine Hull insurance by inserting a warranty**\nthat the insured vessel will not navigate in a certain area, gives an idea to the\ninsurer about the extent of risk he has agreed to provide cover for. If the warranty\nis breached, the risk agreed to initially is altered and the insurer is allowed to\ndischarge himself from further liability from the date of breach**3.** In **Burglary Insurance**, it is warranted that the property is guarded by awatchman for twenty four hours. The rates, terms and conditions of the policy\ncontinue to be the same only if the warranties attached to the policy are\ncomplied with.**Test Yourself 2**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.11**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through a\ndocument called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nconstitute the evidence of the contract. Endorsements may also be issued during the", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Test Yourself 1", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_006", "metadata": {"file_size": 4549, "chunk_index": 6, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Marine Cargo Insurance, a warranty", "Warranties", "Burglary Insurance", "Test Yourself 1", "Endorsements"]}}
{"chunk": "continue to be the same only if the warranties attached to the policy are\ncomplied with.**Test Yourself 2**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.11**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through a\ndocument called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nconstitute the evidence of the contract. Endorsements may also be issued during the\ncurrency of the policy to record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy related to:a) Variations/ changes in sum insured\nb) Change of insurable interest by way of sale, mortgage, etc.\nc) Extension of insurance to cover additional perils/ extension of policy period\nd) Change in risk, e.g. change of construction, or occupancy of the building in fireinsurance\ne) Transfer of property to another location\nf) Cancellation of insurance\ng) Change in name or address etc.**Specimen**For the purpose of illustration, specimen wordings of some endorsements are\nreproduced below:**Cancellation**At the request of the insured the insurance by this Policy is hereby declared to be\ncancelled as from ………. The insurance having been in force for a period over ………….\nMonths, no refund is due to the Insured.12The total insurance now stands at Rs …….Subject otherwise to the terms, provisions and conditions of this policy.**Test Yourself 3**If certain terms and conditions of the policy need to be modified at the time of issuance, or\nduring the policy tenure it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**G.** **Interpretation of policies**Contracts of insurance are expressed in writing and the insurance policy wordings\nare drafted by insurers. These policies have to be interpreted according to certain\nwell-defined rules of construction or interpretation which have been established by\nvarious courts. **The most important rule of construction is that the intention of**\n**the parties must prevail and this intention is to be looked for in the policy itself.**\nIf the policy is issued in an ambiguous manner, it will be interpreted by the courts\nin favour of the insured and against the insurer on the general principle that the\npolicy was drafted by the latter.**Policy wordings** are understood and interpreted as per the following rules:a) An express condition overrides an implied condition except where there isinconsistency in doing so.\nb) In the event of a contradiction in terms between the standard printed policyform and the typed or handwritten parts, the typed or handwritten part is\ndeemed to express the intention of the parties in the particular contract,\nand their meaning will overrule those of the original printed words.\nc) If an endorsement contradicts other parts of the contract the meaning of theendorsement will prevail as it is the later document.\nd) Clauses in italics over-ride the ordinary printed wording where they areinconsistent.13e) Clauses printed or typed in the margin of the policy are to be given moreimportance than the wording within the body of the policy.\nf) Clauses attached or pasted to the policy override both marginal clauses andthe clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wording impressedby an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts as\nin the case of other contracts.The principal rule of construction is that the intention of the parties of the contract\nmust prevail, that intention must be gathered from the policy document itself and\nthe proposal form, clauses, endorsements, warranties etc. attached to it and\nforming a part of the contract.**2.** **Meaning of wordings**", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Test Yourself 2", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_007", "metadata": {"file_size": 4549, "chunk_index": 7, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Meaning of wordings", "Construction of policies", "Specimen", "Endorsements", "Interpretation of policies"]}}
{"chunk": "d) Clauses in italics over-ride the ordinary printed wording where they areinconsistent.13e) Clauses printed or typed in the margin of the policy are to be given moreimportance than the wording within the body of the policy.\nf) Clauses attached or pasted to the policy override both marginal clauses andthe clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wording impressedby an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts as\nin the case of other contracts.The principal rule of construction is that the intention of the parties of the contract\nmust prevail, that intention must be gathered from the policy document itself and\nthe proposal form, clauses, endorsements, warranties etc. attached to it and\nforming a part of the contract.**2.** **Meaning of wordings**\nThe words used are to be construed in their ordinary and popular sense. **The**\n**meaning to be used for words is the meaning that the ordinary man in the street**\n**would construe. Thus, “fire” means flame or actual burning.**On the other hand, **words which have a common business or trade meaning will**\n**be construed with that meaning unless the context of the sentence indicates**\n**otherwise** . Where words are defined by statute, the meaning of that definition will\nbe used, such as “theft” as in the Indian Penal Code.Many words used in insurance policies have been the subject of previous legal\ndecisions and those decisions of a higher court will be binding on a lower court\ndecision. Technical terms must always be given their technical meaning, unless\nthere is an indication to the contrary.**H.** **Renewal Notice****Most of the non-life insurance policies are insured on annual basis.**Although there is no legal obligation on the part of insurers to advise the insured\nthat his policy is due to expire on a particular date, yet as a matter of courtesy and\nhealthy business practice, insurers issue a renewal notice in advance of the date of\nexpiry, inviting renewal of the policy. The notice incorporates all the relevant\nparticulars of the policy such as sum insured, the annual premium, etc. It is also the14practice to include a note advising the insured that he should intimate any material\nalterations in the risk.**In motor renewal notice, for example, the insured’s attention is to be drawn to**\n**revise the sum insured (i.e. the Insured’s Declared Value of the vehicle) in the**\n**light of current requirements.**The insured’s attention is also to be invited to the statutory provision that no risk\ncan be assumed unless the premium is paid in advance.**Test Yourself 4**Which of the following statements is correct with regards to renewal notice?I. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 30 days before the expiry of the policy\nII. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 15 days before the expiry of the policy\nIII. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 7 days before the expiry of the policy\nIV. As per regulations there is no legal obligation on insurers to send a renewalnotice to insured before the expiry of the policy**Summary**a) The first stage of documentation is essentially the proposal forms through whichthe insured informs about himself/ herself\nb) The duty of disclosure of material information arises prior to the inception ofthe policy, and continues even after the conclusion of the contract\nc) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance is knownas underwriting.", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "e14", "section": "Important", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_008", "metadata": {"file_size": 4549, "chunk_index": 8, "chunk_tokens": 962, "has_examples": true, "has_tables": false, "key_concepts": ["On the other hand,", "The", "Meaning of wordings", "Construction of policies", "Renewal Notice"]}}
{"chunk": "IV. As per regulations there is no legal obligation on insurers to send a renewalnotice to insured before the expiry of the policy**Summary**a) The first stage of documentation is essentially the proposal forms through whichthe insured informs about himself/ herself\nb) The duty of disclosure of material information arises prior to the inception ofthe policy, and continues even after the conclusion of the contract\nc) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance is knownas underwriting.\ng) Premium is the consideration or amount paid by the insured to the insurer forinsuring the subject matter of insurance, under a contract of insurance.15h) Payment of premium can be made by cash, any recognised banking negotiableinstrument, postal money order, credit or debit card, internet, e-transfer, direct\ncredit or any other method approved by IRDAI from time to time.\ni) A cover note is issued when preparation of policy is pending or when negotiationsfor insurance are in progress and it is necessary to provide insurance cover on\nprovisional basis.\nj) Cover notes are used predominantly in marine and motor classes of business.\nk) A certificate of insurance provides existence of insurance in cases where proofmay be required\nl) The policy is a formal document which provides an evidence of the contract ofinsurance.\nm) A warranty is a condition expressly stated in the policy which has to be literallycomplied with for validity of the contract.\nn) If certain terms and conditions of the policy need to be modified at the time ofissuance or during the policy tenure, it is done by setting out the amendments/\nchanges through a document called endorsement.\no) The most important rule of construction is that the intention of the parties mustprevail and this intention is to be looked for in the policy itself.**Key Terms**a) Policy form\nb) Advance payment of premium\nc) Cover note\nd) Certificate of Insurance\ne) Renewal notice\nf) Warranty**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is IV.16## CHAPTER G-02## UNDERWRITING AND RATE MAKING**Chapter Introduction**We have learnt various concepts and principles related to general insurance.\nUnderwriting is the process by which the Insurer decides whether to accept a risk\nor not. For this, the underwriters analyse the risk. They understand how risky the\nrisk is. Also, how much of money should be collected as premium. Again, sometimes\nthe risks can be accepted only subject to conditions to improve the risk. All these\nangles are discussed in this chapter.**Learning Outcomes**After studying this chapter, you should be able to:1. Understand Physical hazards\n2. Appreciate Underwriting as a function\n3. Methods used by underwriters to reduce the risk\n4. Understand how the Sum Insured is fixed.17**A.** **Physical Hazards**A thorough knowledge of various hazards to which property and persons are exposed\nis most essential for underwriting.Physical hazard can be ascertained from the information given in a proposal form.\nIt can be better ascertained by a survey or inspection of the risk. The following are\nsome examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in walls androof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors involve\nrisk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower floors", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "G-02", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_009", "metadata": {"file_size": 4549, "chunk_index": 9, "chunk_tokens": 954, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Physical Hazards", "Nature of flooring:"]}}
{"chunk": "2. Appreciate Underwriting as a function\n3. Methods used by underwriters to reduce the risk\n4. Understand how the Sum Insured is fixed.17**A.** **Physical Hazards**A thorough knowledge of various hazards to which property and persons are exposed\nis most essential for underwriting.Physical hazard can be ascertained from the information given in a proposal form.\nIt can be better ascertained by a survey or inspection of the risk. The following are\nsome examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in walls androof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors involve\nrisk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower floors\nthrough falling machinery or goods from upper floors.**iv.** **Occupancy:** The occupancy of a building, and the purpose for which it is used.Various types of hazards arise from occupancy.**v.** **Ignition hazard:** Buildings in which chemicals are produced or used in largequantity involve a considerable **ignition hazard** . A timber yard presents a **high**\n**combustibility hazard** because once a fire starts, timber burns quickly. The\ncontents may be highly susceptible to damage in the event of fire.For example, paper, clothing etc. are susceptible not only to fire damage but\nalso to damage by water, heat etc.**vi.** **The process of manufacture:** If work is carried during the night, the hazardis increased due to the use of artificial lights, continuous use of machinery\nleading to friction and the likely carelessness of workers due to fatigue.**vii.** **Situation/ location of risk:** Location in a congested area, exposure tohazardous adjacent premises and distance from the fire brigade is an example\nof physical hazard.**b)** **Marine****i.** **The age and condition of vessel: Older vessels are inferior risks.****ii.** **The voyage to be undertaken: The route of the voyage, loading and****unloading conditions and warehousing facilities at the ports are factors.****iii.** **The nature of the stocks: Articles of high value are exposed to theft;****machinery is liable to breakage in transit.****iv.** **The method of packing: Cargo packed in bales is considered to be better****than cargo in bags. Again, double bags are safer than single bags. Liquid**\n**cargo in second-hand drums constitute bad physical hazard.**18**c)** **Motor****i.** **The age and condition of the vehicle:** Older vehicles are more prone toaccidents.**ii.** **The type of vehicle:** Sports cars involve greater physical hazard etc.**d)** **Burglary****i.** **The nature of the stocks:** Articles of high value in small bulk (e.g. Jewellery)and easily disposable are considered to be bad risks.**ii.** **Situation:** Ground floor risks are inferior to upper floor risks: privatedwellings situated in isolated areas are hazardous.**iii.** **Constructional hazard** : Too many doors and windows constitute bad physicalhazard.**e)** **Personal accident****i.** **The age of the person:** Very old persons are accident prone; besides theywill take longer to recover in the event of an accident.**ii.** **Nature of occupation:** Jockeys, mining engineers, manual workers areexamples of bad physical hazard.**iii.** **Health and physical condition:** A person suffering from Diabetes may notrespond to surgical treatment in the event of accidental bodily injury.**B.** **Physical Hazards – Importance of Risk Management, Clauses and Rating**Underwriters use the following methods to deal with physical hazards: Loading of premium Applying warranties on the policy Applying certain clauses Imposition of excess/ deductibles Restricting the cover granted Declinature of cover**a)** **Loading of premium**There may be some adverse features in a risk exposure for which the underwriters\nmay decide to charge an extra premium before acceptance of the same. By loading\nthe premium the higher probability of claims or occurrence of large claims is taken\ninto consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.In personal accident insurance if the insured is engaged in hazardous pursuits like", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "A.", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_010", "metadata": {"file_size": 4549, "chunk_index": 10, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "The age of the person:", "The type of vehicle:", "Nature of flooring:", "Situation:"]}}
{"chunk": "may decide to charge an extra premium before acceptance of the same. By loading\nthe premium the higher probability of claims or occurrence of large claims is taken\ninto consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.In personal accident insurance if the insured is engaged in hazardous pursuits like\nmountaineering, racing on wheels, big game hunting etc. extra premium is charged.19Sometimes loading of premium is also done for adverse claims ratio, as in case of\nmotor insurance or health insurance policies.**b)** **Imposition of warranties**Insurers incorporate appropriate warranties to reduce the physical hazard. Some\nexamples are provided below.**Example****i.** **Marine cargo:** A warranty is inserted to the effect that goods (e.g. Tea) arepacked in tin lined cases.**ii.** **Burglary:** It is warranted that the property is guarded by a watchman for twentyfour hours.**iii.** **Fire:** In fire insurance, it is warranted the premises would not be used beyondnormal working hours.**iv.** **Motor:** It is warranted that the vehicle will not be used for speed testing orracing.**Example****Marine cargo:** Small damage to parts may cause costly machinery to be a\nconstructive total loss. Such machinery are subject to the Replacement Clause,\nwhich limits underwriter’s liability only to the cost of replacing, forwarding and\nrefitting any broken part.Cast pipes, hard board sometimes get damaged only at the edges. Marine policies\non cast pipes, hardboard etc., are subject to the cutting clause warranting that the\ndamaged portion should be cut off and the balance utilised.**c)** **Deciding on Excess/ Deductibles and Restricting the Cover**When the loss amount exceeds the deductible/ excess mentioned the balance is\npaid under 'excess' clause. Loss below the limit is not payable.The object of these clauses is to eliminate small claims. As the insured is made to\npay part of a loss, he is encouraged to exercise more care and to practice loss\nprevention.**Example****i.** **Motor** : A proposal for an old motor vehicle will not be accepted oncomprehensive terms but insurers will offer a restricted cover i.e. against third\nparty risks only.**ii.** **Personal accident** : A personal accident proposer who has crossed themaximum acceptance age limit may be covered for death risk only instead of\non comprehensive terms i.e. including disablement benefits.20**d)** **Discounts**Lower rates are charged or a discount is given in the normal premium if the risk is\nfavourable. The following features are considered to contribute to improvement of\nrisk in fire insurance.i. Installation of sprinkler system within the premisesii. Installation of hydrant system in the compoundiii. Installation of hand appliances consisting of buckets, portable extinguishersand manual fire pumpsiv. Installation of automatic fire alarm**Example**Under **motor insurance** a discount in the premium is provided if the motor cycle is\nalways used with a side-car attached, as this feature contributes to improved risk\nbecause of the greater stability of the vehicle.In **marine insurance**, the insurer may consider giving discounts on premium for “Full\nLoad” container as this reduces the incidence of theft and shortage.Under a **group personal accident** cover, discounts would be given for coverage of a\nlarge group, which reduces the administrative work and expenses of the insurer.**e)** **No claim bonus (NCB)**A certain percentage is given as bonus for every claim free renewal year with a limit\nto the maximum bonus that can be availed. It is allowed by way of deduction on the\ntotal premium at renewal only, depending upon the incurred claim ratio for the\nentire group or to Motor vehicle Own damage policy holders for claim free years.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of moral\nhazard in the insured. It rewards the insured for not lodging claims either by\nadopting better driving skills as in motor insurance or taking better care of his health\nin Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.**C.** **Moral hazard**Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_011", "metadata": {"file_size": 4549, "chunk_index": 11, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "Discounts", "Moral hazard", "Imposition of warranties", "Fire:"]}}
{"chunk": "to the maximum bonus that can be availed. It is allowed by way of deduction on the\ntotal premium at renewal only, depending upon the incurred claim ratio for the\nentire group or to Motor vehicle Own damage policy holders for claim free years.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of moral\nhazard in the insured. It rewards the insured for not lodging claims either by\nadopting better driving skills as in motor insurance or taking better care of his health\nin Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.**C.** **Moral hazard**Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,\nan honest insured may be tempted to stage a loss, if he happens to be in financial\ndifficulties.21**b)** **Carelessness**Indifference towards loss is an example of carelessness. Because of the\nexistence of insurance, the insured may tend to adopt a careless attitude\ntowards the insured property.If the insured does not take the same care of the property as a prudent and\nreasonable man would if he were uninsured the moral hazard is unsatisfactory.**c)** **Industrial relations**Employer-employee relationship may involve an element of bad moral hazard.**d)** **Wrong claims**This kind of moral hazard arises when claims occur. An insured may not\ndeliberately bring about a loss but once a loss occurs, he would attempt to\ndemand unreasonably high amount of compensation, in total disregard of the\nprinciple of indemnity.**Information****Sub-limits:** The insurer may impose a limit on the total pay-out separately each for\nroom expenses, surgical procedures or doctor fees to check the inflated bills.**Where the moral hazard of the insured is suspected, the agent should not**\n**entertain or bring such proposals to the insurance company. S/ he should also**\n**bring such issues before the insurance company officials.****1.** **Short period scales**Normally, premium rates are quoted for a period of twelve months. If a policy is\ntaken for a shorter period, the premium is charged according to a special scale,\nknown as short period scale. The premium chargeable for short period insurance is\nnot on proportionate basis.**Need for short period scales**a) These rates are applied because the expenses involved in the issue of the policywhether for a 12 months period or a shorter period, are almost the same.b) Further, an annual policy requires renewal procedure only once during a yearwhereas short period insurances involve more frequent renewals. If a\nproportionate premium is allowed, there would be a tendency on the part of the\ninsured to go on taking short period policies and thereby, in effect, pay\npremiums in instalments.c) Besides, some insurance are seasonal in character and the risk is greater duringthat season. Insurances are sometimes taken during such period when the risk is\ngreatest and thereby selection takes place against the insurers. Short period\nscales are evolved to prevent such selection against the insurers. They are also\napplicable when annual insurance is cancelled by the insured. In that case\nrefund is made keeping the premium on short period scale for the period Insurer\nwas in risk.22**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "No claim bonus is a powerful strategy to improve underwriting experience and", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_012", "metadata": {"file_size": 4549, "chunk_index": 12, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Carelessness", "Sub-limits:", "Information", "Moral hazard", "Need for short period scales"]}}
{"chunk": "refund is made keeping the premium on short period scale for the period Insurer\nwas in risk.22**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points\nwhich have to be borne in mind while deciding the sum insured:**a)** **Personal accident insurance** : The sum insured offered by a company can be afixed amount or it can also be based on the insured’s income. Some insurance\ncompanies may give a benefit equal to 60 times or 100 times of the insured’s\nmonthly income for a particular disability. There could be an upper limit or ‘cap’\non the maximum amount. Compensations can vary from company to company. In\ngroup personal accident policies the sum insured may be fixed separately for\neach insured person or may be linked to emoluments payable to the insuredperson.**b)** **Motor insurance** : In case of motor insurance the sum insured is the insured'sdeclared value [IDV]. It is the value of the vehicle, which is arrived at by adjusting\nthe current manufacture's listed selling price of the vehicle with depreciation\npercentage as prescribed in the erstwhile India Motor Tariff. Manufacturer's listed\nselling price will include local duties/ taxes excluding registration and insurance.IDV = (Manufacturer’s listed selling price – depreciation) + (Accessories that are\nnot included in listed selling price-depreciation) and excludes registration and\ninsurance costs.The IDV of vehicles that are obsolete or aged over 5 years is calculated by mutual\nagreement between insurer and the insured. Instead of depreciation, IDV of old23cars is arrived at by assessment of vehicle’s condition done by surveyors, car\ndealers etc.IDV is the amount of compensation given in case a vehicle is stolen or suffers\ntotal loss. It is highly recommended to get IDV which is near the market value of\nthe car. Insurers provide a range of 5% to 10% to decrease IDV to the insured.\nLess IDV would mean lesser premium.**c)** **Fire insurance:** In fire insurance the sum insured may be fixed on the basis ofindemnity or reinstatement value for buildings/ plant and machinery and\nfixtures. Contents are covered on the basis of their market value which is cost of\nthe item less depreciation. (Reinstatement value is explained in detail in Chapter\n28 - Commercial Insurance)**d)** **Stocks insurance:** In case of stocks, sum insured is their market value. Theinsured will be reimbursed at the cost at which these stocks can be purchased in\nthe market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured is asper the agreement between insurer and insured at the time of contract. Normally\nit would consist of the sum of cost of the commodity plus Insurance + freight i.e.\nCIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "d23", "section": "Minimum premium", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_013", "metadata": {"file_size": 4549, "chunk_index": 13, "chunk_tokens": 957, "has_examples": false, "has_tables": false, "key_concepts": ["Fire insurance:", "Marine cargo insurance:", "Test Yourself 1", "Motor insurance", "Minimum premium"]}}
{"chunk": "the market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured is asper the agreement between insurer and insured at the time of contract. Normally\nit would consist of the sum of cost of the commodity plus Insurance + freight i.e.\nCIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of\nnegligence against him.I. Personal accident insuranceII. Professional Liability insuranceIII. Marine hull insuranceIV. Health insurance24**Summary**a) Process of classifying risks and deciding into which category they fall isimportant for rate making.b) Underwriting is the process of determining whether a risk offered for insuranceis acceptable, and if so, at what rate, terms and conditions the insurance cover\nwill be accepted.c) A rate is the price of a given unit of insurance.d) The basic objective of rate making is to ensure that price of insurance should beadequate and reasonable.e) ‘Pure premium’ is suitably loaded or increased by adding percentages to providefor expenses, reserves and profits.f) The term hazard in insurance language refers to those conditions or features orcharacteristics which create or increase the chance of loss arising from a given\nperil.g) The objective of imposing deductible/ excess clauses is to eliminate smallclaims.h) No claim bonus is a powerful strategy to improve underwriting experience andforms an integral part of rating systems.i) Sum insured is the maximum amount that an insurance company will indemnifyas per policy condition.**Key terms**a) Underwritingb) Rate makingc) Physical hazardsd) Moral hazardse) Indemnityf) Loading of premiumg) Warrantiesh) Deductiblesi) Excess**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.25## CHAPTER G-03## PERSONAL AND RETAIL INSURANCE**Chapter Introduction**In the previous chapters we have learnt various concepts and principles related to\ngeneral insurance. General insurance products are classified differently in different\nmarkets. Some classify them as property, casualty and liability. Elsewhere, they are\ngrouped as fire, marine, motor and miscellaneous. In this chapter, common products\nsuch as personal accident, travel, home and shop keepers and motor insurance that\nare bought by such retail customers are discussed.**Learning Outcomes**After studying this chapter, you should be able to:1. Explain householder’s insurance\n2. Prepare shop insurance cover\n3. Discuss motor insurance26**A.** **Retail Insurance Products**There are some insurance products that are purchased for individuals for covering\ncertain interests. Though small commercial or business interests could be there for\nsuch insurances, these are generally sold to individuals. In some markets these are\ncalled ‘small ticket’ policies or ‘retail policies’ or ‘retail products’. Insurances of\nthe home, motor cars, two-wheelers, small businesses like shops etc. fall under this\ncategory. These products are usually sold by the same agents/ distribution channels\nthat deal with personal lines of insurance as the buyers also are essentially from the\nsame consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’s Policy,Office Package Policy etc. that, under one policy, seek to cover various physical\nassets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "e24", "section": "Marine cargo insurance:", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_014", "metadata": {"file_size": 4549, "chunk_index": 14, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Retail Insurance Products", "Marine cargo insurance:"]}}
{"chunk": "that deal with personal lines of insurance as the buyers also are essentially from the\nsame consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’s Policy,Office Package Policy etc. that, under one policy, seek to cover various physical\nassets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.\niv. Package covers could have common terms and conditions for all sections as alsospecific terms for specific sections of the policy.I.**D.** **Shopkeeper’s Insurance**A shop owner is not a corporate house that has large reserves of money to restart\nbusiness. A single mishap may lead to closure of her/ his shop and could probably\nruin her/ his family. There may be bank loans also to repay. There is always the\npossibility that a member of the public suffers a personal injury or damage to her/\nhis property, caused by the shop owner’s operations and a court holds the shop\nowner liable to pay the damages. Such situations can also ruin a shopkeeper.\nTherefore, it's very essential to secure this means of livelihood.27**Shopkeeper’s Insurance policies are devised to cover many of such aspects of**\n**commercial shop/ retail business.** There are policies that are customised to cover\nspecific interests of many types of shops such as antique shop, barbershop, beauty\nparlour, bookstore, department store, dry cleaners, gift shop, pharmacy, stationery\nshop, toy shop, apparel store etc.**1.** **What does shopkeeper’s insurance cover?**The policy can be tailored to provide cover to protect the specific areas of retail\nbusiness. It usually covers damage to the shop structure and contents due to fire,\nearthquake, flooding or malicious damage; and burglary. Shop insurance can also\ninclude business interruption protection. This will cover any loss of income or\nadditional expenditure in the event of operation of unexpected peril causing\ninterruption of business operation. The coverage can be selected by the insured\ndepending on her/ his range of activities.The additional covers the insured can opt may vary from insurer to insurer and can\nbe verified from the respective websites of the non-life insurance companies. These\ncould be:**i.** **Burglary and Housebreaking:** Cover for housebreaking, theft, and larceny of\noffice content\n**ii.** **Machinery Breakdown:** Cover for breakdown of electrical/ mechanicalappliances\n**iii.** **Electronic Equipment and Appliances:** Provides all-risk cover for electronic appliances\n Cover for loss of electronic installations\n**iv.** **Money Insurance** : Provides coverage against loss of money due to an accidentwhile it is in: Transit from the business premises to bank and vice versa\n A safe at the business premises\n A till (box/ drawer/ counter) at the business premises\n**v.** **Baggage** : Compensates for loss of baggage while on travel for official purposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course of employment\n Provides cover for legal liability to third parties\nFire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be taken\nseparately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.28**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is usually", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_015", "metadata": {"file_size": 4549, "chunk_index": 15, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Machinery Breakdown:", "Personal Accident", "Shopkeeper’s Insurance", "Baggage", "What does shopkeeper’s insurance cover?"]}}
{"chunk": "**v.** **Baggage** : Compensates for loss of baggage while on travel for official purposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course of employment\n Provides cover for legal liability to third parties\nFire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be taken\nseparately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.28**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is usually\na package of all the needs of a Householder.Losses normally covered include fire, lightning, explosion and aircraft fall/ impact\ndamage (commonly known as FLEXA); storm, tempest, flood and inundation\n(commonly known as STFI); and burglary. Coverage differs from company to\ncompany and from policy to policy.Apart from the structure, it covers the contents of the house against burglary,\nhousebreaking, larceny and theft. Jewellery whilst being worn or kept in locked safe\ncan also be insured under Householder’s Insurance. Cover is also given for electrical\nand mechanical failure of domestic and electronic appliances.Similarly, Householder’s insurance Package also provides coverage for loss of\npersonal baggage, lost during travel, or liabilities to neighbours/ visitors may also\nbe part of Householders’ insurance package. Some insurers also provide coverage\nfor pedal cycle, personal accident and workmen’s compensation.IRDAI has introduced a standard product with effect from 1st April, 2021 – Bharat\nGriha Raksha policy with a tenure of upto 10 years, which shall be mandatorily\noffered by all general insurers carrying on Fire and allied perils insurance business.**Bharat Griha Raksha (meant for Home Building and Home Contents) policy** offers\ncover against a wide range of perils, namely Fire, Natural Catastrophe, Forest,\nJungle and Bush fires, Impact Damage of any kind, Riot, Strike, Malicious Damages,\nActs of terrorism, Bursting and overflowing of water tanks, apparatus and pipes,\nLeakage from automatic sprinkler installations and Theft within 7 days from the\noccurrence of any of the aforesaid events. This policy can be for a period of 1 to 10years.In addition to the Home Building, the policy covers General Home Contents\nautomatically (without any need for declaration of details) for 20% of the Sum\nInsured of the Building subject to a maximum of Rs.10 lakhs. One can also opt for a\nhigher Sum Insured for general contents by declaring the details.The policy offers two optional covers, namely (i) Insurance for Valuable Contents\nlike jewellery and curios; and (ii) Personal Accident of the insured and spouse due\nto an insured peril under the policy.The policy gives complete waiver of underinsurance. That is, if the Sum Insured\ndeclared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.29**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value of\nassets, therefore, it may not be difficult to arrive at the sum insured. In the case of\nshop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two methods\nof fixing the sum insured, viz. market value and reinstatement/ replacement value.For additional coverage like money, baggage, personal accident the premium would\ndepend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the case\nof M.V., in the event of a loss, depreciation is levied on the asset depending on\nits age. Under this method, the insured is not paid amount sufficient to replace", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Baggage", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_016", "metadata": {"file_size": 4549, "chunk_index": 16, "chunk_tokens": 983, "has_examples": false, "has_tables": false, "key_concepts": ["Personal Accident", "Baggage", "Householder’s Insurance", "Legal Liability:", "Sum Insured and Premium"]}}
{"chunk": "declared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.29**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value of\nassets, therefore, it may not be difficult to arrive at the sum insured. In the case of\nshop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two methods\nof fixing the sum insured, viz. market value and reinstatement/ replacement value.For additional coverage like money, baggage, personal accident the premium would\ndepend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the case\nof M.V., in the event of a loss, depreciation is levied on the asset depending on\nits age. Under this method, the insured is not paid amount sufficient to replace\nthe property.ii. In the RIV method, the insurance company will pay the cost of replacementsubject to ceiling of sum insured. Under this method, no depreciation is levied.\nOne condition is that the damaged asset should be repaired/ replaced in order\nto get the claim. It may be noted that RIV method is allowed only for fixed assets\nand not for other assets like stocks and stocks in process.Most policies insure the structure of the home for its reconstruction, which is called\n‘reinstatement value’ (and not on ‘market value’). Reinstatement value is the cost\nincurred to reconstruct the home if it is damaged. On the other hand, market value\ndepends on factors like age of the property, depreciation, etc.Sum insured is generally calculated by multiplying the built up area of insured's\nhome with the construction rate per square foot. The contents of the home furniture, durables, clothes, utensils, etc. - are valued on market value basis i.e.\nthe current market value of similar items after depreciation.Premium would depend on the value insured and the coverage taken.**Test Yourself 1**Which of the below statements is correct with regards to a package policy?I. Package Policy provide a combination of covers under a single document\nII. Package Policy can cover only physical assets like buildings\nIII. A named peril policy or package policy comes at the same price.\nIV. Only named peril policies can be bought and package policies are not available.V.30**Definition****Some important definitions****a)** **Burglary** means the unforeseen and unauthorised entry to or exit from theinsured premises by aggressive and detectable means with the intent to steal\ncontents there from.**b)** **Housebreaking** is said to have taken place when a house trespass has beencommitted by entering it for the purpose of committing an offence.**c)** **Robbery** means the theft of contents at the insured’s premises using aggressiveand violent means against the Insured and/ or insured’s employees.**d)** **Safe** means a strong cabinet within the insured’s premises designed for the safeand secure storage of valuable items, and access to which is restricted.**e)** **Theft** is a generic term for all crimes in which a person intentionally andfraudulently takes the property of another without permission or consent and\nwith the intent to convert it to the taker’s use or potential sale. Theft is\nsynonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed plate\nglass and sanitary fittings’ cover. This will cover accidental loss of damage to which of the\nfollowing?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and taken\nit for a drive. Out of nowhere, a dog comes in the way and to avoid hitting it, Revathi\nswerves sharply, breaks and goes over the divider, hits another car and injures a\nperson walking on the road. The outcome of a single incident has resulted in damage\nto Revathi’s own car, public property, another car and also caused injury to anotherperson.In this scenario, if Revathi does not have a car insurance, she may end up paying far\nmore than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "F.", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_017", "metadata": {"file_size": 4549, "chunk_index": 17, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Housebreaking", "Burglary", "Motor Insurance", "Theft"]}}
{"chunk": "synonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed plate\nglass and sanitary fittings’ cover. This will cover accidental loss of damage to which of the\nfollowing?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and taken\nit for a drive. Out of nowhere, a dog comes in the way and to avoid hitting it, Revathi\nswerves sharply, breaks and goes over the divider, hits another car and injures a\nperson walking on the road. The outcome of a single incident has resulted in damage\nto Revathi’s own car, public property, another car and also caused injury to anotherperson.In this scenario, if Revathi does not have a car insurance, she may end up paying far\nmore than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?\n What if they don't have insurance?31That is why the laws of the land make it mandatory to have third-party liability\ninsurance. While motor insurance does not prevent these things from happening, it\nprovides a financial security blanket for the owner.Apart from an accident, the car can also be stolen, damaged by an accident or\ndestroyed by fire and the owner would suffer financially.Motor insurance must be taken by a vehicle owner (i.e. the person in whose name\nthe vehicle is registered with the Regional Transport Authority in India.)**Important****Mandatory Third Party Insurance**As per the Motor Vehicles Act, 1988, it is mandatory for every owner of a vehicle\nplying on public roads, to take an insurance policy, to cover the amount, which the\nowner becomes legally liable to pay as damages to third parties as a result of\naccidental death, bodily injury or damage to property. A Certificate of Insurance\nmust be carried in the vehicle as a proof of such insurance.**1.** **Motor insurance coverage**The country has a large vehicle population. A number of new vehicles keep coming\non to the road every day. Many of them are very costly as well. People say that in\nIndia, vehicles do not get junked, but only keep changing hands. This means that\nold vehicles continue to be on the road and new vehicles get added. The area of the\nroads (the space for driving) is not growing correspondingly with the number of\nvehicles. The number of people walking on the road is also increasing. Police and\nhospital statistics say that the number of road accidents in the country is increasing.\nThe amount of compensations awarded to accident victims by Courts of Law are\nincreasing. Even vehicle repair costs are going up. **All these show the importance**\n**of motor insurance in the country.**Motor insurance covers the loss of vehicles and the damages to them due to\naccidents and some other reasons. Motor insurance also covers the legal liability of\nvehicle owners to compensate the victims of the accidents caused by their vehicles.Despite, the government mandate, all the vehicles in the country are not insured.**Motor Insurance covers all types of vehicles plying on public roads such as:** Two wheelers\n Private cars\n All types of commercial vehicles: Goods carrying and passenger carrying\n Miscellaneous type of vehicles e.g. cranes,\n Motor Trade (Vehicles in Showrooms and Garages)32**‘Third-Party Insurance’**An insurance policy purchased for protection against the legal actions of another\nparty. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any vehicle\nplying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury caused\nby a motor accident are to be filed by the complainant in Motor Accident Claim\nTribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident cover", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Test Yourself 2", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_018", "metadata": {"file_size": 4549, "chunk_index": 18, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["All these show the importance", "Motor insurance coverage", "Motor Insurance", "Important", "Mandatory Third Party Insurance"]}}
{"chunk": "party. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any vehicle\nplying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury caused\nby a motor accident are to be filed by the complainant in Motor Accident Claim\nTribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident cover\nfor Owner-Driver effective 1st January, 2019. The Cover is provided to the OwnerDriver whilst driving the vehicle including mounting into/ dismounting from or\ntraveling in the insured vehicle as a co-driver. However, the policyholder can choose\nto opt for the CPA cover as part of the Liability Only policy or the Package policy.\nIn the event the policyholder chooses to take a stand-alone CPA policy, the CPA\ncover offered as part of Liability only or Package policy shall be deleted.**Package/ Comprehensive Policy: (Own Damage + Third Party Liability)**In addition to the above, the loss or damage to the vehicle insured by specified\nperils (known as own damage to motor vehicles) is also covered subject to the value\ndeclared (called IDV – discussed above) other terms and conditions in the policy.\nSome of these perils are fire, theft, riot and strike, earthquake, flood, accident etc.Some insurers may also pay for towing charges from the place of accident to the\nworkshop. A restricted cover is also available covering the risk of fire and/ or theft\nonly, in addition to the compulsory cover granted under Act (Liability) Only Policy.The policy can also cover loss or damage to accessories fitted in the vehicle,\npersonal accident cover under private car policies for passengers, paid driver; legal\nliability to employees and non-fare paying passengers in commercial vehicles.\nInsurers also provide free emergency services or use of alternative car in case of\nbreakdown.33**2.** **Exclusions**Some of the important exclusions under the policies are wear and tear, breakdowns,\nconsequential loss, and loss due to driving with invalid driving license or under the\ninfluence of alcohol. Use of vehicle not in accordance with `limitations as to use '\n(e.g. private car being used as a taxi) is not covered.**3.** **Sum Insured and Premium**The sum insured of a vehicle in a Motor Policy is referred to as Insured's Declared\nValue (IDV).In case of theft of vehicle or total damage beyond repairs in an accident, the claim\namount will be determined on the basis of the IDV.Rating/ premium calculation depends on factors like the Insured's Declared Value,\ncubic capacity, geographical zone, age of the vehicle etc.**Test Yourself 3**Motor insurance should be taken in whose name?I. In the name of the vehicle owner whose name is registered with RegionalTransport Authority\nII. If the person who will be driving the vehicle is different from the owner, thenin the name of the person who will be driving the vehicle, subject to approval\nfrom Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primary policyshould be in the name of the vehicle owner and additional policies should be\npurchased in the names of all the people who will be driving the vehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred to aninsured property from hazards or events named in the policy. The perils covered\nwill be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire, riots,bursting of pipes, earthquakes etc. Apart from the structure, it covers the\ncontents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Two important types of covers that are popular in the market are discussed", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_019", "metadata": {"file_size": 4549, "chunk_index": 19, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Exclusions", "Test Yourself 3", "Sum Insured and Premium", "Summary", "Act [Liability] Only Policy:"]}}
{"chunk": "from Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primary policyshould be in the name of the vehicle owner and additional policies should be\npurchased in the names of all the people who will be driving the vehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred to aninsured property from hazards or events named in the policy. The perils covered\nwill be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire, riots,bursting of pipes, earthquakes etc. Apart from the structure, it covers the\ncontents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).\ne) Shopkeeper’s insurance usually covers damage to the shop structure andcontents due to fire, earthquake, flooding or malicious damage; and burglary.\nShop insurance can also include business interruption protection.\nf) Motor insurance covers the loss of vehicles and the damages to them due toaccidents and some other reasons. Motor insurance also covers the legal liability34of vehicle owners to compensate the victims of the accidents caused by their\nvehicles. Compulsory Personal Accident cover for Owner-Driver is provided to\nwhilst driving the vehicle including mounting into/ dismounting from or traveling\nin the insured vehicle as a co-driver.**Key terms**a) Householder’s insurance\nb) Shopkeeper’s insurance\nc) Motor insurance**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is I.35## CHAPTER G-04## COMMERCIAL INSURANCE**Chapter Introduction**In the previous chapter we considered various kinds of insurance products that cover\nthe risks faced by individuals and households. There is another set of customers who\nhave other needs for protection. These are the commercial or business enterprises\nor firms, who are engaged in or deal with of various kinds of goods and services. In\nthis chapter we shall consider the insurance products available to cover the risks\nfaced by this segment.**Learning Outcomes**After studying this chapter, you should be able to understand the importance and\nbasic purposes of the 11 types of insurances discussed.36**A.** **Property/ Fire Insurance**Commercial enterprises are broadly divided into two types: Small and Medium Enterprises [SMEs]Bharat Sookshma PolicyBharat Laghu Policy Large Business Enterprises-Standard fire and Special Perils Policy (SFSP), IAR etc.Historically, general insurance sector has largely developed by catering to the needs\nof these customers.Selling general insurance products to commercial enterprises calls for a careful\nmatching of insurance products with their needs. Agents must have a proper\nunderstanding of the products available. Let us briefly consider some of these\ngeneral insurance products.**1. Standard Fire and Special Perils Policy (SFSP)**Fire insurance policy is suitable for commercial establishments as well as for the\nowner of property, one who holds property in trust or in commission and for,\nindividuals/ financial institutions who have financial interest in the property.All immovable and movable property located at a particular premises such as\nbuildings, plant and machinery, furniture, fixtures, fittings and other contents,\nstocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild and\nrenew the property damaged to bring back the business to its normal course. It is\nhere that fire insurance plays its role.**1.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile All\nIndia Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood and inundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation\n Bush fire37There are two important features which differentiate commercial insurance from", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "y34", "section": "Summary", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_020", "metadata": {"file_size": 4549, "chunk_index": 20, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Answer 1"]}}
{"chunk": "stocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild and\nrenew the property damaged to bring back the business to its normal course. It is\nhere that fire insurance plays its role.**1.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile All\nIndia Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood and inundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation\n Bush fire37There are two important features which differentiate commercial insurance from\nindividual and retail lines.a) The insurance needs of firms or business enterprises are much larger than thatof individuals. The reason is that the value of the assets of a commercial\nenterprise is much larger than that of an individual’s assets. Their loss or damage\ncould adversely impact the very survival and future of the company.b) The demand for insurance of commercial enterprise is often mandated or madenecessary by legal or other requirements. For instance, when plants and assets\nare set up through a bank loan, their insurance may be a condition of the loan.\nMany corporate enterprises in India are professionally run companies and a\nnumber of them are multinationals.They are required to maintain global quality standards, including the adoption\nof appropriate risk management strategies and insurance for protecting their\nassets.Any loss arising out of the above perils is covered by the policy subject to some\nexclusion.**1.2.** **Revised Standard Fire and Special Perils (SFSP) Policies:**IRDAI has issued guidelines with effect from 1st April, 2021 whereby the Standard\nFire and Special Perils (SFSP) Policy will be replaced by the following two standard\nproducts **for the risks** given **below** that shall be mandatorily offered by all general\ninsurers carrying on Fire and allied perils insurance business.**i.** **Bharat Sookshma Udyam Suraksha (meant for enterprises where the total****value at risk is upto Rs. 5 Crore)** - designed for financial protection of MSMEsThis policy provides cover for the Building/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value at risk across all insurable\nasset classes at one location is up to Rs. 5 Crore. This policy also offers cover against\na wide range of perils, quite similar to the policy meant for Dwellings.The policy has many in-built covers in addition to the basic coverage — Cover for\nalterations, additions or extensions, Cover for stocks on a floater basis, Cover for\ntemporary removal of stocks, Cover for Specific Contents, Cover for start-up\nexpenses (following a loss), Cover for payment of professional fees for Architects,\nSurveyors and Consulting Engineers, Cost for removal of debris and Costs compelled\nby Municipal Regulations.The policy can be taken by micro level enterprises such as offices, hotels, industries,\nstorage risks and so on. The policy underinsurance to the extent of 15% is waived.\nBharat Sookshma Udyam Policies allow increase in Sum Insurer during the policy\ntenure by endorsement.38**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total value****at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for financial\nprotection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value of risk across all insurable\nasset classes at one location exceeds Rs.5 Crore but does not exceed Rs. 50 Crore\nat the policy commencement date. This policy also has all the in-built covers offered\nby the policy for micro level enterprises mentioned above. The perils against which\ninsurance is offered are also similar to the policy meant for micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "e37", "section": "What does the Standard Fire policy cover?", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_021", "metadata": {"file_size": 4549, "chunk_index": 21, "chunk_tokens": 983, "has_examples": true, "has_tables": false, "key_concepts": ["What does the Standard Fire policy cover?"]}}
{"chunk": "storage risks and so on. The policy underinsurance to the extent of 15% is waived.\nBharat Sookshma Udyam Policies allow increase in Sum Insurer during the policy\ntenure by endorsement.38**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total value****at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for financial\nprotection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value of risk across all insurable\nasset classes at one location exceeds Rs.5 Crore but does not exceed Rs. 50 Crore\nat the policy commencement date. This policy also has all the in-built covers offered\nby the policy for micro level enterprises mentioned above. The perils against which\ninsurance is offered are also similar to the policy meant for micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in\nSum Insurer during the policy tenure by endorsement.**iii.** **Exclusions under Fire Policies**Insurers traditionally exclude the following from the scope of Fire policies.**Losses due to excepted perils like**i. War and war like activities.\nii. Nuclear perils\niii. Ionisation and radiationiv. Pollution and contamination losses**Perils that are covered by other policies in General Insurance**i. Machinery Breakdown,\nii. Business Interruptioniv. **Add-on Covers**However some perils can be covered by payment of additional premium like earth\nquake, fire and shock; deterioration of stock in the cold storages following power\nfailure as a result of insured peril, additional expenditure involved in removal of\ndebris, architect, consulting engineers’ fee over and above the amount covered by\nthe policy, forest fire, spontaneous combustion and impact damage due to own\nvehicles; terrorism.v. **Variants of Fire policy**Fire policies are generally issued for a period of 12 months. Only for dwellings,\ninsurance companies offer long term policies, i.e. for a period over 12 months. In\nsome cases short period policies are also issued, to which the short period scales\nare applicable.a. **Market Value and Reinstatement Value Policies:** In the event of a loss, theinsurer would normally pay the market value [which is the depreciated value].\nUnder Reinstatement Value Policy, however, the insurers would pay cost of\nreplacement of the damaged property, by new property of the same kind.39Reinstatement value policies are issued for covering buildings, plant,\nmachinery and furniture, fixture, fittings. Reinstatement value policies are not\nissued to cover stocks, which are usually covered on market value basis.b. **Declaration Policy:** To take care of frequent fluctuations in stocks values inwarehouse, Declaration Policy is granted subject to certain conditions. The sum\ninsured should be the highest value that is expected to be stored in the godown\nduring the period of policy. On this value a provisional premium is charged. The\ninsured has to declare the value of his stocks at agreed intervals, during the\ncurrency of policy. This is adjustable along with the premium at the end of the\npolicy period.c. **Floater Policies:** Floater policies may be issued for stocks of goods which arestored at various specified locations under one sum insured. Unspecified\nlocations are not covered. The premium rate is the highest rate applicable to\ninsured’s stocks at any one location with a loading of 10%. These are also called\nfire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on the natureof occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and flood groupperils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Bharat Laghu Udyam Suraksha(meant for enterprises where the total value", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_022", "metadata": {"file_size": 4549, "chunk_index": 22, "chunk_tokens": 1006, "has_examples": false, "has_tables": false, "key_concepts": ["Market Value and Reinstatement Value Policies:", "Premium rating depends on:", "Test Yourself 1", "Losses due to excepted perils like", "Declaration Policy:"]}}
{"chunk": "fire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on the natureof occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and flood groupperils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or\nLoss of Profit Insurance.Fire insurance provides indemnity against material or property damage or loss\nsuffered to building, plant, machinery fixtures, fittings, merchandise goods, etc. by40insured perils. **This may result in total or partial interruption of the insured’s**\n**business**, resulting in various economic losses, during the period of interruption.**Coverage under Business Interruption Policy**Consequential Loss (CL) Policy [Business Interruption (BI)] provides indemnity for\nloss of what is termed as gross profit – which includes Net Profit plus Standing\nCharges along with the increased cost of working incurred by the insured to get the\nbusiness back to normalcy, as soon as possible to reduce the final loss. The perils\ncovered and conditions are the same as those covered under the fire policy.**Example**If a Fire results in damage to the car manufacturer's plant, the production loss will\nresult in loss of income to the manufacturer. This loss of income along with extra\nexpenses incurred can be insured provided it has resulted from a peril insured.This policy can be taken only in conjunction with standard fire and special perils\npolicy as claims under this policy are admissible only if there is a claim under\nstandard fire and special perils policy.**Test Yourself 2**A business interruption insurance policy can be taken only in conjunction with____________.I. Standard fire and special perils insurance policy\nII. Standard marine insurance policy\nIII. Standard motor insurance policy\nIV. Standard health insurance policy**C.** **Burglary Insurance**The policy is meant for business premises like factories, shops, offices, warehouses\nand godowns which may contain stocks, goods, furniture fixtures and cash in a\nlocked safe which can be stolen. The scope of cover is clearly expressed in the\npolicy.**Risks covered under burglary insurance**a) Loss of property following actual forcible and violent entry into the premises orloss followed by actual, forcible and violent exit from the premises or hold up.b) Damage to insured property or premises by burglars. Property insured is coveredonly when it is lost from the insured premises and not from any other premises.**Cash cover:** An important part of burglary cover is cash cover. It operates only when\nthe cash is secured in a safe, which is burglar proof and is of an approved make and\ndesign. The common conditions applicable for granting cash cover are given below:a) Cash lost from the safe following the use of the original key to open, it is coveredonly where such key has been obtained by violence or threats of violence or\nthrough means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some place otherthan the safe. The liability of the insurer is limited to the amount actually shown\nby such records.41**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales, grain,\nsugar etc.) the risk of losing the entire stock on a single occasion is considered\nremote. The value that can be burgled is ascertained as probable maximum loss\n(PML) and the full premium is charged for this maximum probable loss and\ncertain percentage of full premium is charged on rest amount of stock as PML\nfloats over the entire stock. It is assumed that a second burglary may not follow\nimmediately or the insured may take additional security measures from itsrecurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other persons", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "y40", "section": "Premium rating depends on:", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_023", "metadata": {"file_size": 4549, "chunk_index": 23, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Premium rating depends on:", "Burglary Insurance", "Exclusions", "Test Yourself 1", "Example"]}}
{"chunk": "through means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some place otherthan the safe. The liability of the insurer is limited to the amount actually shown\nby such records.41**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales, grain,\nsugar etc.) the risk of losing the entire stock on a single occasion is considered\nremote. The value that can be burgled is ascertained as probable maximum loss\n(PML) and the full premium is charged for this maximum probable loss and\ncertain percentage of full premium is charged on rest amount of stock as PML\nfloats over the entire stock. It is assumed that a second burglary may not follow\nimmediately or the insured may take additional security measures from itsrecurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other persons\nwho are lawfully on the premises, nor does it cover larceny or ordinary theft. It\nalso excludes losses that are covered by a fire or plate glass policy.**4.** **Extensions**The policy can be extended to cover riot, strikes and terrorism risks at extra\npremium.**5.** **Premium**Rates of premium for burglary policy depend upon the nature of insured\nproperty, the moral hazard of the insured himself, construction and location of\npremises, safety measures ( _e.g. watchmen, burglar alarm)_, previous claims\nexperience etc.In addition to details given in the proposal form, a pre-acceptance inspection is\ndone by insurers where high values are involved.**Test Yourself 3**The premium for burglary policy depends on ______________.I. Nature of insured property\nII. Moral hazard of the insured himself\nIII. Construction and location of the premises\nIV. All of the above**D.** **Money Insurance**Handling of cash is an integral part of any business. The Money Insurance policy is\nintended to protect banks and industrial business establishments against loss of\nmoney. Money is at risk in the premises as well as outside. It can be unlawfully taken\naway while withdrawing, depositing, making payments or collections.**1.** **Coverage of Money Insurance**Money insurance policy is designed to cover the losses that may occur while cash,\ncheques/ postal orders/ postal stamps are being handled. The policy normally\nprovides cover under two sections42**a)** **Transit section:** It covers loss of money as a result of robbery or theft or otherfortuitous cause whilst it is carried outside by the insured or her authorised\nemployees.The transit section specifies two amounts:**i.** **Limit per carrying** : This is the maximum amount that insurers may berequired to pay in respect of each loss.**ii.** **Estimated amount in transit during the policy period:** It represents theamount to which the rate of premium is to be applied to arrive at the amount\nof premium.Policies can be issued on “ **declaration basis”**, similar to the practice in fire\ninsurance. Insurers thus charge a provisional premium on the estimated amount\nin transit and adjust this premium at the time of expiry of the policy, based on\nactual amount in transit during the policy period, as declared by the insured.**b)** **Premises section:** This section covers loss of cash from one’s premises/ lockedsafe due to burglary, housebreaking, hold up etc. Other features of the policy\nare normally the same as of burglary insurance (of business premises) that this\nwas discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized person andc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risksc) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried\nthroughout the year based on declaration made within 30 days of expiry of the\npolicy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission\nII. Loss of cash from one’s premises due to burglary\nIII. Loss of money that has been entrusted to other than authorized person", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "s42", "section": "First Loss Insurance", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_024", "metadata": {"file_size": 4549, "chunk_index": 24, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Exclusions", "Extensions", "Test Yourself 4", "First Loss Insurance", "Test Yourself 3"]}}
{"chunk": "are normally the same as of burglary insurance (of business premises) that this\nwas discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized person andc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risksc) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried\nthroughout the year based on declaration made within 30 days of expiry of the\npolicy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission\nII. Loss of cash from one’s premises due to burglary\nIII. Loss of money that has been entrusted to other than authorized person\nIV. Riot, strike and terrorism43**E.** **Fidelity Guarantee Insurance**Companies suffer financial loss due to what are termed as white collar crimes like\nfraud or dishonesty of their employees. Fidelity guarantee insurance indemnifies\nemployers against the financial loss suffered by them due to fraud or dishonesty of\ntheir employees by forgery, embezzlement, larceny, misappropriation and default.**1.** **Coverage under Fidelity Guarantee Insurance**Cover is granted against a direct pecuniary loss and does not include consequential\nlosses.a) The loss should be in respect of moneys, securities or goodsb) The act should be committed in the course of the duties specified;c) The loss has be discovered within 12 months of expiry of the policy or deathretirement resignation or dismissal of the employee, whichever is earlierd) No cover is provided in respect of a dishonest employee who has been re\nemployed**2.** **Types of Fidelity Guarantee Policy**There are various types of fidelity guarantee policies, as discussed below:**a)** **Individual policy:** This type of policy is used where only one individual is tobe guaranteed. Name, designation of the employee and amount of guarantee\nhas to be specified.**b)** **Collective policy:** This policy comprises a schedule listing out the names ofthose employees to whom the guarantee applies, along with a note on the\nduties of each employee and separate individual sums insured.**c)** **Floating policy or floater:** In this policy, the names and duties of theindividuals to be covered are inserted in a schedule, but instead of individual\namounts of guarantee, a specified amount of guarantee is “floated” over the\nwhole group. A claim in respect of any one employee will, therefore, reduce\nthe floated guarantee, unless the original sum is reinstated by payment of an\nextra premium.**d)** **Positions policy:** This is similar to a collective policy with the difference thatonly the schedule lists out \"positions’ (say, Cashier, Account Officer Etc.) that\nare to be guaranteed for a specified amount and the name are not mentioned.**e)** **Blanket policy:** This policy covers the entire staff without showing names orpositions. No enquiries about the employees are made by the insurers. Such\npolicies are only suitable for an employer with a large staff and the\norganization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers in\nthe event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.44**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud or dishonestyof their employees\nII. Employees against the financial loss suffered by them due to fraud or dishonestyof their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate\nIV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions\nwho deal with operations involving money, considering the special risks faced by\nthem regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "m43", "section": "Important exclusions", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_025", "metadata": {"file_size": 4549, "chunk_index": 25, "chunk_tokens": 982, "has_examples": true, "has_tables": false, "key_concepts": ["Bankers Indemnity Insurance", "Extensions", "Types of Fidelity Guarantee Policy", "Test Yourself 4", "Coverage under Fidelity Guarantee Insurance"]}}
{"chunk": "organization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers in\nthe event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.44**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud or dishonestyof their employees\nII. Employees against the financial loss suffered by them due to fraud or dishonestyof their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate\nIV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions\nwho deal with operations involving money, considering the special risks faced by\nthem regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**\nThere are different variations to this policy based on the requirement of banker.a) Money securities lost or damaged whilst within the premises due to fire,burglary, riot and strike.b) Loss suffered due to any cause whatsoever including negligence of theemployees, when the property is carried outside the premises in the hands\nof authorized employees.c) Forgery or alteration of cheques, drafts, fixed deposit receipts etc.d) Dishonesty of employees with reference to money/ securities or in respectof goods pledged.e) Dispatches by registered post parcels.f) Dishonesty of appraisers.g) Money lost while in the hands of agents of the bank like ‘Janata Agents’,‘Chhoti Bachat Yojana Agents’.The cover is issued on discovery basis, this means the policy will respond to a period\nduring which a loss is discovered and not necessarily the period when it occurred.\nBut a cover should have been in existence when the loss actually occurred.Conventionally losses within a period of 2 years prior to date of discovery only are\npayable, subject to the cover having been continuous, from a date earlier than that\nwhen the loss has occurred.**2.** **Important exclusions**\nMajor exclusions are Trading losses, Negligence, Software crimes and dishonesty of\nthe partners/ directors45**3.** **Scope**\nThe policy comprises of 7 sections viz.:1. On Premises2. In Transit\n3. Forgery or Alteration\n4. Dishonesty\n5. Hypothecated Goods\n6. Registered Postal Service\n7. Appraisers\n8. Janata Agents**4.** **Sum insured**The bank has to fix the **sum insured** which would usually float over the first 5\nsections. This is termed as ‘basic sum insured’. Additional sum insured can be\npurchased for section (1) and (2) if the basic sum insured is not sufficient. The policy\nalso allows one compulsory and automatic reinstatement of sum insured by payment\nof an extra premium**5.** **Rating**The premium calculation is based on:a) Basic sum insured\nb) Additional sum insured\nc) Number of staff\nd) Number of branches.**Test Yourself 6**Which of the below can be covered under a bankers indemnity insurance policy?I. Money securities lost or damaged whilst within the premises due to fire\nII. Forgery or alteration of cheques\nIII. Dishonesty of employees with reference to money\nIV. All of the above**G.** **Jewelers’ Block Policy**In recent years India has emerged as a leading centre in world trade for jewellery,\nespecially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in large\nquantity and moving them between different premises.46**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are allowed\nto avail of other sections at their option. It is also the market practice to include\nsome more sections to cover other assets like Electronic equipment, Plate glass,\nSignage etc. and liabilities like Employees Compensation, Infidelity of employees.Fidelity guarantee cover should also be taken by the insured for full protection if\nthere is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for each\nsection with discounts for exclusive round the clock watchman, close circuit TV/", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "s45", "section": "Premium", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_026", "metadata": {"file_size": 4549, "chunk_index": 26, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Jewelers’ Block Policy", "Bankers Indemnity Insurance", "Sum insured", "Test Yourself 5"]}}
{"chunk": "especially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in large\nquantity and moving them between different premises.46**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are allowed\nto avail of other sections at their option. It is also the market practice to include\nsome more sections to cover other assets like Electronic equipment, Plate glass,\nSignage etc. and liabilities like Employees Compensation, Infidelity of employees.Fidelity guarantee cover should also be taken by the insured for full protection if\nthere is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for each\nsection with discounts for exclusive round the clock watchman, close circuit TV/\nalarm system, exclusive strong room and for any other safety expedient etc.**Test Yourself 7**In case of a Jeweller’s Block Policy, there are traditionally multiple sections, of\nwhich one is usually compulsory while the remaining sections are ____________.I. Mandatory\nII. Retrospective\nIII. Optional\nIV. Compensatory**H.** **Engineering Insurance**Engineering insurance is a branch of general insurance that developed parallel with\nthe growth of fire insurance. Its origins can be traced to the development of\nindustrialization, which highlighted the need for a separate cover for plant and\nmachinery. Concept of **All Risks** cover was also developed with regard to\nengineering projects - covering damage due to any cause except those specifically\nexcluded. The products covered various stages – from construction to testing till the\nplant became operational. The customers for this insurance are both large and small\nindustrial units. This also includes units having electronic equipment and\ncontractors doing big projects. There are two types of engineering insurance\npolicies:1) Annual Policies-Generally of one year duration\na. Machinery Breakdown Policy\nb. Boiler Pressure Plant policy\nc. Electronic Equipment Policy\nd. Contractor’s Plant & Machinery Policy\ne. Deterioration of Stock Policy\nf. Civil Engineering Completed Risk\n2) Project Policies with variable duration based on project period\na) Contractors All Risk Policy\nb) Erection All Risk Policy47There are two “Consequential Loss” policies associated with Engineering Policies:a) Machinery Breakdown Loss of Profit Policy (MBLOP) taken with Machinery\nBreakdown Policy or with Boiler and Pressure Plant policy andb) Advance loss of Profit (ALOP) or Delay in Startup (DSU) Policy taken with\nproject policy.Let us briefly consider the policies:\n**A.** **Annual Policies****1.** **Machinery Breakdown Policy (MB):** This policy is suitable for every industrywhich operates on machines and for whom breakdown of plant and machinery is\nof serious consequence. This policy covers machines like generators,\ntransformer and other electrical, mechanical and lifting equipment.The policy covers unforeseen and sudden physical damage by mechanical or\nelectrical breakdown by any cause (subject to excepted risks) to the insured\nproperty:a) While it is at work or at rest.\nb) While being dismantled for cleaning or overhauling\nc) During cleaning or overhauling operations and during reassembly thereafter.\nd) When being shifted within the premise.Premium is charged on the reinstatement/ replacement value of individual\nmachinery. The machine as a whole should be insured. Rates depend on the type of\nmachine; the industry in which it is used and its value. Discounts are offered based\non factors such as stand-by facilities, spares available and claims experience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plant andto surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for adequate**\n**cover, both the policies need to be taken. Sum insured under all Engineering**\n**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronic equipment,which includes the entire computer system consisting of CPU, keyboards,\nmonitors, printers, UPS, system software etc. Auxiliary equipment such as airconditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and burglary", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "y47", "section": "Coverage of Jeweller’s Block Policy", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_027", "metadata": {"file_size": 4549, "chunk_index": 27, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 7", "Boiler and Pressure Plant Policy:", "Engineering Insurance", "Annual Policies", "Electronic Equipment Policy:"]}}
{"chunk": "machine; the industry in which it is used and its value. Discounts are offered based\non factors such as stand-by facilities, spares available and claims experience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plant andto surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for adequate**\n**cover, both the policies need to be taken. Sum insured under all Engineering**\n**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronic equipment,which includes the entire computer system consisting of CPU, keyboards,\nmonitors, printers, UPS, system software etc. Auxiliary equipment such as airconditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and burglary\npolicy. The policy covers the contingencies such as defective design (not covered\nunder a warranty), effects of natural phenomena; defective functioning due to48voltage fluctuations, impact shock etc., burglary, housebreaking & theft are also\ncovered.The policy is available to the owner, lessor or hirer, depending upon the\nresponsibility or liability in each case. It has usually three sections that cover various\ntypes of losses:**a)** **Section 1:** Loss and damage to equipment\n**b)** **Section 2:** Loss and damage to external data media like computer externalhard disks\n**c)** **Section 3:** Increased cost of working - to ensure continued data processingon substitute equipment up to 12, 26, 40 or 52 weeks.**4.** **Contractors Plant & Machinery (CPM) Policy:** Suitable for contractors involvedin construction business for covering all kinds of machinery like cranes,\nexcavators from unforeseen and sudden physical loss or damage from any cause\nincluding:a) Burglary, Theft, Riot, Storm, Malicious Damage, Tempest\nb) Fire and lightning, external explosion, earthquake and other Acts of Godperils\nc) Accidental damage while at work due to faulty manhandling, dropping orfalling, collapse, collision and impact; can be extended for third party\ndamage.The Premium to be charged depends on the type of equipment and the location\nat which it operates.**The cover is operative whilst the equipment is at work or at rest or being**\n**dismantled for cleaning or overhauling or re-assembling thereafter. The**\n**cover also applies while the same are lying at contractors own premises.**\n**However floater policy covering the equipment “Anywhere in India basis” is**\n**also available by charging 10% extra premium and with certain conditions.****5.** **Deterioration of Stock Policy:** This policy is suitable for the owner of the coldstorage (individual or a cooperative society) or those who take the cold storage\non lease or hire for storage of perishable commodities. The cover is against the\nrisk of deterioration and contamination following breakdown of the refrigeration\nplant and machinery and also due to rise in temperature and sudden and\nunforeseen escape of refrigerants into the cold storage rooms.**6.** **Civil Engineering Completed Risk:** It is generally taken by contractors who hasto maintain the civil projects after completion. The civil projects like – Bridges,\nDry docks, Harbours, Jetties Railway lines, Rock Filled dams, Concrete dams,\nEarthen dams, Canals, Irrigation system are considered under this policy. Risks\ncovered are –1. Fire\n2. Lightning\n3. Explosion/ Implosion494. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami\n9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be on\nan annual basis.\n**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small\nbuildings to massive dams, buildings, bridges, tunnels, etc. The policy provides\nan “All Risk” cover – thus providing indemnity against any sudden and unforeseen", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "o48", "section": "Boiler and Pressure Plant Policy:", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_028", "metadata": {"file_size": 4549, "chunk_index": 28, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Boiler and Pressure Plant Policy:", "Project Policies", "Section 1:", "Civil Engineering Completed Risk:", "Contractors Plant & Machinery (CPM) Policy:"]}}
{"chunk": "Dry docks, Harbours, Jetties Railway lines, Rock Filled dams, Concrete dams,\nEarthen dams, Canals, Irrigation system are considered under this policy. Risks\ncovered are –1. Fire\n2. Lightning\n3. Explosion/ Implosion494. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami\n9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be on\nan annual basis.\n**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small\nbuildings to massive dams, buildings, bridges, tunnels, etc. The policy provides\nan “All Risk” cover – thus providing indemnity against any sudden and unforeseen\nloss or damage that occurs to property insured at the construction site. This can\nbe extended to cover third party liability and other exposures. Premium\nchargeable depends on the nature of the project, the project cost, the project\nperiod, geographic location and the period of testing.**2.** **Erection All Risks (EAR) Policy:** This policy is also known as Storage-cum\nErection (SCE) policy. It is suitable for the principal or contractors of a project\nwhereas plant and machinery is being erected as it is exposed to various external\nrisks. This is a comprehensive insurance policy that covers any sort of\ncontingency right from the moment the materials are unloaded at the project\nsite and continues during the entire project period until the project is tested,\ncommissioned and handed over.Premium chargeable depends on the nature of the project, the cost, the project\nperiod, geographic location, and the period of testing.**If required a marine cover can be issued along with the erection policy for**\n**providing coverage to the equipment and materials during the transit phase**\n**till delivered at the project site.****C.** **Consequential Loss Policies**These type of policies are issued to cover losses consequential to other losses. These\nare also called ‘Business Interruption’ policies or ‘Loss of Profits’ policies.\n**3.** **Machinery Loss of Profits (MLOP) Policy**This policy is suitable for industries where interruptions or delays as a result of\nmachinery breakdown or boiler explosion result in huge consequential losses.Where the time lag between the breakdown or loss and the restoration is large, this\npolicy compensates for the loss of profits during the intervening period due to\nreduction in turnover and increase in cost of working. The terms and conditions and50coverage of business interruption policy is the same as the business interruption\npolicy following a fire policy loss, which has been discussed earlier in this chapter.**4.** **Advance Loss of Profit Cover (ALOP) or Delay in Start-up Policy (D.S.U.)**This covers financial consequences of a project being delayed because of accidental\ndamages during the project. It is suitable for the insured who is deprived of the\nanticipated earning and for the financial institutions to the extent of their interest\nin the project. It is issued as an extension to the MCE/ EAR/ CAR Policy before the\nactual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated\nnet profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are also\ncritical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both\nmanufacturing and storage facilities, anywhere in India under one policy. It provides\nindemnification against material damage and business interruption.\nUsually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,\nii. Burglary (except larceny)\niii. Machinery breakdown/ boiler explosion/ electronic equipment", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "n494", "section": "B.", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_029", "metadata": {"file_size": 4549, "chunk_index": 29, "chunk_tokens": 987, "has_examples": true, "has_tables": false, "key_concepts": ["Project Policies", "Test Yourself 8", "Erection All Risks (EAR) Policy:", "Contractors All Risks (C.A.R.) Policy:", "Consequential Loss Policies"]}}
{"chunk": "actual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated\nnet profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are also\ncritical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both\nmanufacturing and storage facilities, anywhere in India under one policy. It provides\nindemnification against material damage and business interruption.\nUsually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,\nii. Burglary (except larceny)\niii. Machinery breakdown/ boiler explosion/ electronic equipment\niv. Business interruption following operation of perils mentioned above(Note: Business interruption following perils under (iii) above is usually not included\nin the package cover but available as optional cover) The policy offers widest range of cover compared to that provided byindividual operational policies.\n Premium rates for the policy depend on the cover opted, claims experience,and deductibles opted, risk assessment report for MLOP etc.51**Test Yourself 9**Which of the following is not covered under Industrial All Risks insurance?I. Fire and special perils as per fire insurance practice\nII. Larceny\nIII. Machinery breakdown\nIV. Electronic equipment**J.** **Marine Insurance**Marine insurance is classified into two types: marine cargo and marine hull**1.** **Marine Cargo Insurance**Though the term ‘marine’ may indicate only losses due to sea (marine)\nmisadventures, **marine cargo insurance** covers much more. It provides indemnity\nin respect of loss of or damage to goods during transit by rail, road, sea, air or\nregistered post, within the country as well as abroad. Type of goods may range from\ndiamonds to household goods, bulk items like cement, grains, over dimensional\ncargoes for projects etc.Cargo insurance plays an important role in domestic trade as well as in international\ntrade. Most contracts of sale require that the goods must be covered, either by the\nseller or the buyer, against loss or damage.**Who effects the insurance:** The seller or the buyer of the goods [consignment] may\ninsure the cargo depending upon the contract of sale.Marine insurance contract needs to have provisions that apply internationally. This\nis because it covers goods that are in transit beyond any country’s borders. The\ncovers are accordingly governed by international conventions and certain clauses\nattached to the policy.While the basic policy document contains general conditions, the scope of cover and\nexceptions and special exclusions are attached by separate clauses known as\nInstitute cargo Clauses (ICC). These are drafted by the Institute of London\nUnderwriters.**a)** **Coverage under Marine Cargo Insurance**\nCargo policies are essentially voyage policies, i.e. they cover the subject matter\nwhilst in transit from one place to another. However, the insured is required to\nalways act with reasonable care in all circumstances within his control. The main\nfeature of this policy is that it's an Agreed Value Policy. The valuation is agreed\nbetween the insurer and insured and is not subject to revaluation later unless fraud\nis suspected. The convention for the Sum Insured is CIF + 10% (Cost Insurance &\nFreight + 10%). Another unique feature is that the policy is freely assignable.52The cover normally commences from the time the goods leave the warehouse at the\nplace named in the policy and terminates at the destination named in the policy,\ndepending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit\nii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due to\naccident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle\niii. Stranding, grounding or sinking of the vessel (in case of ship)\niv. Collision with an external object\nv. Discharge of cargo at a port of distress\nvi. General average sacrifice", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Test Yourself 8", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_030", "metadata": {"file_size": 4549, "chunk_index": 30, "chunk_tokens": 997, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 8", "Coverage under Marine Cargo Insurance", "Marine Insurance", "Test Yourself 9", "Industrial All Risks Insurance"]}}
{"chunk": "between the insurer and insured and is not subject to revaluation later unless fraud\nis suspected. The convention for the Sum Insured is CIF + 10% (Cost Insurance &\nFreight + 10%). Another unique feature is that the policy is freely assignable.52The cover normally commences from the time the goods leave the warehouse at the\nplace named in the policy and terminates at the destination named in the policy,\ndepending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit\nii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due to\naccident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle\niii. Stranding, grounding or sinking of the vessel (in case of ship)\niv. Collision with an external object\nv. Discharge of cargo at a port of distress\nvi. General average sacrifice\nvii. Jettison.Institute Cargo Clause B is wider than C. Apart from the perils covered in C it also\ncovers loss or damage due to:i. Act of God (AOG) perils like earthquake, volcanic eruption and lightning\nii. Collapse of bridges in Inland transit\niii. Washing overboard and sling loss in case of ocean transit\niv. Entry of water into the vessel.Institute Cargo Clause A is the widest cover as it covers all perils of B and C and loss\nor damage due to any other risk except some exclusion specified such as:i. Loss or damage due to wilful conduct of the insured\nii. Ordinary leakage, breakage, wear and tear or ordinary loss in weight/volume\niii. Insufficiency in packing\niv. Inherent vice\nv. Delays\nvi. Loss due to insolvency of owners\nvii. Nuclear perilsThese exclusions are common to all clauses of inland, air and sea. There are\nseparate clauses also for trading of specific commodities like coal, bulk oil and tea\netc. Marine cover can be extended by paying additional premium to cover War,\nStrikes, Riots, Civil Commotion and Terrorism. Marine and Aviation policies are the\nonly branches of insurance that offer cover against War perils.53**Important**Risks covered under a marine policy, under the standard policy form and under the\nvarious clauses attached to the policy broadly fall into three categories:i. Marine perils,\nii. Extraneous perils and\niii. War, strike riot, civil commotion and terrorism risks.**b)** **Different types of marine policies****i.** **Specific Policy**This policy covers a single shipment. It is valid for the particular voyage or\ntransit. Merchants who are engaged in regular import and export trade or\nwho are sending consignments regularly by inland transit would find it\nconvenient to arrange insurances under special arrangements like the open\npolicy.**ii.** **Open Policy**The carriage of goods within the country can be covered under an open\npolicy. The policy is valid for one year and all consignments during this period\nhave to be declared by the insured to the insurer as agreed between them\non a fortnightly, monthly or quarterly basis.**iii.** **Open Cover**The open cover is a contract for a year giving the Insured continuous\nprotection to cover a large number of shipments/ despatches. The premium\non the consignments would be adjusted from the respective cash deposit\naccount maintained by the Insured. Open covers are issued to large exporters\nand importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for transactions\nof marine dispatches for one-year. The open cover is not a policy and it is\nnot stamped. A certificate of insurance is issued for each declaration duly\nstamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is increased\ndue to payment of customs duty or increase in the market value of the goods\nat the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across different\ncountries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Important", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_031", "metadata": {"file_size": 4549, "chunk_index": 31, "chunk_tokens": 976, "has_examples": false, "has_tables": false, "key_concepts": ["Duty and increased value insurance", "Specific Policy", "Open Policy", "Institute Voyage Clauses", "Different types of marine policies"]}}
{"chunk": "protection to cover a large number of shipments/ despatches. The premium\non the consignments would be adjusted from the respective cash deposit\naccount maintained by the Insured. Open covers are issued to large exporters\nand importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for transactions\nof marine dispatches for one-year. The open cover is not a policy and it is\nnot stamped. A certificate of insurance is issued for each declaration duly\nstamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is increased\ndue to payment of customs duty or increase in the market value of the goods\nat the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across different\ncountries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**\n**b)** **Covering a period of time: Usually one year. The set of clauses used here****are called Institute (Time) Clauses**54**c)** War risks are governed by special regulations and the premiums collected willbe credited to the Central Government.**Information**Hull insurance also includes the following insurances:i. Inland vessels such as barges, launches, passenger vessels etc.\nii. Dredgers (Mechanized or non-mechanized)\niii. Fishing Vessels (Mechanized or non-mechanized)\niv. Sailing Vessels (Mechanized or non-mechanized)\nv. Jetties and Wharvesvi. Vessels in the course of construction**The ship owner has insurable interest not only in the ship, but also in the freight**\n**to** be earned during the period of insurance. In addition to freight the ship owner\nhas insurable interest in the amount spent by him in fitting out the vessel, including\nprovisions and stores. **These expenses are termed disbursements and are insured**\n**concurrently with the hull policy for a period of time.****Important****Aviation insurance:** A comprehensive policy is also available for aircraft which\ncovers loss or damage to the aircraft as also the legal liability to third parties and\nto passengers arising out of the operation of the aircraft.**Test Yourself 10**Which branch of insurance offers cover against war perils?I. Marine policies\nII. Aviation policies\nIII. Both of the aboveIV. None of the above**K.** **Liability Policies**Accidents cannot be avoided altogether, however careful a person is. This could\nresult in injury to oneself and damage to one’s property and also may simultaneously\ncause injury to third parties and damage to their property. The persons thus\naffected would claim compensation for such loss.A liability could also arise from a defect in a product manufactured and sold, say\nchocolates or medicines, causing harm to the consumer. Similarly, liability could\narise from wrong diagnosis/ treatment of a patient or from a case improperly\nhandled by a lawyer for his client.In all such cases, where a third party, consumer or the patient would demand\ncompensation for the alleged wrong doing, it would raise a need for payment of\ncompensation or meeting expenses involved in defending the suits filed by the\nclaimants. In other words there is a financial loss arising from a liability to pay. The\nexistence of such a liability and the amount of compensation to be paid would be\ndecided by a civil court which would go into the aspect of alleged negligence/ fraud.\nLiability insurance policies provide coverage of such liabilities. Let us look at some\nof the liability policies.**Statutory liability**55There are certain laws or statutes which provide for the payment of compensation.\nThe laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010\nInsurance policies are available for protection in respect of such liabilities. Let us\nlook at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation payable\nper person is fixed as shown below.|Compensation payable|Col2|\n|---|---|\n|Fatal Accident|Rs. 25,000|\n|Permanent Total Disability|Rs. 25,000|", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "l2", "section": "Duty and increased value insurance", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_032", "metadata": {"file_size": 4549, "chunk_index": 32, "chunk_tokens": 994, "has_examples": false, "has_tables": true, "key_concepts": ["Duty and increased value insurance", "Test Yourself 10", "Information", "Institute Voyage Clauses", "Important"]}}
{"chunk": "existence of such a liability and the amount of compensation to be paid would be\ndecided by a civil court which would go into the aspect of alleged negligence/ fraud.\nLiability insurance policies provide coverage of such liabilities. Let us look at some\nof the liability policies.**Statutory liability**55There are certain laws or statutes which provide for the payment of compensation.\nThe laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010\nInsurance policies are available for protection in respect of such liabilities. Let us\nlook at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation payable\nper person is fixed as shown below.|Compensation payable|Col2|\n|---|---|\n|Fatal Accident|Rs. 25,000|\n|Permanent Total Disability|Rs. 25,000|\n|Permanent Partial Disability|% of Rs. 25,000 based on % of disability|\n|Temporary Partial Disablement|Rs. 1000 per month, maximum 3 months|\n|Actual Medical Expenses|Up to a maximum of Rs. 12,500|\n|Actual damage to property up to|Rs. 6,000|The premium is based on the AOA (Any One Accident) limit and the turnover of the\nclient. A special feature of this policy is that the insured has to pay compulsorily an\namount equal to the premium as contribution to Environment Relief Fund. If large\nnumbers of third parties are affected and the total amount of relief payable exceeds\nA.O.A. limit, the balance amount will be paid by the fund.**2.** **Public Liability Policy (Industrial/ Non-industrial Risks)**This type of policy covers liability arising out of fault/ negligence of the insured\ncausing third party personal injury or property destruction [TPPI OR TPPD].There are separate policies covering industrial risks as well as non-industrial risks\nlike those affecting hotels, cinema halls, auditoriums, residential premises, offices,\nstadiums, godowns and shops. It covers the legal liability to pay compensation\nincluding claimant’s costs, fees and expense according to Indian Law, in respect of\nTPPI/ TPPD **.**The policy does not cover:a) Products liabilityb) Pollution liabilityc) Transportation andd) Injuries to workmen/ employees**3.** **Products Liability Policy**The demand for products liability insurance has arisen because of the wide variety\nof products (e.g. canned food stuff, aerated waters, medicines and injections,56electrical appliances, mechanical equipment, chemicals etc.) that are today\nmanufactured and sold to the public. If a defect in the product causes death, bodily\ninjury or illness or even damage to the property of third parties, it could cause a\nclaim to arise. Product liability policies cover this liability of the insured.Cover is available for exports as well as domestic sales.4. **Lift (Third Party) Liability Insurance**The policy provides indemnity to owners of buildings in respect of liabilities arising\nout of the use and operation of lifts. It covers legal liabilities for:a) Death/ bodily injury of any person (excluding employees of the insured)b) Damage to property (excluding insured’s own or employee’s property)The premium rates depend upon the limit of indemnity, any one person, any one\naccident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are available\nfor doctors hospitals; engineers, architects; chartered accountants, financial\nconsultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility. They\nmay become liable to pay damages to shareholders, employees, creditors and other\nstakeholders of the company, for wrongful acts committed by them in the\nsupervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to pay\ncompensation to his employees who sustain personal injury by accident or disease\narising out of and in the course of his employment. This is also called **Workman’s**", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "l2", "section": "Statutory liability", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_033", "metadata": {"file_size": 4549, "chunk_index": 33, "chunk_tokens": 993, "has_examples": false, "has_tables": true, "key_concepts": ["Directors' and Officers' Liability Policy", "Lift (Third Party) Liability Insurance", "Workman’s", "Statutory liability", "Employee’s Compensation Insurance"]}}
{"chunk": "accident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are available\nfor doctors hospitals; engineers, architects; chartered accountants, financial\nconsultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility. They\nmay become liable to pay damages to shareholders, employees, creditors and other\nstakeholders of the company, for wrongful acts committed by them in the\nsupervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to pay\ncompensation to his employees who sustain personal injury by accident or disease\narising out of and in the course of his employment. This is also called **Workman’s**\n**Compensation Insurance.**Two forms of insurance are prevalent in the market:**a)** **Table A:** Indemnity against legal liability for accidents to employees underthe Employees Compensation Act, 1923, (Workman’s Compensation Act,\n1923), Fatal Accident Act, 1855 & Common Law.**b)** **Table B** : Indemnity against legal liability under Fatal Accidents Act, 1855and Common law.The premium rate is applied on the estimated wages of employees as declared in\nthe proposal form.The policy may be extended to cover:i. Medical and hospital expenses incurred by the insured for treatment ofemployee injuries, up to specific amounts57ii. Liability for occupational diseases listed in the Actiii. Liability towards employees of contractors**Test Yourself 11**Under the Public Liability Insurance Act, 1991, how much is the compensation\npayable for actual medical expenses for non-fatal accidents?I. Rs. 6,250\nII. Rs, 12,500\nIII. Rs. 25,000\nIV. Rs. 50,000**Answers to Test Yourself****Answer 1** - The correct option is III.\n**Answer 2** - The correct option is I.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is I.\n**Answer 6** - The correct option is IV.\n**Answer 7** - The correct option is III.\n**Answer 8** - The correct option is II.\n**Answer 9** - The correct option is II.\n**Answer 10** - The correct option is III.\n**Answer 11** - The correct option is II.58## CHAPTER G-05## GENERAL INSURANCE CLAIMS**Chapter Introduction**At the core of any insurance contract is the promise made at the beginning i.e. to\nindemnify the insured in the event of a loss. This chapter talks about the procedures\nand documents involved, from the time loss takes place, making it easier to\ncomprehend the entire process of claims settlement. It also explains the method of\ndealing with disputed claims either by insured or insurer.After studying this chapter, you should be able to:1. Argue the importance of claim settlement functions2. Describe the procedures for intimation of loss3. Appraise claim investigation and assessment4. Explain the importance of surveyors and loss assessors5. Illustrate the contents of claim forms6. Define claims adjustment and settlement59**A.** **Claims settlement process****1.** **Importance of settling claims**The most important function of an insurance company is to settle claims of\npolicyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble business ofinsurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon as\nthe possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "s57", "section": "Professional Liability", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_034", "metadata": {"file_size": 4549, "chunk_index": 34, "chunk_tokens": 989, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 11", "Answer 10", "Answer 6", "Answer 5", "Answer 7"]}}
{"chunk": "policyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble business ofinsurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon as\nthe possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early\nas possible after the loss.b) **Professionalism**The insurance officials consider each and every claim on its merits and do not\napply prejudicial or pre-conceived notions to reject the claim without examining\nall the documents that would answer the following questions.i. Did the loss really happen?ii. If so, did the loss making event really cause the damage?iii. The extent of damage out of this event.iv. What was the reason for the loss?v. Was the loss covered under the policy?vi. Is the claim payable as per the contract/ policy conditions?vii. If so, how much is payable?The answers to all these questions need to be found out by the insurance company.Processing claims is an important activity. All claims forms, procedures and\nprocesses have been carefully designed by the company to ensure that all claims\n‘payable’ under the policy are promptly paid and those that are not payable are not\npaid.The agent, being the representative of the company known to the insured, has to\nensure that all the relevant forms are properly filled up with correct information,60all documents evidencing the loss are attached and all prescribed procedures are\nfollowed in a timely manner and duly submitted to the company. The role of the\nagent at the time of loss has already been discussed earlier.2. **Intimation or Notice of Loss**Policy conditions provide that the loss be intimated to the insurer immediately. The\npurpose of an immediate notice is to allow the insurer to investigate a loss at its\nearly stages. Delays may result in loss of valuable information relating to the loss.\nIt would also enable the insurer to suggest measures to minimise the loss and to\ntake steps to protect salvage. The notice of loss is to be given as soon as reasonably\npossible.After this initial check/ scrutiny, the claim is allotted a number and entered in the\nclaims register, with details like policy number, name of insured, estimate of\namount of loss, date of loss, the claim is now ready to be processed.**Under certain types of policies (e.g. Burglary) notice is also to be given to police**\n**authorities. Under cargo rail transit policies, notice has to be served on the**\n**Railways.**3. **Investigation and assessment****a)** **Overview**On receipt of the claim form, from the insured, the insurers decide about\ninvestigation and assessment of the loss. If the claim amount is small, the\ninvestigation to determine the cause and extent of loss is done, by an officer of theinsurers.**The investigation** of other claims is entrusted to independent licensed professional\nsurveyors who are specialists in loss assessment. The assessment of loss by\nindependent surveyors is based on the principle that since both the insurers and\ninsured are interested parties, the unbiased opinion of an independent professional\nperson should be acceptable to both the parties as well as to a court of law in the\nevent of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with supporting\ndocuments. Where necessary Police report/ fire Brigade report, Investigator’s\nreport are also obtained. For personal accident claims, the insured is required to\nsubmit a report from the attending doctor specifying the cause of accident or the\nnature of illness as the case may be, and the duration of disablement.Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of the", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": null, "section": "Settling claims professionally is regarded the biggest advertisement for an", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_035", "metadata": {"file_size": 4549, "chunk_index": 35, "chunk_tokens": 943, "has_examples": true, "has_tables": false, "key_concepts": ["Railways.", "Professionalism", "Overview", "Investigation and assessment", "Promptness"]}}
{"chunk": "investigation to determine the cause and extent of loss is done, by an officer of theinsurers.**The investigation** of other claims is entrusted to independent licensed professional\nsurveyors who are specialists in loss assessment. The assessment of loss by\nindependent surveyors is based on the principle that since both the insurers and\ninsured are interested parties, the unbiased opinion of an independent professional\nperson should be acceptable to both the parties as well as to a court of law in the\nevent of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with supporting\ndocuments. Where necessary Police report/ fire Brigade report, Investigator’s\nreport are also obtained. For personal accident claims, the insured is required to\nsubmit a report from the attending doctor specifying the cause of accident or the\nnature of illness as the case may be, and the duration of disablement.Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of the\nreport of a veterinary doctor.61**Information**On receipt of intimation of loss or damage insurers check whether:1. The insurance policy is in force on the date of occurrence of the loss or damage2. The loss or damage is caused by an insured peril3. The property (subject matter of insurance) affected by the loss is the same asinsured under the policy4. Notice of loss has been received without delay.Motor third party claims involving death and personal injuries are assessed on the\nbasis of doctor’s report. These claims are dealt by Motor Accident Claims Tribunal\nand the amount to be paid is decided by factors like the age and income of theclaimant.Claims involving third party property damage are assessed on the basis of a surveyreport. Motor own damage claim is assessed on the basis of surveyors report. It may require police report if third party damage is involved.**Information**Investigation is different from the assessment of loss. Investigation is done to ensure\nthat a valid claim has been made and verify the important details and doubts like\nabsence of insurable interest, suppression or misrepresentation of material facts,\ndeliberately creating the loss, etc. are ruled out.Insurance surveyors undertake the work of investigation also. It helps if a surveyor\ngets on to the job as early as possible. Therefore, the practice is to appoint the\nsurveyor, as soon as possible after the intimation of the claim is received.**B.** **Role of Surveyors and Loss Assessors****a)** **Surveyors**Surveyors are professionals licensed by IRDAI. They are experts in inspecting and\nevaluating losses in specific areas. Surveyors are generally paid fees by the\ninsurance company, engaging them. Surveyors and loss assessors are hired by\ngeneral insurance companies normally, at the time of a claim. They inspect the\nproperty in question, examine and verify the causes and circumstances of the loss.\nThey also estimate the quantum of the loss and submit reports to the insurancecompany.They also advise insurers, regarding appropriate measures to prevent further\nlosses. Surveyors are governed by provisions of the Insurance Act, 1938, Insurance\nRules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open Cover’\nfor exports, are assessed by the claims settling agents abroad named in the policy.\nThese agents may assess the loss and make payment, which is reimbursed by the62insurers along with their settling fees. Alternatively, all the claims papers are\ncollected by the insurance claim settling agents and submitted to the insurers,\nalong with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons (not\nbeing a person disqualified for the time being for being employed as a surveyor or\nloss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other questions", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "e2", "section": "The investigation", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_036", "metadata": {"file_size": 4549, "chunk_index": 36, "chunk_tokens": 936, "has_examples": false, "has_tables": false, "key_concepts": ["Surveyors", "Information", "Section 64 UM of Insurance Act", "Important", "Role of Surveyors and Loss Assessors"]}}
{"chunk": "Rules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open Cover’\nfor exports, are assessed by the claims settling agents abroad named in the policy.\nThese agents may assess the loss and make payment, which is reimbursed by the62insurers along with their settling fees. Alternatively, all the claims papers are\ncollected by the insurance claim settling agents and submitted to the insurers,\nalong with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons (not\nbeing a person disqualified for the time being for being employed as a surveyor or\nloss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other questions\nvary from one class of insurance to another.**Example**An example of information sought in a fire claim form is given here under:i. Name of the insured, policy number and addressii. Date, time, cause and circumstances of the fireiii. Details of damaged propertyiv. Sound value of the property at the time of fire. Where the insurance consists ofseveral items under which the claim is made. [The claim must be based on actual\nvalue of property at the place and time of occurrence after allowance for\ndepreciation, wear and tear (unless the policy in respect of building, plant and\nmachinery is on “reinstatement value” basis). It shall not include profit]v. Amount claimed after deduction of salvage valuevi. Situation and occupancy of the premises in which the fire occurredvii. Capacity in which the insured claims, whether as owner, mortgage or the likeviii. If any other person is interested in the property damagedix. If any other insurance is in force upon such property if so, details thereofThis is followed by the declaration as to the truth and accuracy of the statement of\nin the form and signature of the insured and the date.The issuance of claim form by the insurance company does not imply or mean that\nliability for the claim is admitted by insurers. Claim forms are issued with the\nremark ‘without prejudice’.63**Supporting documents**In addition to the claim form, certain documents are required to be submitted by\nthe claimant or secured by the insurers to substantiate the claim.i. For fire claims, a report from the Fire Brigade would be necessary.ii. For cyclone damage, a report from the Meteorological office may be called foriii. In burglary claims, a report from the Police may be necessary.iv. For fatal accident claims, reports may be necessary from the Coroner and thePolice.v. For motor claims, the insurer may like to examine driving license, registrationbook, police report etc.vi. In marine cargo claims, the nature of documents varies according to the type ofloss i.e. total loss, particular average, inland or overseas transit claims etc.**Test Yourself 1**Which of the following activities is not considered as professional in settlement ofclaims?I. Seeking information relating to the cause of the lossII. Approaching the claim with a prejudiceIII. Ascertaining whether the loss was a result of an insured perilIV. Quantifying the amount payable under the claim**Test Yourself 2**Raj is involved in a car accident. His car is insured under a motor insurance\ncomprehensive policy. Which among the following is most appropriate for Raj to do?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage**Test Yourself 3**Which of the following statements about claims investigation and claims assessmentis correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether there\nwas any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the loss64IV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "e62", "section": "Important", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_037", "metadata": {"file_size": 4549, "chunk_index": 37, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Test Yourself 4", "Example", "Section 64 UM of Insurance Act", "Test Yourself 5"]}}
{"chunk": "comprehensive policy. Which among the following is most appropriate for Raj to do?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage**Test Yourself 3**Which of the following statements about claims investigation and claims assessmentis correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether there\nwas any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the loss64IV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while\nexamining a cyclone damage claim?I. Coroner’s reportII. Report from Fire BrigadeIII. Police reportIV. Report from Meteorological Department**Test Yourself 6**Under which principle can the insurer assume the rights of the insured in order to\nrecover from a third party the loss paid under a policy?I. ContributionII. DischargeIII. SubrogationIV. Indemnity**Test Yourself 7**If the insurer decides that a certain loss is not payable because it is not covered\nunder the policy then who decides on such matters?I. Insurer’s decision is finalII. UmpireIII. ArbitratorIV. Court of Law**Summary**a) Settling claims professionally is regarded as the biggest advertisement for aninsurance company.b) Policy conditions provide that the loss be intimated to the insurer immediately.65c) If the claim amount is small, the investigation to determine the cause and extentof loss is done by an officer of the insurer. But for other claims it is entrusted\nto independent licensed professional surveyors who are specialists in lossassessment.d) In general the claim form is designed to get full information regarding thecircumstances of the loss, such as date of loss, time, cause of loss, extent of\nloss, etc.e) Claims assessment is the process of determining whether the cause of the losssuffered by the insured was caused by an insured peril and whether there was\nany breach of warranty. The quantum of loss suffered by the insured and the\ninsurer’s liability under the policy are assessed. This is done before payment ofthe claim.f) Settlement of the claim is made only after obtaining a discharge under thepolicy.**Key terms**a) Intimation of lossb) Investigation and Assessmentc) Surveyors and Loss Assessorsd) Claim formse) Adjustment and Settlement**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is I.**Answer 3** - The correct option is II.**Answer 4** - The correct option is III.**Answer 5** - The correct option is IV.**Answer 6** - The correct option is III.**Answer 7** - The correct option is IV.66## SECTION## ANNEXURES67## CHAPTER A-01## ANNEXURESThese annexures are provided so that the students get a better idea of proposal\nforms used in general insurance.6869**Proposal Forms of Bharat Griha Raksha, Bharat Sookshma & Bharat Laghu Udyam**For a better understanding of standard products and their respective proposal\nforms, i.e. Bharat Griha Raksha, Bharat Sookshma and Bharat Laghu Udyam, please\ncheck the following link to the IRDAI website.https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/StandardProducts/Annex\nure-I-BharatGrihaRaksha.pdf70", "source_file": "Final IC-38 - Corporate Agent _General _ English.md", "chapter": "s64", "section": "ANNEXURESThese annexures are provided so that the students get a better idea of proposal", "chunk_id": "Final IC-38 - Corporate Agent _General _ English_038", "metadata": {"file_size": 4549, "chunk_index": 38, "chunk_tokens": 856, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 7", "Answer 2", "Answer 7", "Answer 6"]}}
{"chunk": "## IC - 38 **CORPORATE AGENTS** **SECTION-HEALTH****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## CORPORATE AGENTS **SECTION-HEALTH** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nInsurance Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**HEALTH INSURANCE **|**HEALTH INSURANCE **|\n|H-01|Introduction to Health Insurance|2|\n|H-02|Health Insurance Documentation|9|\n|H-03|Health Insurance Products|16|\n|H-04|Health Insurance Underwriting|42|\n|H-05|Health Insurance Claims<br>|57|iv## SECTION## HEALTH SECTION1## CHAPTER H-01## INTRODUCTION TO HEALTH INSURANCE**Chapter Introduction**This chapter will tell you about how insurance evolved over time. It will also explain\nwhat healthcare is, levels of healthcare and types of healthcare. You will also learn\nabout the healthcare system in India and factors affecting it. Finally, it will explain\nhow health insurance evolved in India and also the various players in the health\ninsurance market in India.**Learning Outcomes**After studying this chapter, you should be able to:a) Understand how insurance evolved.\nb) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.2**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness of\nthe body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "C-46", "section": "CORPORATE AGENTS", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_000", "metadata": {"file_size": 4590, "chunk_index": 0, "chunk_tokens": 1002, "has_examples": true, "has_tables": true, "key_concepts": ["IC - 38", "Chapter Introduction", "Understanding Healthcare", "India, Mumbai.", "SECTION-HEALTH"]}}
{"chunk": "what healthcare is, levels of healthcare and types of healthcare. You will also learn\nabout the healthcare system in India and factors affecting it. Finally, it will explain\nhow health insurance evolved in India and also the various players in the health\ninsurance market in India.**Learning Outcomes**After studying this chapter, you should be able to:a) Understand how insurance evolved.\nb) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.2**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness of\nthe body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was\nHippocrates (460 to 370 BC) who came up with the reasons behind illness. According\nto him, illness is caused due to various factors relating to environment, sanitation,\npersonal hygiene and diets. Vedic texts of ancient India speak about _‘Arogyame_\n_Mahabhagyam’_ meaning ‘Health is great luck’ or in other words, ‘Health is Wealth’.\nMany treatises of ancient India like _Atharva Veda, Charaka Samhita, Sushruta_\n_Samhita, Ashtangahrdayam, Ashtangasamgraha, Bhela Samhita_, and _Kashyapa_\n_Samhita_ discuss healing traditions practiced in India in olden times.**Definition**A widely accepted definition of health was given by World Health Organization\n(WHO) _–‘Health is a state of complete physical, mental and social wellbeing and_\n_not merely the absence of disease or infirmity.’_**Determinants of health**It is generally believed that the following factors determine the health of any\nindividual:**a)** **Lifestyle factors**Lifestyle factors are those which are mostly in the control of the individual\nconcerned e.g. exercising and eating within limits, avoiding worry and the like\nleading to good health; leading to diseases such as cancer, aids, hypertension\nand diabetes, to name a few.**b)** **Environmental factors**Communicable diseases like Influenza and Chickenpox etc. are spread due to\nbad hygiene, diseases like Malaria and Dengue are spread due to bad\nenvironmental sanitation, while certain diseases are also caused due to\nenvironmental factors.**c)** **Genetic factors**Diseases may be passed on from parents to children through genes. Such genetic\nfactors result in differing health trends amongst the population spread across\nthe globe based on race, geographical location and even communities.It is quite obvious that a country’s social and economic progress depends on the\nhealth of its people. This poses a question as to whether different types of\nhealthcare are required for different situations.3**Test Yourself 1**Which of the following diseases is not attributed to Lifestyle factors (i.e. not in the\ncontrol of the individual)?I. CancerII. AidsIII. Malaria\nIV. Hypertension**B.** **Levels of Healthcare**Healthcare is nothing but a set of services provided by various agencies and\nproviders including the government, to promote, maintain, monitor or restore\nhealth of people. Health care to be effective must be:Appropriate to the needs of the peopleComprehensiveAdequateEasily available- Affordable\nThe health care facilities should be based upon the probability of the incidence of\ndisease for the population. For example, a person may get fever, cold, cough, skin\nallergies etc. many times a year, but the probability of him/ her suffering from\nHepatitis B is less as compared to cold and cough.Hence, the need to set up the healthcare facilities in any area whether a village or\na district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres for", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Learning Outcomes", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_001", "metadata": {"file_size": 4590, "chunk_index": 1, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Environmental factors", "Determinants of health", "Genetic factors", "Test Yourself 1", "Understanding Healthcare"]}}
{"chunk": "The health care facilities should be based upon the probability of the incidence of\ndisease for the population. For example, a person may get fever, cold, cough, skin\nallergies etc. many times a year, but the probability of him/ her suffering from\nHepatitis B is less as compared to cold and cough.Hence, the need to set up the healthcare facilities in any area whether a village or\na district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres for\nprimary, secondary and tertiary health care and takes other measures to make\nappropriate healthcare affordable and accessible to the population.4**C.** **Types of Healthcare**Healthcare is broadly categorized as follows:**1.** **Primary healthcare**Primary health care refers to the services offered by the doctors, nurses and other\nsmall clinics which are contacted first by the patient for any sickness, that is to say\nthat primary healthcare provider is the first point of contact for all patients within\na health system.For example, if a person visits a doctor for fever and the first diagnosis is indicative\nof Dengue fever, the primary health care provider will prescribe some medicines\nbut also direct the patient to get admitted in a hospital for specialized treatment.At a country level, Primary Health care centres are set up both by Government and\nprivate players. Government primary health care centres are established depending\nupon the population size and are present right up to the village level in some form\nor the other.**2.** **Secondary healthcare**Secondary health care refers to the healthcare services provided by medical\nspecialists and other health professionals who generally do not have first contact\nwith patient. It includes acute care requiring treatment for a short period for a\nserious illness, often (but not necessarily) as an in-patient, including Intensive Care\nservices, ambulance facilities, pathology, diagnostic and other relevant medical\nservices.**3.** **Tertiary healthcare**Tertiary Health care is specialized consultative healthcare, usually for inpatients\nand on referral from primary/ secondary care providers.Examples of Tertiary Health care providers are those who have advanced medical\nfacilities and medical professionals, beyond the scope of secondary health care\nproviders e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk\npregnancy specialists etc.It is to be noted that as the level of care increases, the expenses associated with\nthe care also increase. The infrastructure for different levels of care also varies\nfrom country to country, rural-urban areas, while socio-economic factors also\ninfluence the same.**Test Yourself 2**Which of the following are part of primary healthcare?I. FeverII. Cancer\nIII. Organ Transplant\nIV. High risk pregnancy5**D.** **Evolution of Health Insurance in India**While the government had been busy with its policy decisions on healthcare, it also\nput in place health insurance schemes. Insurance companies came with their health\ninsurance policies only later. Here is how health insurance developed in India:**1.** **Employees’ State Insurance Scheme**Health Insurance in India formally began with the beginning of the Employees’\nState Insurance Scheme, introduced vide the ESI Act, 1948, shortly after the\ncountry’s independence in 1947. This scheme was introduced for blue-collar\nworkers employed in the formal private sector and provides comprehensive\nhealth services through a network of its own dispensaries and hospitals.ESIC (Employees State Insurance Corporation) is the implementing agency which\nruns its own hospitals and dispensaries and also contracts public/ private\nproviders wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme (CGHS),\nwhich was introduced in 1954 for the central government employees including\npensioners and their family members working in civilian jobs. It aims to provide\ncomprehensive medical care to employees and their families and is partly\nfunded by the employees and largely by the employer (central government).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers before\nas well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and their", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "y5", "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_002", "metadata": {"file_size": 4590, "chunk_index": 2, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Secondary healthcare", "Employees’ State Insurance Scheme", "Central Government Health Scheme", "Evolution of Health Insurance in India", "Tertiary healthcare"]}}
{"chunk": "State Insurance Scheme, introduced vide the ESI Act, 1948, shortly after the\ncountry’s independence in 1947. This scheme was introduced for blue-collar\nworkers employed in the formal private sector and provides comprehensive\nhealth services through a network of its own dispensaries and hospitals.ESIC (Employees State Insurance Corporation) is the implementing agency which\nruns its own hospitals and dispensaries and also contracts public/ private\nproviders wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme (CGHS),\nwhich was introduced in 1954 for the central government employees including\npensioners and their family members working in civilian jobs. It aims to provide\ncomprehensive medical care to employees and their families and is partly\nfunded by the employees and largely by the employer (central government).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers before\nas well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and their\nfamilies was launched in the Indian market by all the four nationalized non-life\ninsurance companies (these were then the subsidiaries of the General Insurance\nCorporation of India). This product, **Mediclaim** was introduced to provide\ncoverage for the hospitalisation expenses up to a certain annual limit of\nindemnity with certain exclusions such as maternity, pre-existing diseases etc.\nThe hospitalization indemnity-based annual contract continues to be the most\npopular form of private health insurance in India today. With private players\ncoming into the insurance sector in 2001, health insurance has grown\ntremendously. However, there is a large untapped market even today.The Government has encouraged individuals to purchase Health Insurance\npolicies. Premiums paid by the individuals towards Health Insurance of self,\nspouse and family members are allowed to be deducted from taxable income\nunder Section 80 D of the Income Tax Act. The Section allows higher limits for\npaying premiums of parents/ parents in law above 60 years of age.Considerable variations in covers, exclusions and newer add-on covers have been\nintroduced which will be discussed in later chapters.6**Test Yourself 3**The first standardised health insurance product for individuals and their families\nwas launched in the Indian market by all the four nationalized non-life insurance\ncompanies in the year _____.I. 1948II. 1954III. 1986IV. 2001**E.** **Health Insurance Market**The health insurance market today consists of a number of players some providing\nthe health care facilities called providers, others the insurance services and also\nvarious intermediaries. Some form the basic infrastructure while others provide\nsupport facilities. Some are in the government sector while others are in the private\nsector.**1.** **Private sector Health Care providers**India has a very large private health sector providing all three types of healthcare\nservices - primary, secondary as well as tertiary. These range from voluntary, notfor-profit organisations and individuals to for-profit corporate, trusts, solo\npractitioners, stand-alone specialist services, diagnostic laboratories, pharmacy\nshops, and also the unqualified providers (quacks).India also has the largest number of qualified practitioners in other systems of\nMedicine (Ayurveda/ Siddha/ Unani/ Homeopathy) which is over 7 lakh\npractitioners. These are located in the public as well as the private sector. Apart\nfrom the for-profit private providers of health care, the NGOs and the voluntary\nsector have also been engaged in providing health care services to the community.**Insurance Companies** in the general insurance sector provide the bulk of the health\ninsurance services. Stand Alone Health Insurance (SAHI) Companies are allowed to\ntransact all types of Health Insurances, while Life Insurance Companies are also\npermitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance brokers,\nreinsurance brokers, insurance consultants, surveyors and loss assessors as well as\nThird Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:7a. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or both,\nas per the underlying terms and conditions of the respective policy and within", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Central Government Health Scheme", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_003", "metadata": {"file_size": 4590, "chunk_index": 3, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Health Insurance Market", "Central Government Health Scheme", "Private sector Health Care providers", "Test Yourself 3", "Commercial Health insurance"]}}
{"chunk": "insurance services. Stand Alone Health Insurance (SAHI) Companies are allowed to\ntransact all types of Health Insurances, while Life Insurance Companies are also\npermitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance brokers,\nreinsurance brokers, insurance consultants, surveyors and loss assessors as well as\nThird Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:7a. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or both,\nas per the underlying terms and conditions of the respective policy and within\nthe framework of the guidelines issued by the insurers for settlement of claims.\nb. Servicing of claims for Hospitalization cover, if any, under Personal AccidentPolicy and domestic travel policy.\nc. Facilitating carrying out of pre-insurance medical examinations in connectionwith underwriting of the health insurance policies.**Summary**a) Insurance in some form or other existed many centuries ago but its modern formis only a few centuries old. Insurance in India has passed through many stages\nwith government regulation.b) Health of its citizens being very important, governments play a major role increating a suitable healthcare system.c) Level of healthcare provided depends on many factors relating to a country’spopulation.d) The three type of healthcare are primary, secondary and tertiary depending onthe level of medical attention required. Cost of healthcare rises with each level\nwith tertiary care being the costliest.\ne) India has its own peculiar challenges such as population growth and urbanizationwhich require proper healthcare.f) The public sector insurance companies were the first to come up with schemesfor health insurance followed later by commercial insurance by private\ninsurance companies.g) The health insurance market is made up of many players some providing theinfrastructure, with others providing insurance services, intermediaries such as\nbrokers, agents and third party administrators servicing health insurance\nbusiness and also other regulatory, educational as well as legal entities playing\ntheir role.**Answers to Test Yourself****Answer 1** The correct option is III.\n**Answer 2** The correct option is I.\n**Answer 3** The correct option is III.**Key terms**\na) Healthcare\nb) Commercial insurance\nc) Nationalization\nd) Primary, Secondary and Tertiary Healthcare\ne) Third Party Administrator8## CHAPTER H-02## HEALTH INSURANCE DOCUMENTATION**Chapter Introduction**In the insurance industry, we deal with a large number of forms, documents etc.\nThis chapter takes us through the documents and their importance in a health\ninsurance contract.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of proposal form.\nb) Describe the importance of Prospectus\nc) Explain terms and wordings in insurance policy document.\nd) Discuss policy conditions and warranties.\ne) Appreciate why endorsements are issued.\nf) Understand the premium receipt.\ng) Appreciate why renewal notices are issued.9**A.** **Proposal forms****1.** **Health Insurance Proposal forms**As discussed in the common chapters, the Proposal Form contains information which\nis useful for the insurance company to accept the risk offered for insurance. Given\nbelow are some of the details of the proposal form for a health insurance policy:1. The proposal form incorporates a prospectus which gives details of the cover, suchas coverage, exclusions, provisions etc. The prospectus forms part of the proposal\nform and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address, occupation,date of birth, sex, and relationship of each insured person with the proposer,\naverage monthly income and income tax PAN No., name and address of the Medical\nPractitioner, his qualifications and registration number. Bank details of the insured\nare also now a days collected to make payment of claim money directly through\nbank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "r8", "section": "Intermediaries:", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_004", "metadata": {"file_size": 4590, "chunk_index": 4, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Proposal forms", "Answer 3", "Chapter Introduction"]}}
{"chunk": "below are some of the details of the proposal form for a health insurance policy:1. The proposal form incorporates a prospectus which gives details of the cover, suchas coverage, exclusions, provisions etc. The prospectus forms part of the proposal\nform and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address, occupation,date of birth, sex, and relationship of each insured person with the proposer,\naverage monthly income and income tax PAN No., name and address of the Medical\nPractitioner, his qualifications and registration number. Bank details of the insured\nare also now a days collected to make payment of claim money directly through\nbank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment\nb. Date of first treatment\nc. Name and address of attending Doctor\nd. Whether fully recovered\n6. The proposer as to state any additional facts which should be disclosed to insurersand if he has any knowledge of any positive existence or presence of any illness or\ninjury which may require medical attention.\n7. The form also includes questions relating to past insurance and claims history andadditional present insurance with any other insurer.\n8. The special features of the declaration to be signed by the proposer must be noted.\n9. The insured person agrees and authorises the insurer to seek medical informationfrom any hospital/ medical practitioner who has at any time attended or may\nattend concerning any illness which affects his physical or mental health.\n10. The insured person confirms that he has read the prospectus forming part of theform and is willing to accept the terms and conditions.\n11. The declaration includes the usual warranty regarding the truth of the statementsand the proposal form as the basis of the contract.**2.** **Medical Questionnaire**In case of adverse medical history in the proposal form, the insured person has to\ncomplete a detailed questionnaire relating to diseases such as Diabetes, Hypertension,\nChest pain or Coronary Insufficiency or Myocardial Infarction.These have to be supported by a form completed by a consulting physician. This form\nis scrutinised by company’s panel doctor, based on whose opinion, acceptance,\nexclusion, etc. are decided.10**Standard form of Declaration**The IRDAI has specified the format of the standard declaration in the health\ninsurance proposal as under:1. I/ We hereby declare, on my behalf and on behalf of all persons proposed to beinsured, that the above statements, answers and/ or particulars given by me are\ntrue and complete in all respects to the best of my knowledge and that I/ We\nam/ are authorized to propose on behalf of these other persons.2. I understand that the information provided by me will form the basis of theinsurance policy, is subject to the Board approved underwriting policy of the\ninsurance company and that the policy will come into force only after full receipt\nof the premium chargeable.3. I/ We further declare that I/ we will notify in writing any change occurring in theoccupation or general health of the life to be insured/ proposer after the proposal\nhas been submitted but before communication of the risk acceptance by thecompany.4. I/ We declare and consent to the company seeking medical information from anydoctor or from a hospital who at any time has attended on the life to be insured/\nproposer or from any past or present employer concerning anything which affects\nthe physical or mental health of the life to be assured/ proposer and seeking\ninformation from any insurance company to which an application for insurance\non the life to be assured/ proposer has been made for the purpose of underwriting\nthe proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting and/\nor claims settlement and with any Governmental and/ or Regulatory Authority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal forms\nare designed to get information about the proposer’s health, way of life and habits,", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Medical Questionnaire", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_005", "metadata": {"file_size": 4590, "chunk_index": 5, "chunk_tokens": 985, "has_examples": false, "has_tables": false, "key_concepts": ["Standard form of Declaration", "Nature of questions in a proposal form", "Medical Questionnaire"]}}
{"chunk": "has been submitted but before communication of the risk acceptance by thecompany.4. I/ We declare and consent to the company seeking medical information from anydoctor or from a hospital who at any time has attended on the life to be insured/\nproposer or from any past or present employer concerning anything which affects\nthe physical or mental health of the life to be assured/ proposer and seeking\ninformation from any insurance company to which an application for insurance\non the life to be assured/ proposer has been made for the purpose of underwriting\nthe proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting and/\nor claims settlement and with any Governmental and/ or Regulatory Authority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal forms\nare designed to get information about the proposer’s health, way of life and habits,\npre-existing health conditions, medical history, hereditary traits, past healthinsurance experience etc. along with the proposer’s profession, occupation or\nbusiness which important as they could have a material bearing on the risk.**Example 1** A delivery man of a fast-food restaurant, who has to frequently travel on motorbikes at a high speed to deliver food to his customers, may be more exposed to\naccidents than the accountant of the same restaurant. A person working in a coal mine or a cement plant may be exposed to dustparticles leading to lung ailments.11**Example 2** For the purpose of overseas travel insurance, the proposer is required to state(who is travelling, when, to which country, for what purpose) or For the purpose of health insurance, the proposer is asked about his/ her health\n(with person’s name, address and identification) etc. depending on the case.**Example 3** In case of health insurance, it could be the cost of hospital treatment, while forpersonal accident insurance this could be a fixed amount for loss of life, loss of\na limb, or loss of sight due to an accident.**a)** **Previous and Present insurance**The proposer is required to inform the details about his previous insurances to the\ninsurer. This is to understand his insurance history. In some markets there are\nsystems by which insurers confidentially share data about the insured.The proposer is also required to state whether any insurer had declined his proposal,\nimposed special conditions, required an increased premium at renewal or refused\nto renew or cancelled the policy. Details of current insurance with any other insurer\nincluding the names of the insurers are also required to be disclosed. Further, in\npersonal accident insurance an insurer would like to restrict the amount of coverage\n(sum insured) depending on the sum insured under other PA policies taken by the\nsame insured.**b)** **Claim Experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about the\nsubject matter of insurance and how the insured has managed the risk in the past.\nIt means the insurance company has a duty to record all the information received\neven orally, which the agent has to keep in mind by way of follow up.**B.** **Acceptance of the proposal (underwriting)**A completed proposal form broadly gives the following information: Details of the insured\n Details of the subject matter\n Type of cover required\n Details of the physical features both positive and negative\n Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the prospective\ncustomer e.g. above 45 years of age to a doctor and/ or for medical check-up. Based\non the information available in the proposal and, where medical check-up has been\nadvised, based on the medical report and the recommendation of the doctor, the\ninsurer takes the decision. Sometimes, where the medical history is not satisfactory,\nan additional questionnaire to get more information is also required to be obtained\nfrom the prospective client. The insurer then decides about the rate to be applied\nto the risk factor and calculates the premium based on various factors, which is\nthen conveyed to the insured.12**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the prospective\nbuyers of insurance. It is usually in the form of a brochure or leaflet or it can be in", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Nature of questions in a proposal form", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_006", "metadata": {"file_size": 4590, "chunk_index": 6, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Example 3", "Prospectus", "Previous and Present insurance", "Acceptance of the proposal (underwriting)", "Nature of questions in a proposal form"]}}
{"chunk": " Details of the subject matter\n Type of cover required\n Details of the physical features both positive and negative\n Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the prospective\ncustomer e.g. above 45 years of age to a doctor and/ or for medical check-up. Based\non the information available in the proposal and, where medical check-up has been\nadvised, based on the medical report and the recommendation of the doctor, the\ninsurer takes the decision. Sometimes, where the medical history is not satisfactory,\nan additional questionnaire to get more information is also required to be obtained\nfrom the prospective client. The insurer then decides about the rate to be applied\nto the risk factor and calculates the premium based on various factors, which is\nthen conveyed to the insured.12**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the prospective\nbuyers of insurance. It is usually in the form of a brochure or leaflet or it can be in\nelectronic form also and serves the purpose of introducing a product to such\nprospective buyers. Issue of prospectus is governed by the Insurance Act, 1938 as\nwell as by Protection of Policyholders’ Interest Regulations 2017 and the Health\nInsurance Regulations 2016 of the IRDAI. Insurers of Health policies usually publish\nProspectuses about their Health insurance products. The proposal form in such cases\nwould contain a declaration that the customer has read the Prospectus and agrees\nto it.As discussed in Chapter 4, Section 64 VB of the Insurance Act 1938 stipulates that\nPremiums have to be collected in advance. However, considering the need for\neasing the payment of health insurance premiums in view of conditions owing to\nCOVID-19 outbreak, IRDAI allowed insurers to collect premiums of individual health\ninsurance products in instalments. It was also mandated that Insurance companies\nwould announce the availability of the facility of payment of premiums in\ninstalments, and the conditions thereof, on their websites. This facility would be\noffered to all policyholders without any discrimination.**D.** **Policy Document**IRDAI Regulations for protecting policy holder’s interest act 2017 specified that a Health\nInsurance Policy document should contain:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter\nb) Full description of the persons or interest insured\nc) The sum insured under the policy person and/ or peril wise\nd) UIN of the product, name, code number, contact details of the personinvolved in sales process;\ne) Date of birth of the insured and corresponding age in completed years;\nf) The period of insurance and the date from which the policyholder has beencontinuously obtaining health insurance cover in India from any of the\ninsurers without break\ng) The sub-limits, Proportionate Deductions and the existence of Package ratesif any, with cross reference to the concerned policy section;\nh) Co-pay limits if any;\ni) The pre-existing disease (PED) waiting period, if applicable;\nj) Specific waiting periods as applicable;\nk) Deductible as applicable – general and specific, if any Perils covered andexclusions\nl) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium along with periodicity of\ninstalments if any\nm) Policy terms, conditions and warranties\nn) Action to be taken by the insured upon occurrence of a contingency likely togive rise to a claim under the policy13o) The obligations of the insured in relation to the subject-matter of insuranceupon occurrence of an event giving rise to a claim and the rights of the\ninsurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings. These\nare called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made or", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "D-19", "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_007", "metadata": {"file_size": 4590, "chunk_index": 7, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Prospectus", "EXAMPLES:", "Policy Document", "Conditions:"]}}
{"chunk": "insurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings. These\nare called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made or\nused in support thereof or if any fraudulent means or devices are used by the\nInsured or any one acting on his behalf to obtain any benefit under the policy or\nif the loss or damage be occasioned by the wilful act, or with the connivance of\nthe Insured, all benefits under this policy shall be forfeited.**b.** **The Claim Intimation condition in a Health policy may state:**Claim must be filed within certain days from date of discharge from the Hospital.\nHowever, waiver of this Condition may be considered in extreme cases of\nhardship.A breach of condition makes the policy voidable at the option of the insurer.2. **Warranties:** A warranty is an agreement between insurer and insured that must\nbe carried out fully. It forms a part of the policy document. For example, the Insurer\nmay be covering the risk of a particular disease on the condition that the insured\nshall do a quarterly consultations with a specialist. In the above example, failure of\nthe insured to fulfil his part of the agreement shall either negate or reduce the\nliability in respect of that particular section/ warranty.Warranties must be observed and complied with strictly and literally, whether it is\nmaterial to the risk or not.**Test Yourself 1**Which of the below statement is correct with regards to a warranty?I. A warranty is a condition which is implied without being stated in the policy\nII. A warranty forms part of a policy document14III. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.**Endorsements in Health Insurance**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be changed at the time of issuance,\nit is done by setting out the amendments/ changes through a document called\nendorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nmake up the contract. Endorsements may also be issued during the currency of the policy\nto record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy relate to:a) Variations/ changes in sum insured\nb) Addition and deletion of insured family members\nc) Change of insurable interest by way of taking of a loan and mortgaging thepolicy to a bank.\nd) Extension of insurance to cover additional perils/ extension of policy period\ne) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of issuance,\nit is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.15## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product – Mediclaim\nto hundreds of products of different kinds, the customer has a wide range to choose\nappropriate cover. The chapter explains the features of various health products that\ncan cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance\nb) Describe the IRDAI guidelines on standardization in health insurance", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "t14", "section": "E.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_008", "metadata": {"file_size": 4590, "chunk_index": 8, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Warranties:", "Answers to Test Yourself", "Answer 2", "EXAMPLES:"]}}
{"chunk": "e) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of issuance,\nit is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.15## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product – Mediclaim\nto hundreds of products of different kinds, the customer has a wide range to choose\nappropriate cover. The chapter explains the features of various health products that\ncan cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance\nb) Describe the IRDAI guidelines on standardization in health insurance\nc) Discuss the various types of health products available in the Indian market today\nd) Explain Personal Accident insurance\ne) Discuss overseas travel insurance\nf) Understand key terms and clauses in health policies16**A.** **Classification of health insurance products****1.** **Introduction to health insurance products**“Health insurance business” is defined under Section 2(6C) of the Insurance Act,\n1938 as _“the effecting of contracts which provide for sickness benefits or medical,_\n_surgical or hospital expense benefits, whether in-patient or out-patient travel_\n_cover and personal accident cover.”_ IRDAI follows this definition of Health insurance\nbusiness.Health insurance products available in the Indian market are mostly in the nature\nof **hospitalization products.** These products cover the expenses incurred by an\nindividual during hospitalization.Therefore, health insurance is important mainly for two reasons: **Providing financial assistance to pay for medical facilities** in case of anyillness. **Preserving the savings of an individual** which may otherwise be wiped out dueto illness.Today, the health insurance segment has developed to a large extent, with hundreds\nof products offered by almost all general Insurance companies, standalone health\ninsurers and life insurers. However, the basic benefit structure of the Mediclaim\npolicy i.e. cover against hospitalization expenses still remains the most popular form\nof insurance.**2.** **Broad classification of health insurance products**Whatever be the product design, health insurance products can be broadly classified\ninto two categories:**a)** **Indemnity covers**These products constitute the bulk of the health insurance market and pay for\nactual medical expenses incurred due to hospitalization.**b)** **Fixed benefit covers**Also called as ‘hospital cash’, these products pay for a fixed sum per day for the\nperiod of hospitalization. Some products also provide for a pre-decided amount\nfor different surgeries.**3.** **Classification based on customer segment**Products can also be classified on the basis of the target customer segment.\nProducts classified based on customer segments are:a) **Individual cover** offered to retail customers and their family membersb) **Group cover** offered to corporate clients, covering employees and groups,covering their members17c) **Mass policies** for government schemes like/ Pradhan Mantri Jan Arogya Yojana/various State health insurance schemes covering very poor sections of the\npopulation.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought in\nHealth Regulations, 2016 regarding Health Products, some of which have been given\nbelow:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General-Insurersand Health-Insurers, can offer these products for policy tenure of 1 Year, but\nnot exceeding 5 Years. Group Health Policies can be offered by any insurer\nfor a term of one year except credit linked products where the term can be\nextended up to the loan period not exceeding five years.4. No Group Health Insurance Policy shall be issued where a Group is formedwith the main purpose of availing itself of insurance. The Group shall have a", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "H-03", "section": "Test Yourself 2", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_009", "metadata": {"file_size": 4590, "chunk_index": 9, "chunk_tokens": 1006, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Preserving the savings of an individual", "Answer 2", "Introduction to health insurance products", "Mass policies"]}}
{"chunk": "population.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought in\nHealth Regulations, 2016 regarding Health Products, some of which have been given\nbelow:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General-Insurersand Health-Insurers, can offer these products for policy tenure of 1 Year, but\nnot exceeding 5 Years. Group Health Policies can be offered by any insurer\nfor a term of one year except credit linked products where the term can be\nextended up to the loan period not exceeding five years.4. No Group Health Insurance Policy shall be issued where a Group is formedwith the main purpose of availing itself of insurance. The Group shall have a\nsize as determined by the Insurer which shall be applicable for all its group\npolicies, subject to a minimum of 7.5. General Insurers and Health Insurers may also offer Credit Linked GroupPersonal Accident policies for a term extended up to the loan period not\nexceeding five years.6. Multiple policies –In case insured has taken health policies from more thanone insurance company which provide fixed benefits, each insurer shall make\nthe claim payment, on occurrence of an insured event, independent of\npayments received from other similar policies in accordance with the terms\nand conditions of the policies.If two or more policies are taken by an insured during a period from one or\nmore insurers to indemnify treatment costs, the policyholder shall have the\nright to ask for a settlement of his/ her claim in terms of any of his/ her\npolicies. The insurer on whom the claim is made shall make the claim\npayment and balance claim or claims disallowed under the earlier chosen\npolicy/ policies may be made from the other policy/ policies even if the sum\ninsured is not exhausted in the earlier chosen policy/ policies.18**B.** **IRDA Guidelines on Standardization in health insurance**With so many insurers providing numerous varied products and with different\ndefinitions of various terms and exclusions, confusion arose in the market. It became\ndifficult for the customer to compare products and take a considered decision.\nMoreover, in critical illness policies, there is no clear understanding as to what is\nmeant by critical illness and what is not.To remove the confusion among insurers, service providers, TPAs and hospitals and\nthe grievances of the insuring public, the regulator tried to provide some kind of\nstandardization in health insurance. Based on a common understanding, IRDA issued\nGuidelines on standardization in health insurance in 2016 which was further\namended in 2020. These are applicable to all General and Health Insurers offering\nindemnity based Health insurance (excluding PA and Domestic/ Overseas Travel)\nproducts (both Individual and Group)The guidelines now provide for standardization of:1. definitions of commonly used insurance terms\n2. definitions of critical illnesses\n3. list of optional items of expenses in hospitalization indemnity policies\n4. claim forms and pre-authorization forms\n5. billing formats\n6. discharge summary of hospitals\n7. standard contracts between TPAs, insurers and hospitals\n8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get recovery\nof medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical bill", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "s10", "section": "Regulations for Health Insurance", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_010", "metadata": {"file_size": 4590, "chunk_index": 10, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Hospitalization indemnity", "Regulations for Health Insurance", "Example"]}}
{"chunk": "8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get recovery\nof medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical bill\nraised was Rs. 1.25 lakhs. The insurance company paid Rs 1 lakh according to the\nplan coverage and Raghu had to pay the remaining amount of Rs. 25,000 from his\nown pocket19The main features of the indemnity based Mediclaim policy are detailed below,\n**though variations in limits of cover, additional exclusions or benefits or some**\n**add-ons may apply to products marketed by each insurer** .**1.** **Inpatient hospitalization expenses**The policy pays the insured the cost of hospitalization expenses incurred on\naccount of illness/ accident. The policy has a minimum prescribed period of\nhospitalization (generally 24 hours) after which the policy provisions come into\nforce. However once this period is reached then the expenses for the entire\nperiod become payable.Most of the expenses related with the treatment are paid, yet certain expenses that\nincludes items of personal comfort, cosmetic surgeries are not. It is therefore\nimportant for the customer to be made aware of the excluded items of expenses\nthat are not covered under the policy.i. Room, boarding and nursing expenses as provided by the hospital/ nursinghome. This includes nursing care, RMO charges, IV fluids/ blood transfusion/\ninjection administration charges and similar expensesii. Intensive Care Unit (ICU) expensesiii. Surgeon, anaesthetist, medical practitioner, consultants, specialists feesiv. Anaesthetic, blood, oxygen, operation theatre charges, surgical appliances,v. Medicines and drugs,vi. Dialysis, chemotherapy, radiotherapyvii. Cost of prosthetic devices implanted during surgical procedure likepacemaker, orthopaedic implants, infra cardiac valve replacements,\nvascular stentsviii.Relevant laboratory/ diagnostic tests and other medical expenses related tothe treatmentix. Hospitalization expenses (excluding cost of organ) incurred on donor inrespect of organ transplant to the insured.**2.** **Day Care Procedures**There are many surgeries that do not require can be conducted at specialized\nhospitals. Treatments such as eye surgeries, chemotherapy; dialysis etc. can be\nclassified under day-care surgeries and the list is ever growing. These are also\ncovered under the policy.**3.** **OPD cover**Coverage of outpatient expenses is still very limited in India, with few such products\noffering OPD covers. However there are some plans that provide cover treatment\nas outpatient and also related health care expenses associated with doctor visits,\nregular medical tests, dental and pharmacy costs.20**4.** **Pre and post hospitalization expenses****i.** **Pre hospitalization expenses**Hospitalization could be either emergency hospitalization or planned. If a\npatient goes in for a planned surgery, there would be expenses incurred by him\nprior to the hospitalization. Such expenses are known as Pre hospitalisationexpenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized anda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissible bythe Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "s10", "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_011", "metadata": {"file_size": 4590, "chunk_index": 11, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Day Care Procedures", "Hospitalization indemnity", "Example", "Inpatient hospitalization expenses", "Post hospitalization expenses"]}}
{"chunk": "regular medical tests, dental and pharmacy costs.20**4.** **Pre and post hospitalization expenses****i.** **Pre hospitalization expenses**Hospitalization could be either emergency hospitalization or planned. If a\npatient goes in for a planned surgery, there would be expenses incurred by him\nprior to the hospitalization. Such expenses are known as Pre hospitalisationexpenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized anda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissible bythe Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if\na) They are incurred for the same condition for which the Insured Person’sHospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissible bythe Insurance Company.\nPost hospitalization expenses would be relevant medical expenses incurred\nduring period up to the defined number of days after hospitalization and will be\nconsidered as part of claim.\nPost hospitalization expenses could be in the form of medicines, drugs, review\nby doctors etc. after discharge from hospital. Such expenses have to be related\nto the treatment taken in hospital and are covered under the health policies.Though the duration of cover for pre and post hospitalization expenses would\nvary from insurer to insurer and is defined in the policy, the most common cover\nis for **thirty days pre and sixty days post hospitalization** .Pre and post-hospitalization expenses form part of the overall sum insured for\nwhich cover is granted under the policy.**iii.** **Domiciliary Hospitalization**\n**iv.** There is also a benefit available for patients whose illness otherwise needshospitalisation but avail treatment at home either for accommodation in\nhospitals or in a position that they cannot be moved to a hospital.21To prevent misuse of the provision, this cover usually carries an **excess clause**\n**of three to five days** meaning that treatment costs for the first three to five\ndays have to be borne by the insured. The cover excludes domiciliary treatments\nfor certain chronic or common ailments such as Asthma, Bronchitis, Diabetes\nMellitus, Hypertension, Influenza Cough, Cold, and fevers etc.**Example**Mira had taken a health insurance policy for coverage of expenses in the event of\nhospitalisation. The policy had a clause for initial waiting period of 30 days.\nUnfortunately, 20 days after she took the policy, Mira contracted malaria and was\nhospitalised for 5 days. She had to pay heavy hospital bills.When she asked for reimbursement from the insurance company, they denied\npayment of the claim because the event of hospitalization occurred within the\nwaiting period of 30 days from taking the policy.**a)** **COVERAGE OPTIONS AVAILABLE****i.** **Individual coverage:** An individual insured can cover himself along with familymembers such as spouse, dependent children, dependent parents, dependent\nparents in law, dependent siblings etc. Some insurers do not have a restriction\non the dependents who can be covered. It is possible to cover each of such\ndependent insured’s under a single policy with a separate sum insured chosen\nfor each insured person. In such covers, each person insured under the policy\ncan claim up to the maximum amount of his sum insured during the currency of\nthe policy. Premium will be charged for each individual insured according to his\nage and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered a\nsingle sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during the\npolicy period, it will pay for claims related to more than one family member or\nmultiple claims of a single member of the family. All these together cannot exceed\nthe total coverage of Rs. 5 lacs. Premium will normally be charged based on the age\nof the oldest member of the family proposed for insuranceThe covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets coverage", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Pre and post hospitalization expenses", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_012", "metadata": {"file_size": 4590, "chunk_index": 12, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["COVERAGE OPTIONS AVAILABLE", "Example", "Individual coverage:", "Domiciliary Hospitalization", "Post hospitalization expenses"]}}
{"chunk": "dependent insured’s under a single policy with a separate sum insured chosen\nfor each insured person. In such covers, each person insured under the policy\ncan claim up to the maximum amount of his sum insured during the currency of\nthe policy. Premium will be charged for each individual insured according to his\nage and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered a\nsingle sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during the\npolicy period, it will pay for claims related to more than one family member or\nmultiple claims of a single member of the family. All these together cannot exceed\nthe total coverage of Rs. 5 lacs. Premium will normally be charged based on the age\nof the oldest member of the family proposed for insuranceThe covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets coverage\nfor an overall sum insured which can be chosen at a higher level at a reasonable\npremium.**Pre-Existing diseases**\nInsurance is designed to cover accidents/ diseases etc. that happen unexpectedly.\nCovering the costs of treating existing medical conditions is not part of insurance,\nas it is unfair to healthy people who would have to pay for the existing illnesses of22some others. It goes against the principle of creating risk pools covering similarly\nplaced risks. So, it is very important to collect details of the existing ailments/\ninjuries of each insured person before issuing a health policy. This will enable the\ninsurer to decide on accepting the proposal for insurance, charging proper premiums\nand/ or providing additional conditions for those who are more likely to make\nclaims.**What is a pre-existing disease?**\nDiseases suffered by an insured person within 48 months prior to commencement of\nthe policy are regarded as pre-existing diseases. Based on the same logic, insurers\nare not allowed to exclude pre-existing diseases after a person is covered for\ninsurance continuously for 48 months.**Renewability:** Although Healthcare policies have a contract life of one year, and a\nfresh policy is to be issued every year, Lifelong renewability has been made\ncompulsory by IRDAI for all policies.**SPECIAL FEATURES**In order to provide new features in the product as also to maintain the pricing,\ninsurance companies have come out innovative modifications in the products. For\nexample, the Mediclaim Policy, which was the most popular policy before 2000, has\nundergone many changes and new special features have been added to the\ncoverage. Some features have been added to the basic indemnity cover. These\nfeatures may vary from insurer to insurer and product to product and may not be\navailable uniformly for all products.**i.** **Sub limits and Disease specific capping**Some of the products have disease specific capping e.g. cataract. A few also have\nsub limits on room rent linked to sum insured e.g. per day room rent restricted to\n1% of sum insured and ICU charges to 2% of sum insured. As expenses under other\nheads such as ICU charges, OT charges and even surgeon’s fees are linked to the\ntype of room opted for, room rent capping helps in restricting expenses under other\nheads also and hence the overall hospitalization expenses.**ii.** **Co-payment (popularly called Co-pay)**Co-payment is defined by IRDAI as a cost sharing requirement under a health\ninsurance policy that provides that the policyholder/ insured will bear a specified\npercentage of the admissible claims amount. A co-payment does not reduce the Sum\nInsured.\nCo-payment is the concept of the insured bearing a portion of each and every claim\nunder a health policy. These could be compulsory or voluntary depending on the\nproduct. Co-payment brings in a certain discipline among the insured to avoid\nunnecessary hospitalizations. This ensures that the insured exercises caution in\nselecting his healthcare options and avoids luxurious ones.23When an insured event occurs, many health policies require the insured to share a\npart of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay amount\nis 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a specified", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "f22", "section": "Family floater:", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_013", "metadata": {"file_size": 4590, "chunk_index": 13, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["What is a pre-existing disease?", "Co-payment (popularly called Co-pay)", "Example", "Sub limits and Disease specific capping", "Deductible/ Excess"]}}
{"chunk": "insurance policy that provides that the policyholder/ insured will bear a specified\npercentage of the admissible claims amount. A co-payment does not reduce the Sum\nInsured.\nCo-payment is the concept of the insured bearing a portion of each and every claim\nunder a health policy. These could be compulsory or voluntary depending on the\nproduct. Co-payment brings in a certain discipline among the insured to avoid\nunnecessary hospitalizations. This ensures that the insured exercises caution in\nselecting his healthcare options and avoids luxurious ones.23When an insured event occurs, many health policies require the insured to share a\npart of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay amount\nis 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a specified\nnumber of days/ hours in case of hospital cash policies which will apply before any\nbenefits are payable by the insurer. In Health policies, it is the fixed amount of\nmoney the insured is required to pay initially before the claim is paid by insurer, for\ne.g. if the deductible in a policy is Rs. 10,000, the insured pays first Rs. 10,000 in\neach insured loss claimed for. To illustrate, if the claim is for Rs. 80,000, the insured\nbears the first Rs. 10,000 and the insurer pays Rs. 70,000. A deductible does not\nreduce the Sum Insured.Deductible may also be a specified number of days/ hours in case of hospital cash\npolicies which will apply before any benefits are payable by the insurer.An agent must examine and inform the insured whether the deductible is applicable\nper year, per life or per event and the specific deductible to be applied.**iv.** **Waiting Period**A waiting period of 30 days from inception of policy is normally applicable in most\npolicies for making any claim. This however will not be applied for hospitalization\ndue to an accident.**v.** **Waiting periods for specific diseases**This is applicable for diseases for which treatment can be delayed and planned.\nDepending on the product waiting periods of one/ two/ four years are imposed by\nthe insurance companies and claims are paid for these ailments only after expiry of\nthis period. Some of the diseases are Cataract, Benign Prostatic Hypertrophy,\nHysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele, Congenital\ninternal disease, Fistula in anus, piles, Sinusitis and related disorders etc.**vi.** **Coverage for Day care procedure**Advancement of medical science has seen inclusion of large number of procedures\nunder day care category as already discussed earlier**vii.** **Cost of pre policy check up**Cost of medical examination was earlier borne by prospective clients. Now insurer\nreimburses the cost, provided the proposal is accepted for underwriting, the\nreimbursement varying from 50% to 100%.Now this has also been mandated by IRDAI\nthat insurer would bear at least 50% of health check-up expenses.**viii.** **Add on covers**Various new additional covers called Add-on covers have been introduced by some\nof the insurers. Some of them are:24 **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end version productsfor certain ailments which are life threatening and entail expensive treatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured (whichgets reduced on payment of a claim) can be restored to the original limit by\npaying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage of\nthe hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Deductible/ Excess", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_014", "metadata": {"file_size": 4590, "chunk_index": 14, "chunk_tokens": 973, "has_examples": false, "has_tables": false, "key_concepts": ["Maternity cover:", "Coverage for Day care procedure", "Deductible/ Excess", "Cost of pre policy check up", "Add on covers"]}}
{"chunk": "of the insurers. Some of them are:24 **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end version productsfor certain ailments which are life threatening and entail expensive treatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured (whichgets reduced on payment of a claim) can be restored to the original limit by\npaying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage of\nthe hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in\npatient hospitalization expenses. Few companies now offer limited cover for outpatient expenses under some of the high-end plans. **Hospital cash:** This provides for fixed lump sum payment for each day ofhospitalization for a specified period. Normally the period is granted for 7 days\nexcluding the policies deductible of 2/ 3 days. Thus, the benefit would trigger\nonly if hospitalization period is beyond the deductible period. This is in addition\nto the hospitalization claim but within the overall sum insured of the policy or\nmay be with a separate sub-limit. **Recovery benefit:** Lump sum benefit is paid if the total period of stay in hospitaldue to sickness and/ or accident is not less than 10 days. **Donor’s expenses:** The policy provides for reimbursement of expenses towardsdonor in case of major organ transplant as per the terms and condition defined\nin the policy. **Reimbursement of ambulance:** Expenses incurred towards ambulance byInsured/ insured person are reimbursed up to a certain limit specified in the\nschedule of the policy. **Expenses for accompanying person:** This is intended to cover the expensesincurred by accompanying person towards food, transportation whilst attending\nto insured patient during the period of hospitalization. Lump sum payment or\nreimbursement payment as per the policy terms is paid, up to the limit specified\nin the schedule of the policy. **Family definition:** Definition of family has undergone changes in few healthproducts. Earlier, primary insured, spouse, dependent children were granted25cover. Now there are policies where parents and in-laws can also be granted\ncover under the same policy.**x.** **Failure to seek or follow medical advice or failure to follow treatment**Initially the health insurance cover was denied to persons suffering from pre-existing\ndiseases. Such cases are now being offered cover by excluding such diseases.**Standard Health Product** **– Arogya Sanjeevani** : In the background of the Covid-19\npandemic, IRDAI asked all Insurance Companies to come out with a standard health\nproduct called Arogya Sanjeevani with no variations in terms and conditions to make\nit easy to understand. The premium may however vary according to the pricing\npolicy of each company. This is to ensure better penetration of Health Insurance in\nmarket. All Insurers are required to offer this product called Arogya Sanjeevani.[The context for this move was that there were different Health Insurances available\nin the market and customers were not able to compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder can becomethe beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by insurers,\nprovide cover for high sums insured over and above a specified amount (called\nthreshold).This policy works along with a basic health cover having a low sum\ninsured and comes at a comparatively reasonable premium. For example, Individuals\ncovered by their employers can also opt for a top-up cover for additional protection\n(keeping the sum insured of the first policy as the threshold).To be eligible to receive a claim under the top-up policy, the medical costs must be", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "d25", "section": "Maternity cover:", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_015", "metadata": {"file_size": 4590, "chunk_index": 15, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Hospital cash:", "Standard Health Product", "Recovery benefit:", "Reinstatement of sum insured:"]}}
{"chunk": "in the market and customers were not able to compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder can becomethe beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by insurers,\nprovide cover for high sums insured over and above a specified amount (called\nthreshold).This policy works along with a basic health cover having a low sum\ninsured and comes at a comparatively reasonable premium. For example, Individuals\ncovered by their employers can also opt for a top-up cover for additional protection\n(keeping the sum insured of the first policy as the threshold).To be eligible to receive a claim under the top-up policy, the medical costs must be\ngreater than the deductible (or threshold) level chosen under the plan and the\nreimbursement under the high deductible plan would be the amount of expense\nincurred i.e. greater than the deductible.**Example**An individual is covered for a sum insured of Rs. 3 lacs by his employer. He could\nopt for a top-up policy of Rs. 10 lacs in excess of Rs. Three lacs. If the cost of a\nsingle hospitalization is Rs. 5 lacs, the basic policy would cover up to Rs. Three lacs\nonly. With the top-up cover, the balance sum of Rs. Two lacs would be paid out by\nthe top-up policy.26Top-up policies come cheap and the cost of a single Rs. 10 lacs policy would be far\nhigher than the top-up policy of Rs. 10 lacs in excess of Rs. Three lacs.These covers are available on individual basis and family basis the top-up plan\nrequires the deductible amount to be crossed at every single event of\nhospitalization. However some top-up plans that allow the deductible to be crossed\npost a series of hospitalizations during the policy period are known as Aggregate\nbased high deductible plans or Super top-up cover as known in the Indian market. A\nsuper top-up plan covers the total of all hospitalisation bills (up to the super top-up\nplan limit) above the deductible amount, that is, the deductible is applied to the\ntotal claims in one year. Hence, once the deductible is paid, the plan becomes\nactive for subsequent claims.**E.** **Senior Citizen Policy**These plans are designed to offer cover to elderly people who often were denied\ncoverage after certain age (e.g. people over 60 years of age). The structure of the\ncoverage and exclusions are much like a hospitalization policy.Special attention is paid to diseases of the elderly in setting coverage and waiting\nperiod. Entry age is mostly after 60 years and renewable lifelong. Sum insured range\nfrom Rs. 50,000 to Rs. 5,00,000. There is variation of waiting period applicable to\ncertain ailments.Example: Cataract may have 1 year waiting for one insurer and 2 year waiting period\nfor some other insurer.Example: Sinusitis does not fall in waiting period clause of some insurers but few\nothers include it in their waiting period clause.Some policies have waiting periods or capping in respect of Pre-existing diseases.\nPre-post hospital expenses are either paid as a percentage of hospital claims or a\nsub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90 days.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of the\namount spent by him for the named treatment. In this product, commonly occurring\ntreatments are listed under segments such as ENT, Ophthalmology, Obstetrics and\nGynaecology, etc. and the maximum pay out for each of these is spelt out in the\npolicy.27These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a daily\ncash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find a\nplace in the list named in the policy. Multiple claims for different treatments are", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Individual Plan", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_016", "metadata": {"file_size": 4590, "chunk_index": 16, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Senior Citizen Policy", "Example", "Family Floater Plan", "Individual Plan"]}}
{"chunk": "sub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90 days.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of the\namount spent by him for the named treatment. In this product, commonly occurring\ntreatments are listed under segments such as ENT, Ophthalmology, Obstetrics and\nGynaecology, etc. and the maximum pay out for each of these is spelt out in the\npolicy.27These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a daily\ncash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find a\nplace in the list named in the policy. Multiple claims for different treatments are\npossible during the policy period. However the claims are finally limited by the sum\ninsured chosen under the policy.Some of the fixed benefit insurance plans are: Hospital daily cash insurance plans\n Critical illness insurance plans**1.** **HOSPITAL DAILY CASH POLICY****a)** **Per day amount limit**\nHospital cash coverage provides a fixed sum to the insured person for each day\nof hospitalization. Per day cash coverage could vary from (for example) Rs. 1,500\nper day to Rs. 5,000 or even more per day. An upper limit is provided on the\ndaily cash pay-out per illness as well as for the duration of the policy, which is\nusually an annual policy.**b)** **Number of payment days**\nIn some of the variants of this policy, the number of days of daily cash allowed\nis linked to the disease for which treatment is being taken. A detailed list of\ntreatments and duration of stay for each is stipulated which limits the daily cash\nbenefit allowed for each type of procedure/ illness.**c)** **Standalone cover or add-on cover**\nThe hospital daily cash policy is available as a standalone policy as offered by\nsome insurers while, in other cases, it is an add-on cover to a regular indemnity\npolicy. These policies help the insured to cover incidental expenses as the payout is a fixed sum and not related to the actual cost of treatment. This also\nallows the pay out under the policy to be provided in addition to any cover\nreceived under an indemnity based health insurance plan.**d)** **Supplementary cover**\nThese policies could supplement a regular hospital expenses policy as it is cost\neffective and provides compensation for incidental expenses and also expenses\nnot payable under the indemnity policy such as exclusions, co-pay etc.**e)** **Other advantages of the cover**From the insurer’s point of view, this plan has several advantages as it is easy\nto explain to a customer and hence can be sold more easily. It beats medical\ninflation as a fixed sum per day is paid for the duration of hospitalization\nwhatever may be the actual expense. Also, acceptance of such insurance covers\nand claims settlements are really simplified.28**2.** **CRITICAL ILLNESS POLICY**With advancement in medical science, people are surviving some of the major\ndiseases like cancer, strokes and heart attack etc., which in earlier times would\nhave resulted in death. However surviving a major illness entails huge expense for\ntreatment as well as for living expenses post treatment. Onset of critical illness\nthreatens the financial security of a person. A basic health insurance policy may not\nbe sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of large expenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated CI\nbenefit plan and standalone CI benefit plan. To avoid confusion, the definitions of\n22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.The critical illnesses covered vary across insurers and products. Generally 100% of\nthe sum insured is paid on diagnosis of a critical illness. In some cases compensation\ncould vary from 25% to 100% of sum insured depending on the policy terms and\nconditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to\nbecome payable under the policy and the survival clause of 30 days after diagnosis", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "F.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_017", "metadata": {"file_size": 4590, "chunk_index": 17, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Per day amount limit", "CRITICAL ILLNESS POLICY", "HOSPITAL DAILY CASH POLICY", "Standalone cover or add-on cover", "Supplementary cover"]}}
{"chunk": "treatment as well as for living expenses post treatment. Onset of critical illness\nthreatens the financial security of a person. A basic health insurance policy may not\nbe sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of large expenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated CI\nbenefit plan and standalone CI benefit plan. To avoid confusion, the definitions of\n22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.The critical illnesses covered vary across insurers and products. Generally 100% of\nthe sum insured is paid on diagnosis of a critical illness. In some cases compensation\ncould vary from 25% to 100% of sum insured depending on the policy terms and\nconditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to\nbecome payable under the policy and the survival clause of 30 days after diagnosis\nof the illness. Rigorous medical examinations are to be undergone for persons\nespecially over 45 years of age.The policy terminates, once compensation is paid under the policy in respect of any\nof the insured person. This policy is also offered to groups especially corporates who\ntake policies for their employees.**Disease Specific Products** - **Corona Kavach**In June 2020, when the country was facing many cases of Corona Virus infection\n(Covid-19), the market saw the introduction of many benefit based products\nproviding lump sum payment on the diagnosis of Covid-19 positive. Later some\ncompanies introduced indemnity based products too. However, there were many\nconsumables like PPE kits, Oximeter etc. and quarantine expenses that were not\ntaken care of in these products.IRDAI came up with two standard Health Insurance Policies called _Corona Kavach_\nand _Corona Rakshak (discussed separately under Life insurance section)_ . While it is\nmandatory for general and health insurers to provide _Corona Kavach_ as an\nindemnity-based standard COVID-19 product, _Corona Rakshak,_ offering the benefitbased product, is optional for all insurers. Both products have a waiting period of\n15 days.29_Corona Rakshak_ is a standard benefit based health insurance designed for providing\nlump sum benefit to insured individuals affected by COVID-19 and require\nhospitalisation for a minimum continuous period of 72 hours. The plan offers\ncoverage on individual basis for people between the age of 18 years and 65 years,\nwith different policy terms of 3.5months, 6.5 months and 9.5 months as a one-time\nbenefit policy and terminates upon the payment of benefit. _Corona Rakshak_ offers\nsum insured options ranging from Rs. 50,000 to Rs. 2.5 lakh, in multiples of\n50,000.The policy provides (i) complete sum insured benefit, (ii) economical\npremium, (iii) lump-sum amount of claim, (iv) a short waiting period of 15 days and\n(v) tax benefits.**Corona Kavach** offers the following coverage vide Guidelines issued by IRDAI in June\n2020:1. Hospitalization Expenses incurred for the treatment of Covid-19 on Positivediagnosis of Covid-19 in a government authorized diagnostic centre covering the\nfollowing: (Expenses on Hospitalization for a minimum period of 24 hours are\nadmissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgical appliances,ventilator charges, medicines and drugs, costs towards diagnostics,\ndiagnostic imaging modalities, PPE Kit, gloves, mask and such other similarexpenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up to maximum14 days per incident subject to the conditions (not exhaustive) mentioned\nbelow:\na. The Medical practitioner advices the Insured person to undergo treatment athome.\nb. There is a continuous monitoring of the health status by a medicalpractitioner for each day, including records of treatment administered.3. Other Expenses covered if prescribed by the treating medical practitioner andrelated to treatment of COVID,\na. Diagnostic tests undergone at home or at diagnostics centre", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "d-19", "section": "Disease Specific Products", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_018", "metadata": {"file_size": 4590, "chunk_index": 18, "chunk_tokens": 1008, "has_examples": false, "has_tables": false, "key_concepts": ["Corona Kavach", "Disease Specific Products"]}}
{"chunk": "admissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgical appliances,ventilator charges, medicines and drugs, costs towards diagnostics,\ndiagnostic imaging modalities, PPE Kit, gloves, mask and such other similarexpenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up to maximum14 days per incident subject to the conditions (not exhaustive) mentioned\nbelow:\na. The Medical practitioner advices the Insured person to undergo treatment athome.\nb. There is a continuous monitoring of the health status by a medicalpractitioner for each day, including records of treatment administered.3. Other Expenses covered if prescribed by the treating medical practitioner andrelated to treatment of COVID,\na. Diagnostic tests undergone at home or at diagnostics centre\nb. Medicines prescribed in writing\nc. Consultation charges of the medical practitioner\nd. Nursing charges related to medical staff\ne. Medical procedures limited to parenteral administration of medicines\nf. Cost of Pulse oximeter, Oxygen cylinder and Nebulizer30Additional Cover - Hospital Daily Cash: The Insurer will pay 0.5% of sum insured per\nday for each 24 hours of continuous hospitalization for treatment of Covid following\nan admissible hospitalization claim under this policy.**Standard Vector Borne Disease Health Policy:**IRDAI vide its Guidelines dated 3 February 2021 decided that Standard Products for\nvector borne diseases shall offer the following coverage:\n1. **Hospitalization Benefit:** Lump sum benefit equal to 100% of the Sum Insuredshall be payable on positive diagnosis of any of the following vector borne\ndisease (s) requiring hospitalization for a minimum continuous period of 72\nhours.\na) Dengue fever\nb) Malaria\nc) Filaria (Lymphatic Filariasis)\nd) Kala-azar\ne) Chikungunya\nf) Japanese Encephalitis\ng) Zika Virus2. **Diagnosis Cover:** 2% of the sum insured shall be payable on positive diagnosis(through laboratory examination and confirmed by the medical practitioner) of\nevery covered vector borne disease on the first diagnosis during the Cover\nPeriod, subject to policy terms and conditions. The Policyholder is entitled for\npayments under “diagnosis cover” payment for each disease only once in the\npolicy year.**G.** **Combo-products****Health plus Life Combo Products** offer the combination of a life insurance cover of\na Life Insurance Company and a health insurance cover offered by Non-Life and/ or\nStandalone Health Insurance Company.The product may be offered both as individual insurance policy and on group\ninsurance basis. However in respect of health insurance floater policies, the pure\nterm life insurance coverage is allowed on the life of one of the earning members\nof the family who is also the proposer on health insurance policy subject to insurable\ninterest and other applicable underwriting norms of respective insurers.**Package policies**Package or umbrella covers give, under a single document, a combination of covers.Examples of package policy in health insurance include combining Critical illness\ncover benefits with indemnity policies and even life insurance policies and hospital\ndaily cash benefits with indemnity policies.31**Travel Insurance:**Travel insurance policy is also offered as a package policy covering not only health\ninsurance but also accidental death/ disability benefits along with Medical expenses\ndue to illness/ accident and the coverages like Loss of or delay in arrival of checked\nin baggage, Loss of passport and documents, Third party liability for property/\npersonal damages, Cancellation of trips and even Hijack cover traditionally provided\nunder travel policies. (Details of Travel Insurance are provided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of low\nincome people from rural and informal sectors. It is a low value product, with an\naffordable premium and benefit package. Micro insurance is governed by the IRDA\nMicro Insurance Regulations, 2005.Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of society\nare Jan Arogya Bima Policy and Universal Health Scheme. The private sector\ninsurance companies have also come out with many innovative micro insurance\nhealth products to cater to this target segment like Bima Kavach Yojana, Grameena", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "m14", "section": "Standard Vector Borne Disease Health Policy:", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_019", "metadata": {"file_size": 4590, "chunk_index": 19, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Hospitalization Benefit:", "Diagnosis Cover:", "Travel Insurance:", "Health plus Life Combo Products", "Combo-products"]}}
{"chunk": "insurance but also accidental death/ disability benefits along with Medical expenses\ndue to illness/ accident and the coverages like Loss of or delay in arrival of checked\nin baggage, Loss of passport and documents, Third party liability for property/\npersonal damages, Cancellation of trips and even Hijack cover traditionally provided\nunder travel policies. (Details of Travel Insurance are provided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of low\nincome people from rural and informal sectors. It is a low value product, with an\naffordable premium and benefit package. Micro insurance is governed by the IRDA\nMicro Insurance Regulations, 2005.Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of society\nare Jan Arogya Bima Policy and Universal Health Scheme. The private sector\ninsurance companies have also come out with many innovative micro insurance\nhealth products to cater to this target segment like Bima Kavach Yojana, Grameena\nJeevan Raksha Plan, Bhaghya Laxmi - the entire list can be found on IRDAI website.**I.** **Rashtriya Swasthya Bima Yojana**The government has also launched various health schemes, some of them applicable\nto particular states. It had implemented the Rashtriya Swasthya Bima Yojana (RSBY)\nin association with insurance companies to provide health insurance coverage for\nthe below poverty line (BPL) families. However RSBY provided a Sum Insured of only\nRs 30,000 which was not considered enough to cover major surgeries/\nhospitalisation expenses.**J.** **Pradhan Mantri Jan Arogya Yojana**To address the shortcomings of RSBY, as recommended by the National Health Policy\n2017, the Government of India launched ‘Ayushman Bharat Scheme’ in 2017, a\nflagship scheme of to achieve the vision of Universal Health Coverage (UHC). Also\nknown as Pradhan Mantri Jan Arogya Yojana (PMJAY) Ayushman Bharat came with a\nSum Insured of Rs. 5,00,000.It subsumed the then existing Rashtriya Swasthya Bima Yojana (RSBY). PM-JAY is\nfully funded by the Government and cost of implementation is shared between the\nCentral and State Governments.**K.** **Pradhan Mantri Suraksha Bima Yojana**Features of the recently announced PMSBY covering personal accident death and\ndisability cover are as follows:\n**Scope of coverage:** All savings bank account holders in the age 18 to 70 years in\nparticipating banks are entitled to join through one savings bank account only and\nif he enrols in more than one bank, he gets no extra benefit and the extra premium\npaid will stand forfeited. Aadhaar would be the primary KYC for the bank account.32**Enrolment Modality/ Period** : The cover shall be for the one year period from 1 [st]\nJune to 31 [st] May for which option to join/ pay by auto-debit from the designated\nsavings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from the", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "H.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_020", "metadata": {"file_size": 4590, "chunk_index": 20, "chunk_tokens": 937, "has_examples": true, "has_tables": true, "key_concepts": ["Scope of coverage:", "Rashtriya Swasthya Bima Yojana", "Pradhan Mantri Jan Arogya Yojana", "Enrolment Modality/ Period", "Premium"]}}
{"chunk": "savings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from the\naccount holder’s savings bank account through ‘auto debit’ facility**Termination of cover** : The accident cover for the member shall terminate:1. On member attaining the age of 70 years (age nearest birth day) or2. Closure of account with the Bank or insufficiency of balance to keep theinsurance in force orIf the insurance cover is ceased due to any technical reasons such as insufficient\nbalance on due date or due to any administrative issues, the same can be reinstated\non receipt of full annual premium, subject to conditions that may be laid down.**L.** **Personal Accident and Disability cover**A **Personal Accident (PA) Cover** provides compensation due to death and disability\nin the event of unforeseen accident.In a PA policy,a) The death benefit is payment of 100% of the sum insured,b) In the event of disability, compensation varies from a fixed percentage of the\nsum insured in the case of permanent disabilityc) Weekly compensation for temporary disablement.Weekly compensation means payment of a fixed sum per week of disablement\nsubject to a maximum limit in terms of number of weeks for which the compensation\nwould be payable.**1.** **Types of disability covered**Types of disability which are normally covered under the policy are:**i.** **Permanent total disability (PTD):** means becoming totally disabled forlifetime viz. paralysis of all four limbs, comatose condition, loss of both\neyes/ both hands/ both limbs or one hand and one eye or one eye and one\nleg or one hand and one leg,33**ii.** **Permanent partial disability (PPD):** means becoming partially disabled forlifetime viz. loss of fingers, toes, phalanges etc.**iii.** **Temporary total disability (TTD):** means becoming totally disabled for atemporary period of time. This section of cover is intended to cover the loss\nof income during the disability period.The client has choice to select only death cover or death plus permanent\ndisablement of Or Death plus permanent disablement and also temporary total\ndisablement.**2.** **Sum insured**Sums insured for PA policies are usually decided on the basis of gross monthly\nincome. Typically, it is 60 times of the gross monthly income. However, some\ninsurers also offer on fixed plan basis without considering the income level. In such\npolicies sum insured for each section of cover varies as per the plan opted.**3.** **Personal Accident Insurance – a Benefit plan**Being a benefit plan, PA policies are not subject to the principle of ‘contribution’\nat the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on the\nbasis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out of\ndisability existing prior to the inception of policy, death or disability due to mental\ndisorders or any sickness, injury due to war, invasion, culpable homicide or murder,\nintentional self-injury, suicide, intake of drugs/ alcohol, injury while engaging in\ndefined extra hazardous activity like aviation or ballooning . This is an indicative", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "r2", "section": "Premium", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_021", "metadata": {"file_size": 4590, "chunk_index": 21, "chunk_tokens": 994, "has_examples": true, "has_tables": true, "key_concepts": ["Personal Accident and Disability cover", "Scope of cover", "Exclusions:", "Sum insured", "Permanent partial disability (PPD):"]}}
{"chunk": "at the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on the\nbasis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out of\ndisability existing prior to the inception of policy, death or disability due to mental\ndisorders or any sickness, injury due to war, invasion, culpable homicide or murder,\nintentional self-injury, suicide, intake of drugs/ alcohol, injury while engaging in\ndefined extra hazardous activity like aviation or ballooning . This is an indicative\nlist and can vary from company to company.PA policies are offered to individuals, family and also to groups.**Group Personal Accident Policies**Group Personal Accident Policies are usually annual policies with renewals being\nallowed on the anniversary. However, non-life and standalone health insurers may\noffer group personal accident products with term less than one year also to provide\ncoverage to specific events.**Broken bone policy and compensation for loss of daily activities**This is a specialised PA policy. This policy is designed to provide cover against listed\nfractures. Fixed benefit or percentage of sum insured mentioned against each\nfracture is paid at the time of claim. Quantum of benefit depends on the type of\nbone covered and nature of fracture sustained.34**M.** **Overseas Travel insurance****Need for the policy:** To cover expenses of accidental injury or hospitalisation whilst\ntravelling outside India for business, holidays or studies., The cost of medical care,\nespecially in countries such as USA and Canada, is very high and could cause major\nfinancial problems.**Scope of coverage**Such policies are primarily meant for accident and sickness benefits, but most\nproducts available in the market package a range of covers within one product.The usual covers offered are:**a) Medical and sickness section:**i. Accidental death/ disability\nii. Medical expenses due to illness/ accident\n**b) Repatriation and evacuation**\n**c) Personal accident cover**\n**d) Personal liability**\n**e) Other non-medical covers:**i. Trip Cancellation\nii. Trip Delay\niii. Trip interruption\niv. Missed Connection\nv. Delay of Checked Baggage\nvi. Loss of Checked Baggage\nvii. Loss of Passport\nviii. Emergency Cash Advance\nix. Hijack Allowance\nx. Bail Bond insurance\nxi. Hijack cover\nxii. Sponsor Protection\nxiii. Compassionate Visit\nxiv. Study Interruption\nxv. Home burglary**1.** **Types of plans**The popular policies are the Business and Holiday Plans, the Study Plans and the\nEmployment Plans.**2.** **Who can take the policy**An Indian citizen travelling abroad on business, holiday or for studies can avail this\npolicy. Employees of Indian employers sent on contracts abroad can also be covered.**3.** **Sum insured and premiums**The cover is granted in US Dollars and generally varies from USD 100,000 to USD\n500,000 for the section covering medical expenses, evacuation and repatriation. For\nother sections the Sum Insured is lower, except for the liability cover. Premiums\ncan be paid in Indian rupees except in the case of the employment plan where\npremium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada35 World-wide including USA/ CanadaSome products provide cover for a group of countries. Examples are travel to Asian\ncountries only, European countries only or travel to a particular country only.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies for\nits executives who frequently make trips outside India. This cover can also be taken\nby individuals who fly overseas many times during a year. An advance premium is\npaid based on the estimated man days of travel in a year by a company’s employees.\nThe above policies are granted only for business and holiday travels. Pre-existing\ndiseases are usually excluded for Overseas Medical/ Travel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "a35", "section": "Scope of cover", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_022", "metadata": {"file_size": 4590, "chunk_index": 22, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Scope of cover", "Exclusions:", "Overseas Travel insurance", "Need for the policy:", "Group Health cover"]}}
{"chunk": "can be paid in Indian rupees except in the case of the employment plan where\npremium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada35 World-wide including USA/ CanadaSome products provide cover for a group of countries. Examples are travel to Asian\ncountries only, European countries only or travel to a particular country only.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies for\nits executives who frequently make trips outside India. This cover can also be taken\nby individuals who fly overseas many times during a year. An advance premium is\npaid based on the estimated man days of travel in a year by a company’s employees.\nThe above policies are granted only for business and holiday travels. Pre-existing\ndiseases are usually excluded for Overseas Medical/ Travel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year\nrenewable contracts.**Features of group policies - Hospitalisation benefit covers.****1.** **Scope of coverage**The most common form of group health insurance is the policy taken by\nemployers covering employees and their families including dependent spouse,\nchildren and parents/ parents in law.**2.** **Tailor-made cover**Group policies are often tailor-made covers to suit the requirements of the\ngroup. Thus, in group policies, one will find several standard exclusions of the\nindividual policy being covered under the group policy.**3.** **Maternity cover**One of the most common extensions in a group policy is the maternity cover.\nMaternity cover would provide for the expenses incurred in hospitalization for\ndelivery of child and includes C- section delivery. This cover is generally\nrestricted to a certain amount within the overall sum insured of the family.**4.** **Child cover**Coverage is given to babies from day one, sometimes restricted to the\nmaternity cover limit and sometimes extended to include the full sum insured\nof the family.**5.** **Pre-existing diseases covered, waiting period waived off**Several of the usual exclusions, such as the pre-existing disease exclusion,\nthirty days waiting period, two years waiting period, congenital diseases may\nbe waived off, in tailor-made group policies.**6.** **Premium calculation**The premium charged for a group policy is based on the age profile of the\ngroup members, the size of the group and most importantly the claims\nexperience of the group.36**7.** **Non-employer employee groups**In India, regulatory provisions strictly prohibit formation of groups primarily\nfor the purpose of taking out a group insurance cover. When group policies\nare given to other than employers, it is important to determine the relation\nof the group owner to its members.**Example**A bank taking a policy for its saving bank account holders or credit card\nholders constitutes a homogenous group, whereby a large group is able to\nbenefit by a tailor-made policy designed to suit their requirements.**8.** **Pricing**In group policies, there is provision for discount on premium based on size of\nthe group as also the claims experience of the group**2.** **CORPORATE BUFFER OR FLOATER COVER**In most group policies, each family is covered for a defined sum insured, varying\nfrom Rs. One lac to five lacs and sometimes more. There arise situations where the\nsum insured of the family is exhausted, especially in the case of major illness of a\nfamily member. In such situations, if the buffer cover is opted for it brings relief,\nwhereby the excess expenses over and above the family sum insured are met from\nthis buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health check-up\npaid for by the insurer. There is incentive for better control of factors like blood\nglucose, blood pressure etc. in the form of reduced premiums from second year of\npolicy onwards. On the other hand, a higher premium would be chargeable for poor\ncontrol.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "a35", "section": "Corporate Frequent Flyer plans", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_023", "metadata": {"file_size": 4590, "chunk_index": 23, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Non-employer employee groups", "CORPORATE BUFFER OR FLOATER COVER", "Disease covers", "Child cover", "Tailor-made cover"]}}
{"chunk": "family member. In such situations, if the buffer cover is opted for it brings relief,\nwhereby the excess expenses over and above the family sum insured are met from\nthis buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health check-up\npaid for by the insurer. There is incentive for better control of factors like blood\nglucose, blood pressure etc. in the form of reduced premiums from second year of\npolicy onwards. On the other hand, a higher premium would be chargeable for poor\ncontrol.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up\nto 70 years. Sum Insured ranges from Rs. 50,000 to Rs. 5,00,000. Capping on Room\nrent is applicable. Product is aimed to cover hospitalization complications of\ndiabetes like diabetic retinopathy (eye), kidney, diabetic foot, kidney transplant\nincluding donor expenses.37**Test Yourself 1**Though the duration of cover for pre-hospitalization expenses would vary from\ninsurer to insurer and is defined in the policy, the most common cover is for\n________ pre-hospitalization.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty daysKey terms in health policies **(All the terms are as defined in IRDAI Master**\n**Circular on Standardization of Health Insurance Products dated 22.07.2020)****1.** **Network Provider**Network provider refers to a hospital/ nursing home/ day care centre which is under\ntie-up with an insurer/ TPA for providing cashless treatment to insured patients.\nPatients are free to go to out-of-network providers but there they are generally\ncharged much higher fees.**2.** **Preferred provider network (PPN)**An insurer has the option to create a preferred network of hospitals to ensure quality\ntreatment and at best rates. When this group is limited to only a select few by the\ninsurer based on experience, utilization and cost of providing care, preferred\nprovider networks get formed.**3.** **Cashless service**A cashless service enables the insured to avail of the treatment up to the limit of\ncover without any payment to the hospitals. All that the insured has to do is\napproach a network hospital and present his medical card as proof of insurance. The\ninsurer facilitates a cashless access to the health service and directly makes\npayment to the network provider for the admissible amount. However, the insured\nhas to make payment for amounts beyond the policy limits and for expenses not\npayable as per policy conditions.**4.** **Third Party Administrator (TPA)**A major development in the field of health insurance is the introduction of the third\nparty administrator or TPA. Several insurers across the world utilize the services of\nindependent organizations for managing health insurance claims. These agencies\nare known as the TPAs. In India, a TPA is engaged by an insurer for provision of\nhealth services which includes among other things:i. Providing an identity card to the policyholder which is proof of his insurancepolicy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards for\nhospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals\nor health service providers and ensure that any person who undergoes treatment in\nthe network hospitals is given a cashless service. They are the intermediaries38between the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "d-19", "section": "O.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_024", "metadata": {"file_size": 4590, "chunk_index": 24, "chunk_tokens": 942, "has_examples": false, "has_tables": false, "key_concepts": ["Hospital", "Network Provider", "Disease covers", "Test Yourself 1", "Special Products"]}}
{"chunk": "independent organizations for managing health insurance claims. These agencies\nare known as the TPAs. In India, a TPA is engaged by an insurer for provision of\nhealth services which includes among other things:i. Providing an identity card to the policyholder which is proof of his insurancepolicy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards for\nhospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals\nor health service providers and ensure that any person who undergoes treatment in\nthe network hospitals is given a cashless service. They are the intermediaries38between the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum\ncriteria as under:a) Has at least 10 inpatient beds in those towns having a population of less than10,00,000 and 15 inpatient beds in all other places;b) Has qualified nursing staff under its employment round the clock;c) Has qualified medical practitioner(s) in charge round the clock;d) Has a fully equipped operation theatre of its own where surgical proceduresare carried out;e) Maintains daily records of patients and will make these accessible to theInsurance Company’s authorized personnel.**6.** **Medical practitioner**A Medical practitioner is a person who holds a valid registration from the medical\ncouncil of any state of India or for homeopathy and is thereby entitled to practice\nmedicine within its jurisdiction; and is acting within the scope and jurisdiction of\nhis license. However, insurance companies are free to make a restriction that the\nregistered practitioner should not be the insured or any close family member. This\nis to ensure fraudulent claims are not lodged by taking treatment from relatives or\nby self or by hospitals owned by either.**Qualified nurse:** Qualified nurse means a person who holds a valid registration from\nthe Nursing Council of India or the Nursing Council of any state in India.**7.** **Reasonable and necessary expenses**A health insurance policy always contains this clause as the policy provides for\ncompensation of expenses that would be deemed to be reasonable for treatment of\na particular ailment and in a particular geographical area.**8.** **Notice of claim**Every insurance policy provides for immediate intimation of claim and specified\ntime limits for document submission. In health insurance policies, wherever cashless\nfacility is desired by the customer, intimations are given well before the\nhospitalization. However in cases of reimbursement claims the time limit for\nsubmission of claim documents is normally fixed at 15 days from the date of\ndischarge.**9.** **Free health check**In individual health policies, a provision is generally available to give some form of\nincentive to a claim free policyholder. Many policies provide for reimbursement of\nthe cost of health check-up at the end of four continuous, claim free policy periods.39**10.** **Cumulative bonus**A cumulative bonus is given on the sum insured for every claim free year. This means\nthat the sum insured gets increased on renewal by a fixed percentage say 5%\nannually and is allowed up to a maximum of 50% for ten claim-free renewals.\nMoreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second year,\nin case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs (5% more\nthan the previous year) at the same premium of Rs. 5,000. This could go up to Rs.\n4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or loading\nof premium is collected at renewal. However, in case of group policies, the malus\nis charged by way of loading the overall premium suitably to keep the claim ratio\nwithin reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year instead", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "s38", "section": "Hospital", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_025", "metadata": {"file_size": 4590, "chunk_index": 25, "chunk_tokens": 994, "has_examples": true, "has_tables": false, "key_concepts": ["Medical practitioner", "Reasonable and necessary expenses", "Hospital", "Notice of claim", "Cumulative bonus"]}}
{"chunk": "Moreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second year,\nin case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs (5% more\nthan the previous year) at the same premium of Rs. 5,000. This could go up to Rs.\n4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or loading\nof premium is collected at renewal. However, in case of group policies, the malus\nis charged by way of loading the overall premium suitably to keep the claim ratio\nwithin reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year instead\nof a bonus on sum insured.**13.** **Room rent restrictions**Some health plans place a restriction on the category of room that an insured\nchooses by linking it to the sum insured. Hence a person with a sum insured of one\nlac would be entitled to a room of Rs 1,000 per day if the policy has a room rent\nrestriction of 1% of sum insured per day.**14.** **Renewability clause**The IRDAI guidelines on renewability of health insurance policies makes lifetime\nguaranteed renewal of the health policies compulsory, except on grounds of fraud\nand misrepresentation. In accordance to the provisions of IRDAI Health Insurance\nRegulation 2016, once a proposal is accepted in respect of a health insurance policy\n(except Personal Accident and Travel Policies) and a policy is issued which is\nthereafter renewed periodically without any break, further renewal shall not be\ndenied on the grounds of age of the Insured. Thus, health insurance policies are\nrenewable lifelong.**15.** **Cancellation clause**An insurance company may at any time cancel the policy only on grounds of\nmisrepresentation, fraud, and non-disclosure of material fact or non-cooperation by\nthe insured.When policies are cancelled by the insurer, a proportion of the premium\ncorresponding to the unexpired period of insurance, is returned to the insured\nprovided no claim has been paid under the policy. This is usually on pro-rata basis.When annual policies are cancelled by the insured, insurers usually charge premiums\nat Short period scales, instead of pro-rata premiums. This would prevent antiselection against the insurers and take care of the initial expenses of the insurer.40**16.** **Grace period for renewal**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period.Most of above key clauses, definitions, exclusions relating to grace period have been\nstandardized under Health Regulations and Health Insurance Standardization\nGuidelines issued by IRDAI and updated from time to time.**Test Yourself 2**As per IRDA guidelines, a ________ grace period is allowed for renewal of individual\nhealth policies.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty days**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.41## CHAPTER H-04## HEALTH INSURANCE UNDERWRITING**Chapter Introduction**This chapter aims to provide you detailed knowledge about underwriting in health\ninsurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get an\nunderstanding about basic principles, tools, methods and process of underwriting.\nIt will also provide you the knowledge about group health insurance underwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten42**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "H-04", "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_026", "metadata": {"file_size": 4590, "chunk_index": 26, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Room rent restrictions", "Example", "Chapter Introduction"]}}
{"chunk": "insurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get an\nunderstanding about basic principles, tools, methods and process of underwriting.\nIt will also provide you the knowledge about group health insurance underwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten42**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his\nfamily health history, habits and so on.On receipt of his proposal form, he was also required to submit many documents\nsuch as identity and age proof, proof of address and previous medical records. Then\nthey told him to undergo a health check-up and some medical tests which frustrated\nhim.Manish, who considered himself a healthy person and with a good income level,\nstarted wondering why such a lengthy process was being followed by the insurance\ncompany in his case. Even after going through all this, the insurance company told\nhim that high cholesterol and high BP had been diagnosed in his medical tests, which\nincreased the chances of heart diseases later. Though they offered him a policy, the\npremium was much higher than what his friend had paid and so he refused to take\nthe policy.Here, the insurance company was following all these steps as part of their\nunderwriting process. While providing risk coverage, an insurer needs to evaluate\nrisks properly and also to make reasonable profit. If the risk is not assessed properly\nand there is a claim, it will result in a loss. Moreover, insurers collect premiums on\nbehalf of all insuring persons and have to handle these moneys like a trust.**A.** **What is underwriting?****1.** **Underwriting**\nInsurance companies try to insure people who are expected to pay adequate\npremium in proportion to the risk they bring to the insurance pool. This process of\ncollecting and analysing information from a proposer is known as underwriting. On\nthe basis of information collected through this process, they decide whether they\nwant to insure a proposer. If they decide to do so, then at what premium, terms\nand conditions so as to make a reasonable profit from taking such risk.**Definition****Underwriting** is the process of assessing the risk appropriately and deciding the\nterms on which the insurance cover is to be granted. Thus, it is a process of risk\nassessment and risk pricing.**2.** **Need for Underwriting**Underwriting is the backbone of an insurance company as acceptance of the risk\ncarelessly or for insufficient premiums will lead to insurer’s insolvency. On the other\nhand, being too selective or careful will prevent the insurance company from43creating a big pool so as to spread the risk uniformly. It is therefore critical to strike\nthe correct balance between risk and business, thereby being competitive and yet\nprofitable for the organization.This process of balancing is done by the underwriter, in accordance with the\nphilosophy, policies and risk hunger of the insurance company concerned. Although\nage affects the chance of sickness as well as death, it must be remembered that\nsickness usually comes much before death and could be frequent. Hence, it is quite\nlogical that the underwriting norms and guidelines are much tighter for health\ncoverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored as\nthere has to be an insurable interest and financial underwriting is important to rule\nout any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A life\ninsurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered carefully\nwhile assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young adults", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "n42", "section": "Learning Outcomes", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_027", "metadata": {"file_size": 4590, "chunk_index": 27, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["What is underwriting?", "Example", "Factors which affect chance of illness", "Learning Outcomes", "Look at this Scenario"]}}
{"chunk": "sickness usually comes much before death and could be frequent. Hence, it is quite\nlogical that the underwriting norms and guidelines are much tighter for health\ncoverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored as\nthere has to be an insurable interest and financial underwriting is important to rule\nout any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A life\ninsurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered carefully\nwhile assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young adults\ndue to increased risk of infections and accidents. Similarly, for adults beyond\nthe age of 45 years, the premiums are higher, as the probability of an\nindividual suffering from a chronic ailment like diabetes, a sudden heart\nailment or other such morbidity is much higher.\n**b)** **Gender:** Women are exposed to additional risk of illness during child bearingperiod. However, men are more likely to get affected by heart attacks than\nwomen or suffer job related accidents than women as they may be more\ninvolved in hazardous employment.\n**c)** **Habits:** Consumption of tobacco, alcohol or narcotics in any form has a directbearing on the morbidity risk.\n**d)** **Occupation:** Extra risk to accidents is possible in certain occupations, e.g.driver, blaster, aviator etc. Likewise, certain occupations may have higher\nhealth risks, like an X-Ray machine operator, asbestos industry workers,\nminers etc.44**e)** **Family history:** This has greater relevance, as genetic factors influencediseases like asthma, diabetes and certain cancers. This does impact the\nmorbidity and should be taken into consideration while accepting risk.\n**f)** **Build:** Stout, thin or average build may also be linked to morbidity in certaingroups.\n**g)** **Past illness or surgery:** It has to be ascertained whether the past illness hasany possibility of causing increased physical weakness or even recur and\naccordingly the policy terms should be decided. For e.g. kidney stones are\nknown to recur and similarly, cataract in one eye increases possibility of\ncataract in the other eye.\n**h)** **Current health status and other factors or complaints:** This is important toascertain the degree of risk and insurability and can be established by proper\ndisclosure and medical examination.\n**i)** **Environment and residence:** These also have a bearing on morbidity rates.**Understanding Moral Hazard in Health Insurance**While factors like age, gender, habits etc. refer to the physical hazard of a health\nrisk, there is something else that needs to be closely watched. This is the moral\nhazard of the client which can prove very costly to the insurance company.An extreme example of bad moral hazard is that of an insured taking health\ninsurance knowing that he will undergo a surgical operation within a short time but\nnot disclosing this to the insurer. There is thus a deliberate intention of taking\ninsurance just to collect a claim.**Test Yourself 1**Underwriting is the process of ___________.\nI. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks**Definition**The term **assessment of risks** refers to the process of evaluating each proposal for\nhealth insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.45**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance eagerly\nand to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there is\na chance that people with serious ailments like diabetes, high BP, heart problems\nor cancer, who knew that they would soon require hospitalization, would seek to", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Underwriting – Risk Assessment", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_028", "metadata": {"file_size": 4590, "chunk_index": 28, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Purposes of Underwriting", "Understanding Moral Hazard in Health Insurance", "Gender:", "Test Yourself 1", "Example"]}}
{"chunk": "insurance just to collect a claim.**Test Yourself 1**Underwriting is the process of ___________.\nI. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks**Definition**The term **assessment of risks** refers to the process of evaluating each proposal for\nhealth insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.45**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance eagerly\nand to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there is\na chance that people with serious ailments like diabetes, high BP, heart problems\nor cancer, who knew that they would soon require hospitalization, would seek to\nbuy health insurance, create losses for the insurer. In other words, if an insurer does\nnot assess risk properly, it would be selected against and suffer losses in the process.**2.** **Equity among risks**\nLet us now consider equity among risks. “Equity” means that applicants who are\nexposed to similar types and degrees of risk be placed in the same premium class.\nInsurers would like to have some type of standardization to determine the premiums\nto be charged. The proposals that come to the underwriter are classified into\nfollowing risk types:**i.** **Standard risks**\nThese are the people whose expected morbidity (chance of falling ill) is average.**ii.** **Preferred risks**\nIn some cases, the expected morbidity is significantly lower than average and\nhence are preferred risks. These could be charged a lower premium.**iii.** **Substandard risks**\nIn some other cases, the expected morbidity may be higher than the average.\nThough these risks also may be insurable, insurers may charge higher premiums\nand/or accept them subject to certain conditions and restrictions.**iv.** **Declined risks**There are some persons who have certain medical or other conditions, which\nmake them highly prone to sicknesses and making claims. It is highly probable\nthat such persons fall sick and cause a disproportionate degree of liability on\nthe common pool. In other words, while others in the pool have a more or less\naverage chance of falling sick, these persons have a very high chance of falling\nsick making it difficult to insure them even at higher rates of premium.[Sometimes, such persons may be posing a Moral Hazard when they do not reveal\ntheir high probability of falling sick and try to get insured like other normal\npeople.] Most insurers decline such risks and create a database of such people\nfor future use.Being a ‘Declined Risk’ means only that a particular insurer does not wish to\ninsure a person for that type of insurance product, at that particular point in\ntime. However, it is possible that another insurer might insure him/ her at a\ndifferent premium and/or with different conditions. The same insurer might also46consider him/ her for another type of policy or even for the same policy at a\nlater date, when the conditions change.**3.** **Underwriting process**The underwriting process takes place at two levels: At the primary or field level or\n At the underwriting department level**a)** **Primary Underwriting**Primary underwriting (or Field level underwriting) includes information gathering\nby an agent or company representative to decide whether an applicant is suitable\nfor granting insurance coverage. The agent plays this critical role of **primary**\n**underwriting** . He is in the best position to know whether prospective client is\ninsurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may also\nbe sought from an official of the insurance company. These reports typically\ncover the occupation, income and financial standing and reputation of the person\nproposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts disclosed\nby the proposer in the Proposal Form. It would be difficult for an underwriter\nsitting in the office to know whether these facts are true or have been\nfraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the agent", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "o46", "section": "Test Yourself 1", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_029", "metadata": {"file_size": 4590, "chunk_index": 29, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Equity among risks", "Purposes of Underwriting", "Substandard risks", "Moral Hazard report", "Test Yourself 1"]}}
{"chunk": "by an agent or company representative to decide whether an applicant is suitable\nfor granting insurance coverage. The agent plays this critical role of **primary**\n**underwriting** . He is in the best position to know whether prospective client is\ninsurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may also\nbe sought from an official of the insurance company. These reports typically\ncover the occupation, income and financial standing and reputation of the person\nproposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts disclosed\nby the proposer in the Proposal Form. It would be difficult for an underwriter\nsitting in the office to know whether these facts are true or have been\nfraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the agent\nhas direct personal contact with the proposer, he or she is in the best position to\nfind out whether the information submitted is true and whether any wilful nondisclosure or misrepresentation has been made.**a)** **Role of the Underwriting department**The Underwriting department in the insurer’s office does the major part of the\nunderwriting. Here, specialists who are proficient in such work, consider and\nanalyse all the relevant data on the particular risk and even some demographical\ndata. They finally decide whether to accept the proposal for insurance, decide\nthe terms, and charge the appropriate premiums.47**C.** **Other Health Insurance regulations of IRDAI**\nThe regulator has also brought in some changes for benefit of the Insured as given\nbelow.a. The insured is to be informed of any underwriting loading charged over andabove the premium and the specific consent of the policyholder for such loadings\nshall be obtained before issuance of a policy.\nb. If an insurance company requires any further information, such as change ofoccupation, at any subsequent stage of a policy or at the time of its renewal, it\nhas prescribed standard forms to be filled up by the insured which forms part of\nthe policy document.\nc. Insurers have come out with various mechanisms to reward policyholders forearly entry, continued renewals, favourable claims experience etc. with the\nsame insurer and disclose upfront such mechanism or incentives in the\nprospectus and the policy document.**D.** **Portability of Health Insurance**Portability is defined by IRDAI as **the right** accorded to individual health insurance\npolicyholders (including all members under family cover), **to transfer** the credit\ngained for pre-existing conditions and time bound exclusions, **from one insurer to**\n**another insurer or from one plan to another plan of the same insurer**, provided\nthe previous policy has been maintained without any break.Portability is the provision by which an Insured can move from one insurer to another\ncarrying with him/ her all the benefits earned over a period of time. Students may\nplease read IRDAI’s Consolidated Guidelines on Product filing in Health Insurance\nBusiness dated 22 July 2020 lays down norms for standardising many of the practices\nincluding Portability.IRDAI mandates that Portability shall be allowed under all individual indemnity\nhealth insurance policies issued by General Insurers and Health Insurers including\nfamily floater policies.However, porting can be done only at the time of renewal. Apart from the waiting\nperiod credit, other terms of the new policy including the premium would be\ndecided by the new insurance company. Procedurally, the request for porting should\nbe made by the insured to the old insurer at least 45 days before the renewal,\nspecifying the company to which the policy has to be ported. The policy has to be\nrenewed without a break (there is a 30 day grace period if porting is under process).\nIRDA has created a web-based facility that maintains data about all health insurance\npolicies issued by insurance companies to individuals, to enable the new insurer to\naccess and obtain data on the porting policyholder’s health insurance history in a\nsmooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance policyholders\n(including all members under family cover and members of group health insurance48policy), **to transfer** the credit gained for pre-existing conditions and time bound\nexclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business dated\n22 July 2020 revised the guidelines on Migration of health insurance policies. It\nprovides that every individual policyholder (including members under family floater", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "e48", "section": "Moral Hazard report", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_030", "metadata": {"file_size": 4590, "chunk_index": 30, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Other Health Insurance regulations of IRDAI", "Role of the Underwriting department", "Fraud monitoring role of Agent", "Migration of Health Insurance"]}}
{"chunk": "decided by the new insurance company. Procedurally, the request for porting should\nbe made by the insured to the old insurer at least 45 days before the renewal,\nspecifying the company to which the policy has to be ported. The policy has to be\nrenewed without a break (there is a 30 day grace period if porting is under process).\nIRDA has created a web-based facility that maintains data about all health insurance\npolicies issued by insurance companies to individuals, to enable the new insurer to\naccess and obtain data on the porting policyholder’s health insurance history in a\nsmooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance policyholders\n(including all members under family cover and members of group health insurance48policy), **to transfer** the credit gained for pre-existing conditions and time bound\nexclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business dated\n22 July 2020 revised the guidelines on Migration of health insurance policies. It\nprovides that every individual policyholder (including members under family floater\npolicy) covered under an indemnity based individual health insurance policy shall\nbe provided an option of migration at the explicit option exercised by the\npolicyholder. Migration from group policies to individual policy will be subject to\nunderwriting.A policyholder desirous of migrating his/ her policy shall be allowed to apply to the\ninsurance company to migrate the policy along with all members of the family, if\nany, at least 30 days before the premium renewal date of his/her existing policy.\nHowever, if the insurer is willing to consider even less than 30 days period, then the\ninsurer may do so. Insurers shall not levy any charges exclusively for migration.**F.** **Basic principles of insurance and tools for underwriting****1.** **Basic principles relevant to underwriting**In any form of insurance, whether it is life insurance or general insurance, there are\ncertain legal principles which operate along with acceptance of risks. Health\ninsurance is equally governed by these principles and any violation of the principles\nmay result in the insurer deciding to avoid the liability. (These principles have been\ndiscussed in the common chapters.)**2.** **Tools for underwriting**These are the sources of information for the underwriter and the basis on which the\nrisk classification is done and premiums finally decided. The following are the key\ntools for underwriting:**a)** **Proposal form**This document is the base of the contract where all the critical information\npertaining to the health and personal details of the proposer (i.e. age,\noccupation, build, habits, health status, income, premium payment details etc.)\nare collected. Any breach or concealment of information by the insured shall\nrender the policy void. (This has been discussed in the common chapters.)**b)** **Age proof**Premiums are determined on the basis of the age of the insured. Hence it is\nimperative that the age disclosed at the time of enrolment is verified through\nsubmission of an age proof.49**Example**\nIn India, there are many documents which can be considered as age proof but all of\nthem are not legally acceptable. Mostly valid documents are divided into two broad\ncategories. They are as follows:a) Standard age proof: Some of these include school certificate, passport,domicile certificate, PAN card etc.\nb) Non-standard age proof: Some of these include ration card, voter ID, elder’sdeclaration, gram panchayat certificate etc.**Financial documents**\nKnowing the financial status of the proposer is particularly relevant for benefit\nproducts and to reduce the moral hazard. However, normally the financial\ndocuments are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and usually\ndepends upon the age of the insured and sometimes on the amount of cover\nopted. Some replies in the proposal form may also contain some information\nthat leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive to\ngenerate more business, there is a conflict of interest which has to be watched\nout for.**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "e48", "section": "E.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_031", "metadata": {"file_size": 4590, "chunk_index": 31, "chunk_tokens": 985, "has_examples": true, "has_tables": false, "key_concepts": ["Basic principles relevant to underwriting", "Financial documents", "Reports of sales personnel", "Example", "Migration of Health Insurance"]}}
{"chunk": "Knowing the financial status of the proposer is particularly relevant for benefit\nproducts and to reduce the moral hazard. However, normally the financial\ndocuments are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and usually\ndepends upon the age of the insured and sometimes on the amount of cover\nopted. Some replies in the proposal form may also contain some information\nthat leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive to\ngenerate more business, there is a conflict of interest which has to be watched\nout for.**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.\nI. The insurerII. The insuredIII. Both the insurer and the insuredIV. The medical examiners**Test Yourself 3**Insurable interest refers to ____________.\nI. Financial interest of the person in the asset to be insured\nII. The asset which is already insured50III. Each insurer’s share of loss when more than one company covers the same loss\nIV. The amount of the loss that can be recovered from the insurer**G.** **Underwriting** **process**Once the required information is received, the underwriter decides the terms of the\npolicy. The common forms used for underwriting health insurance business are as\nbelow:**1.** **Medical underwriting**Medical underwriting is a process in which medical reports are called for from the\nproposer to determine the health status of an individual applying for health\ninsurance policy. The health information collected is then evaluated by the insurers\nto determine whether to offer coverage, up to what limit and on what conditions\nand exclusions. Thus medical underwriting can determine the acceptance or\ndeclining of a risk and also the terms of cover.**Example**Medical conditions like hypertension, overweight/ obesity and raised sugar levels\nhave a high probability of future hospitalization for diseases of the heart, kidney\nand the nervous system. So, these conditions should be carefully considered while\nassessing the risk for medical underwriting.Medical underwriting guidelines may also require a signed declaration of the\nproposer’s health status by his/ her family physician.Persons above the age of 45-50 years, enrolling for the first time are normally\nrequired to undergo specified pathological investigations to assess health risk profile\nand to obtain information on their current health status. Such investigations also\nprovide an indication of prevalence of any pre-existing medical conditions or\ndiseases.**2.** **Non-medical underwriting**Most of the proposers which apply for health insurance do not need medical\nexamination.Even, if the proposer were to disclose all material facts completely and truthfully\nand the same were checked by agent carefully, then also the need for medical\nexamination could be much less.**Example**\nIf an individual has to take health insurance coverage quickly without going through\na long process of medical examinations, waiting periods and processing delays, then\nhe can opt for a non-medical underwriting policy. In a non-medical underwriting51policy, premium rates and sum assured are usually decided on the basis of answers\nto a few health questions mostly based on age, gender, smoking class, build etc.\nThe process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practiced inall companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate. This\nbecomes an additional exclusion apart from the standard policy exclusion and shall", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "d50", "section": "Medical reports", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_032", "metadata": {"file_size": 4590, "chunk_index": 32, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Reports of sales personnel", "Non-medical underwriting", "Example", "Test Yourself 3", "Numerical rating method"]}}
{"chunk": "The process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practiced inall companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate. This\nbecomes an additional exclusion apart from the standard policy exclusion and shall\nform the part of the contract.**5.** **Use of general or standard exclusions**The majority of policies impose exclusions that apply to all their members. These\nare known as standard exclusions or sometimes referred to as general exclusions.\nInsurers limit their exposure by the implementation of standard exclusions. These\nhave been discussed in an earlier chapter.**6.** **Zone wise premium**Normally, the premium would depend on the age of the insured person and the sum\ninsured selected. Premium differential has been introduced in certain zones with\nhigher claims cost e.g. Delhi and Mumbai form part of highest premium zone for\ncertain products by some insurers. For e.g. Individual Policy for age group of 55-65\nyears would be rated higher in Metros and ‘A Class’ cities than a similar policy for\nthe same age bracket in a city like Indore or Jammu.52**Test Yourself 4**Which of the following statements about medical underwriting is incorrect?I. It involves high cost in collecting and assessing medical reports.\nII. Current health status and age are the key factors in medical underwriting forhealth insurance.\nIII. Proposers have to undergo medical and pathological investigations to assesstheir health risk profile.\nIV. Percentage assessment is made on each component of the risk.**H.** **Health Insurance at Group Level**While accepting a group for health insurance, the insurers take into consideration\nthe possibility of existence of a few members in the group who may have severe and\nfrequent health problems.**1.** **Group Health Insurance**Underwriting of group health insurance requires analysing the characteristics of the\ngroup to evaluate whether it falls within the insurance company’s underwriting\nguidelines as well as the guidelines laid down for group insurance by the insurance\nregulators.Standard underwriting process for group health insurance requires evaluating the\nproposed group on the following factors:a) Type of group\nb) Group size\nc) Type of industry\nd) Eligible persons for coverage\ne) Whether entire group is being covered or there is an option for members toopt out\nf) Level of coverage – whether uniform for all or differently\ng) Composition of the group in terms of sex, age, single or multiple locations,income levels of group members, employee turnover rate, whether premium\npaid entirely by the group holder or members are required to participate in\npremium payment\nh) Difference in healthcare costs across regions in case of multiple locationsspread in different geographical locations\ni) Preference of the group holder for administration of the group insurance bya third party administrator (of his choice or one selected by the insurer) or\nby the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore, the\ninsurer will price the group health insurance policy accordingly in both the cases.53Similarly to avoid adverse selection in case of groups with high turnover such as IT\ncompanies, insurers can introduce precautionary criteria requiring employees to\nserve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered group\nhealth insurance, the character of the group composition is one of the important\nconsideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Numerical rating method", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_033", "metadata": {"file_size": 4590, "chunk_index": 33, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Underwriting other than employer- employee groups", "Use of general or standard exclusions", "Test Yourself 4", "Health Insurance at Group Level", "Example"]}}
{"chunk": "i) Preference of the group holder for administration of the group insurance bya third party administrator (of his choice or one selected by the insurer) or\nby the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore, the\ninsurer will price the group health insurance policy accordingly in both the cases.53Similarly to avoid adverse selection in case of groups with high turnover such as IT\ncompanies, insurers can introduce precautionary criteria requiring employees to\nserve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered group\nhealth insurance, the character of the group composition is one of the important\nconsideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be\nadopted by insurers in dealing with various groups. Such non-employer groups\ninclude:a) Employer welfare associations\nb) Holders of credit cards issued by a specific company\nc) Customers of a particular business where insurance is offered as an add-onbenefit\nd) Borrowers of a bank and professional associations or societies**I.** **Underwriting of Overseas Travel Insurance**Since the main cover under Overseas Travel Insurance policies is the health cover,\nthe underwriting would follow the pattern for health insurance in general.The premium rating and acceptance would as per individual company guidelines but\na few important considerations are given below:1. Premium rate would depend on the age of the proposer and the duration offoreign travel.\n2. As medical treatment is costly overseas, the premium rates are normallymuch higher compared to domestic health insurance policies.\n3. Even among the foreign countries, USA and Canada premium is the highest.\n4. Care should be taken to rule out the possibility of a Proposer using the policyto take medical treatment abroad and hence the existence of any preexisting disease must be carefully considered at the proposal stage.**J.** **Underwriting of Personal Accident Insurance**The underwriting considerations for Personal Accident Policies are discussed below:**Rating**In personal accident insurance, the main factor considered is the occupation of the\ninsured. The risks associated with profession or occupation varies in accordance\nwith the nature of work performed. For example, an office manager is less exposed\nto risk at work than a civil engineer working at a site where a building is being\nconstructed. To fix a rate, occupations are classified into groups, each group\nreflecting, more or less, similar risk exposure.54**Classification of Risk**On the basis of occupation, the risks associated with the insured person may be\nclassified into three groups:**Risk group I**\nAccountants, Doctors, Lawyers, Architects and persons engaged in\nadministration functions, persons primarily engaged in occupations of similar\nhazards.**Risk group II**\nBuilders, Contractors and Engineers engaged in superintending functions and\npersons engaged in occupation of similar hazards. All persons engaged in manual\nlabour (except those falling under Group III),**Risk group III**\nPersons working in underground mines or engaged in activities like racing on\nwheels and persons engaged in occupations/ activities of similar hazard.\nRisk groups are also known in the form of ‘Normal’, ‘Medium’ and ‘High’\nrespectively.**Age Limits**General age limits for the working population (employer employee) is 1870.However for students Minimum age could be 5 years too.\nThe minimum and maximum age for being covered and renewed varies from\ncompany to company.**Family Package Cover**The Personal accident policy also has a family package cover wherein Children and\nNon-earning spouse are covered for to death and permanent disablement (total or\npartial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the purpose\nof availing of group discount and other benefits, the proposed “Group” should fall\nclearly under one of the following categories, given below:Employer – employee relationship including dependents of the employeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above\ncategories, they may be deliberated and decided upon by the technical department", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Example", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_034", "metadata": {"file_size": 4590, "chunk_index": 34, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Underwriting other than employer- employee groups", "Risk group II", "Group discount criteria", "Example"]}}
{"chunk": "The minimum and maximum age for being covered and renewed varies from\ncompany to company.**Family Package Cover**The Personal accident policy also has a family package cover wherein Children and\nNon-earning spouse are covered for to death and permanent disablement (total or\npartial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the purpose\nof availing of group discount and other benefits, the proposed “Group” should fall\nclearly under one of the following categories, given below:Employer – employee relationship including dependents of the employeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above\ncategories, they may be deliberated and decided upon by the technical department\nof the respective insurers.55**Premium**Varying rates of premium are applicable to named employees as per the\nclassification of risks and the benefits selected.**On-duty cover**PA policies may have a cover for both on-duty and off-duty period or for either\nseparately. The premium is dependent on the Sum Assured, the number of hours of\nduty etc. Some employers may like to restrict themselves to cover the duty period\nonly.**Exclusion of death cover**It is possible to issue group P.A. policies excluding the death benefit, subject to\nindividual company guidelines.**Group discount and Bonus/ Malus**Rating under renewal of group policies is determined with reference to the claims\nexperience.Favourable experience is rewarded with a discount in the renewal premium\n(bonus)Adverse experience is penalised by loading of renewal premium (malus),\naccording to a scaleNormal rates will apply for renewal if the claims experience is, say, 70 percent**Test Yourself 5**1) In a group health insurance, any of the individual constituting the group couldanti-select against the insurer.\n2) Group health insurance provides coverage only to employer-employee groups.\nI. Statement 1 is true and statement 2 is falseII. Statement 2 is true and statement 1 is falseIII. Statement 1 and statement 2 are trueIV. Statement 1 and statement 2 are false**Answers to Test Yourself****Answer 1** **-** The correct option is III.\n**Answer 2** **-** The correct option is III.\n**Answer 3** **-** The correct option is I.\n**Answer 4** **-** The correct option is IV.\n**Answer 5** **-** The correct option is IV.56## CHAPTER H-05## HEALTH INSURANCE CLAIMS**Chapter Introduction**In this chapter we will discuss about claim management process in Health Insurance,\nclaims related procedures and documentation. Apart from this, we will also look\ninto claims management under Personal Accident Insurance and understand the role\nof TPAs.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various stakeholders in insurance claims\nb) Describe how health insurance claims are managed\nc) Discuss the various documents required for settlement of health insuranceclaims\nd) Explain how reserves for claims are provided for by insurers.\ne) Discuss personal accident claims\nf) Understand the concept and role of TPAs57**A.** **Claims Management in Insurance**It is very well understood that insurance is a ‘ **promise’** and the policy is a ‘ **witness’**\nto that promise. The occurrence of an insured event leading to a claim under the\npolicy is the true test of that promise. How well an insurer performs is evaluated by\nhow well it keeps its claims promises. One of the key rating factors in insurance is\nthe claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before looking\nat how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the ‘payers<br>of the claims’. Even if the claims are met from the policy<br>holders’ funds, in most cases, it is they who are liable to keep<br>the promise.|\n|**Underwriters**|Underwriters within an insurance company and across all<br>insurers have the responsibility to understand the claims and<br>design the products, decide policy terms, conditions and pricing<br>etc.|", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "H-05", "section": "Family Package Cover", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_035", "metadata": {"file_size": 4590, "chunk_index": 35, "chunk_tokens": 1009, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Exclusion of death cover", "Group discount criteria", "Answer 5", "Premium"]}}
{"chunk": "to that promise. The occurrence of an insured event leading to a claim under the\npolicy is the true test of that promise. How well an insurer performs is evaluated by\nhow well it keeps its claims promises. One of the key rating factors in insurance is\nthe claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before looking\nat how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the ‘payers<br>of the claims’. Even if the claims are met from the policy<br>holders’ funds, in most cases, it is they who are liable to keep<br>the promise.|\n|**Underwriters**|Underwriters within an insurance company and across all<br>insurers have the responsibility to understand the claims and<br>design the products, decide policy terms, conditions and pricing<br>etc.|\n|**Regulator**|The regulator (Insurance Regulatory and Development Authority<br>of India) is a key stakeholder in its objective to:<br> Maintain order in the insurance environment<br> Protect policy holders’ interest<br> Ensure long term financial health of insurers.|58|Third Party<br>Administrators|Service intermediaries known as Third Party Administrators,<br>who process health insurance claims.|\n|---|---|\n|**Insurance**<br>**agents/**<br>**brokers**|Insurance agents/ brokers not only sell policies but are also<br>expected to service the customers in the event of a claim.<br>|\n|**Providers/**<br>**Hospitals**|~~They ensure that the customer gets a smooth claim experience,~~<br>especially when the hospital is on the panel of the TPA the<br>Insurer to provide cashless hospitalization.|Thus managing claims well means managing the objectives of the each of these\nstakeholders related to the claims. Of course, it may happen that some of these\nobjectives can conflict with each other.**Reserving:** In many cases, insurance companies may not be able to settle claims\ninstantly and may have to wait for information or the results of disputes, litigation\netc. So, they have to hold the claim amounts in reserve till the payments are due.\nReserves are usually are actuarial estimates of the amounts that will be paid on\noutstanding claims.Reserving refers to the amount of provision made for all claims in the books of the\ninsurer based on the status of the claims.**Test Yourself 1**Who among the following is not a stakeholder in Health insurance claim process?I. Customers\nII. Police Department\nIII. Regulator\nIV. TPA**B.** **Management of Health Insurance Claims****1.** **Claim process in health insurance**A claim may be serviced either by the insurance company itself or through the\nservices of a Third Party Administrator (TPA) authorized by the insurance company.From the time a claim is made known to the insurer/ TPA to the time the payment\nis made as per the policy terms, the health claim passes through a set of welldefined steps, each having its own relevance.The processes detailed below are in specific reference to health insurance\n(hospitalization) indemnity products which form the major part of health insurance\nbusiness.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.59**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)**a)** **Intimation**Claim intimation is the first instance of contact between the customer and theclaims team. The customer could inform the company that he is planning to avail\na hospitalization or the intimation would be made after the hospitalization has\ntaken place, especially in case of emergency admission to a hospital.60Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned\nadmission, and within 24 hours of hospitalization in case of an emergency.\nIntimation is now possible through Mobile Apps/ call centres run by insurers/", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Stakeholders in claim process", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_036", "metadata": {"file_size": 4590, "chunk_index": 36, "chunk_tokens": 979, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Reserving:", "Claim process broadly comprises following steps", "Owners", "Diagram 1:"]}}
{"chunk": "business.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.59**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)**a)** **Intimation**Claim intimation is the first instance of contact between the customer and theclaims team. The customer could inform the company that he is planning to avail\na hospitalization or the intimation would be made after the hospitalization has\ntaken place, especially in case of emergency admission to a hospital.60Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned\nadmission, and within 24 hours of hospitalization in case of an emergency.\nIntimation is now possible through Mobile Apps/ call centres run by insurers/\nTPAs open 24 hours as well as through the internet and e-mail.**b)** **Registration**Once the intimation is received by the company directly or through the TPA, the\ndetails thereof are matched for accuracy and a reference number or claim\ncontrol number generated and intimated to the claimant. The documents are\nthen scrutinized for prima facie coverage and pre-authorisation of likely\nexpenditure is given to the Hospital in case the intimation is of a planned surgery\nunder the Cash-less scheme (detailed in subsequent section).The claims that come for the final settlement on the reimbursement basis arescrutinized in detail about admissibility, sum assured, deductibles, sub-limits\netc. In case of deficiency in documents the same has to be communicated\ntogether, not in piecemeal. It is worth knowing that the claim processing\ninvolves not only ensuring that the terms of the contract have to be fulfilled,\nbut also in ensuring that the Hospitals do not indulge in overcharging, doublecharging etc.**Example**Hospitalization is typically associated with Allopathic method of treatment.\nHowever, the patient could undergo other modes of treatment such as: Unani\n Siddha\n Homeopathy\n Ayurveda\n Naturopathy etc.Most policies now include these treatments, however there could be sub-limits.**Telemedicine:** IRDAI has asked insurers to allow telemedicine wherever regular\nmedical consultation is allowed, in the terms and conditions of medical insurance\npolicies.This will help policy holders who may prefer to consult medical practitioners online\nor telephonically to avoid going out of their homes or if they are in quarantine\nthemselves due to the coronavirus infection.**Arriving at the final claim payable:** The factors that decide the claim amount\npayable are:a) Sum insured available for the member under the policyb) Balance sum insured available under the policy for the member after takinginto account any claim made already:61c) Sub-Limitsd) Check for any limits specific to illnesse) Check whether entitled or not to cumulative bonusf) Other expenses covered with limitation:What are finally paid are the Reasonable and Customary Charges meaning the\ncharges for services or supplies, which are the standard charges for the specific\nprovider and consistent with the prevailing charges in the geographical area for\nidentical or similar services, taking into account the nature of the illness/ injury\ninvolved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance Standardization Guidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by cheque\nor by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety of\nreasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_037", "metadata": {"file_size": 4590, "chunk_index": 37, "chunk_tokens": 993, "has_examples": true, "has_tables": false, "key_concepts": ["Denial of claims", "Arriving at the final claim payable:", "Claim process broadly comprises following steps", "Diagram 2:", "Example"]}}
{"chunk": "involved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance Standardization Guidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by cheque\nor by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety of\nreasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs\nviii. Hospitalization is less than 24 hours.Denial or repudiation of a claim (due to whatever reason) has to be informed to\nthe customer in writing by the insurance company. Usually, such denial letter\nclearly states the reason for denial, narrating the policy term/ condition on which\nthe claim was denied.Apart from the representation to the insurer, the customer has the option to\napproach the following in case of denial of claim: Insurance Ombudsman or The Consumer Commissions or IRDAI or Law courts.**e)** **Suspect claims require more detailed investigation by the companies/****TPAs**\nWherever the insurance company suspects foul-play it can get claims\ninvestigated. A few examples of frauds committed in health insurance are:62i. Impersonation, the person insured is different from person treated.\nii. Fabrication of documents to make a claim where there is no hospitalization.\niii. Inflation of expenses, either with the help of the hospital or by addition ofexternal bills fraudulently created.\niv. Outpatient treatment converted to in-patient/ hospitalization to cover costof diagnosis, which could be high in some conditions.It is to be noted that in respect of claims that need to be investigated,\ninvestigations shall be initiated and completed at the earliest, in any case not\nlater than 90 days from the date of receipt of claim intimation. The claim should\nbe settled within 30 days of completing the investigation. (Pl refer to IRDAI\n(Protection of policyholder’s), 2017 Regulations and updated accordingly)**f)** **Cashless settlement process by TPA**How does the cashless facility work? At the heart of this is an agreement that\nthe TPA insurer enters into, with the hospital. There are agreements possible\nwith other medical service providers as well. The process used for providing\ncashless facility are discussed in this section:|ble 3.1|Col2|\n|---|---|\n|**Step 1**| A customer covered under health insurance suffers from an illness or<br>sustains an injury and so is advised admission into a hospital. He/ she (or<br>someone on his/ her behalf) approaches the hospital’s insurance desk<br>with the insurance details such as:<br>i. TPA name,<br>ii. Customer’s membership number,<br>iii. Insurer’s name, etc.|\n|**Step 2**| The hospital compiles the necessary information such as:<br>i. Diagnosis of illness<br>ii. Treatment,<br>iii. Name of treating doctor,<br>iv. Number of days of proposed hospitalization and<br>v. The estimated cost<br> This is presented in a format, called the cashless authorization form.<br>|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could be<br>provided and if so, for how much amount it should be authorized and it<br>is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized by<br>the TPA as credit in the patient’s account. The member may be called on<br>to make a deposit payment to cover the non-treatment expenses and any<br>co-pay required under the policy.<br>|", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "l2", "section": "Payment of claim", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_038", "metadata": {"file_size": 4590, "chunk_index": 38, "chunk_tokens": 970, "has_examples": true, "has_tables": true, "key_concepts": ["Step 2", "Denial of claims", "Step 3", "Payment of claim", "Step 1"]}}
{"chunk": "|**Step 2**| The hospital compiles the necessary information such as:<br>i. Diagnosis of illness<br>ii. Treatment,<br>iii. Name of treating doctor,<br>iv. Number of days of proposed hospitalization and<br>v. The estimated cost<br> This is presented in a format, called the cashless authorization form.<br>|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could be<br>provided and if so, for how much amount it should be authorized and it<br>is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized by<br>the TPA as credit in the patient’s account. The member may be called on<br>to make a deposit payment to cover the non-treatment expenses and any<br>co-pay required under the policy.<br>|\n|**Step 5**|~~~~ When the patient is ready for discharge, the hospital checks the amount<br>of credit in the account of the patient approved by the TPA against the<br>actual treatment charges covered by insurance.<br> If the credit is less, the hospital requests for additional approval of credit<br>for the cashless treatment.<br> TPA analyses the same and approves the additional amount.<br>|\n|**Step 6**|~~~~ Patient pays the non-admissible charges and gets discharged. He will be<br>asked to sign the claim form and the bill, to complete the documentation.|63|Step 7| Hospital consolidates all the documents and presents to the TPA the<br>documents for processing of the bill|\n|---|---|\n|**Step 8**|~~~~ TPA will process the claim and recommend for payment to the hospital<br>after verifying details.|**g)** **Customer must make sure that he/ she has his/ her insurance details with****him/ her.**This includes his TPA card, Policy copy, Terms and conditions of cover etc.When these are not available, he can contact the TPA (through a 24 hour\nhelpline) and seek the details.i. Customer must check if the hospital suggested by his/ her consulting doctoris in the network of the TPA. If not, he needs to check with the TPA the\noptions available where cashless facility for such treatment is available.ii. He/ she needs to make sure that the correct details are entered into thepre-authorization form. This form has been standardized by IRDAI as per\nGuidelines on Standardization in Health Insurance issued in 2013. If the case\nis not clear, the TPA could deny the cashless facility or raise query.iii. He/ she needs to ensure that the hospital charges are consistent with thelimits such as room rent or caps on specified treatments such as cataract.iv. The customer must inform the TPA in advance of the discharge and requestthe hospital to send to the TPA any additional approval that may be required\nbefore discharge. This will ensure the patient does not wait unnecessarily at\nthe hospital.It is also possible that the customer requests and takes an approval for cashless\ntreatment at a hospital but decides to admit the patient elsewhere. In such\ncases, the customer must inform and ask the hospital to communicate to the\nTPA that the cashless approval is not being used.If this is not done, the amount approved could get blocked in the customer’s\npolicy and could prejudice the approval of the subsequent request.**C.** **Documentation in Health Insurance Claims**This section explains the need for and content of each of the documents required\nto be submitted by the customers:**1.** **Discharge summary**Discharge summary can be termed as the most important document that is required\nto process a health insurance claim. It details the complete information about the\ncondition of the patient and the line of treatment and helps the claim processing\nperson immensely to understand the illness/ injury and the line of treatment. Where\nthe patient unfortunately does not survive, the discharge summary is termed **Death**\n**Summary** in many hospitals. The discharge summary is always sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that64prompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the Xray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance policy.", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "t64", "section": "Step 2", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_039", "metadata": {"file_size": 4590, "chunk_index": 39, "chunk_tokens": 1010, "has_examples": false, "has_tables": true, "key_concepts": ["Step 2", "Death", "Discharge summary", "Step 6", "Documentation in Health Insurance Claims"]}}
{"chunk": "policy and could prejudice the approval of the subsequent request.**C.** **Documentation in Health Insurance Claims**This section explains the need for and content of each of the documents required\nto be submitted by the customers:**1.** **Discharge summary**Discharge summary can be termed as the most important document that is required\nto process a health insurance claim. It details the complete information about the\ncondition of the patient and the line of treatment and helps the claim processing\nperson immensely to understand the illness/ injury and the line of treatment. Where\nthe patient unfortunately does not survive, the discharge summary is termed **Death**\n**Summary** in many hospitals. The discharge summary is always sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that64prompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the Xray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance policy.\nWhile the consolidated bill presents the overall picture, the detailed bill will provide\nthe break up, with reference codes. The bills have to be received in original.**4.** **Receipt for payment**The reimbursement of a health insurance claim will also require the formal receipt\nfrom the hospital of the amount paid which must correspond to the total of the bill.The receipt should be numbered and or stamped and be presented in original.**5.** **Claim form**Claim form is the formal and legal request for processing the claim and is submitted\nin original signed by the customer. The claim form has now been standardized by\nIRDAI.Besides information on disease, treatment etc., the declaration the insured person\nmakes in the claim form is the most important document in the legal sense.**6.** **Identity proof**With the increasing use of identity proof across various activities in our life, the\ngeneral Proof of identity helps in verifying whether the person covered and the\nperson treated are one and the same. Usually identification document which is\nsought could be voters’ identity card, driving license, PAN card, Aadhaar card etc.**7.** **Documents contingent to specific claims**There are certain types of claims that require additional documents apart from what\nhas been stated above. These are:a) Accident claims, where FIR or Medico-legal certificate issued by the hospitalto the registered police station, may be required.b) Case indoor papers in case of complicated or high value claims.c) Dialysis/ Chemotherapy/ Physiotherapy charts where applicable.d) Hospital registration certificate, where the compliance with the definitionof hospital needs to be checked**Test Yourself 2**Which of the following document is maintained at the hospital detailing all\ntreatment done to an in-patient?I. Investigation reportII. Discharge summaryIII. Case paperIV. Hospital registration certificate65**Test Yourself 3**The amount of provision made for all claims in the books of the insurer based on\nthe status of the claims is known as ________.I. Pooling\nII. Accounting\nIII. Reserving\nIV. Investing**D.** **Role of Third Party Administrators (TPA)**The Role of TPA has been discussed in earlier chapters too. It is important to know\nthe services offered by TPA so that the customer can be provided suitable services\nby the salesperson.The scope of TPA services starts after the sale and issue of the insurance policy. In\ncase of insurers not using TPAs, the services are performed by in-house team.**1.** **Post sale service of health insurance**a) Once the proposal (and the premium) is accepted, the coverage commences.\nb) If a TPA is to be used for servicing the policy, the insurer passes on theinformation about the customer and the policy to the TPA.\nc) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as well asprocessing of claims when the member requires the support of the policy for\na hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the services withinthe time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospital basedon the information provided for requesting the cashless facility.", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "t64", "section": "C.", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_040", "metadata": {"file_size": 4590, "chunk_index": 40, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Death", "Discharge summary", "Documentation in Health Insurance Claims", "Investigation reports", "Claim form"]}}
{"chunk": "case of insurers not using TPAs, the services are performed by in-house team.**1.** **Post sale service of health insurance**a) Once the proposal (and the premium) is accepted, the coverage commences.\nb) If a TPA is to be used for servicing the policy, the insurer passes on theinformation about the customer and the policy to the TPA.\nc) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as well asprocessing of claims when the member requires the support of the policy for\na hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the services withinthe time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospital basedon the information provided for requesting the cashless facility.\nh) Where the information is not clear or not available, the TPA may reject thecashless request. In such cases the claim could be examined on\nreimbursement basis.**2.** **Customer relationship and contact management**Since TPAs are involved in claims servicing, they usually have a grievance redressal\nmechanism themselves.**E.** **Claims Management – Personal Accident**On receipt of the notification of the claim the following aspects should be looked\ninto:a) Person in respect of whom the claim is made is covered under the policy\nb) Policy is valid as on date of accident and premium has been received\nc) Loss is within the policy period66d) Loss has arisen out of “Accident” and not sickness\ne) Check for any fraud triggers and assign investigation if need be\nf) Register the claim and create reserve for the same\ng) Maintain the turnaround time (claim servicing time) and keep the customerinformed of the development of the claim.**1.** **Claims Investigation**Claims Investigation is about determining the validity of the claim and finding out\nthe real cause and extent of the loss. On receipt of the claim documents, if a claim\nappears suspicious, the claim may be assigned to an internal/ professional\ninvestigator for verification.**Example**Example of case guideline:\n**Road traffic accident**i. When did the incident take place – exact time and date place? Date and time\nii. Was the insured a pedestrian, traveling as passenger/ pillion rider or drivingthe vehicle involved in accident?**Some examples of possible fraud and leakage in personal accident claims:**i. Exaggeration in TTD period.\nii. Illness presented as accident e.g. backache due to pathological reasonsconverted into a PA claim after reported ‘fall/ slip’ at home\nDischarge voucher is an important document for settlement of personal accident\nclaim, especially those involving death claims. It is also important to obtain nominee\ndetails at the time of proposal and the same should form part of policy document.\n**2.** **Claim documentation- Each company gives a list**a) Duly completed Personal Accident claim form signed by the claimant’s\nnominee/ family member\nb) Original or Attested copy of First Information Report.\nc) Original or Attested copy of Death certificate.\nd) Attested copy of Post Mortem Report if conducted.\ne) Attested copy of AML documents (Anti-money laundering) - for name\nverification (passport/ PAN card/ Voter's ID/ Driving license) for address\nverification (Telephone bill/ Bank account statement, Electricity bill/ Ration\ncard).\nf) Legal heir certificate containing affidavit and indemnity bond both dulysigned by all legal heirs and notarized\ng) Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nh) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of exact\nleave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of the\ncase, especially the cases with suspected fraud angle to be investigated.67**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?\nI. Duly completed Personal Accident claim form signed by the claimant.\nII. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "d66", "section": "Post sale service of health insurance", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_041", "metadata": {"file_size": 4590, "chunk_index": 41, "chunk_tokens": 988, "has_examples": true, "has_tables": false, "key_concepts": ["Customer relationship and contact management", "Test Yourself 4", "Example", "Post sale service of health insurance", "Claims Investigation"]}}
{"chunk": "verification (passport/ PAN card/ Voter's ID/ Driving license) for address\nverification (Telephone bill/ Bank account statement, Electricity bill/ Ration\ncard).\nf) Legal heir certificate containing affidavit and indemnity bond both dulysigned by all legal heirs and notarized\ng) Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nh) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of exact\nleave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of the\ncase, especially the cases with suspected fraud angle to be investigated.67**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?\nI. Duly completed Personal Accident claim form signed by the claimant.\nII. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nIV. Fitness certificate from the treating doctor certifying that the insured is fit toperform his normal duties.**F.** **Claims Management- Overseas Travel Insurance**The coverage under this policy has already been discussed under the product\nchapter. This section tries to explain how the claims arising during overseas travel\nare handled.\n**Claims services essentially include:**a) Taking down the claim notification 24*7 basis;\nb) Sending the claim form and procedure;\nc) Guiding customer on what to do immediately after loss;\nd) Extending cashless services for medical and sickness claims;\ne) Arranging for repatriation and evacuation, emergency cash advance.\n**Assistance companies – Role in overseas claims**\nAssistance companies have their own offices and tie up arrangements with other\nsimilar service providers world over. These companies offer assistance to the\ncustomers of insurance companies in case of contingencies covered under the\npolicy.\nThese companies operate a 24*7 call centre including international toll free numbers\nfor claim registration and information. They also offer the following services and\ncharges for the services vary depending on agreement with the particular insurance\ncompany, benefits covered etc.a) Medical assistance services:\ni. Medical service provider referrals\nii. Arrangement of hospital admission\niii. Arrangement of Emergency Medical Evacuation\niv. Arrangement of Emergency Medical Repatriation\nv. Mortal remains repatriation\nvi. Compassionate visit arrangements\nvii. Minor children assistance/ escort\nb) Monitoring of Medical Condition during and after hospitalisation\nc) Delivery of Essential Medicines\nd) Guarantee of Medical Expenses Incurred during hospitalization subject to\nterms and condition of the policy and approval of insurance company.\ne) Pre-trip information services and other services:\ni. Visas and inoculation requirements\nii. Embassy referral services\niii. Lost passport and lost luggage assistance services\niv. Emergency message transmission services\nv. Bail bond arrangement\nvi. Financial Emergency Assistance68f) Interpreter Referral\ng) Legal Referral\nh) Appointment with lawyer\n**a)** **Hospitalization Procedures**i. Most hospitals accept Guarantee of Payments from all international insurancecompanies once the insured provides them with a valid health or overseas\ntravel insurance policy.ii. Hospitals start the treatment immediately. If there is insurance cover theinsurance policy pays or the patient person has to pay. The hospitals tend to\ninflate charges since payments are delayed.iii. Information regarding network hospitals and the procedures is available tothe insured on the toll free numbers provided by the assistance companies.iv. In event of the necessity of a hospitalization the insured needs to intimatethe same at the call centre and proceed to a specified hospital with the valid\ntravel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officer inIndia: Past history, current treatment and further planned course in hospitaland request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee (INR),", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "e68", "section": "Test Yourself 4", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_042", "metadata": {"file_size": 4590, "chunk_index": 42, "chunk_tokens": 994, "has_examples": false, "has_tables": false, "key_concepts": ["Assistance companies – Role in overseas claims", "Claims services essentially include:", "Test Yourself 4", "Hospitalization Procedures", "Claims Management- Overseas Travel Insurance"]}}
{"chunk": "travel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officer inIndia: Past history, current treatment and further planned course in hospitaland request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee (INR),\nunlike in cashless claims where payment is made in foreign currency.While processing the reimbursement claims, currency conversion rate is\napplied as on date of loss to arrive at quantum of liability in INR. Then the\npayment is made though cheque or electronic transfer.**c)** **Claim documentation for Medical Accident and Sickness Expenses**i. Claim formii. Doctor’s reportiii. Original Admission/ discharge card69iv. Original Bills/ Receipts/ Prescriptionv. Original X-ray reports/ Pathological/ Investigative reportsvi. Copy of passport/ Visa with Entry and exit stampThe above list is only indicative. Additional information/ documents may be\nrequired depending on specific case details or depending upon claim settlement\npolicy/ procedure followed by particular insurer.**Test Yourself 5**Most hospitals accept Guarantee of Payments from all international insurance\ncompanies once the insured provides them with a valid __________ Insurance policy.I. Legal Liability\nII. Corona RakshakIII. Overseas TravelIV. Endowment**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.\n**Answer 4** - The correct option is IV.\n**Answer 5** - The correct option is III.**Summary**a) Insurance is a ‘promise’ and the policy is a ‘witness’ to that promise. Theoccurrence of insured event leading to a claim under the policy is the true test\nof that promise.b) One of the key rating parameter in insurance is the claims paying ability of theinsurance company.c) Customers, who buys insurance is the primary stakeholder as well as the receiverof the claim.d) In Cashless claim a network hospital provides the medical services based on apre-approval from the insurer/ TPA and later submits the documents for\nsettlement of the claim.e) In reimbursement claim, the customer pays the hospital from his own resourcesand then files claim with Insurer/ TPA for payment.f) Claim intimation is the first instance of contact between the customer and theclaims team.g) If a fraud is suspected by insurance company in case of insurance claim, it issent for investigation. Investigation of a claim could be done in-house by an\ninsurer/ TPA or be entrusted to a professional investigation agency.h) Reserving refers to the amount of provision made for all claims in the books ofthe insurer based on the status of the claims.70i) In case of a denial, the customer has the option, apart from the representationto the insurer, to approach the Insurance Ombudsman or the consumer\nCommissions or even the legal authorities.j) Frauds occur mostly in hospitalization indemnity policies but Personal accidentpolicies also are used to make fraud claims.k) The TPA provides many important services to the insurer and gets remuneratedin the form of fees.71", "source_file": "Final IC-38 - Corporate Agent _Health_ English.md", "chapter": "t2", "section": "Reimbursement of medical expenses and other non-medical claims:", "chunk_id": "Final IC-38 - Corporate Agent _Health_ English_043", "metadata": {"file_size": 4590, "chunk_index": 43, "chunk_tokens": 809, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Test Yourself 5", "Answer 1"]}}
{"chunk": "## IC - 38 **INSURANCE AGENTS** **SECTION-HEALTH****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## INSURANCE AGENTS **SECTION-HEALTH** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nInsurance Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**HEALTH INSURANCE **|**HEALTH INSURANCE **|\n|H-01|Introduction to Health Insurance|2|\n|H-02|Health Insurance Documentation|9|\n|H-03|Health Insurance Products|16|\n|H-04|Health Insurance Underwriting|42|\n|H-05|Health Insurance Claims<br>|57|iv## SECTION## HEALTH SECTION1## CHAPTER H-01## INTRODUCTION TO HEALTH INSURANCE**Chapter Introduction**This chapter will tell you about how insurance evolved over time. It will also explain\nwhat healthcare is, levels of healthcare and types of healthcare. You will also learn\nabout the healthcare system in India and factors affecting it. Finally, it will explain\nhow health insurance evolved in India and also the various players in the health\ninsurance market in India.**Learning Outcomes**After studying this chapter, you should be able to:a) Understand how insurance evolved.\nb) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.2**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness of\nthe body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "C-46", "section": "INSURANCE AGENTS", "chunk_id": "IC 38 -IA- Eng-Health_000", "metadata": {"file_size": 4590, "chunk_index": 0, "chunk_tokens": 1003, "has_examples": true, "has_tables": true, "key_concepts": ["IC - 38", "INSURANCE AGENTS", "Chapter Introduction", "Understanding Healthcare", "India, Mumbai."]}}
{"chunk": "what healthcare is, levels of healthcare and types of healthcare. You will also learn\nabout the healthcare system in India and factors affecting it. Finally, it will explain\nhow health insurance evolved in India and also the various players in the health\ninsurance market in India.**Learning Outcomes**After studying this chapter, you should be able to:a) Understand how insurance evolved.\nb) Explain the concept of healthcare and the types and levels of healthcare.\nc) Appreciate the factors affecting healthcare in India and the progress madesince independence.\nd) Discuss the evolution of health insurance in India.\ne) Know the health insurance market in India.2**A.** **Understanding Healthcare**The word ‘Health’ was derived from the word ‘hoelth’, which means ‘soundness of\nthe body’.In olden days, health was considered to be a ‘Divine Gift’ and illness was believed\nto have been caused due to the sins committed by the concerned person. It was\nHippocrates (460 to 370 BC) who came up with the reasons behind illness. According\nto him, illness is caused due to various factors relating to environment, sanitation,\npersonal hygiene and diets. Vedic texts of ancient India speak about _‘Arogyame_\n_Mahabhagyam’_ meaning ‘Health is great luck’ or in other words, ‘Health is Wealth’.\nMany treatises of ancient India like _Atharva Veda, Charaka Samhita, Sushruta_\n_Samhita, Ashtangahrdayam, Ashtangasamgraha, Bhela Samhita_, and _Kashyapa_\n_Samhita_ discuss healing traditions practiced in India in olden times.**Definition**A widely accepted definition of health was given by World Health Organization\n(WHO) _–‘Health is a state of complete physical, mental and social wellbeing and_\n_not merely the absence of disease or infirmity.’_**Determinants of health**It is generally believed that the following factors determine the health of any\nindividual:**a)** **Lifestyle factors**Lifestyle factors are those which are mostly in the control of the individual\nconcerned e.g. exercising and eating within limits, avoiding worry and the like\nleading to good health; leading to diseases such as cancer, aids, hypertension\nand diabetes, to name a few.**b)** **Environmental factors**Communicable diseases like Influenza and Chickenpox etc. are spread due to\nbad hygiene, diseases like Malaria and Dengue are spread due to bad\nenvironmental sanitation, while certain diseases are also caused due to\nenvironmental factors.**c)** **Genetic factors**Diseases may be passed on from parents to children through genes. Such genetic\nfactors result in differing health trends amongst the population spread across\nthe globe based on race, geographical location and even communities.It is quite obvious that a country’s social and economic progress depends on the\nhealth of its people. This poses a question as to whether different types of\nhealthcare are required for different situations.3**Test Yourself 1**Which of the following diseases is not attributed to Lifestyle factors (i.e. not in the\ncontrol of the individual)?I. CancerII. AidsIII. Malaria\nIV. Hypertension**B.** **Levels of Healthcare**Healthcare is nothing but a set of services provided by various agencies and\nproviders including the government, to promote, maintain, monitor or restore\nhealth of people. Health care to be effective must be:Appropriate to the needs of the peopleComprehensiveAdequateEasily available- Affordable\nThe health care facilities should be based upon the probability of the incidence of\ndisease for the population. For example, a person may get fever, cold, cough, skin\nallergies etc. many times a year, but the probability of him/ her suffering from\nHepatitis B is less as compared to cold and cough.Hence, the need to set up the healthcare facilities in any area whether a village or\na district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres for", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Learning Outcomes", "chunk_id": "IC 38 -IA- Eng-Health_001", "metadata": {"file_size": 4590, "chunk_index": 1, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Environmental factors", "Determinants of health", "Genetic factors", "Test Yourself 1", "Understanding Healthcare"]}}
{"chunk": "The health care facilities should be based upon the probability of the incidence of\ndisease for the population. For example, a person may get fever, cold, cough, skin\nallergies etc. many times a year, but the probability of him/ her suffering from\nHepatitis B is less as compared to cold and cough.Hence, the need to set up the healthcare facilities in any area whether a village or\na district or a state will be based upon the various healthcare factors called\nindicators of that area such as: Size of population\n Death rate\n Sickness rate\n Disability rate\n Social and mental health of the people\n General nutritional status of the people\n Environmental factors such as if it is a mining area or an industrial area\n The possible health care provider system e.g. heart doctors may not bereadily available in a village but may be in a district town\n How much of the health care system is likely to be used\n Socio-economic factors such as affordabilityBased on the above factors, the government decides upon setting up of centres for\nprimary, secondary and tertiary health care and takes other measures to make\nappropriate healthcare affordable and accessible to the population.4**C.** **Types of Healthcare**Healthcare is broadly categorized as follows:**1.** **Primary healthcare**Primary health care refers to the services offered by the doctors, nurses and other\nsmall clinics which are contacted first by the patient for any sickness, that is to say\nthat primary healthcare provider is the first point of contact for all patients within\na health system.For example, if a person visits a doctor for fever and the first diagnosis is indicative\nof Dengue fever, the primary health care provider will prescribe some medicines\nbut also direct the patient to get admitted in a hospital for specialized treatment.At a country level, Primary Health care centres are set up both by Government and\nprivate players. Government primary health care centres are established depending\nupon the population size and are present right up to the village level in some form\nor the other.**2.** **Secondary healthcare**Secondary health care refers to the healthcare services provided by medical\nspecialists and other health professionals who generally do not have first contact\nwith patient. It includes acute care requiring treatment for a short period for a\nserious illness, often (but not necessarily) as an in-patient, including Intensive Care\nservices, ambulance facilities, pathology, diagnostic and other relevant medical\nservices.**3.** **Tertiary healthcare**Tertiary Health care is specialized consultative healthcare, usually for inpatients\nand on referral from primary/ secondary care providers.Examples of Tertiary Health care providers are those who have advanced medical\nfacilities and medical professionals, beyond the scope of secondary health care\nproviders e.g. Oncology (cancer treatment), Organ Transplant facilities, High risk\npregnancy specialists etc.It is to be noted that as the level of care increases, the expenses associated with\nthe care also increase. The infrastructure for different levels of care also varies\nfrom country to country, rural-urban areas, while socio-economic factors also\ninfluence the same.**Test Yourself 2**Which of the following are part of primary healthcare?I. FeverII. Cancer\nIII. Organ Transplant\nIV. High risk pregnancy5**D.** **Evolution of Health Insurance in India**While the government had been busy with its policy decisions on healthcare, it also\nput in place health insurance schemes. Insurance companies came with their health\ninsurance policies only later. Here is how health insurance developed in India:**1.** **Employees’ State Insurance Scheme**Health Insurance in India formally began with the beginning of the Employees’\nState Insurance Scheme, introduced vide the ESI Act, 1948, shortly after the\ncountry’s independence in 1947. This scheme was introduced for blue-collar\nworkers employed in the formal private sector and provides comprehensive\nhealth services through a network of its own dispensaries and hospitals.ESIC (Employees State Insurance Corporation) is the implementing agency which\nruns its own hospitals and dispensaries and also contracts public/ private\nproviders wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme (CGHS),\nwhich was introduced in 1954 for the central government employees including\npensioners and their family members working in civilian jobs. It aims to provide\ncomprehensive medical care to employees and their families and is partly\nfunded by the employees and largely by the employer (central government).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers before\nas well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and their", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "y5", "section": "C.", "chunk_id": "IC 38 -IA- Eng-Health_002", "metadata": {"file_size": 4590, "chunk_index": 2, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Secondary healthcare", "Employees’ State Insurance Scheme", "Central Government Health Scheme", "Evolution of Health Insurance in India", "Tertiary healthcare"]}}
{"chunk": "State Insurance Scheme, introduced vide the ESI Act, 1948, shortly after the\ncountry’s independence in 1947. This scheme was introduced for blue-collar\nworkers employed in the formal private sector and provides comprehensive\nhealth services through a network of its own dispensaries and hospitals.ESIC (Employees State Insurance Corporation) is the implementing agency which\nruns its own hospitals and dispensaries and also contracts public/ private\nproviders wherever its own facilities are inadequate.**2.** **Central Government Health Scheme**The ESIS was soon followed by the Central Government Health Scheme (CGHS),\nwhich was introduced in 1954 for the central government employees including\npensioners and their family members working in civilian jobs. It aims to provide\ncomprehensive medical care to employees and their families and is partly\nfunded by the employees and largely by the employer (central government).**3.** **Commercial Health insurance**Commercial health insurance was offered by some of the non-life insurers before\nas well as after nationalisation of insurance industry.\nIn 1986, the first standardised health insurance product for individuals and their\nfamilies was launched in the Indian market by all the four nationalized non-life\ninsurance companies (these were then the subsidiaries of the General Insurance\nCorporation of India). This product, **Mediclaim** was introduced to provide\ncoverage for the hospitalisation expenses up to a certain annual limit of\nindemnity with certain exclusions such as maternity, pre-existing diseases etc.\nThe hospitalization indemnity-based annual contract continues to be the most\npopular form of private health insurance in India today. With private players\ncoming into the insurance sector in 2001, health insurance has grown\ntremendously. However, there is a large untapped market even today.The Government has encouraged individuals to purchase Health Insurance\npolicies. Premiums paid by the individuals towards Health Insurance of self,\nspouse and family members are allowed to be deducted from taxable income\nunder Section 80 D of the Income Tax Act. The Section allows higher limits for\npaying premiums of parents/ parents in law above 60 years of age.Considerable variations in covers, exclusions and newer add-on covers have been\nintroduced which will be discussed in later chapters.6**Test Yourself 3**The first standardised health insurance product for individuals and their families\nwas launched in the Indian market by all the four nationalized non-life insurance\ncompanies in the year _____.I. 1948II. 1954III. 1986IV. 2001**E.** **Health Insurance Market**The health insurance market today consists of a number of players some providing\nthe health care facilities called providers, others the insurance services and also\nvarious intermediaries. Some form the basic infrastructure while others provide\nsupport facilities. Some are in the government sector while others are in the private\nsector.**1.** **Private sector Health Care providers**India has a very large private health sector providing all three types of healthcare\nservices - primary, secondary as well as tertiary. These range from voluntary, notfor-profit organisations and individuals to for-profit corporate, trusts, solo\npractitioners, stand-alone specialist services, diagnostic laboratories, pharmacy\nshops, and also the unqualified providers (quacks).India also has the largest number of qualified practitioners in other systems of\nMedicine (Ayurveda/ Siddha/ Unani/ Homeopathy) which is over 7 lakh\npractitioners. These are located in the public as well as the private sector. Apart\nfrom the for-profit private providers of health care, the NGOs and the voluntary\nsector have also been engaged in providing health care services to the community.**Insurance Companies** in the general insurance sector provide the bulk of the health\ninsurance services. Stand Alone Health Insurance (SAHI) Companies are allowed to\ntransact all types of Health Insurances, while Life Insurance Companies are also\npermitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance brokers,\nreinsurance brokers, insurance consultants, surveyors and loss assessors as well as\nThird Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:7a. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or both,\nas per the underlying terms and conditions of the respective policy and within", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Central Government Health Scheme", "chunk_id": "IC 38 -IA- Eng-Health_003", "metadata": {"file_size": 4590, "chunk_index": 3, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Health Insurance Market", "Central Government Health Scheme", "Private sector Health Care providers", "Test Yourself 3", "Commercial Health insurance"]}}
{"chunk": "insurance services. Stand Alone Health Insurance (SAHI) Companies are allowed to\ntransact all types of Health Insurances, while Life Insurance Companies are also\npermitted to transact certain types of Health Insurances.**2.** **Intermediaries:**A number of people and organizations providing services as part of the insurance\nindustry also form part of the health insurance market. Insurance Intermediaries\nare defined under Section 2 of the IRDA Act, 1999. These include insurance brokers,\nreinsurance brokers, insurance consultants, surveyors and loss assessors as well as\nThird Party Administrators.A Third Party Administrator (TPA) is a company registered with IRDAI and engaged\nby an insurer, for a fee, for providing health services. A TPA may render the\nfollowing services to an insurer under an agreement in connection with health\ninsurance business:7a. Servicing of claims under health insurance policies by way of pre authorizationof cashless treatment or settlement of claims other than cashless claims or both,\nas per the underlying terms and conditions of the respective policy and within\nthe framework of the guidelines issued by the insurers for settlement of claims.\nb. Servicing of claims for Hospitalization cover, if any, under Personal AccidentPolicy and domestic travel policy.\nc. Facilitating carrying out of pre-insurance medical examinations in connectionwith underwriting of the health insurance policies.**Summary**a) Insurance in some form or other existed many centuries ago but its modern formis only a few centuries old. Insurance in India has passed through many stages\nwith government regulation.b) Health of its citizens being very important, governments play a major role increating a suitable healthcare system.c) Level of healthcare provided depends on many factors relating to a country’spopulation.d) The three type of healthcare are primary, secondary and tertiary depending onthe level of medical attention required. Cost of healthcare rises with each level\nwith tertiary care being the costliest.\ne) India has its own peculiar challenges such as population growth and urbanizationwhich require proper healthcare.f) The public sector insurance companies were the first to come up with schemesfor health insurance followed later by commercial insurance by private\ninsurance companies.g) The health insurance market is made up of many players some providing theinfrastructure, with others providing insurance services, intermediaries such as\nbrokers, agents and third party administrators servicing health insurance\nbusiness and also other regulatory, educational as well as legal entities playing\ntheir role.**Answers to Test Yourself****Answer 1** The correct option is III.\n**Answer 2** The correct option is I.\n**Answer 3** The correct option is III.**Key terms**\na) Healthcare\nb) Commercial insurance\nc) Nationalization\nd) Primary, Secondary and Tertiary Healthcare\ne) Third Party Administrator8## CHAPTER H-02## HEALTH INSURANCE DOCUMENTATION**Chapter Introduction**In the insurance industry, we deal with a large number of forms, documents etc.\nThis chapter takes us through the documents and their importance in a health\ninsurance contract.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of proposal form.\nb) Describe the importance of Prospectus\nc) Explain terms and wordings in insurance policy document.\nd) Discuss policy conditions and warranties.\ne) Appreciate why endorsements are issued.\nf) Understand the premium receipt.\ng) Appreciate why renewal notices are issued.9**A.** **Proposal forms****1.** **Health Insurance Proposal forms**As discussed in the common chapters, the Proposal Form contains information which\nis useful for the insurance company to accept the risk offered for insurance. Given\nbelow are some of the details of the proposal form for a health insurance policy:1. The proposal form incorporates a prospectus which gives details of the cover, suchas coverage, exclusions, provisions etc. The prospectus forms part of the proposal\nform and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address, occupation,date of birth, sex, and relationship of each insured person with the proposer,\naverage monthly income and income tax PAN No., name and address of the Medical\nPractitioner, his qualifications and registration number. Bank details of the insured\nare also now a days collected to make payment of claim money directly through\nbank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "r8", "section": "Intermediaries:", "chunk_id": "IC 38 -IA- Eng-Health_004", "metadata": {"file_size": 4590, "chunk_index": 4, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Proposal forms", "Answer 3", "Chapter Introduction"]}}
{"chunk": "below are some of the details of the proposal form for a health insurance policy:1. The proposal form incorporates a prospectus which gives details of the cover, suchas coverage, exclusions, provisions etc. The prospectus forms part of the proposal\nform and the proposer has to sign it as having noted its contents.\n2. The proposal form collects information relating to the name, address, occupation,date of birth, sex, and relationship of each insured person with the proposer,\naverage monthly income and income tax PAN No., name and address of the Medical\nPractitioner, his qualifications and registration number. Bank details of the insured\nare also now a days collected to make payment of claim money directly through\nbank transfer.\n3. In addition, there are questions relating to the medical condition of the insuredperson. These detailed questions in the form are based on past claims experience\nand are to achieve proper underwriting of the risk.\n4. The insured person is required to state full details if he has suffered from any ofthe specified diseases in the form.\n5. Further, the details of any other illness or disease suffered or accident sustainedare called for as follows:\na. Nature of illness/ injury and treatment\nb. Date of first treatment\nc. Name and address of attending Doctor\nd. Whether fully recovered\n6. The proposer as to state any additional facts which should be disclosed to insurersand if he has any knowledge of any positive existence or presence of any illness or\ninjury which may require medical attention.\n7. The form also includes questions relating to past insurance and claims history andadditional present insurance with any other insurer.\n8. The special features of the declaration to be signed by the proposer must be noted.\n9. The insured person agrees and authorises the insurer to seek medical informationfrom any hospital/ medical practitioner who has at any time attended or may\nattend concerning any illness which affects his physical or mental health.\n10. The insured person confirms that he has read the prospectus forming part of theform and is willing to accept the terms and conditions.\n11. The declaration includes the usual warranty regarding the truth of the statementsand the proposal form as the basis of the contract.**2.** **Medical Questionnaire**In case of adverse medical history in the proposal form, the insured person has to\ncomplete a detailed questionnaire relating to diseases such as Diabetes, Hypertension,\nChest pain or Coronary Insufficiency or Myocardial Infarction.These have to be supported by a form completed by a consulting physician. This form\nis scrutinised by company’s panel doctor, based on whose opinion, acceptance,\nexclusion, etc. are decided.10**Standard form of Declaration**The IRDAI has specified the format of the standard declaration in the health\ninsurance proposal as under:1. I/ We hereby declare, on my behalf and on behalf of all persons proposed to beinsured, that the above statements, answers and/ or particulars given by me are\ntrue and complete in all respects to the best of my knowledge and that I/ We\nam/ are authorized to propose on behalf of these other persons.2. I understand that the information provided by me will form the basis of theinsurance policy, is subject to the Board approved underwriting policy of the\ninsurance company and that the policy will come into force only after full receipt\nof the premium chargeable.3. I/ We further declare that I/ we will notify in writing any change occurring in theoccupation or general health of the life to be insured/ proposer after the proposal\nhas been submitted but before communication of the risk acceptance by thecompany.4. I/ We declare and consent to the company seeking medical information from anydoctor or from a hospital who at any time has attended on the life to be insured/\nproposer or from any past or present employer concerning anything which affects\nthe physical or mental health of the life to be assured/ proposer and seeking\ninformation from any insurance company to which an application for insurance\non the life to be assured/ proposer has been made for the purpose of underwriting\nthe proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting and/\nor claims settlement and with any Governmental and/ or Regulatory Authority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal forms\nare designed to get information about the proposer’s health, way of life and habits,", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Medical Questionnaire", "chunk_id": "IC 38 -IA- Eng-Health_005", "metadata": {"file_size": 4590, "chunk_index": 5, "chunk_tokens": 985, "has_examples": false, "has_tables": false, "key_concepts": ["Standard form of Declaration", "Nature of questions in a proposal form", "Medical Questionnaire"]}}
{"chunk": "has been submitted but before communication of the risk acceptance by thecompany.4. I/ We declare and consent to the company seeking medical information from anydoctor or from a hospital who at any time has attended on the life to be insured/\nproposer or from any past or present employer concerning anything which affects\nthe physical or mental health of the life to be assured/ proposer and seeking\ninformation from any insurance company to which an application for insurance\non the life to be assured/ proposer has been made for the purpose of underwriting\nthe proposal and/ or claim settlement.5. I/ We authorize the company to share information pertaining to my proposalincluding the medical records for the sole purpose of proposal underwriting and/\nor claims settlement and with any Governmental and/ or Regulatory Authority.**3.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the type\nof insurance concerned. Sum insured indicates the limit of liability of the insurer\nunder the policy and has to be indicated in all proposal forms.In **personal lines** like health, personal accident and travel insurance, proposal forms\nare designed to get information about the proposer’s health, way of life and habits,\npre-existing health conditions, medical history, hereditary traits, past healthinsurance experience etc. along with the proposer’s profession, occupation or\nbusiness which important as they could have a material bearing on the risk.**Example 1** A delivery man of a fast-food restaurant, who has to frequently travel on motorbikes at a high speed to deliver food to his customers, may be more exposed to\naccidents than the accountant of the same restaurant. A person working in a coal mine or a cement plant may be exposed to dustparticles leading to lung ailments.11**Example 2** For the purpose of overseas travel insurance, the proposer is required to state(who is travelling, when, to which country, for what purpose) or For the purpose of health insurance, the proposer is asked about his/ her health\n(with person’s name, address and identification) etc. depending on the case.**Example 3** In case of health insurance, it could be the cost of hospital treatment, while forpersonal accident insurance this could be a fixed amount for loss of life, loss of\na limb, or loss of sight due to an accident.**a)** **Previous and Present insurance**The proposer is required to inform the details about his previous insurances to the\ninsurer. This is to understand his insurance history. In some markets there are\nsystems by which insurers confidentially share data about the insured.The proposer is also required to state whether any insurer had declined his proposal,\nimposed special conditions, required an increased premium at renewal or refused\nto renew or cancelled the policy. Details of current insurance with any other insurer\nincluding the names of the insurers are also required to be disclosed. Further, in\npersonal accident insurance an insurer would like to restrict the amount of coverage\n(sum insured) depending on the sum insured under other PA policies taken by the\nsame insured.**b)** **Claim Experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about the\nsubject matter of insurance and how the insured has managed the risk in the past.\nIt means the insurance company has a duty to record all the information received\neven orally, which the agent has to keep in mind by way of follow up.**B.** **Acceptance of the proposal (underwriting)**A completed proposal form broadly gives the following information: Details of the insured\n Details of the subject matter\n Type of cover required\n Details of the physical features both positive and negative\n Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the prospective\ncustomer e.g. above 45 years of age to a doctor and/ or for medical check-up. Based\non the information available in the proposal and, where medical check-up has been\nadvised, based on the medical report and the recommendation of the doctor, the\ninsurer takes the decision. Sometimes, where the medical history is not satisfactory,\nan additional questionnaire to get more information is also required to be obtained\nfrom the prospective client. The insurer then decides about the rate to be applied\nto the risk factor and calculates the premium based on various factors, which is\nthen conveyed to the insured.12**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the prospective\nbuyers of insurance. It is usually in the form of a brochure or leaflet or it can be in", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Nature of questions in a proposal form", "chunk_id": "IC 38 -IA- Eng-Health_006", "metadata": {"file_size": 4590, "chunk_index": 6, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Example 3", "Prospectus", "Previous and Present insurance", "Acceptance of the proposal (underwriting)", "Nature of questions in a proposal form"]}}
{"chunk": " Details of the subject matter\n Type of cover required\n Details of the physical features both positive and negative\n Previous history of insurance and claim experienceIn the case of a health insurance proposal, the insurer may also refer the prospective\ncustomer e.g. above 45 years of age to a doctor and/ or for medical check-up. Based\non the information available in the proposal and, where medical check-up has been\nadvised, based on the medical report and the recommendation of the doctor, the\ninsurer takes the decision. Sometimes, where the medical history is not satisfactory,\nan additional questionnaire to get more information is also required to be obtained\nfrom the prospective client. The insurer then decides about the rate to be applied\nto the risk factor and calculates the premium based on various factors, which is\nthen conveyed to the insured.12**C.** **Prospectus**A Prospectus is a document issued by the insurer or on its behalf to the prospective\nbuyers of insurance. It is usually in the form of a brochure or leaflet or it can be in\nelectronic form also and serves the purpose of introducing a product to such\nprospective buyers. Issue of prospectus is governed by the Insurance Act, 1938 as\nwell as by Protection of Policyholders’ Interest Regulations 2017 and the Health\nInsurance Regulations 2016 of the IRDAI. Insurers of Health policies usually publish\nProspectuses about their Health insurance products. The proposal form in such cases\nwould contain a declaration that the customer has read the Prospectus and agrees\nto it.As discussed in Chapter 4, Section 64 VB of the Insurance Act 1938 stipulates that\nPremiums have to be collected in advance. However, considering the need for\neasing the payment of health insurance premiums in view of conditions owing to\nCOVID-19 outbreak, IRDAI allowed insurers to collect premiums of individual health\ninsurance products in instalments. It was also mandated that Insurance companies\nwould announce the availability of the facility of payment of premiums in\ninstalments, and the conditions thereof, on their websites. This facility would be\noffered to all policyholders without any discrimination.**D.** **Policy Document**IRDAI Regulations for protecting policy holder’s interest act 2017 specified that a Health\nInsurance Policy document should contain:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter\nb) Full description of the persons or interest insured\nc) The sum insured under the policy person and/ or peril wise\nd) UIN of the product, name, code number, contact details of the personinvolved in sales process;\ne) Date of birth of the insured and corresponding age in completed years;\nf) The period of insurance and the date from which the policyholder has beencontinuously obtaining health insurance cover in India from any of the\ninsurers without break\ng) The sub-limits, Proportionate Deductions and the existence of Package ratesif any, with cross reference to the concerned policy section;\nh) Co-pay limits if any;\ni) The pre-existing disease (PED) waiting period, if applicable;\nj) Specific waiting periods as applicable;\nk) Deductible as applicable – general and specific, if any Perils covered andexclusions\nl) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium along with periodicity of\ninstalments if any\nm) Policy terms, conditions and warranties\nn) Action to be taken by the insured upon occurrence of a contingency likely togive rise to a claim under the policy13o) The obligations of the insured in relation to the subject-matter of insuranceupon occurrence of an event giving rise to a claim and the rights of the\ninsurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings. These\nare called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made or", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "D-19", "section": "C.", "chunk_id": "IC 38 -IA- Eng-Health_007", "metadata": {"file_size": 4590, "chunk_index": 7, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Prospectus", "EXAMPLES:", "Policy Document", "Conditions:"]}}
{"chunk": "insurer in the circumstances\np) Any special conditions\nq) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured\nr) The details of the Add-on covers, if any\ns) Details of Grievance Redressal mechanism and address of Ombudsman\nt) Details of Grievance Redressal mechanism of Insurer;\nu) Free-look period facility and portability conditions;\nv) Policy migration facility and conditions where applicable.**E.** **Conditions and Warranties**Here, it is important to explain two important terms used in policy wordings. These\nare called Conditions and Warranties.1. **Conditions:** A condition is a provision in an insurance contract which forms the\nbasis of the agreement.**EXAMPLES:****a.** **One of the standard conditions in most insurance policies states:**If the claim be in any respect fraudulent, or if any false declaration be made or\nused in support thereof or if any fraudulent means or devices are used by the\nInsured or any one acting on his behalf to obtain any benefit under the policy or\nif the loss or damage be occasioned by the wilful act, or with the connivance of\nthe Insured, all benefits under this policy shall be forfeited.**b.** **The Claim Intimation condition in a Health policy may state:**Claim must be filed within certain days from date of discharge from the Hospital.\nHowever, waiver of this Condition may be considered in extreme cases of\nhardship.A breach of condition makes the policy voidable at the option of the insurer.2. **Warranties:** A warranty is an agreement between insurer and insured that must\nbe carried out fully. It forms a part of the policy document. For example, the Insurer\nmay be covering the risk of a particular disease on the condition that the insured\nshall do a quarterly consultations with a specialist. In the above example, failure of\nthe insured to fulfil his part of the agreement shall either negate or reduce the\nliability in respect of that particular section/ warranty.Warranties must be observed and complied with strictly and literally, whether it is\nmaterial to the risk or not.**Test Yourself 1**Which of the below statement is correct with regards to a warranty?I. A warranty is a condition which is implied without being stated in the policy\nII. A warranty forms part of a policy document14III. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.**Endorsements in Health Insurance**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be changed at the time of issuance,\nit is done by setting out the amendments/ changes through a document called\nendorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nmake up the contract. Endorsements may also be issued during the currency of the policy\nto record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy relate to:a) Variations/ changes in sum insured\nb) Addition and deletion of insured family members\nc) Change of insurable interest by way of taking of a loan and mortgaging thepolicy to a bank.\nd) Extension of insurance to cover additional perils/ extension of policy period\ne) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of issuance,\nit is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.15## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product – Mediclaim\nto hundreds of products of different kinds, the customer has a wide range to choose\nappropriate cover. The chapter explains the features of various health products that\ncan cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance\nb) Describe the IRDAI guidelines on standardization in health insurance", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "t14", "section": "E.", "chunk_id": "IC 38 -IA- Eng-Health_008", "metadata": {"file_size": 4590, "chunk_index": 8, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Conditions and Warranties", "Warranties:", "Answers to Test Yourself", "Answer 2", "EXAMPLES:"]}}
{"chunk": "e) Change in risk, e.g. change of destinations in the case of an overseas travelpolicy\nf) Cancellation of insurance\ng) Change in name or address etc.**Test Yourself 2**If certain terms and conditions of the policy need to be modified at the time of issuance,\nit is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**Answers to Test Yourself****Answer 1** -The correct option is II.\n**Answer 2** - The correct option is II.15## CHAPTER H-03## HEALTH INSURANCE PRODUCTS**Chapter Introduction**This chapter will give you an overall insight into the various health insurance\nproducts offered by insurance companies in India. From just one product – Mediclaim\nto hundreds of products of different kinds, the customer has a wide range to choose\nappropriate cover. The chapter explains the features of various health products that\ncan cover individuals, family and group.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various classes of health insurance\nb) Describe the IRDAI guidelines on standardization in health insurance\nc) Discuss the various types of health products available in the Indian market today\nd) Explain Personal Accident insurance\ne) Discuss overseas travel insurance\nf) Understand key terms and clauses in health policies16**A.** **Classification of health insurance products****1.** **Introduction to health insurance products**“Health insurance business” is defined under Section 2(6C) of the Insurance Act,\n1938 as _“the effecting of contracts which provide for sickness benefits or medical,_\n_surgical or hospital expense benefits, whether in-patient or out-patient travel_\n_cover and personal accident cover.”_ IRDAI follows this definition of Health insurance\nbusiness.Health insurance products available in the Indian market are mostly in the nature\nof **hospitalization products.** These products cover the expenses incurred by an\nindividual during hospitalization.Therefore, health insurance is important mainly for two reasons: **Providing financial assistance to pay for medical facilities** in case of anyillness. **Preserving the savings of an individual** which may otherwise be wiped out dueto illness.Today, the health insurance segment has developed to a large extent, with hundreds\nof products offered by almost all general Insurance companies, standalone health\ninsurers and life insurers. However, the basic benefit structure of the Mediclaim\npolicy i.e. cover against hospitalization expenses still remains the most popular form\nof insurance.**2.** **Broad classification of health insurance products**Whatever be the product design, health insurance products can be broadly classified\ninto two categories:**a)** **Indemnity covers**These products constitute the bulk of the health insurance market and pay for\nactual medical expenses incurred due to hospitalization.**b)** **Fixed benefit covers**Also called as ‘hospital cash’, these products pay for a fixed sum per day for the\nperiod of hospitalization. Some products also provide for a pre-decided amount\nfor different surgeries.**3.** **Classification based on customer segment**Products can also be classified on the basis of the target customer segment.\nProducts classified based on customer segments are:a) **Individual cover** offered to retail customers and their family membersb) **Group cover** offered to corporate clients, covering employees and groups,covering their members17c) **Mass policies** for government schemes like/ Pradhan Mantri Jan Arogya Yojana/various State health insurance schemes covering very poor sections of the\npopulation.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought in\nHealth Regulations, 2016 regarding Health Products, some of which have been given\nbelow:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General-Insurersand Health-Insurers, can offer these products for policy tenure of 1 Year, but\nnot exceeding 5 Years. Group Health Policies can be offered by any insurer\nfor a term of one year except credit linked products where the term can be\nextended up to the loan period not exceeding five years.4. No Group Health Insurance Policy shall be issued where a Group is formedwith the main purpose of availing itself of insurance. The Group shall have a", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "H-03", "section": "Test Yourself 2", "chunk_id": "IC 38 -IA- Eng-Health_009", "metadata": {"file_size": 4590, "chunk_index": 9, "chunk_tokens": 1006, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Preserving the savings of an individual", "Answer 2", "Introduction to health insurance products", "Mass policies"]}}
{"chunk": "population.The benefit structures, pricing, underwriting and marketing for each segment are\nquite distinct.**Regulations for Health Insurance** : Some important changes have been brought in\nHealth Regulations, 2016 regarding Health Products, some of which have been given\nbelow:1. Life Insurance Companies can offer long term health products but thepremium for such products shall remain unchanged for at least a period of\nevery block of three years, thereafter the premium may be reviewed and\nmodified as necessary.2. Non-Life and Standalone Health insurance companies can offer individualhealth products with a minimum tenure of one year and a maximum tenure\nof three years, provided that the premium will remain unchanged for the\ntenure.3. Insurance companies may offer innovative ‘Pilot-Products’. General-Insurersand Health-Insurers, can offer these products for policy tenure of 1 Year, but\nnot exceeding 5 Years. Group Health Policies can be offered by any insurer\nfor a term of one year except credit linked products where the term can be\nextended up to the loan period not exceeding five years.4. No Group Health Insurance Policy shall be issued where a Group is formedwith the main purpose of availing itself of insurance. The Group shall have a\nsize as determined by the Insurer which shall be applicable for all its group\npolicies, subject to a minimum of 7.5. General Insurers and Health Insurers may also offer Credit Linked GroupPersonal Accident policies for a term extended up to the loan period not\nexceeding five years.6. Multiple policies –In case insured has taken health policies from more thanone insurance company which provide fixed benefits, each insurer shall make\nthe claim payment, on occurrence of an insured event, independent of\npayments received from other similar policies in accordance with the terms\nand conditions of the policies.If two or more policies are taken by an insured during a period from one or\nmore insurers to indemnify treatment costs, the policyholder shall have the\nright to ask for a settlement of his/ her claim in terms of any of his/ her\npolicies. The insurer on whom the claim is made shall make the claim\npayment and balance claim or claims disallowed under the earlier chosen\npolicy/ policies may be made from the other policy/ policies even if the sum\ninsured is not exhausted in the earlier chosen policy/ policies.18**B.** **IRDA Guidelines on Standardization in health insurance**With so many insurers providing numerous varied products and with different\ndefinitions of various terms and exclusions, confusion arose in the market. It became\ndifficult for the customer to compare products and take a considered decision.\nMoreover, in critical illness policies, there is no clear understanding as to what is\nmeant by critical illness and what is not.To remove the confusion among insurers, service providers, TPAs and hospitals and\nthe grievances of the insuring public, the regulator tried to provide some kind of\nstandardization in health insurance. Based on a common understanding, IRDA issued\nGuidelines on standardization in health insurance in 2016 which was further\namended in 2020. These are applicable to all General and Health Insurers offering\nindemnity based Health insurance (excluding PA and Domestic/ Overseas Travel)\nproducts (both Individual and Group)The guidelines now provide for standardization of:1. definitions of commonly used insurance terms\n2. definitions of critical illnesses\n3. list of optional items of expenses in hospitalization indemnity policies\n4. claim forms and pre-authorization forms\n5. billing formats\n6. discharge summary of hospitals\n7. standard contracts between TPAs, insurers and hospitals\n8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get recovery\nof medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical bill", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "s10", "section": "Regulations for Health Insurance", "chunk_id": "IC 38 -IA- Eng-Health_010", "metadata": {"file_size": 4590, "chunk_index": 10, "chunk_tokens": 1001, "has_examples": true, "has_tables": false, "key_concepts": ["Hospitalization indemnity", "Regulations for Health Insurance", "Example"]}}
{"chunk": "8. standard File and Use format for getting IRDAI for new policies\n9. Standardisation of exclusions10. Exclusions not allowed**C.** **Hospitalization indemnity** **product**Hospitalization indemnity products protect individuals from the expenditure they\nmay need to incur in the event of hospitalisation. In most of the cases, they also\ncover a specific number of days before and after hospitalisation, but exclude any\nexpenses not involving hospitalisation.Hospitalization indemnity policy popularly called Mediclaim operates on an\n**‘indemnity’ basis. It indemnifies the policyholder by covering the expenses**\nduring hospitalisation. **Some expenses that are not covered are specified in the**\n**policy document.****Example**Raghu has a small family consisting of his wife and a 14 year old son. He has taken\na Mediclaim policy, covering each member of his family, from a health insurance\ncompany, for an individual cover of Rs. 1 lakh each. Each of them could get recovery\nof medical expenses up to Rs. 1 lakh in case of hospitalization.Raghu was hospitalized due to heart attack and required surgery. The medical bill\nraised was Rs. 1.25 lakhs. The insurance company paid Rs 1 lakh according to the\nplan coverage and Raghu had to pay the remaining amount of Rs. 25,000 from his\nown pocket19The main features of the indemnity based Mediclaim policy are detailed below,\n**though variations in limits of cover, additional exclusions or benefits or some**\n**add-ons may apply to products marketed by each insurer** .**1.** **Inpatient hospitalization expenses**The policy pays the insured the cost of hospitalization expenses incurred on\naccount of illness/ accident. The policy has a minimum prescribed period of\nhospitalization (generally 24 hours) after which the policy provisions come into\nforce. However once this period is reached then the expenses for the entire\nperiod become payable.Most of the expenses related with the treatment are paid, yet certain expenses that\nincludes items of personal comfort, cosmetic surgeries are not. It is therefore\nimportant for the customer to be made aware of the excluded items of expenses\nthat are not covered under the policy.i. Room, boarding and nursing expenses as provided by the hospital/ nursinghome. This includes nursing care, RMO charges, IV fluids/ blood transfusion/\ninjection administration charges and similar expensesii. Intensive Care Unit (ICU) expensesiii. Surgeon, anaesthetist, medical practitioner, consultants, specialists feesiv. Anaesthetic, blood, oxygen, operation theatre charges, surgical appliances,v. Medicines and drugs,vi. Dialysis, chemotherapy, radiotherapyvii. Cost of prosthetic devices implanted during surgical procedure likepacemaker, orthopaedic implants, infra cardiac valve replacements,\nvascular stentsviii.Relevant laboratory/ diagnostic tests and other medical expenses related tothe treatmentix. Hospitalization expenses (excluding cost of organ) incurred on donor inrespect of organ transplant to the insured.**2.** **Day Care Procedures**There are many surgeries that do not require can be conducted at specialized\nhospitals. Treatments such as eye surgeries, chemotherapy; dialysis etc. can be\nclassified under day-care surgeries and the list is ever growing. These are also\ncovered under the policy.**3.** **OPD cover**Coverage of outpatient expenses is still very limited in India, with few such products\noffering OPD covers. However there are some plans that provide cover treatment\nas outpatient and also related health care expenses associated with doctor visits,\nregular medical tests, dental and pharmacy costs.20**4.** **Pre and post hospitalization expenses****i.** **Pre hospitalization expenses**Hospitalization could be either emergency hospitalization or planned. If a\npatient goes in for a planned surgery, there would be expenses incurred by him\nprior to the hospitalization. Such expenses are known as Pre hospitalisationexpenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized anda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissible bythe Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "s10", "section": "C.", "chunk_id": "IC 38 -IA- Eng-Health_011", "metadata": {"file_size": 4590, "chunk_index": 11, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Day Care Procedures", "Hospitalization indemnity", "Example", "Inpatient hospitalization expenses", "Post hospitalization expenses"]}}
{"chunk": "regular medical tests, dental and pharmacy costs.20**4.** **Pre and post hospitalization expenses****i.** **Pre hospitalization expenses**Hospitalization could be either emergency hospitalization or planned. If a\npatient goes in for a planned surgery, there would be expenses incurred by him\nprior to the hospitalization. Such expenses are known as Pre hospitalisationexpenses**Definition**It means medical expenses incurred during a predefined number of days\npreceding the hospitalization of the Insured Person, provided that these\nexpenses are incurred immediately before the insured person is hospitalized anda) Such Medical Expenses are incurred for the same condition for which theInsured Person’s Hospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissible bythe Insurance Company.\nPre hospitalization expenses could be in the form of tests, medicines,\ndoctors’ fees etc. Such expenses relevant and pertaining to the\nhospitalization are covered under the health policies.**ii.** **Post hospitalization expenses**After stay in the hospital, in most cases there would be expenses related to\nrecovery and follow-up immediately after the insured is discharged from\nhospital.Both these two types of expenses are admissible if\na) They are incurred for the same condition for which the Insured Person’sHospitalization was required, and\nb) The In-patient Hospitalization claim for such Hospitalization is admissible bythe Insurance Company.\nPost hospitalization expenses would be relevant medical expenses incurred\nduring period up to the defined number of days after hospitalization and will be\nconsidered as part of claim.\nPost hospitalization expenses could be in the form of medicines, drugs, review\nby doctors etc. after discharge from hospital. Such expenses have to be related\nto the treatment taken in hospital and are covered under the health policies.Though the duration of cover for pre and post hospitalization expenses would\nvary from insurer to insurer and is defined in the policy, the most common cover\nis for **thirty days pre and sixty days post hospitalization** .Pre and post-hospitalization expenses form part of the overall sum insured for\nwhich cover is granted under the policy.**iii.** **Domiciliary Hospitalization**\n**iv.** There is also a benefit available for patients whose illness otherwise needshospitalisation but avail treatment at home either for accommodation in\nhospitals or in a position that they cannot be moved to a hospital.21To prevent misuse of the provision, this cover usually carries an **excess clause**\n**of three to five days** meaning that treatment costs for the first three to five\ndays have to be borne by the insured. The cover excludes domiciliary treatments\nfor certain chronic or common ailments such as Asthma, Bronchitis, Diabetes\nMellitus, Hypertension, Influenza Cough, Cold, and fevers etc.**Example**Mira had taken a health insurance policy for coverage of expenses in the event of\nhospitalisation. The policy had a clause for initial waiting period of 30 days.\nUnfortunately, 20 days after she took the policy, Mira contracted malaria and was\nhospitalised for 5 days. She had to pay heavy hospital bills.When she asked for reimbursement from the insurance company, they denied\npayment of the claim because the event of hospitalization occurred within the\nwaiting period of 30 days from taking the policy.**a)** **COVERAGE OPTIONS AVAILABLE****i.** **Individual coverage:** An individual insured can cover himself along with familymembers such as spouse, dependent children, dependent parents, dependent\nparents in law, dependent siblings etc. Some insurers do not have a restriction\non the dependents who can be covered. It is possible to cover each of such\ndependent insured’s under a single policy with a separate sum insured chosen\nfor each insured person. In such covers, each person insured under the policy\ncan claim up to the maximum amount of his sum insured during the currency of\nthe policy. Premium will be charged for each individual insured according to his\nage and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered a\nsingle sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during the\npolicy period, it will pay for claims related to more than one family member or\nmultiple claims of a single member of the family. All these together cannot exceed\nthe total coverage of Rs. 5 lacs. Premium will normally be charged based on the age\nof the oldest member of the family proposed for insuranceThe covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets coverage", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Pre and post hospitalization expenses", "chunk_id": "IC 38 -IA- Eng-Health_012", "metadata": {"file_size": 4590, "chunk_index": 12, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["COVERAGE OPTIONS AVAILABLE", "Example", "Individual coverage:", "Domiciliary Hospitalization", "Post hospitalization expenses"]}}
{"chunk": "dependent insured’s under a single policy with a separate sum insured chosen\nfor each insured person. In such covers, each person insured under the policy\ncan claim up to the maximum amount of his sum insured during the currency of\nthe policy. Premium will be charged for each individual insured according to his\nage and sum insured chosen and any other rating factor.**ii.** **Family floater:** In the variant known as a family floater policy, the familyconsisting of spouse, dependent children and dependent parents are offered a\nsingle sum insured which floats over the entire family.\n**Example**\nIf a floater policy of Rs. 5 lacs is taken for a family of four, it means that during the\npolicy period, it will pay for claims related to more than one family member or\nmultiple claims of a single member of the family. All these together cannot exceed\nthe total coverage of Rs. 5 lacs. Premium will normally be charged based on the age\nof the oldest member of the family proposed for insuranceThe covers and exclusions under both these policies would be the same. Family\nfloater policies are getting popular in the market as the entire family gets coverage\nfor an overall sum insured which can be chosen at a higher level at a reasonable\npremium.**Pre-Existing diseases**\nInsurance is designed to cover accidents/ diseases etc. that happen unexpectedly.\nCovering the costs of treating existing medical conditions is not part of insurance,\nas it is unfair to healthy people who would have to pay for the existing illnesses of22some others. It goes against the principle of creating risk pools covering similarly\nplaced risks. So, it is very important to collect details of the existing ailments/\ninjuries of each insured person before issuing a health policy. This will enable the\ninsurer to decide on accepting the proposal for insurance, charging proper premiums\nand/ or providing additional conditions for those who are more likely to make\nclaims.**What is a pre-existing disease?**\nDiseases suffered by an insured person within 48 months prior to commencement of\nthe policy are regarded as pre-existing diseases. Based on the same logic, insurers\nare not allowed to exclude pre-existing diseases after a person is covered for\ninsurance continuously for 48 months.**Renewability:** Although Healthcare policies have a contract life of one year, and a\nfresh policy is to be issued every year, Lifelong renewability has been made\ncompulsory by IRDAI for all policies.**SPECIAL FEATURES**In order to provide new features in the product as also to maintain the pricing,\ninsurance companies have come out innovative modifications in the products. For\nexample, the Mediclaim Policy, which was the most popular policy before 2000, has\nundergone many changes and new special features have been added to the\ncoverage. Some features have been added to the basic indemnity cover. These\nfeatures may vary from insurer to insurer and product to product and may not be\navailable uniformly for all products.**i.** **Sub limits and Disease specific capping**Some of the products have disease specific capping e.g. cataract. A few also have\nsub limits on room rent linked to sum insured e.g. per day room rent restricted to\n1% of sum insured and ICU charges to 2% of sum insured. As expenses under other\nheads such as ICU charges, OT charges and even surgeon’s fees are linked to the\ntype of room opted for, room rent capping helps in restricting expenses under other\nheads also and hence the overall hospitalization expenses.**ii.** **Co-payment (popularly called Co-pay)**Co-payment is defined by IRDAI as a cost sharing requirement under a health\ninsurance policy that provides that the policyholder/ insured will bear a specified\npercentage of the admissible claims amount. A co-payment does not reduce the Sum\nInsured.\nCo-payment is the concept of the insured bearing a portion of each and every claim\nunder a health policy. These could be compulsory or voluntary depending on the\nproduct. Co-payment brings in a certain discipline among the insured to avoid\nunnecessary hospitalizations. This ensures that the insured exercises caution in\nselecting his healthcare options and avoids luxurious ones.23When an insured event occurs, many health policies require the insured to share a\npart of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay amount\nis 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a specified", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "f22", "section": "Family floater:", "chunk_id": "IC 38 -IA- Eng-Health_013", "metadata": {"file_size": 4590, "chunk_index": 13, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["What is a pre-existing disease?", "Co-payment (popularly called Co-pay)", "Example", "Sub limits and Disease specific capping", "Deductible/ Excess"]}}
{"chunk": "insurance policy that provides that the policyholder/ insured will bear a specified\npercentage of the admissible claims amount. A co-payment does not reduce the Sum\nInsured.\nCo-payment is the concept of the insured bearing a portion of each and every claim\nunder a health policy. These could be compulsory or voluntary depending on the\nproduct. Co-payment brings in a certain discipline among the insured to avoid\nunnecessary hospitalizations. This ensures that the insured exercises caution in\nselecting his healthcare options and avoids luxurious ones.23When an insured event occurs, many health policies require the insured to share a\npart of the insured loss. E.g. If the insured loss is INR 20000 and the co-pay amount\nis 10% in the policy, then insured pays INR 2000.**iii.** **Deductible/ Excess**As explained in Chapter 5, ‘Deductible’, also called ‘Excess’ is a cost-sharing\nprovision. Under a health insurance policy, it provides that the insurer will not be\nliable for a specified rupee amount in case of indemnity policies and for a specified\nnumber of days/ hours in case of hospital cash policies which will apply before any\nbenefits are payable by the insurer. In Health policies, it is the fixed amount of\nmoney the insured is required to pay initially before the claim is paid by insurer, for\ne.g. if the deductible in a policy is Rs. 10,000, the insured pays first Rs. 10,000 in\neach insured loss claimed for. To illustrate, if the claim is for Rs. 80,000, the insured\nbears the first Rs. 10,000 and the insurer pays Rs. 70,000. A deductible does not\nreduce the Sum Insured.Deductible may also be a specified number of days/ hours in case of hospital cash\npolicies which will apply before any benefits are payable by the insurer.An agent must examine and inform the insured whether the deductible is applicable\nper year, per life or per event and the specific deductible to be applied.**iv.** **Waiting Period**A waiting period of 30 days from inception of policy is normally applicable in most\npolicies for making any claim. This however will not be applied for hospitalization\ndue to an accident.**v.** **Waiting periods for specific diseases**This is applicable for diseases for which treatment can be delayed and planned.\nDepending on the product waiting periods of one/ two/ four years are imposed by\nthe insurance companies and claims are paid for these ailments only after expiry of\nthis period. Some of the diseases are Cataract, Benign Prostatic Hypertrophy,\nHysterectomy for Menorrhagia or Fibromyoma, Hernia, Hydrocele, Congenital\ninternal disease, Fistula in anus, piles, Sinusitis and related disorders etc.**vi.** **Coverage for Day care procedure**Advancement of medical science has seen inclusion of large number of procedures\nunder day care category as already discussed earlier**vii.** **Cost of pre policy check up**Cost of medical examination was earlier borne by prospective clients. Now insurer\nreimburses the cost, provided the proposal is accepted for underwriting, the\nreimbursement varying from 50% to 100%.Now this has also been mandated by IRDAI\nthat insurer would bear at least 50% of health check-up expenses.**viii.** **Add on covers**Various new additional covers called Add-on covers have been introduced by some\nof the insurers. Some of them are:24 **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end version productsfor certain ailments which are life threatening and entail expensive treatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured (whichgets reduced on payment of a claim) can be restored to the original limit by\npaying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage of\nthe hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Deductible/ Excess", "chunk_id": "IC 38 -IA- Eng-Health_014", "metadata": {"file_size": 4590, "chunk_index": 14, "chunk_tokens": 973, "has_examples": false, "has_tables": false, "key_concepts": ["Maternity cover:", "Coverage for Day care procedure", "Deductible/ Excess", "Cost of pre policy check up", "Add on covers"]}}
{"chunk": "of the insurers. Some of them are:24 **Maternity cover:** Maternity was not offered earlier under retail policies but isnow offered by most insurers, with varying waiting periods.\n **Critical illness cover:** Available as an option under the high end version productsfor certain ailments which are life threatening and entail expensive treatment.\n **Reinstatement of sum insured:** After payment of claim, the sum insured (whichgets reduced on payment of a claim) can be restored to the original limit by\npaying extra premium.\n **Coverage for AYUSH – Ayurveda – Yoga – Unani – Siddha – Homeopath: A f** ewpolicies cover expenses towards AYUSH treatment up to a certain percentage of\nthe hospitalization expenses.**ix.** **Value added covers**Few indemnity products include value added covers as listed below. The benefits\nare payable up to the limit of sum insured specified against each cover in the\nschedule of the policy, not exceeding the overall sum insured. **Outpatient cover:** Health insurance products in India mostly cover only in\npatient hospitalization expenses. Few companies now offer limited cover for outpatient expenses under some of the high-end plans. **Hospital cash:** This provides for fixed lump sum payment for each day ofhospitalization for a specified period. Normally the period is granted for 7 days\nexcluding the policies deductible of 2/ 3 days. Thus, the benefit would trigger\nonly if hospitalization period is beyond the deductible period. This is in addition\nto the hospitalization claim but within the overall sum insured of the policy or\nmay be with a separate sub-limit. **Recovery benefit:** Lump sum benefit is paid if the total period of stay in hospitaldue to sickness and/ or accident is not less than 10 days. **Donor’s expenses:** The policy provides for reimbursement of expenses towardsdonor in case of major organ transplant as per the terms and condition defined\nin the policy. **Reimbursement of ambulance:** Expenses incurred towards ambulance byInsured/ insured person are reimbursed up to a certain limit specified in the\nschedule of the policy. **Expenses for accompanying person:** This is intended to cover the expensesincurred by accompanying person towards food, transportation whilst attending\nto insured patient during the period of hospitalization. Lump sum payment or\nreimbursement payment as per the policy terms is paid, up to the limit specified\nin the schedule of the policy. **Family definition:** Definition of family has undergone changes in few healthproducts. Earlier, primary insured, spouse, dependent children were granted25cover. Now there are policies where parents and in-laws can also be granted\ncover under the same policy.**x.** **Failure to seek or follow medical advice or failure to follow treatment**Initially the health insurance cover was denied to persons suffering from pre-existing\ndiseases. Such cases are now being offered cover by excluding such diseases.**Standard Health Product** **– Arogya Sanjeevani** : In the background of the Covid-19\npandemic, IRDAI asked all Insurance Companies to come out with a standard health\nproduct called Arogya Sanjeevani with no variations in terms and conditions to make\nit easy to understand. The premium may however vary according to the pricing\npolicy of each company. This is to ensure better penetration of Health Insurance in\nmarket. All Insurers are required to offer this product called Arogya Sanjeevani.[The context for this move was that there were different Health Insurances available\nin the market and customers were not able to compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder can becomethe beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by insurers,\nprovide cover for high sums insured over and above a specified amount (called\nthreshold).This policy works along with a basic health cover having a low sum\ninsured and comes at a comparatively reasonable premium. For example, Individuals\ncovered by their employers can also opt for a top-up cover for additional protection\n(keeping the sum insured of the first policy as the threshold).To be eligible to receive a claim under the top-up policy, the medical costs must be", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "d25", "section": "Maternity cover:", "chunk_id": "IC 38 -IA- Eng-Health_015", "metadata": {"file_size": 4590, "chunk_index": 15, "chunk_tokens": 1008, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Hospital cash:", "Standard Health Product", "Recovery benefit:", "Reinstatement of sum insured:"]}}
{"chunk": "in the market and customers were not able to compare them, causing confusion.]The following two types of plans are available under Arogya Sanjeevani Insurance\nPolicy:- **Individual Plan** : A single policyholder will be the beneficiary of ArogyaSanjeevani policy.**Family Floater Plan** : Multiple family members of the policyholder can becomethe beneficiaries of Arogya Sanjeevani plan.This product comes with a capping on room rent and ICU charges but it also covers\nmodern day treatment and stem cell therapy with 50% capping.**D.** **Top-up covers or high deductible insurance plans**A top-up cover is also known as a high deductible policy. Top-Up policies by insurers,\nprovide cover for high sums insured over and above a specified amount (called\nthreshold).This policy works along with a basic health cover having a low sum\ninsured and comes at a comparatively reasonable premium. For example, Individuals\ncovered by their employers can also opt for a top-up cover for additional protection\n(keeping the sum insured of the first policy as the threshold).To be eligible to receive a claim under the top-up policy, the medical costs must be\ngreater than the deductible (or threshold) level chosen under the plan and the\nreimbursement under the high deductible plan would be the amount of expense\nincurred i.e. greater than the deductible.**Example**An individual is covered for a sum insured of Rs. 3 lacs by his employer. He could\nopt for a top-up policy of Rs. 10 lacs in excess of Rs. Three lacs. If the cost of a\nsingle hospitalization is Rs. 5 lacs, the basic policy would cover up to Rs. Three lacs\nonly. With the top-up cover, the balance sum of Rs. Two lacs would be paid out by\nthe top-up policy.26Top-up policies come cheap and the cost of a single Rs. 10 lacs policy would be far\nhigher than the top-up policy of Rs. 10 lacs in excess of Rs. Three lacs.These covers are available on individual basis and family basis the top-up plan\nrequires the deductible amount to be crossed at every single event of\nhospitalization. However some top-up plans that allow the deductible to be crossed\npost a series of hospitalizations during the policy period are known as Aggregate\nbased high deductible plans or Super top-up cover as known in the Indian market. A\nsuper top-up plan covers the total of all hospitalisation bills (up to the super top-up\nplan limit) above the deductible amount, that is, the deductible is applied to the\ntotal claims in one year. Hence, once the deductible is paid, the plan becomes\nactive for subsequent claims.**E.** **Senior Citizen Policy**These plans are designed to offer cover to elderly people who often were denied\ncoverage after certain age (e.g. people over 60 years of age). The structure of the\ncoverage and exclusions are much like a hospitalization policy.Special attention is paid to diseases of the elderly in setting coverage and waiting\nperiod. Entry age is mostly after 60 years and renewable lifelong. Sum insured range\nfrom Rs. 50,000 to Rs. 5,00,000. There is variation of waiting period applicable to\ncertain ailments.Example: Cataract may have 1 year waiting for one insurer and 2 year waiting period\nfor some other insurer.Example: Sinusitis does not fall in waiting period clause of some insurers but few\nothers include it in their waiting period clause.Some policies have waiting periods or capping in respect of Pre-existing diseases.\nPre-post hospital expenses are either paid as a percentage of hospital claims or a\nsub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90 days.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of the\namount spent by him for the named treatment. In this product, commonly occurring\ntreatments are listed under segments such as ENT, Ophthalmology, Obstetrics and\nGynaecology, etc. and the maximum pay out for each of these is spelt out in the\npolicy.27These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a daily\ncash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find a\nplace in the list named in the policy. Multiple claims for different treatments are", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Individual Plan", "chunk_id": "IC 38 -IA- Eng-Health_016", "metadata": {"file_size": 4590, "chunk_index": 16, "chunk_tokens": 1019, "has_examples": true, "has_tables": false, "key_concepts": ["Top-up covers or high deductible insurance plans", "Senior Citizen Policy", "Example", "Family Floater Plan", "Individual Plan"]}}
{"chunk": "sub limit whichever is higher. In some policies they follow the typical indemnity\nplans such as expenses falling within specified period of 30/ 60 days or 60/ 90 days.IRDAI has mandated that all health insurers and TPAs shall establish a separate\nchannel to address the health insurance related claims and grievances of senior\ncitizens.**F.** **Fixed benefit covers – Hospital Cash, Critical Illness**Under this cover, the insured gets a fixed sum as claim amount irrespective of the\namount spent by him for the named treatment. In this product, commonly occurring\ntreatments are listed under segments such as ENT, Ophthalmology, Obstetrics and\nGynaecology, etc. and the maximum pay out for each of these is spelt out in the\npolicy.27These policies are simple as only proof of hospitalization and coverage of ailment\nunder the policy are sufficient to process the claim. Some products package a daily\ncash benefit along with the fixed benefit cover.A provision is made to pay a fixed sum for surgeries/ treatment which do not find a\nplace in the list named in the policy. Multiple claims for different treatments are\npossible during the policy period. However the claims are finally limited by the sum\ninsured chosen under the policy.Some of the fixed benefit insurance plans are: Hospital daily cash insurance plans\n Critical illness insurance plans**1.** **HOSPITAL DAILY CASH POLICY****a)** **Per day amount limit**\nHospital cash coverage provides a fixed sum to the insured person for each day\nof hospitalization. Per day cash coverage could vary from (for example) Rs. 1,500\nper day to Rs. 5,000 or even more per day. An upper limit is provided on the\ndaily cash pay-out per illness as well as for the duration of the policy, which is\nusually an annual policy.**b)** **Number of payment days**\nIn some of the variants of this policy, the number of days of daily cash allowed\nis linked to the disease for which treatment is being taken. A detailed list of\ntreatments and duration of stay for each is stipulated which limits the daily cash\nbenefit allowed for each type of procedure/ illness.**c)** **Standalone cover or add-on cover**\nThe hospital daily cash policy is available as a standalone policy as offered by\nsome insurers while, in other cases, it is an add-on cover to a regular indemnity\npolicy. These policies help the insured to cover incidental expenses as the payout is a fixed sum and not related to the actual cost of treatment. This also\nallows the pay out under the policy to be provided in addition to any cover\nreceived under an indemnity based health insurance plan.**d)** **Supplementary cover**\nThese policies could supplement a regular hospital expenses policy as it is cost\neffective and provides compensation for incidental expenses and also expenses\nnot payable under the indemnity policy such as exclusions, co-pay etc.**e)** **Other advantages of the cover**From the insurer’s point of view, this plan has several advantages as it is easy\nto explain to a customer and hence can be sold more easily. It beats medical\ninflation as a fixed sum per day is paid for the duration of hospitalization\nwhatever may be the actual expense. Also, acceptance of such insurance covers\nand claims settlements are really simplified.28**2.** **CRITICAL ILLNESS POLICY**With advancement in medical science, people are surviving some of the major\ndiseases like cancer, strokes and heart attack etc., which in earlier times would\nhave resulted in death. However surviving a major illness entails huge expense for\ntreatment as well as for living expenses post treatment. Onset of critical illness\nthreatens the financial security of a person. A basic health insurance policy may not\nbe sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of large expenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated CI\nbenefit plan and standalone CI benefit plan. To avoid confusion, the definitions of\n22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.The critical illnesses covered vary across insurers and products. Generally 100% of\nthe sum insured is paid on diagnosis of a critical illness. In some cases compensation\ncould vary from 25% to 100% of sum insured depending on the policy terms and\nconditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to\nbecome payable under the policy and the survival clause of 30 days after diagnosis", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "F.", "chunk_id": "IC 38 -IA- Eng-Health_017", "metadata": {"file_size": 4590, "chunk_index": 17, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Per day amount limit", "CRITICAL ILLNESS POLICY", "HOSPITAL DAILY CASH POLICY", "Standalone cover or add-on cover", "Supplementary cover"]}}
{"chunk": "treatment as well as for living expenses post treatment. Onset of critical illness\nthreatens the financial security of a person. A basic health insurance policy may not\nbe sufficient to cover all medical costs in such cases.Critical illness policy has a provision to pay a lump sum amount on diagnosis of\ncertain named critical illness. The sum insured is high to take care of large expenses.In India, Critical Illness (CI) benefits are most commonly sold by life insurers as\nriders to life policies and two forms of cover are offered by them – accelerated CI\nbenefit plan and standalone CI benefit plan. To avoid confusion, the definitions of\n22 most common critical illnesses have been standardized under IRDA Health\nInsurance Standardization guidelines.The critical illnesses covered vary across insurers and products. Generally 100% of\nthe sum insured is paid on diagnosis of a critical illness. In some cases compensation\ncould vary from 25% to 100% of sum insured depending on the policy terms and\nconditions and severity of illness.There is a waiting period of 90 days from inception of policy for any benefit to\nbecome payable under the policy and the survival clause of 30 days after diagnosis\nof the illness. Rigorous medical examinations are to be undergone for persons\nespecially over 45 years of age.The policy terminates, once compensation is paid under the policy in respect of any\nof the insured person. This policy is also offered to groups especially corporates who\ntake policies for their employees.**Disease Specific Products** - **Corona Kavach**In June 2020, when the country was facing many cases of Corona Virus infection\n(Covid-19), the market saw the introduction of many benefit based products\nproviding lump sum payment on the diagnosis of Covid-19 positive. Later some\ncompanies introduced indemnity based products too. However, there were many\nconsumables like PPE kits, Oximeter etc. and quarantine expenses that were not\ntaken care of in these products.IRDAI came up with two standard Health Insurance Policies called _Corona Kavach_\nand _Corona Rakshak (discussed separately under Life insurance section)_ . While it is\nmandatory for general and health insurers to provide _Corona Kavach_ as an\nindemnity-based standard COVID-19 product, _Corona Rakshak,_ offering the benefitbased product, is optional for all insurers. Both products have a waiting period of\n15 days.29_Corona Rakshak_ is a standard benefit based health insurance designed for providing\nlump sum benefit to insured individuals affected by COVID-19 and require\nhospitalisation for a minimum continuous period of 72 hours. The plan offers\ncoverage on individual basis for people between the age of 18 years and 65 years,\nwith different policy terms of 3.5months, 6.5 months and 9.5 months as a one-time\nbenefit policy and terminates upon the payment of benefit. _Corona Rakshak_ offers\nsum insured options ranging from Rs. 50,000 to Rs. 2.5 lakh, in multiples of\n50,000.The policy provides (i) complete sum insured benefit, (ii) economical\npremium, (iii) lump-sum amount of claim, (iv) a short waiting period of 15 days and\n(v) tax benefits.**Corona Kavach** offers the following coverage vide Guidelines issued by IRDAI in June\n2020:1. Hospitalization Expenses incurred for the treatment of Covid-19 on Positivediagnosis of Covid-19 in a government authorized diagnostic centre covering the\nfollowing: (Expenses on Hospitalization for a minimum period of 24 hours are\nadmissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgical appliances,ventilator charges, medicines and drugs, costs towards diagnostics,\ndiagnostic imaging modalities, PPE Kit, gloves, mask and such other similarexpenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up to maximum14 days per incident subject to the conditions (not exhaustive) mentioned\nbelow:\na. The Medical practitioner advices the Insured person to undergo treatment athome.\nb. There is a continuous monitoring of the health status by a medicalpractitioner for each day, including records of treatment administered.3. Other Expenses covered if prescribed by the treating medical practitioner andrelated to treatment of COVID,\na. Diagnostic tests undergone at home or at diagnostics centre", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "d-19", "section": "Disease Specific Products", "chunk_id": "IC 38 -IA- Eng-Health_018", "metadata": {"file_size": 4590, "chunk_index": 18, "chunk_tokens": 1008, "has_examples": false, "has_tables": false, "key_concepts": ["Corona Kavach", "Disease Specific Products"]}}
{"chunk": "admissible.)a. Room, Boarding, Nursing Expenses as provided by the Hospital / NursingHome.\nb. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist Fees\nc. Anaesthesia, blood, oxygen, operation theatre charges, surgical appliances,ventilator charges, medicines and drugs, costs towards diagnostics,\ndiagnostic imaging modalities, PPE Kit, gloves, mask and such other similarexpenses\nd. Intensive Care Unit (ICU) / Intensive Cardiac Care Unit (ICCU) expenses.\ne. Expenses incurred on road Ambulance subject to a maximum of Rs.2000/\nper hospitalization.2. Home Care Treatment Expenses for availing treatment at home up to maximum14 days per incident subject to the conditions (not exhaustive) mentioned\nbelow:\na. The Medical practitioner advices the Insured person to undergo treatment athome.\nb. There is a continuous monitoring of the health status by a medicalpractitioner for each day, including records of treatment administered.3. Other Expenses covered if prescribed by the treating medical practitioner andrelated to treatment of COVID,\na. Diagnostic tests undergone at home or at diagnostics centre\nb. Medicines prescribed in writing\nc. Consultation charges of the medical practitioner\nd. Nursing charges related to medical staff\ne. Medical procedures limited to parenteral administration of medicines\nf. Cost of Pulse oximeter, Oxygen cylinder and Nebulizer30Additional Cover - Hospital Daily Cash: The Insurer will pay 0.5% of sum insured per\nday for each 24 hours of continuous hospitalization for treatment of Covid following\nan admissible hospitalization claim under this policy.**Standard Vector Borne Disease Health Policy:**IRDAI vide its Guidelines dated 3 February 2021 decided that Standard Products for\nvector borne diseases shall offer the following coverage:\n1. **Hospitalization Benefit:** Lump sum benefit equal to 100% of the Sum Insuredshall be payable on positive diagnosis of any of the following vector borne\ndisease (s) requiring hospitalization for a minimum continuous period of 72\nhours.\na) Dengue fever\nb) Malaria\nc) Filaria (Lymphatic Filariasis)\nd) Kala-azar\ne) Chikungunya\nf) Japanese Encephalitis\ng) Zika Virus2. **Diagnosis Cover:** 2% of the sum insured shall be payable on positive diagnosis(through laboratory examination and confirmed by the medical practitioner) of\nevery covered vector borne disease on the first diagnosis during the Cover\nPeriod, subject to policy terms and conditions. The Policyholder is entitled for\npayments under “diagnosis cover” payment for each disease only once in the\npolicy year.**G.** **Combo-products****Health plus Life Combo Products** offer the combination of a life insurance cover of\na Life Insurance Company and a health insurance cover offered by Non-Life and/ or\nStandalone Health Insurance Company.The product may be offered both as individual insurance policy and on group\ninsurance basis. However in respect of health insurance floater policies, the pure\nterm life insurance coverage is allowed on the life of one of the earning members\nof the family who is also the proposer on health insurance policy subject to insurable\ninterest and other applicable underwriting norms of respective insurers.**Package policies**Package or umbrella covers give, under a single document, a combination of covers.Examples of package policy in health insurance include combining Critical illness\ncover benefits with indemnity policies and even life insurance policies and hospital\ndaily cash benefits with indemnity policies.31**Travel Insurance:**Travel insurance policy is also offered as a package policy covering not only health\ninsurance but also accidental death/ disability benefits along with Medical expenses\ndue to illness/ accident and the coverages like Loss of or delay in arrival of checked\nin baggage, Loss of passport and documents, Third party liability for property/\npersonal damages, Cancellation of trips and even Hijack cover traditionally provided\nunder travel policies. (Details of Travel Insurance are provided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of low\nincome people from rural and informal sectors. It is a low value product, with an\naffordable premium and benefit package. Micro insurance is governed by the IRDA\nMicro Insurance Regulations, 2005.Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of society\nare Jan Arogya Bima Policy and Universal Health Scheme. The private sector\ninsurance companies have also come out with many innovative micro insurance\nhealth products to cater to this target segment like Bima Kavach Yojana, Grameena", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "m14", "section": "Standard Vector Borne Disease Health Policy:", "chunk_id": "IC 38 -IA- Eng-Health_019", "metadata": {"file_size": 4590, "chunk_index": 19, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Hospitalization Benefit:", "Diagnosis Cover:", "Travel Insurance:", "Health plus Life Combo Products", "Combo-products"]}}
{"chunk": "insurance but also accidental death/ disability benefits along with Medical expenses\ndue to illness/ accident and the coverages like Loss of or delay in arrival of checked\nin baggage, Loss of passport and documents, Third party liability for property/\npersonal damages, Cancellation of trips and even Hijack cover traditionally provided\nunder travel policies. (Details of Travel Insurance are provided later.)**H.** **Micro insurance and health insurance for poorer sections**Micro-insurance products are specifically designed to aim for the protection of low\nincome people from rural and informal sectors. It is a low value product, with an\naffordable premium and benefit package. Micro insurance is governed by the IRDA\nMicro Insurance Regulations, 2005.Such covers are mostly taken on a group basis by various community organizations\nor non-governmental organizations (NGOs) for their members.Two policies particularly created by PSUs to cater to the poorer sections of society\nare Jan Arogya Bima Policy and Universal Health Scheme. The private sector\ninsurance companies have also come out with many innovative micro insurance\nhealth products to cater to this target segment like Bima Kavach Yojana, Grameena\nJeevan Raksha Plan, Bhaghya Laxmi - the entire list can be found on IRDAI website.**I.** **Rashtriya Swasthya Bima Yojana**The government has also launched various health schemes, some of them applicable\nto particular states. It had implemented the Rashtriya Swasthya Bima Yojana (RSBY)\nin association with insurance companies to provide health insurance coverage for\nthe below poverty line (BPL) families. However RSBY provided a Sum Insured of only\nRs 30,000 which was not considered enough to cover major surgeries/\nhospitalisation expenses.**J.** **Pradhan Mantri Jan Arogya Yojana**To address the shortcomings of RSBY, as recommended by the National Health Policy\n2017, the Government of India launched ‘Ayushman Bharat Scheme’ in 2017, a\nflagship scheme of to achieve the vision of Universal Health Coverage (UHC). Also\nknown as Pradhan Mantri Jan Arogya Yojana (PMJAY) Ayushman Bharat came with a\nSum Insured of Rs. 5,00,000.It subsumed the then existing Rashtriya Swasthya Bima Yojana (RSBY). PM-JAY is\nfully funded by the Government and cost of implementation is shared between the\nCentral and State Governments.**K.** **Pradhan Mantri Suraksha Bima Yojana**Features of the recently announced PMSBY covering personal accident death and\ndisability cover are as follows:\n**Scope of coverage:** All savings bank account holders in the age 18 to 70 years in\nparticipating banks are entitled to join through one savings bank account only and\nif he enrols in more than one bank, he gets no extra benefit and the extra premium\npaid will stand forfeited. Aadhaar would be the primary KYC for the bank account.32**Enrolment Modality/ Period** : The cover shall be for the one year period from 1 [st]\nJune to 31 [st] May for which option to join/ pay by auto-debit from the designated\nsavings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from the", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "H.", "chunk_id": "IC 38 -IA- Eng-Health_020", "metadata": {"file_size": 4590, "chunk_index": 20, "chunk_tokens": 937, "has_examples": true, "has_tables": true, "key_concepts": ["Scope of coverage:", "Rashtriya Swasthya Bima Yojana", "Pradhan Mantri Jan Arogya Yojana", "Enrolment Modality/ Period", "Premium"]}}
{"chunk": "savings bank account on the prescribed forms will be required to be given by 31 [st]\nMay of every year,Joining subsequently on payment of full annual premium may be possible on\nspecified terms. Individuals who exit the scheme at any point may re-join the\nscheme in future years through the above modality.Benefits under the insurance are as follows:|Table of Benefits|Sum Insured|\n|---|---|\n|~~Death~~<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of both eyes or loss of use of both~~<br>hands or feet or loss of sight of one eye and loss of use of hand<br>or foot<br>|~~Rs. 2 Lakh~~<br>|\n|~~Total and irrecoverable loss of sight of one eye or loss of use of~~<br>one hand or foot|~~Rs. 1 Lakh~~|Joining and Nomination facility is available by SMS, email or personal visit.**Premium** : Rs.12/- per annum per member. The premium will be deducted from the\naccount holder’s savings bank account through ‘auto debit’ facility**Termination of cover** : The accident cover for the member shall terminate:1. On member attaining the age of 70 years (age nearest birth day) or2. Closure of account with the Bank or insufficiency of balance to keep theinsurance in force orIf the insurance cover is ceased due to any technical reasons such as insufficient\nbalance on due date or due to any administrative issues, the same can be reinstated\non receipt of full annual premium, subject to conditions that may be laid down.**L.** **Personal Accident and Disability cover**A **Personal Accident (PA) Cover** provides compensation due to death and disability\nin the event of unforeseen accident.In a PA policy,a) The death benefit is payment of 100% of the sum insured,b) In the event of disability, compensation varies from a fixed percentage of the\nsum insured in the case of permanent disabilityc) Weekly compensation for temporary disablement.Weekly compensation means payment of a fixed sum per week of disablement\nsubject to a maximum limit in terms of number of weeks for which the compensation\nwould be payable.**1.** **Types of disability covered**Types of disability which are normally covered under the policy are:**i.** **Permanent total disability (PTD):** means becoming totally disabled forlifetime viz. paralysis of all four limbs, comatose condition, loss of both\neyes/ both hands/ both limbs or one hand and one eye or one eye and one\nleg or one hand and one leg,33**ii.** **Permanent partial disability (PPD):** means becoming partially disabled forlifetime viz. loss of fingers, toes, phalanges etc.**iii.** **Temporary total disability (TTD):** means becoming totally disabled for atemporary period of time. This section of cover is intended to cover the loss\nof income during the disability period.The client has choice to select only death cover or death plus permanent\ndisablement of Or Death plus permanent disablement and also temporary total\ndisablement.**2.** **Sum insured**Sums insured for PA policies are usually decided on the basis of gross monthly\nincome. Typically, it is 60 times of the gross monthly income. However, some\ninsurers also offer on fixed plan basis without considering the income level. In such\npolicies sum insured for each section of cover varies as per the plan opted.**3.** **Personal Accident Insurance – a Benefit plan**Being a benefit plan, PA policies are not subject to the principle of ‘contribution’\nat the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on the\nbasis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out of\ndisability existing prior to the inception of policy, death or disability due to mental\ndisorders or any sickness, injury due to war, invasion, culpable homicide or murder,\nintentional self-injury, suicide, intake of drugs/ alcohol, injury while engaging in\ndefined extra hazardous activity like aviation or ballooning . This is an indicative", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "r2", "section": "Premium", "chunk_id": "IC 38 -IA- Eng-Health_021", "metadata": {"file_size": 4590, "chunk_index": 21, "chunk_tokens": 994, "has_examples": true, "has_tables": true, "key_concepts": ["Personal Accident and Disability cover", "Scope of cover", "Exclusions:", "Sum insured", "Permanent partial disability (PPD):"]}}
{"chunk": "at the time of claim. Thus, if a person has more than one policy with different\ninsurers, claims would be paid under all the policies.**4.** **Scope of cover**These policies are often extended to cover medical expenses, i.e. reimbursement\nof hospitalization/ medical costs incurred following the accident.**5.** **Value added benefits**Along with personal accident, many insurers also offer value added benefits like\nhospital cash on account of hospitalization due to accident, cost of transportation\nof mortal remains, education benefit for a fixed sum and ambulance charges on the\nbasis of actual or fixed limit whichever is lower.**6.** **Exclusions:**Common exclusions under Personal Accident insurance are accidents arising out of\ndisability existing prior to the inception of policy, death or disability due to mental\ndisorders or any sickness, injury due to war, invasion, culpable homicide or murder,\nintentional self-injury, suicide, intake of drugs/ alcohol, injury while engaging in\ndefined extra hazardous activity like aviation or ballooning . This is an indicative\nlist and can vary from company to company.PA policies are offered to individuals, family and also to groups.**Group Personal Accident Policies**Group Personal Accident Policies are usually annual policies with renewals being\nallowed on the anniversary. However, non-life and standalone health insurers may\noffer group personal accident products with term less than one year also to provide\ncoverage to specific events.**Broken bone policy and compensation for loss of daily activities**This is a specialised PA policy. This policy is designed to provide cover against listed\nfractures. Fixed benefit or percentage of sum insured mentioned against each\nfracture is paid at the time of claim. Quantum of benefit depends on the type of\nbone covered and nature of fracture sustained.34**M.** **Overseas Travel insurance****Need for the policy:** To cover expenses of accidental injury or hospitalisation whilst\ntravelling outside India for business, holidays or studies., The cost of medical care,\nespecially in countries such as USA and Canada, is very high and could cause major\nfinancial problems.**Scope of coverage**Such policies are primarily meant for accident and sickness benefits, but most\nproducts available in the market package a range of covers within one product.The usual covers offered are:**a) Medical and sickness section:**i. Accidental death/ disability\nii. Medical expenses due to illness/ accident\n**b) Repatriation and evacuation**\n**c) Personal accident cover**\n**d) Personal liability**\n**e) Other non-medical covers:**i. Trip Cancellation\nii. Trip Delay\niii. Trip interruption\niv. Missed Connection\nv. Delay of Checked Baggage\nvi. Loss of Checked Baggage\nvii. Loss of Passport\nviii. Emergency Cash Advance\nix. Hijack Allowance\nx. Bail Bond insurance\nxi. Hijack cover\nxii. Sponsor Protection\nxiii. Compassionate Visit\nxiv. Study Interruption\nxv. Home burglary**1.** **Types of plans**The popular policies are the Business and Holiday Plans, the Study Plans and the\nEmployment Plans.**2.** **Who can take the policy**An Indian citizen travelling abroad on business, holiday or for studies can avail this\npolicy. Employees of Indian employers sent on contracts abroad can also be covered.**3.** **Sum insured and premiums**The cover is granted in US Dollars and generally varies from USD 100,000 to USD\n500,000 for the section covering medical expenses, evacuation and repatriation. For\nother sections the Sum Insured is lower, except for the liability cover. Premiums\ncan be paid in Indian rupees except in the case of the employment plan where\npremium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada35 World-wide including USA/ CanadaSome products provide cover for a group of countries. Examples are travel to Asian\ncountries only, European countries only or travel to a particular country only.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies for\nits executives who frequently make trips outside India. This cover can also be taken\nby individuals who fly overseas many times during a year. An advance premium is\npaid based on the estimated man days of travel in a year by a company’s employees.\nThe above policies are granted only for business and holiday travels. Pre-existing\ndiseases are usually excluded for Overseas Medical/ Travel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "a35", "section": "Scope of cover", "chunk_id": "IC 38 -IA- Eng-Health_022", "metadata": {"file_size": 4590, "chunk_index": 22, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Scope of cover", "Exclusions:", "Overseas Travel insurance", "Need for the policy:", "Group Health cover"]}}
{"chunk": "can be paid in Indian rupees except in the case of the employment plan where\npremium has to be paid in dollars. The plans are usually of two types: World-wide excluding USA/ Canada35 World-wide including USA/ CanadaSome products provide cover for a group of countries. Examples are travel to Asian\ncountries only, European countries only or travel to a particular country only.**Corporate Frequent Flyer plans**This is an annual policy whereby a corporate/ employer takes individual policies for\nits executives who frequently make trips outside India. This cover can also be taken\nby individuals who fly overseas many times during a year. An advance premium is\npaid based on the estimated man days of travel in a year by a company’s employees.\nThe above policies are granted only for business and holiday travels. Pre-existing\ndiseases are usually excluded for Overseas Medical/ Travel Insurances.**N.** **Group Health cover****1.** **GROUP POLICIES**As explained earlier in the chapter a group policy is taken by a group owner who\ncould be an employer, an association, a bank’s credit card division, where a single\npolicy covers the entire group of individuals. These policies are usually, one year\nrenewable contracts.**Features of group policies - Hospitalisation benefit covers.****1.** **Scope of coverage**The most common form of group health insurance is the policy taken by\nemployers covering employees and their families including dependent spouse,\nchildren and parents/ parents in law.**2.** **Tailor-made cover**Group policies are often tailor-made covers to suit the requirements of the\ngroup. Thus, in group policies, one will find several standard exclusions of the\nindividual policy being covered under the group policy.**3.** **Maternity cover**One of the most common extensions in a group policy is the maternity cover.\nMaternity cover would provide for the expenses incurred in hospitalization for\ndelivery of child and includes C- section delivery. This cover is generally\nrestricted to a certain amount within the overall sum insured of the family.**4.** **Child cover**Coverage is given to babies from day one, sometimes restricted to the\nmaternity cover limit and sometimes extended to include the full sum insured\nof the family.**5.** **Pre-existing diseases covered, waiting period waived off**Several of the usual exclusions, such as the pre-existing disease exclusion,\nthirty days waiting period, two years waiting period, congenital diseases may\nbe waived off, in tailor-made group policies.**6.** **Premium calculation**The premium charged for a group policy is based on the age profile of the\ngroup members, the size of the group and most importantly the claims\nexperience of the group.36**7.** **Non-employer employee groups**In India, regulatory provisions strictly prohibit formation of groups primarily\nfor the purpose of taking out a group insurance cover. When group policies\nare given to other than employers, it is important to determine the relation\nof the group owner to its members.**Example**A bank taking a policy for its saving bank account holders or credit card\nholders constitutes a homogenous group, whereby a large group is able to\nbenefit by a tailor-made policy designed to suit their requirements.**8.** **Pricing**In group policies, there is provision for discount on premium based on size of\nthe group as also the claims experience of the group**2.** **CORPORATE BUFFER OR FLOATER COVER**In most group policies, each family is covered for a defined sum insured, varying\nfrom Rs. One lac to five lacs and sometimes more. There arise situations where the\nsum insured of the family is exhausted, especially in the case of major illness of a\nfamily member. In such situations, if the buffer cover is opted for it brings relief,\nwhereby the excess expenses over and above the family sum insured are met from\nthis buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health check-up\npaid for by the insurer. There is incentive for better control of factors like blood\nglucose, blood pressure etc. in the form of reduced premiums from second year of\npolicy onwards. On the other hand, a higher premium would be chargeable for poor\ncontrol.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "a35", "section": "Corporate Frequent Flyer plans", "chunk_id": "IC 38 -IA- Eng-Health_023", "metadata": {"file_size": 4590, "chunk_index": 23, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Non-employer employee groups", "CORPORATE BUFFER OR FLOATER COVER", "Disease covers", "Child cover", "Tailor-made cover"]}}
{"chunk": "family member. In such situations, if the buffer cover is opted for it brings relief,\nwhereby the excess expenses over and above the family sum insured are met from\nthis buffer amount.Amounts are drawn from the buffer, once a family’s sum insured is exhausted.\nHowever this utilization is usually restricted to major illness/ critical illness\nexpenses where a single hospitalization exhausts the sum insured.**O.** **Special Products****1.** **Disease covers**In recent years, disease specific covers for cancer, diabetes, Covid-19 have been\nintroduced in the Indian market. The cover is either short term or long term – 5\nyears to 20 years and a wellness benefit is also included – a regular health check-up\npaid for by the insurer. There is incentive for better control of factors like blood\nglucose, blood pressure etc. in the form of reduced premiums from second year of\npolicy onwards. On the other hand, a higher premium would be chargeable for poor\ncontrol.**2.** **Product designed to cover diabetic persons**This policy can be taken by persons between 26 and 65 years and is renewable up\nto 70 years. Sum Insured ranges from Rs. 50,000 to Rs. 5,00,000. Capping on Room\nrent is applicable. Product is aimed to cover hospitalization complications of\ndiabetes like diabetic retinopathy (eye), kidney, diabetic foot, kidney transplant\nincluding donor expenses.37**Test Yourself 1**Though the duration of cover for pre-hospitalization expenses would vary from\ninsurer to insurer and is defined in the policy, the most common cover is for\n________ pre-hospitalization.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty daysKey terms in health policies **(All the terms are as defined in IRDAI Master**\n**Circular on Standardization of Health Insurance Products dated 22.07.2020)****1.** **Network Provider**Network provider refers to a hospital/ nursing home/ day care centre which is under\ntie-up with an insurer/ TPA for providing cashless treatment to insured patients.\nPatients are free to go to out-of-network providers but there they are generally\ncharged much higher fees.**2.** **Preferred provider network (PPN)**An insurer has the option to create a preferred network of hospitals to ensure quality\ntreatment and at best rates. When this group is limited to only a select few by the\ninsurer based on experience, utilization and cost of providing care, preferred\nprovider networks get formed.**3.** **Cashless service**A cashless service enables the insured to avail of the treatment up to the limit of\ncover without any payment to the hospitals. All that the insured has to do is\napproach a network hospital and present his medical card as proof of insurance. The\ninsurer facilitates a cashless access to the health service and directly makes\npayment to the network provider for the admissible amount. However, the insured\nhas to make payment for amounts beyond the policy limits and for expenses not\npayable as per policy conditions.**4.** **Third Party Administrator (TPA)**A major development in the field of health insurance is the introduction of the third\nparty administrator or TPA. Several insurers across the world utilize the services of\nindependent organizations for managing health insurance claims. These agencies\nare known as the TPAs. In India, a TPA is engaged by an insurer for provision of\nhealth services which includes among other things:i. Providing an identity card to the policyholder which is proof of his insurancepolicy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards for\nhospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals\nor health service providers and ensure that any person who undergoes treatment in\nthe network hospitals is given a cashless service. They are the intermediaries38between the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "d-19", "section": "O.", "chunk_id": "IC 38 -IA- Eng-Health_024", "metadata": {"file_size": 4590, "chunk_index": 24, "chunk_tokens": 942, "has_examples": false, "has_tables": false, "key_concepts": ["Hospital", "Network Provider", "Disease covers", "Test Yourself 1", "Special Products"]}}
{"chunk": "independent organizations for managing health insurance claims. These agencies\nare known as the TPAs. In India, a TPA is engaged by an insurer for provision of\nhealth services which includes among other things:i. Providing an identity card to the policyholder which is proof of his insurancepolicy and can be used for admission into a hospitalii. Providing a cashless service at network hospitalsiii. Processing of claimsTPAs service health policyholders starting from issuance of unique identity cards for\nhospital admissions up to settlement of claims either on cashless basis or\nreimbursement basis. Third party administrators enter into an MOU with hospitals\nor health service providers and ensure that any person who undergoes treatment in\nthe network hospitals is given a cashless service. They are the intermediaries38between the insurer(s) and the insured(s), who co-ordinate with the hospitals and\nfinalize health claims.**5.** **Hospital**A hospital means any institution established for in-patient care and day care\ntreatment of sickness and/ or injuries and which has been registered as a hospital\nwith the local authorities, wherever applicable, and is under the supervision of a\nregistered and qualified medical practitioner AND must comply with all minimum\ncriteria as under:a) Has at least 10 inpatient beds in those towns having a population of less than10,00,000 and 15 inpatient beds in all other places;b) Has qualified nursing staff under its employment round the clock;c) Has qualified medical practitioner(s) in charge round the clock;d) Has a fully equipped operation theatre of its own where surgical proceduresare carried out;e) Maintains daily records of patients and will make these accessible to theInsurance Company’s authorized personnel.**6.** **Medical practitioner**A Medical practitioner is a person who holds a valid registration from the medical\ncouncil of any state of India or for homeopathy and is thereby entitled to practice\nmedicine within its jurisdiction; and is acting within the scope and jurisdiction of\nhis license. However, insurance companies are free to make a restriction that the\nregistered practitioner should not be the insured or any close family member. This\nis to ensure fraudulent claims are not lodged by taking treatment from relatives or\nby self or by hospitals owned by either.**Qualified nurse:** Qualified nurse means a person who holds a valid registration from\nthe Nursing Council of India or the Nursing Council of any state in India.**7.** **Reasonable and necessary expenses**A health insurance policy always contains this clause as the policy provides for\ncompensation of expenses that would be deemed to be reasonable for treatment of\na particular ailment and in a particular geographical area.**8.** **Notice of claim**Every insurance policy provides for immediate intimation of claim and specified\ntime limits for document submission. In health insurance policies, wherever cashless\nfacility is desired by the customer, intimations are given well before the\nhospitalization. However in cases of reimbursement claims the time limit for\nsubmission of claim documents is normally fixed at 15 days from the date of\ndischarge.**9.** **Free health check**In individual health policies, a provision is generally available to give some form of\nincentive to a claim free policyholder. Many policies provide for reimbursement of\nthe cost of health check-up at the end of four continuous, claim free policy periods.39**10.** **Cumulative bonus**A cumulative bonus is given on the sum insured for every claim free year. This means\nthat the sum insured gets increased on renewal by a fixed percentage say 5%\nannually and is allowed up to a maximum of 50% for ten claim-free renewals.\nMoreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second year,\nin case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs (5% more\nthan the previous year) at the same premium of Rs. 5,000. This could go up to Rs.\n4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or loading\nof premium is collected at renewal. However, in case of group policies, the malus\nis charged by way of loading the overall premium suitably to keep the claim ratio\nwithin reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year instead", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "s38", "section": "Hospital", "chunk_id": "IC 38 -IA- Eng-Health_025", "metadata": {"file_size": 4590, "chunk_index": 25, "chunk_tokens": 994, "has_examples": true, "has_tables": false, "key_concepts": ["Medical practitioner", "Reasonable and necessary expenses", "Hospital", "Notice of claim", "Cumulative bonus"]}}
{"chunk": "Moreover, if a claim is made in any particular year, the cumulative bonus accrued\ncan only be reduced at the same rate at which it is accrued.**Example**A person takes a policy for Rs. 3 lacs at a premium of Rs. 5,000. In the second year,\nin case of no claims in the first year, he gets a sum insured of Rs. 3.15 lacs (5% more\nthan the previous year) at the same premium of Rs. 5,000. This could go up to Rs.\n4.5 lacs over a ten year claim free renewal.**11.** **Malus/ Bonus**Just as there is an incentive to keep the health policy free of claims, the opposite\nis called a malus. Here, if the claims under a policy are very high, a malus or loading\nof premium is collected at renewal. However, in case of group policies, the malus\nis charged by way of loading the overall premium suitably to keep the claim ratio\nwithin reasonable limits.**12.** **No claim discount**Some products provide for a discount on premium for every claim free year instead\nof a bonus on sum insured.**13.** **Room rent restrictions**Some health plans place a restriction on the category of room that an insured\nchooses by linking it to the sum insured. Hence a person with a sum insured of one\nlac would be entitled to a room of Rs 1,000 per day if the policy has a room rent\nrestriction of 1% of sum insured per day.**14.** **Renewability clause**The IRDAI guidelines on renewability of health insurance policies makes lifetime\nguaranteed renewal of the health policies compulsory, except on grounds of fraud\nand misrepresentation. In accordance to the provisions of IRDAI Health Insurance\nRegulation 2016, once a proposal is accepted in respect of a health insurance policy\n(except Personal Accident and Travel Policies) and a policy is issued which is\nthereafter renewed periodically without any break, further renewal shall not be\ndenied on the grounds of age of the Insured. Thus, health insurance policies are\nrenewable lifelong.**15.** **Cancellation clause**An insurance company may at any time cancel the policy only on grounds of\nmisrepresentation, fraud, and non-disclosure of material fact or non-cooperation by\nthe insured.When policies are cancelled by the insurer, a proportion of the premium\ncorresponding to the unexpired period of insurance, is returned to the insured\nprovided no claim has been paid under the policy. This is usually on pro-rata basis.When annual policies are cancelled by the insured, insurers usually charge premiums\nat Short period scales, instead of pro-rata premiums. This would prevent antiselection against the insurers and take care of the initial expenses of the insurer.40**16.** **Grace period for renewal**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period.Most of above key clauses, definitions, exclusions relating to grace period have been\nstandardized under Health Regulations and Health Insurance Standardization\nGuidelines issued by IRDAI and updated from time to time.**Test Yourself 2**As per IRDA guidelines, a ________ grace period is allowed for renewal of individual\nhealth policies.I. Fifteen daysII. Thirty daysIII. Forty Five daysIV. Sixty days**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.41## CHAPTER H-04## HEALTH INSURANCE UNDERWRITING**Chapter Introduction**This chapter aims to provide you detailed knowledge about underwriting in health\ninsurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get an\nunderstanding about basic principles, tools, methods and process of underwriting.\nIt will also provide you the knowledge about group health insurance underwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten42**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "H-04", "section": "Example", "chunk_id": "IC 38 -IA- Eng-Health_026", "metadata": {"file_size": 4590, "chunk_index": 26, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Room rent restrictions", "Example", "Chapter Introduction"]}}
{"chunk": "insurance. Underwriting is a very important aspect of any type of insurance and\nplays a vital role in issuance of an insurance policy. In this chapter, you will get an\nunderstanding about basic principles, tools, methods and process of underwriting.\nIt will also provide you the knowledge about group health insurance underwriting.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain what is meant by underwriting\nb) Describe the basic concepts of underwriting\nc) Explain the principles and the various tools followed by underwriters\nd) Appreciate the complete process of underwriting individual health policies\ne) Discuss how group health policies are underwritten42**Look at this Scenario**Manish aged 48 years, working as a software engineer, decided to take a health\ninsurance policy for himself. He went to an insurance company, where they gave\nhim a proposal form in which he was required to answer a number of questions\nrelated to his physical build and health, mental health, pre-existing illnesses, his\nfamily health history, habits and so on.On receipt of his proposal form, he was also required to submit many documents\nsuch as identity and age proof, proof of address and previous medical records. Then\nthey told him to undergo a health check-up and some medical tests which frustrated\nhim.Manish, who considered himself a healthy person and with a good income level,\nstarted wondering why such a lengthy process was being followed by the insurance\ncompany in his case. Even after going through all this, the insurance company told\nhim that high cholesterol and high BP had been diagnosed in his medical tests, which\nincreased the chances of heart diseases later. Though they offered him a policy, the\npremium was much higher than what his friend had paid and so he refused to take\nthe policy.Here, the insurance company was following all these steps as part of their\nunderwriting process. While providing risk coverage, an insurer needs to evaluate\nrisks properly and also to make reasonable profit. If the risk is not assessed properly\nand there is a claim, it will result in a loss. Moreover, insurers collect premiums on\nbehalf of all insuring persons and have to handle these moneys like a trust.**A.** **What is underwriting?****1.** **Underwriting**\nInsurance companies try to insure people who are expected to pay adequate\npremium in proportion to the risk they bring to the insurance pool. This process of\ncollecting and analysing information from a proposer is known as underwriting. On\nthe basis of information collected through this process, they decide whether they\nwant to insure a proposer. If they decide to do so, then at what premium, terms\nand conditions so as to make a reasonable profit from taking such risk.**Definition****Underwriting** is the process of assessing the risk appropriately and deciding the\nterms on which the insurance cover is to be granted. Thus, it is a process of risk\nassessment and risk pricing.**2.** **Need for Underwriting**Underwriting is the backbone of an insurance company as acceptance of the risk\ncarelessly or for insufficient premiums will lead to insurer’s insolvency. On the other\nhand, being too selective or careful will prevent the insurance company from43creating a big pool so as to spread the risk uniformly. It is therefore critical to strike\nthe correct balance between risk and business, thereby being competitive and yet\nprofitable for the organization.This process of balancing is done by the underwriter, in accordance with the\nphilosophy, policies and risk hunger of the insurance company concerned. Although\nage affects the chance of sickness as well as death, it must be remembered that\nsickness usually comes much before death and could be frequent. Hence, it is quite\nlogical that the underwriting norms and guidelines are much tighter for health\ncoverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored as\nthere has to be an insurable interest and financial underwriting is important to rule\nout any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A life\ninsurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered carefully\nwhile assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young adults", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "n42", "section": "Learning Outcomes", "chunk_id": "IC 38 -IA- Eng-Health_027", "metadata": {"file_size": 4590, "chunk_index": 27, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["What is underwriting?", "Example", "Factors which affect chance of illness", "Learning Outcomes", "Look at this Scenario"]}}
{"chunk": "sickness usually comes much before death and could be frequent. Hence, it is quite\nlogical that the underwriting norms and guidelines are much tighter for health\ncoverage than death coverage.**3.** **Underwriting – Risk Assessment**In health insurance, there is a higher focus on medical or health findings than\nfinancial or income based underwriting. However, the latter cannot be ignored as\nthere has to be an insurable interest and financial underwriting is important to rule\nout any adverse selection and ensure continuity in health insurance.**Example**An individual who is diabetic has a far higher chance of developing a cardiac or\nkidney complication requiring hospitalization than of death, and also health\nepisodes can happen multiple times during the course of insurance coverage. A life\ninsurance underwriting guideline might rate this individual as an average risk.\nHowever, for medical underwriting, he would be rated as a higher risk.**4.** **Factors which affect chance of illness**The factors which affect morbidity (risk of falling ill) should be considered carefully\nwhile assessing risk are as follows:**a)** **Age:** Premiums are charged corresponding with age and the degree of risk.For e.g. the premiums for infants and children are higher than young adults\ndue to increased risk of infections and accidents. Similarly, for adults beyond\nthe age of 45 years, the premiums are higher, as the probability of an\nindividual suffering from a chronic ailment like diabetes, a sudden heart\nailment or other such morbidity is much higher.\n**b)** **Gender:** Women are exposed to additional risk of illness during child bearingperiod. However, men are more likely to get affected by heart attacks than\nwomen or suffer job related accidents than women as they may be more\ninvolved in hazardous employment.\n**c)** **Habits:** Consumption of tobacco, alcohol or narcotics in any form has a directbearing on the morbidity risk.\n**d)** **Occupation:** Extra risk to accidents is possible in certain occupations, e.g.driver, blaster, aviator etc. Likewise, certain occupations may have higher\nhealth risks, like an X-Ray machine operator, asbestos industry workers,\nminers etc.44**e)** **Family history:** This has greater relevance, as genetic factors influencediseases like asthma, diabetes and certain cancers. This does impact the\nmorbidity and should be taken into consideration while accepting risk.\n**f)** **Build:** Stout, thin or average build may also be linked to morbidity in certaingroups.\n**g)** **Past illness or surgery:** It has to be ascertained whether the past illness hasany possibility of causing increased physical weakness or even recur and\naccordingly the policy terms should be decided. For e.g. kidney stones are\nknown to recur and similarly, cataract in one eye increases possibility of\ncataract in the other eye.\n**h)** **Current health status and other factors or complaints:** This is important toascertain the degree of risk and insurability and can be established by proper\ndisclosure and medical examination.\n**i)** **Environment and residence:** These also have a bearing on morbidity rates.**Understanding Moral Hazard in Health Insurance**While factors like age, gender, habits etc. refer to the physical hazard of a health\nrisk, there is something else that needs to be closely watched. This is the moral\nhazard of the client which can prove very costly to the insurance company.An extreme example of bad moral hazard is that of an insured taking health\ninsurance knowing that he will undergo a surgical operation within a short time but\nnot disclosing this to the insurer. There is thus a deliberate intention of taking\ninsurance just to collect a claim.**Test Yourself 1**Underwriting is the process of ___________.\nI. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks**Definition**The term **assessment of risks** refers to the process of evaluating each proposal for\nhealth insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.45**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance eagerly\nand to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there is\na chance that people with serious ailments like diabetes, high BP, heart problems\nor cancer, who knew that they would soon require hospitalization, would seek to", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Underwriting – Risk Assessment", "chunk_id": "IC 38 -IA- Eng-Health_028", "metadata": {"file_size": 4590, "chunk_index": 28, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Purposes of Underwriting", "Understanding Moral Hazard in Health Insurance", "Gender:", "Test Yourself 1", "Example"]}}
{"chunk": "insurance just to collect a claim.**Test Yourself 1**Underwriting is the process of ___________.\nI. Marketing insurance products\nII. Collecting premiums from customers\nIII. Risk assessment and risk pricing\nIV. Selling various insurance products**B.** **Underwriting – Basic concepts****1.** **Purposes of Underwriting**\nThere are two main purposes for Underwriting.i. To prevent anti-selection, that is selection against the insurer\nii. To classify risks and ensure equity among risks**Definition**The term **assessment of risks** refers to the process of evaluating each proposal for\nhealth insurance in terms of the degree of risk it represents and then deciding\nwhether or not to grant insurance and on what terms.45**Anti-selection** (or **adverse selection** ) is the tendency of people, who suspect or\nknow that their chance of experiencing a loss is high, to seek out insurance eagerly\nand to gain in the process.**Example**If insurers were not selective about whom and how they offered insurance, there is\na chance that people with serious ailments like diabetes, high BP, heart problems\nor cancer, who knew that they would soon require hospitalization, would seek to\nbuy health insurance, create losses for the insurer. In other words, if an insurer does\nnot assess risk properly, it would be selected against and suffer losses in the process.**2.** **Equity among risks**\nLet us now consider equity among risks. “Equity” means that applicants who are\nexposed to similar types and degrees of risk be placed in the same premium class.\nInsurers would like to have some type of standardization to determine the premiums\nto be charged. The proposals that come to the underwriter are classified into\nfollowing risk types:**i.** **Standard risks**\nThese are the people whose expected morbidity (chance of falling ill) is average.**ii.** **Preferred risks**\nIn some cases, the expected morbidity is significantly lower than average and\nhence are preferred risks. These could be charged a lower premium.**iii.** **Substandard risks**\nIn some other cases, the expected morbidity may be higher than the average.\nThough these risks also may be insurable, insurers may charge higher premiums\nand/or accept them subject to certain conditions and restrictions.**iv.** **Declined risks**There are some persons who have certain medical or other conditions, which\nmake them highly prone to sicknesses and making claims. It is highly probable\nthat such persons fall sick and cause a disproportionate degree of liability on\nthe common pool. In other words, while others in the pool have a more or less\naverage chance of falling sick, these persons have a very high chance of falling\nsick making it difficult to insure them even at higher rates of premium.[Sometimes, such persons may be posing a Moral Hazard when they do not reveal\ntheir high probability of falling sick and try to get insured like other normal\npeople.] Most insurers decline such risks and create a database of such people\nfor future use.Being a ‘Declined Risk’ means only that a particular insurer does not wish to\ninsure a person for that type of insurance product, at that particular point in\ntime. However, it is possible that another insurer might insure him/ her at a\ndifferent premium and/or with different conditions. The same insurer might also46consider him/ her for another type of policy or even for the same policy at a\nlater date, when the conditions change.**3.** **Underwriting process**The underwriting process takes place at two levels: At the primary or field level or\n At the underwriting department level**a)** **Primary Underwriting**Primary underwriting (or Field level underwriting) includes information gathering\nby an agent or company representative to decide whether an applicant is suitable\nfor granting insurance coverage. The agent plays this critical role of **primary**\n**underwriting** . He is in the best position to know whether prospective client is\ninsurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may also\nbe sought from an official of the insurance company. These reports typically\ncover the occupation, income and financial standing and reputation of the person\nproposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts disclosed\nby the proposer in the Proposal Form. It would be difficult for an underwriter\nsitting in the office to know whether these facts are true or have been\nfraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the agent", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "o46", "section": "Test Yourself 1", "chunk_id": "IC 38 -IA- Eng-Health_029", "metadata": {"file_size": 4590, "chunk_index": 29, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Equity among risks", "Purposes of Underwriting", "Substandard risks", "Moral Hazard report", "Test Yourself 1"]}}
{"chunk": "by an agent or company representative to decide whether an applicant is suitable\nfor granting insurance coverage. The agent plays this critical role of **primary**\n**underwriting** . He is in the best position to know whether prospective client is\ninsurable.Some insurance companies require the agents to provide a statement or a\nconfidential report, with specific information, opinion and recommendations\nwith respect to the proposer.A similar kind of report, which has been called as **Moral Hazard report**, may also\nbe sought from an official of the insurance company. These reports typically\ncover the occupation, income and financial standing and reputation of the person\nproposed for health insurance.**4.** **Fraud monitoring role of Agent**Decisions regarding selecting a risk for insurance depends on the facts disclosed\nby the proposer in the Proposal Form. It would be difficult for an underwriter\nsitting in the office to know whether these facts are true or have been\nfraudulently misrepresented with an intention to cheat the insurer.The agent, **as primary underwriter** plays a significant role here. Since the agent\nhas direct personal contact with the proposer, he or she is in the best position to\nfind out whether the information submitted is true and whether any wilful nondisclosure or misrepresentation has been made.**a)** **Role of the Underwriting department**The Underwriting department in the insurer’s office does the major part of the\nunderwriting. Here, specialists who are proficient in such work, consider and\nanalyse all the relevant data on the particular risk and even some demographical\ndata. They finally decide whether to accept the proposal for insurance, decide\nthe terms, and charge the appropriate premiums.47**C.** **Other Health Insurance regulations of IRDAI**\nThe regulator has also brought in some changes for benefit of the Insured as given\nbelow.a. The insured is to be informed of any underwriting loading charged over andabove the premium and the specific consent of the policyholder for such loadings\nshall be obtained before issuance of a policy.\nb. If an insurance company requires any further information, such as change ofoccupation, at any subsequent stage of a policy or at the time of its renewal, it\nhas prescribed standard forms to be filled up by the insured which forms part of\nthe policy document.\nc. Insurers have come out with various mechanisms to reward policyholders forearly entry, continued renewals, favourable claims experience etc. with the\nsame insurer and disclose upfront such mechanism or incentives in the\nprospectus and the policy document.**D.** **Portability of Health Insurance**Portability is defined by IRDAI as **the right** accorded to individual health insurance\npolicyholders (including all members under family cover), **to transfer** the credit\ngained for pre-existing conditions and time bound exclusions, **from one insurer to**\n**another insurer or from one plan to another plan of the same insurer**, provided\nthe previous policy has been maintained without any break.Portability is the provision by which an Insured can move from one insurer to another\ncarrying with him/ her all the benefits earned over a period of time. Students may\nplease read IRDAI’s Consolidated Guidelines on Product filing in Health Insurance\nBusiness dated 22 July 2020 lays down norms for standardising many of the practices\nincluding Portability.IRDAI mandates that Portability shall be allowed under all individual indemnity\nhealth insurance policies issued by General Insurers and Health Insurers including\nfamily floater policies.However, porting can be done only at the time of renewal. Apart from the waiting\nperiod credit, other terms of the new policy including the premium would be\ndecided by the new insurance company. Procedurally, the request for porting should\nbe made by the insured to the old insurer at least 45 days before the renewal,\nspecifying the company to which the policy has to be ported. The policy has to be\nrenewed without a break (there is a 30 day grace period if porting is under process).\nIRDA has created a web-based facility that maintains data about all health insurance\npolicies issued by insurance companies to individuals, to enable the new insurer to\naccess and obtain data on the porting policyholder’s health insurance history in a\nsmooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance policyholders\n(including all members under family cover and members of group health insurance48policy), **to transfer** the credit gained for pre-existing conditions and time bound\nexclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business dated\n22 July 2020 revised the guidelines on Migration of health insurance policies. It\nprovides that every individual policyholder (including members under family floater", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "e48", "section": "Moral Hazard report", "chunk_id": "IC 38 -IA- Eng-Health_030", "metadata": {"file_size": 4590, "chunk_index": 30, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Other Health Insurance regulations of IRDAI", "Role of the Underwriting department", "Fraud monitoring role of Agent", "Migration of Health Insurance"]}}
{"chunk": "decided by the new insurance company. Procedurally, the request for porting should\nbe made by the insured to the old insurer at least 45 days before the renewal,\nspecifying the company to which the policy has to be ported. The policy has to be\nrenewed without a break (there is a 30 day grace period if porting is under process).\nIRDA has created a web-based facility that maintains data about all health insurance\npolicies issued by insurance companies to individuals, to enable the new insurer to\naccess and obtain data on the porting policyholder’s health insurance history in a\nsmooth manner.**E.** **Migration of Health Insurance**Migration is defined by IRDAI as the right accorded to health insurance policyholders\n(including all members under family cover and members of group health insurance48policy), **to transfer** the credit gained for pre-existing conditions and time bound\nexclusions, **with the same insurer** .IRDAI’s Consolidated Guidelines on Product filing in Health Insurance Business dated\n22 July 2020 revised the guidelines on Migration of health insurance policies. It\nprovides that every individual policyholder (including members under family floater\npolicy) covered under an indemnity based individual health insurance policy shall\nbe provided an option of migration at the explicit option exercised by the\npolicyholder. Migration from group policies to individual policy will be subject to\nunderwriting.A policyholder desirous of migrating his/ her policy shall be allowed to apply to the\ninsurance company to migrate the policy along with all members of the family, if\nany, at least 30 days before the premium renewal date of his/her existing policy.\nHowever, if the insurer is willing to consider even less than 30 days period, then the\ninsurer may do so. Insurers shall not levy any charges exclusively for migration.**F.** **Basic principles of insurance and tools for underwriting****1.** **Basic principles relevant to underwriting**In any form of insurance, whether it is life insurance or general insurance, there are\ncertain legal principles which operate along with acceptance of risks. Health\ninsurance is equally governed by these principles and any violation of the principles\nmay result in the insurer deciding to avoid the liability. (These principles have been\ndiscussed in the common chapters.)**2.** **Tools for underwriting**These are the sources of information for the underwriter and the basis on which the\nrisk classification is done and premiums finally decided. The following are the key\ntools for underwriting:**a)** **Proposal form**This document is the base of the contract where all the critical information\npertaining to the health and personal details of the proposer (i.e. age,\noccupation, build, habits, health status, income, premium payment details etc.)\nare collected. Any breach or concealment of information by the insured shall\nrender the policy void. (This has been discussed in the common chapters.)**b)** **Age proof**Premiums are determined on the basis of the age of the insured. Hence it is\nimperative that the age disclosed at the time of enrolment is verified through\nsubmission of an age proof.49**Example**\nIn India, there are many documents which can be considered as age proof but all of\nthem are not legally acceptable. Mostly valid documents are divided into two broad\ncategories. They are as follows:a) Standard age proof: Some of these include school certificate, passport,domicile certificate, PAN card etc.\nb) Non-standard age proof: Some of these include ration card, voter ID, elder’sdeclaration, gram panchayat certificate etc.**Financial documents**\nKnowing the financial status of the proposer is particularly relevant for benefit\nproducts and to reduce the moral hazard. However, normally the financial\ndocuments are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and usually\ndepends upon the age of the insured and sometimes on the amount of cover\nopted. Some replies in the proposal form may also contain some information\nthat leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive to\ngenerate more business, there is a conflict of interest which has to be watched\nout for.**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "e48", "section": "E.", "chunk_id": "IC 38 -IA- Eng-Health_031", "metadata": {"file_size": 4590, "chunk_index": 31, "chunk_tokens": 985, "has_examples": true, "has_tables": false, "key_concepts": ["Basic principles relevant to underwriting", "Financial documents", "Reports of sales personnel", "Example", "Migration of Health Insurance"]}}
{"chunk": "Knowing the financial status of the proposer is particularly relevant for benefit\nproducts and to reduce the moral hazard. However, normally the financial\ndocuments are only asked for in cases of:a) Personal accident covers or\nb) High sum assured coverage or\nc) When the stated income and occupation as compared to the coveragesought, show a mismatch.**c)** **Medical reports**Requirement of medical reports is based on the norms of the insurer, and usually\ndepends upon the age of the insured and sometimes on the amount of cover\nopted. Some replies in the proposal form may also contain some information\nthat leads to medical reports being asked for.**d)** **Reports of sales personnel**Sales personnel can also be seen as grassroots level underwriters for the\ncompany and the information given by them in their report could form an\nimportant consideration. However, as the sales personnel have an incentive to\ngenerate more business, there is a conflict of interest which has to be watched\nout for.**Test Yourself 2**The principle of utmost good faith in underwriting is required to be followed by___________.\nI. The insurerII. The insuredIII. Both the insurer and the insuredIV. The medical examiners**Test Yourself 3**Insurable interest refers to ____________.\nI. Financial interest of the person in the asset to be insured\nII. The asset which is already insured50III. Each insurer’s share of loss when more than one company covers the same loss\nIV. The amount of the loss that can be recovered from the insurer**G.** **Underwriting** **process**Once the required information is received, the underwriter decides the terms of the\npolicy. The common forms used for underwriting health insurance business are as\nbelow:**1.** **Medical underwriting**Medical underwriting is a process in which medical reports are called for from the\nproposer to determine the health status of an individual applying for health\ninsurance policy. The health information collected is then evaluated by the insurers\nto determine whether to offer coverage, up to what limit and on what conditions\nand exclusions. Thus medical underwriting can determine the acceptance or\ndeclining of a risk and also the terms of cover.**Example**Medical conditions like hypertension, overweight/ obesity and raised sugar levels\nhave a high probability of future hospitalization for diseases of the heart, kidney\nand the nervous system. So, these conditions should be carefully considered while\nassessing the risk for medical underwriting.Medical underwriting guidelines may also require a signed declaration of the\nproposer’s health status by his/ her family physician.Persons above the age of 45-50 years, enrolling for the first time are normally\nrequired to undergo specified pathological investigations to assess health risk profile\nand to obtain information on their current health status. Such investigations also\nprovide an indication of prevalence of any pre-existing medical conditions or\ndiseases.**2.** **Non-medical underwriting**Most of the proposers which apply for health insurance do not need medical\nexamination.Even, if the proposer were to disclose all material facts completely and truthfully\nand the same were checked by agent carefully, then also the need for medical\nexamination could be much less.**Example**\nIf an individual has to take health insurance coverage quickly without going through\na long process of medical examinations, waiting periods and processing delays, then\nhe can opt for a non-medical underwriting policy. In a non-medical underwriting51policy, premium rates and sum assured are usually decided on the basis of answers\nto a few health questions mostly based on age, gender, smoking class, build etc.\nThe process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practiced inall companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate. This\nbecomes an additional exclusion apart from the standard policy exclusion and shall", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "d50", "section": "Medical reports", "chunk_id": "IC 38 -IA- Eng-Health_032", "metadata": {"file_size": 4590, "chunk_index": 32, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Reports of sales personnel", "Non-medical underwriting", "Example", "Test Yourself 3", "Numerical rating method"]}}
{"chunk": "The process is speedy but the premiums may be relatively higher.**3.** **Numerical rating method**This is a process adopted in underwriting, wherein numerical or percentage\nassessments are made on each component of the risk.\nFactors like age, sex, race, occupation, residence, environment, build, habits,\nfamily and personal history are examined and scored numerically based on predetermined criteria.**4.** **Underwriting decisions**The underwriting process is completed when the received information is carefully\nassessed and classified into appropriate risk categories. Based on the above tools\nand his judgment, the underwriter classifies the risk into the following categories:a) Accept risk at standard rates\nb) Accept risk at an extra premium (loading), though it may not be practiced inall companies\nc) Postpone the cover for a stipulated period/ term\nd) Decline the cover\ne) Counter offer (either restrict or deny part of the cover)\nf) Impose a higher deductible or Co-pay\ng) Levy permanent exclusion(s)under the policyIf any illness is permanently excluded, it is endorsed on the policy certificate. This\nbecomes an additional exclusion apart from the standard policy exclusion and shall\nform the part of the contract.**5.** **Use of general or standard exclusions**The majority of policies impose exclusions that apply to all their members. These\nare known as standard exclusions or sometimes referred to as general exclusions.\nInsurers limit their exposure by the implementation of standard exclusions. These\nhave been discussed in an earlier chapter.**6.** **Zone wise premium**Normally, the premium would depend on the age of the insured person and the sum\ninsured selected. Premium differential has been introduced in certain zones with\nhigher claims cost e.g. Delhi and Mumbai form part of highest premium zone for\ncertain products by some insurers. For e.g. Individual Policy for age group of 55-65\nyears would be rated higher in Metros and ‘A Class’ cities than a similar policy for\nthe same age bracket in a city like Indore or Jammu.52**Test Yourself 4**Which of the following statements about medical underwriting is incorrect?I. It involves high cost in collecting and assessing medical reports.\nII. Current health status and age are the key factors in medical underwriting forhealth insurance.\nIII. Proposers have to undergo medical and pathological investigations to assesstheir health risk profile.\nIV. Percentage assessment is made on each component of the risk.**H.** **Health Insurance at Group Level**While accepting a group for health insurance, the insurers take into consideration\nthe possibility of existence of a few members in the group who may have severe and\nfrequent health problems.**1.** **Group Health Insurance**Underwriting of group health insurance requires analysing the characteristics of the\ngroup to evaluate whether it falls within the insurance company’s underwriting\nguidelines as well as the guidelines laid down for group insurance by the insurance\nregulators.Standard underwriting process for group health insurance requires evaluating the\nproposed group on the following factors:a) Type of group\nb) Group size\nc) Type of industry\nd) Eligible persons for coverage\ne) Whether entire group is being covered or there is an option for members toopt out\nf) Level of coverage – whether uniform for all or differently\ng) Composition of the group in terms of sex, age, single or multiple locations,income levels of group members, employee turnover rate, whether premium\npaid entirely by the group holder or members are required to participate in\npremium payment\nh) Difference in healthcare costs across regions in case of multiple locationsspread in different geographical locations\ni) Preference of the group holder for administration of the group insurance bya third party administrator (of his choice or one selected by the insurer) or\nby the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore, the\ninsurer will price the group health insurance policy accordingly in both the cases.53Similarly to avoid adverse selection in case of groups with high turnover such as IT\ncompanies, insurers can introduce precautionary criteria requiring employees to\nserve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered group\nhealth insurance, the character of the group composition is one of the important\nconsideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Numerical rating method", "chunk_id": "IC 38 -IA- Eng-Health_033", "metadata": {"file_size": 4590, "chunk_index": 33, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Underwriting other than employer- employee groups", "Use of general or standard exclusions", "Test Yourself 4", "Health Insurance at Group Level", "Example"]}}
{"chunk": "i) Preference of the group holder for administration of the group insurance bya third party administrator (of his choice or one selected by the insurer) or\nby the insurer itself\nj) Past claims experience of the proposed group**Example**A group of members working in mines or factories is at higher health risk than a\ngroup of members working in air-conditioned offices. Also the nature of diseases\n(thereby claims) are also likely to be quite different for both groups. Therefore, the\ninsurer will price the group health insurance policy accordingly in both the cases.53Similarly to avoid adverse selection in case of groups with high turnover such as IT\ncompanies, insurers can introduce precautionary criteria requiring employees to\nserve their probationary period before becoming eligible for insurance.**2.** **Underwriting other than employer- employee groups**Employer-employee groups are traditionally the most common groups offered group\nhealth insurance, the character of the group composition is one of the important\nconsideration while underwriting the group.Health insurance can also be offered to Non Employer employee groups. The IRDAI\nhas issued group insurance guidelines with a view to regulate the approach to be\nadopted by insurers in dealing with various groups. Such non-employer groups\ninclude:a) Employer welfare associations\nb) Holders of credit cards issued by a specific company\nc) Customers of a particular business where insurance is offered as an add-onbenefit\nd) Borrowers of a bank and professional associations or societies**I.** **Underwriting of Overseas Travel Insurance**Since the main cover under Overseas Travel Insurance policies is the health cover,\nthe underwriting would follow the pattern for health insurance in general.The premium rating and acceptance would as per individual company guidelines but\na few important considerations are given below:1. Premium rate would depend on the age of the proposer and the duration offoreign travel.\n2. As medical treatment is costly overseas, the premium rates are normallymuch higher compared to domestic health insurance policies.\n3. Even among the foreign countries, USA and Canada premium is the highest.\n4. Care should be taken to rule out the possibility of a Proposer using the policyto take medical treatment abroad and hence the existence of any preexisting disease must be carefully considered at the proposal stage.**J.** **Underwriting of Personal Accident Insurance**The underwriting considerations for Personal Accident Policies are discussed below:**Rating**In personal accident insurance, the main factor considered is the occupation of the\ninsured. The risks associated with profession or occupation varies in accordance\nwith the nature of work performed. For example, an office manager is less exposed\nto risk at work than a civil engineer working at a site where a building is being\nconstructed. To fix a rate, occupations are classified into groups, each group\nreflecting, more or less, similar risk exposure.54**Classification of Risk**On the basis of occupation, the risks associated with the insured person may be\nclassified into three groups:**Risk group I**\nAccountants, Doctors, Lawyers, Architects and persons engaged in\nadministration functions, persons primarily engaged in occupations of similar\nhazards.**Risk group II**\nBuilders, Contractors and Engineers engaged in superintending functions and\npersons engaged in occupation of similar hazards. All persons engaged in manual\nlabour (except those falling under Group III),**Risk group III**\nPersons working in underground mines or engaged in activities like racing on\nwheels and persons engaged in occupations/ activities of similar hazard.\nRisk groups are also known in the form of ‘Normal’, ‘Medium’ and ‘High’\nrespectively.**Age Limits**General age limits for the working population (employer employee) is 1870.However for students Minimum age could be 5 years too.\nThe minimum and maximum age for being covered and renewed varies from\ncompany to company.**Family Package Cover**The Personal accident policy also has a family package cover wherein Children and\nNon-earning spouse are covered for to death and permanent disablement (total or\npartial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the purpose\nof availing of group discount and other benefits, the proposed “Group” should fall\nclearly under one of the following categories, given below:Employer – employee relationship including dependents of the employeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above\ncategories, they may be deliberated and decided upon by the technical department", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Example", "chunk_id": "IC 38 -IA- Eng-Health_034", "metadata": {"file_size": 4590, "chunk_index": 34, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Underwriting other than employer- employee groups", "Risk group II", "Group discount criteria", "Example"]}}
{"chunk": "The minimum and maximum age for being covered and renewed varies from\ncompany to company.**Family Package Cover**The Personal accident policy also has a family package cover wherein Children and\nNon-earning spouse are covered for to death and permanent disablement (total or\npartial) only.**Premium Discount in Group Policies**A group discount is allowed off the premium, if the number of insured person\nexceeds a certain number say 100. Group policy however may be issued when\nnumber is smaller, say 25 but without any discount.**Group discount criteria**Group policies should be issued only in respect of the named groups. For the purpose\nof availing of group discount and other benefits, the proposed “Group” should fall\nclearly under one of the following categories, given below:Employer – employee relationship including dependents of the employeeMembers of a registered co-operative societyMembers of registered service clubs- Holders of credit card of banks/ Diners/ Master/ VisaIn case of proposals relating to any further category different from the above\ncategories, they may be deliberated and decided upon by the technical department\nof the respective insurers.55**Premium**Varying rates of premium are applicable to named employees as per the\nclassification of risks and the benefits selected.**On-duty cover**PA policies may have a cover for both on-duty and off-duty period or for either\nseparately. The premium is dependent on the Sum Assured, the number of hours of\nduty etc. Some employers may like to restrict themselves to cover the duty period\nonly.**Exclusion of death cover**It is possible to issue group P.A. policies excluding the death benefit, subject to\nindividual company guidelines.**Group discount and Bonus/ Malus**Rating under renewal of group policies is determined with reference to the claims\nexperience.Favourable experience is rewarded with a discount in the renewal premium\n(bonus)Adverse experience is penalised by loading of renewal premium (malus),\naccording to a scaleNormal rates will apply for renewal if the claims experience is, say, 70 percent**Test Yourself 5**1) In a group health insurance, any of the individual constituting the group couldanti-select against the insurer.\n2) Group health insurance provides coverage only to employer-employee groups.\nI. Statement 1 is true and statement 2 is falseII. Statement 2 is true and statement 1 is falseIII. Statement 1 and statement 2 are trueIV. Statement 1 and statement 2 are false**Answers to Test Yourself****Answer 1** **-** The correct option is III.\n**Answer 2** **-** The correct option is III.\n**Answer 3** **-** The correct option is I.\n**Answer 4** **-** The correct option is IV.\n**Answer 5** **-** The correct option is IV.56## CHAPTER H-05## HEALTH INSURANCE CLAIMS**Chapter Introduction**In this chapter we will discuss about claim management process in Health Insurance,\nclaims related procedures and documentation. Apart from this, we will also look\ninto claims management under Personal Accident Insurance and understand the role\nof TPAs.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the various stakeholders in insurance claims\nb) Describe how health insurance claims are managed\nc) Discuss the various documents required for settlement of health insuranceclaims\nd) Explain how reserves for claims are provided for by insurers.\ne) Discuss personal accident claims\nf) Understand the concept and role of TPAs57**A.** **Claims Management in Insurance**It is very well understood that insurance is a ‘ **promise’** and the policy is a ‘ **witness’**\nto that promise. The occurrence of an insured event leading to a claim under the\npolicy is the true test of that promise. How well an insurer performs is evaluated by\nhow well it keeps its claims promises. One of the key rating factors in insurance is\nthe claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before looking\nat how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the ‘payers<br>of the claims’. Even if the claims are met from the policy<br>holders’ funds, in most cases, it is they who are liable to keep<br>the promise.|\n|**Underwriters**|Underwriters within an insurance company and across all<br>insurers have the responsibility to understand the claims and<br>design the products, decide policy terms, conditions and pricing<br>etc.|", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "H-05", "section": "Family Package Cover", "chunk_id": "IC 38 -IA- Eng-Health_035", "metadata": {"file_size": 4590, "chunk_index": 35, "chunk_tokens": 1009, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Exclusion of death cover", "Group discount criteria", "Answer 5", "Premium"]}}
{"chunk": "to that promise. The occurrence of an insured event leading to a claim under the\npolicy is the true test of that promise. How well an insurer performs is evaluated by\nhow well it keeps its claims promises. One of the key rating factors in insurance is\nthe claims paying ability of the insurance company.**1.** **Stakeholders in claim process**One needs to understand the parties interested in the claims process before looking\nat how claims are managed.**Diagram 1:** **Stakeholders in claim process**|Customer|The person who buys insurance is the first stakeholder and<br>‘receiver of the claim’.|\n|---|---|\n|**Owners**|Owners of the insurance company have a big stake as the ‘payers<br>of the claims’. Even if the claims are met from the policy<br>holders’ funds, in most cases, it is they who are liable to keep<br>the promise.|\n|**Underwriters**|Underwriters within an insurance company and across all<br>insurers have the responsibility to understand the claims and<br>design the products, decide policy terms, conditions and pricing<br>etc.|\n|**Regulator**|The regulator (Insurance Regulatory and Development Authority<br>of India) is a key stakeholder in its objective to:<br> Maintain order in the insurance environment<br> Protect policy holders’ interest<br> Ensure long term financial health of insurers.|58|Third Party<br>Administrators|Service intermediaries known as Third Party Administrators,<br>who process health insurance claims.|\n|---|---|\n|**Insurance**<br>**agents/**<br>**brokers**|Insurance agents/ brokers not only sell policies but are also<br>expected to service the customers in the event of a claim.<br>|\n|**Providers/**<br>**Hospitals**|~~They ensure that the customer gets a smooth claim experience,~~<br>especially when the hospital is on the panel of the TPA the<br>Insurer to provide cashless hospitalization.|Thus managing claims well means managing the objectives of the each of these\nstakeholders related to the claims. Of course, it may happen that some of these\nobjectives can conflict with each other.**Reserving:** In many cases, insurance companies may not be able to settle claims\ninstantly and may have to wait for information or the results of disputes, litigation\netc. So, they have to hold the claim amounts in reserve till the payments are due.\nReserves are usually are actuarial estimates of the amounts that will be paid on\noutstanding claims.Reserving refers to the amount of provision made for all claims in the books of the\ninsurer based on the status of the claims.**Test Yourself 1**Who among the following is not a stakeholder in Health insurance claim process?I. Customers\nII. Police Department\nIII. Regulator\nIV. TPA**B.** **Management of Health Insurance Claims****1.** **Claim process in health insurance**A claim may be serviced either by the insurance company itself or through the\nservices of a Third Party Administrator (TPA) authorized by the insurance company.From the time a claim is made known to the insurer/ TPA to the time the payment\nis made as per the policy terms, the health claim passes through a set of welldefined steps, each having its own relevance.The processes detailed below are in specific reference to health insurance\n(hospitalization) indemnity products which form the major part of health insurance\nbusiness.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.59**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)**a)** **Intimation**Claim intimation is the first instance of contact between the customer and theclaims team. The customer could inform the company that he is planning to avail\na hospitalization or the intimation would be made after the hospitalization has\ntaken place, especially in case of emergency admission to a hospital.60Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned\nadmission, and within 24 hours of hospitalization in case of an emergency.\nIntimation is now possible through Mobile Apps/ call centres run by insurers/", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Stakeholders in claim process", "chunk_id": "IC 38 -IA- Eng-Health_036", "metadata": {"file_size": 4590, "chunk_index": 36, "chunk_tokens": 979, "has_examples": false, "has_tables": true, "key_concepts": ["Stakeholders in claim process", "Reserving:", "Claim process broadly comprises following steps", "Owners", "Diagram 1:"]}}
{"chunk": "business.\nThe general process and supporting documents for a claim under fixed benefit\nproduct or critical illness or daily cash product etc. would be quite similar, except\nfor the fact that such products may not come with cashless facility.In both cases of indemnity as well as reimbursement type of claim, the basic steps\nremain the same.59**Diagram 2:** **Claim process broadly comprises following steps** (may not be in the\nsame order)**a)** **Intimation**Claim intimation is the first instance of contact between the customer and theclaims team. The customer could inform the company that he is planning to avail\na hospitalization or the intimation would be made after the hospitalization has\ntaken place, especially in case of emergency admission to a hospital.60Till recently, the act of intimation of a claim event was a formality. However,\nrecently insurers have started insisting on the intimation of claim as soon as\npracticable. Typically it is required before hospitalization in case of planned\nadmission, and within 24 hours of hospitalization in case of an emergency.\nIntimation is now possible through Mobile Apps/ call centres run by insurers/\nTPAs open 24 hours as well as through the internet and e-mail.**b)** **Registration**Once the intimation is received by the company directly or through the TPA, the\ndetails thereof are matched for accuracy and a reference number or claim\ncontrol number generated and intimated to the claimant. The documents are\nthen scrutinized for prima facie coverage and pre-authorisation of likely\nexpenditure is given to the Hospital in case the intimation is of a planned surgery\nunder the Cash-less scheme (detailed in subsequent section).The claims that come for the final settlement on the reimbursement basis arescrutinized in detail about admissibility, sum assured, deductibles, sub-limits\netc. In case of deficiency in documents the same has to be communicated\ntogether, not in piecemeal. It is worth knowing that the claim processing\ninvolves not only ensuring that the terms of the contract have to be fulfilled,\nbut also in ensuring that the Hospitals do not indulge in overcharging, doublecharging etc.**Example**Hospitalization is typically associated with Allopathic method of treatment.\nHowever, the patient could undergo other modes of treatment such as: Unani\n Siddha\n Homeopathy\n Ayurveda\n Naturopathy etc.Most policies now include these treatments, however there could be sub-limits.**Telemedicine:** IRDAI has asked insurers to allow telemedicine wherever regular\nmedical consultation is allowed, in the terms and conditions of medical insurance\npolicies.This will help policy holders who may prefer to consult medical practitioners online\nor telephonically to avoid going out of their homes or if they are in quarantine\nthemselves due to the coronavirus infection.**Arriving at the final claim payable:** The factors that decide the claim amount\npayable are:a) Sum insured available for the member under the policyb) Balance sum insured available under the policy for the member after takinginto account any claim made already:61c) Sub-Limitsd) Check for any limits specific to illnesse) Check whether entitled or not to cumulative bonusf) Other expenses covered with limitation:What are finally paid are the Reasonable and Customary Charges meaning the\ncharges for services or supplies, which are the standard charges for the specific\nprovider and consistent with the prevailing charges in the geographical area for\nidentical or similar services, taking into account the nature of the illness/ injury\ninvolved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance Standardization Guidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by cheque\nor by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety of\nreasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": null, "section": "Diagram 2:", "chunk_id": "IC 38 -IA- Eng-Health_037", "metadata": {"file_size": 4590, "chunk_index": 37, "chunk_tokens": 993, "has_examples": true, "has_tables": false, "key_concepts": ["Denial of claims", "Arriving at the final claim payable:", "Claim process broadly comprises following steps", "Diagram 2:", "Example"]}}
{"chunk": "involved.Earlier every TPA/ insurer had its own list of non-payable items, now the same\nhas been standardized under IRDAI Health Insurance Standardization Guidelines.**c)** **Payment of claim**Once the payable claim amount is arrived at, payment is done to the customer\nor the hospital as the case may be. The payment may be made either by cheque\nor by transferring the claim money to the customer’s bank account.**d)** **Denial of claims**The experience in health claims show that 10% to 15% of the claims submitted\ndo not fall within the terms of the policy. This could be because of a variety of\nreasons some of which are:i. Date of admission is not within the period of insurance.ii. The Member for whom the claim is made is not covered.iii. Due to Pre-existing illness (where the policy excludes such condition).\niv. Undue delay in submission without valid reason.\nv. No active treatment; admission is only for investigation purpose.\nvi. Illness treated is excluded under the policy.\nvii. The cause of illness is abuse of alcohol or drugs\nviii. Hospitalization is less than 24 hours.Denial or repudiation of a claim (due to whatever reason) has to be informed to\nthe customer in writing by the insurance company. Usually, such denial letter\nclearly states the reason for denial, narrating the policy term/ condition on which\nthe claim was denied.Apart from the representation to the insurer, the customer has the option to\napproach the following in case of denial of claim: Insurance Ombudsman or The Consumer Commissions or IRDAI or Law courts.**e)** **Suspect claims require more detailed investigation by the companies/****TPAs**\nWherever the insurance company suspects foul-play it can get claims\ninvestigated. A few examples of frauds committed in health insurance are:62i. Impersonation, the person insured is different from person treated.\nii. Fabrication of documents to make a claim where there is no hospitalization.\niii. Inflation of expenses, either with the help of the hospital or by addition ofexternal bills fraudulently created.\niv. Outpatient treatment converted to in-patient/ hospitalization to cover costof diagnosis, which could be high in some conditions.It is to be noted that in respect of claims that need to be investigated,\ninvestigations shall be initiated and completed at the earliest, in any case not\nlater than 90 days from the date of receipt of claim intimation. The claim should\nbe settled within 30 days of completing the investigation. (Pl refer to IRDAI\n(Protection of policyholder’s), 2017 Regulations and updated accordingly)**f)** **Cashless settlement process by TPA**How does the cashless facility work? At the heart of this is an agreement that\nthe TPA insurer enters into, with the hospital. There are agreements possible\nwith other medical service providers as well. The process used for providing\ncashless facility are discussed in this section:|ble 3.1|Col2|\n|---|---|\n|**Step 1**| A customer covered under health insurance suffers from an illness or<br>sustains an injury and so is advised admission into a hospital. He/ she (or<br>someone on his/ her behalf) approaches the hospital’s insurance desk<br>with the insurance details such as:<br>i. TPA name,<br>ii. Customer’s membership number,<br>iii. Insurer’s name, etc.|\n|**Step 2**| The hospital compiles the necessary information such as:<br>i. Diagnosis of illness<br>ii. Treatment,<br>iii. Name of treating doctor,<br>iv. Number of days of proposed hospitalization and<br>v. The estimated cost<br> This is presented in a format, called the cashless authorization form.<br>|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could be<br>provided and if so, for how much amount it should be authorized and it<br>is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized by<br>the TPA as credit in the patient’s account. The member may be called on<br>to make a deposit payment to cover the non-treatment expenses and any<br>co-pay required under the policy.<br>|", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "l2", "section": "Payment of claim", "chunk_id": "IC 38 -IA- Eng-Health_038", "metadata": {"file_size": 4590, "chunk_index": 38, "chunk_tokens": 970, "has_examples": true, "has_tables": true, "key_concepts": ["Step 2", "Denial of claims", "Step 3", "Payment of claim", "Step 1"]}}
{"chunk": "|**Step 2**| The hospital compiles the necessary information such as:<br>i. Diagnosis of illness<br>ii. Treatment,<br>iii. Name of treating doctor,<br>iv. Number of days of proposed hospitalization and<br>v. The estimated cost<br> This is presented in a format, called the cashless authorization form.<br>|\n|**Step 3**|~~~~ The TPA studies the information provided in the_cashless authorization_<br>_form_ and takes a decision on whether the cashless authorization could be<br>provided and if so, for how much amount it should be authorized and it<br>is communicated to the hospital without delay.|\n|**Step 4**| The patient is treated by the hospital, keeping the amount authorized by<br>the TPA as credit in the patient’s account. The member may be called on<br>to make a deposit payment to cover the non-treatment expenses and any<br>co-pay required under the policy.<br>|\n|**Step 5**|~~~~ When the patient is ready for discharge, the hospital checks the amount<br>of credit in the account of the patient approved by the TPA against the<br>actual treatment charges covered by insurance.<br> If the credit is less, the hospital requests for additional approval of credit<br>for the cashless treatment.<br> TPA analyses the same and approves the additional amount.<br>|\n|**Step 6**|~~~~ Patient pays the non-admissible charges and gets discharged. He will be<br>asked to sign the claim form and the bill, to complete the documentation.|63|Step 7| Hospital consolidates all the documents and presents to the TPA the<br>documents for processing of the bill|\n|---|---|\n|**Step 8**|~~~~ TPA will process the claim and recommend for payment to the hospital<br>after verifying details.|**g)** **Customer must make sure that he/ she has his/ her insurance details with****him/ her.**This includes his TPA card, Policy copy, Terms and conditions of cover etc.When these are not available, he can contact the TPA (through a 24 hour\nhelpline) and seek the details.i. Customer must check if the hospital suggested by his/ her consulting doctoris in the network of the TPA. If not, he needs to check with the TPA the\noptions available where cashless facility for such treatment is available.ii. He/ she needs to make sure that the correct details are entered into thepre-authorization form. This form has been standardized by IRDAI as per\nGuidelines on Standardization in Health Insurance issued in 2013. If the case\nis not clear, the TPA could deny the cashless facility or raise query.iii. He/ she needs to ensure that the hospital charges are consistent with thelimits such as room rent or caps on specified treatments such as cataract.iv. The customer must inform the TPA in advance of the discharge and requestthe hospital to send to the TPA any additional approval that may be required\nbefore discharge. This will ensure the patient does not wait unnecessarily at\nthe hospital.It is also possible that the customer requests and takes an approval for cashless\ntreatment at a hospital but decides to admit the patient elsewhere. In such\ncases, the customer must inform and ask the hospital to communicate to the\nTPA that the cashless approval is not being used.If this is not done, the amount approved could get blocked in the customer’s\npolicy and could prejudice the approval of the subsequent request.**C.** **Documentation in Health Insurance Claims**This section explains the need for and content of each of the documents required\nto be submitted by the customers:**1.** **Discharge summary**Discharge summary can be termed as the most important document that is required\nto process a health insurance claim. It details the complete information about the\ncondition of the patient and the line of treatment and helps the claim processing\nperson immensely to understand the illness/ injury and the line of treatment. Where\nthe patient unfortunately does not survive, the discharge summary is termed **Death**\n**Summary** in many hospitals. The discharge summary is always sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that64prompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the Xray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance policy.", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "t64", "section": "Step 2", "chunk_id": "IC 38 -IA- Eng-Health_039", "metadata": {"file_size": 4590, "chunk_index": 39, "chunk_tokens": 1010, "has_examples": false, "has_tables": true, "key_concepts": ["Step 2", "Death", "Discharge summary", "Step 6", "Documentation in Health Insurance Claims"]}}
{"chunk": "policy and could prejudice the approval of the subsequent request.**C.** **Documentation in Health Insurance Claims**This section explains the need for and content of each of the documents required\nto be submitted by the customers:**1.** **Discharge summary**Discharge summary can be termed as the most important document that is required\nto process a health insurance claim. It details the complete information about the\ncondition of the patient and the line of treatment and helps the claim processing\nperson immensely to understand the illness/ injury and the line of treatment. Where\nthe patient unfortunately does not survive, the discharge summary is termed **Death**\n**Summary** in many hospitals. The discharge summary is always sought in original.**2.** **Investigation reports**Investigation reports assist in comparing the diagnosis and the treatment, thereby\nproviding the necessary information to understand the exact condition that64prompted the treatment and the progress made during the hospitalization for e.g.\nBlood test reports, X-ray reports and Biopsy reports. The insurer may return the Xray and other films to the customer on specific request.**3.** **Consolidated and detailed bills:**This is the document that decides what needs to be paid under the insurance policy.\nWhile the consolidated bill presents the overall picture, the detailed bill will provide\nthe break up, with reference codes. The bills have to be received in original.**4.** **Receipt for payment**The reimbursement of a health insurance claim will also require the formal receipt\nfrom the hospital of the amount paid which must correspond to the total of the bill.The receipt should be numbered and or stamped and be presented in original.**5.** **Claim form**Claim form is the formal and legal request for processing the claim and is submitted\nin original signed by the customer. The claim form has now been standardized by\nIRDAI.Besides information on disease, treatment etc., the declaration the insured person\nmakes in the claim form is the most important document in the legal sense.**6.** **Identity proof**With the increasing use of identity proof across various activities in our life, the\ngeneral Proof of identity helps in verifying whether the person covered and the\nperson treated are one and the same. Usually identification document which is\nsought could be voters’ identity card, driving license, PAN card, Aadhaar card etc.**7.** **Documents contingent to specific claims**There are certain types of claims that require additional documents apart from what\nhas been stated above. These are:a) Accident claims, where FIR or Medico-legal certificate issued by the hospitalto the registered police station, may be required.b) Case indoor papers in case of complicated or high value claims.c) Dialysis/ Chemotherapy/ Physiotherapy charts where applicable.d) Hospital registration certificate, where the compliance with the definitionof hospital needs to be checked**Test Yourself 2**Which of the following document is maintained at the hospital detailing all\ntreatment done to an in-patient?I. Investigation reportII. Discharge summaryIII. Case paperIV. Hospital registration certificate65**Test Yourself 3**The amount of provision made for all claims in the books of the insurer based on\nthe status of the claims is known as ________.I. Pooling\nII. Accounting\nIII. Reserving\nIV. Investing**D.** **Role of Third Party Administrators (TPA)**The Role of TPA has been discussed in earlier chapters too. It is important to know\nthe services offered by TPA so that the customer can be provided suitable services\nby the salesperson.The scope of TPA services starts after the sale and issue of the insurance policy. In\ncase of insurers not using TPAs, the services are performed by in-house team.**1.** **Post sale service of health insurance**a) Once the proposal (and the premium) is accepted, the coverage commences.\nb) If a TPA is to be used for servicing the policy, the insurer passes on theinformation about the customer and the policy to the TPA.\nc) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as well asprocessing of claims when the member requires the support of the policy for\na hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the services withinthe time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospital basedon the information provided for requesting the cashless facility.", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "t64", "section": "C.", "chunk_id": "IC 38 -IA- Eng-Health_040", "metadata": {"file_size": 4590, "chunk_index": 40, "chunk_tokens": 1001, "has_examples": false, "has_tables": false, "key_concepts": ["Death", "Discharge summary", "Documentation in Health Insurance Claims", "Investigation reports", "Claim form"]}}
{"chunk": "case of insurers not using TPAs, the services are performed by in-house team.**1.** **Post sale service of health insurance**a) Once the proposal (and the premium) is accepted, the coverage commences.\nb) If a TPA is to be used for servicing the policy, the insurer passes on theinformation about the customer and the policy to the TPA.\nc) The TPA enrols the members (while the proposer is the person taking thepolicy, members are those covered under the policy) and may issue a\nmembership identification in the form of a card, either physical or\nelectronic.\nd) The membership with the TPA is used for availing cashless facility as well asprocessing of claims when the member requires the support of the policy for\na hospitalization or treatment that is covered.\ne) TPA processes the claim or cashless request and provides the services withinthe time agreed with the insurer.\nf) The insured persons must carry an Identity Card that relates them to thepolicy and the TPA.\ng) TPA issues a pre-authorization or a Letter of Guarantee to the hospital basedon the information provided for requesting the cashless facility.\nh) Where the information is not clear or not available, the TPA may reject thecashless request. In such cases the claim could be examined on\nreimbursement basis.**2.** **Customer relationship and contact management**Since TPAs are involved in claims servicing, they usually have a grievance redressal\nmechanism themselves.**E.** **Claims Management – Personal Accident**On receipt of the notification of the claim the following aspects should be looked\ninto:a) Person in respect of whom the claim is made is covered under the policy\nb) Policy is valid as on date of accident and premium has been received\nc) Loss is within the policy period66d) Loss has arisen out of “Accident” and not sickness\ne) Check for any fraud triggers and assign investigation if need be\nf) Register the claim and create reserve for the same\ng) Maintain the turnaround time (claim servicing time) and keep the customerinformed of the development of the claim.**1.** **Claims Investigation**Claims Investigation is about determining the validity of the claim and finding out\nthe real cause and extent of the loss. On receipt of the claim documents, if a claim\nappears suspicious, the claim may be assigned to an internal/ professional\ninvestigator for verification.**Example**Example of case guideline:\n**Road traffic accident**i. When did the incident take place – exact time and date place? Date and time\nii. Was the insured a pedestrian, traveling as passenger/ pillion rider or drivingthe vehicle involved in accident?**Some examples of possible fraud and leakage in personal accident claims:**i. Exaggeration in TTD period.\nii. Illness presented as accident e.g. backache due to pathological reasonsconverted into a PA claim after reported ‘fall/ slip’ at home\nDischarge voucher is an important document for settlement of personal accident\nclaim, especially those involving death claims. It is also important to obtain nominee\ndetails at the time of proposal and the same should form part of policy document.\n**2.** **Claim documentation- Each company gives a list**a) Duly completed Personal Accident claim form signed by the claimant’s\nnominee/ family member\nb) Original or Attested copy of First Information Report.\nc) Original or Attested copy of Death certificate.\nd) Attested copy of Post Mortem Report if conducted.\ne) Attested copy of AML documents (Anti-money laundering) - for name\nverification (passport/ PAN card/ Voter's ID/ Driving license) for address\nverification (Telephone bill/ Bank account statement, Electricity bill/ Ration\ncard).\nf) Legal heir certificate containing affidavit and indemnity bond both dulysigned by all legal heirs and notarized\ng) Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nh) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of exact\nleave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of the\ncase, especially the cases with suspected fraud angle to be investigated.67**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?\nI. Duly completed Personal Accident claim form signed by the claimant.\nII. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "d66", "section": "Post sale service of health insurance", "chunk_id": "IC 38 -IA- Eng-Health_041", "metadata": {"file_size": 4590, "chunk_index": 41, "chunk_tokens": 988, "has_examples": true, "has_tables": false, "key_concepts": ["Customer relationship and contact management", "Test Yourself 4", "Example", "Post sale service of health insurance", "Claims Investigation"]}}
{"chunk": "verification (passport/ PAN card/ Voter's ID/ Driving license) for address\nverification (Telephone bill/ Bank account statement, Electricity bill/ Ration\ncard).\nf) Legal heir certificate containing affidavit and indemnity bond both dulysigned by all legal heirs and notarized\ng) Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nh) Medical certificate from treating doctor mentioning the type of disabilityand disability period. Leave certificate from employer giving details of exact\nleave period, duly signed and sealed by the employer.\nThe above list is only indicative, further documents (including photographs of scar\nmarks, site of accident etc.) may be required depending on particular facts of the\ncase, especially the cases with suspected fraud angle to be investigated.67**Test Yourself 4**Which of the following documents are not required to be submitted for Permanent\nTotal Disability claim?\nI. Duly completed Personal Accident claim form signed by the claimant.\nII. Copy of Insurance Policy.\nIII. Permanent disability certificate from a civil surgeon or any equivalentcompetent doctors certifying the disability of the insured.\nIV. Fitness certificate from the treating doctor certifying that the insured is fit toperform his normal duties.**F.** **Claims Management- Overseas Travel Insurance**The coverage under this policy has already been discussed under the product\nchapter. This section tries to explain how the claims arising during overseas travel\nare handled.\n**Claims services essentially include:**a) Taking down the claim notification 24*7 basis;\nb) Sending the claim form and procedure;\nc) Guiding customer on what to do immediately after loss;\nd) Extending cashless services for medical and sickness claims;\ne) Arranging for repatriation and evacuation, emergency cash advance.\n**Assistance companies – Role in overseas claims**\nAssistance companies have their own offices and tie up arrangements with other\nsimilar service providers world over. These companies offer assistance to the\ncustomers of insurance companies in case of contingencies covered under the\npolicy.\nThese companies operate a 24*7 call centre including international toll free numbers\nfor claim registration and information. They also offer the following services and\ncharges for the services vary depending on agreement with the particular insurance\ncompany, benefits covered etc.a) Medical assistance services:\ni. Medical service provider referrals\nii. Arrangement of hospital admission\niii. Arrangement of Emergency Medical Evacuation\niv. Arrangement of Emergency Medical Repatriation\nv. Mortal remains repatriation\nvi. Compassionate visit arrangements\nvii. Minor children assistance/ escort\nb) Monitoring of Medical Condition during and after hospitalisation\nc) Delivery of Essential Medicines\nd) Guarantee of Medical Expenses Incurred during hospitalization subject to\nterms and condition of the policy and approval of insurance company.\ne) Pre-trip information services and other services:\ni. Visas and inoculation requirements\nii. Embassy referral services\niii. Lost passport and lost luggage assistance services\niv. Emergency message transmission services\nv. Bail bond arrangement\nvi. Financial Emergency Assistance68f) Interpreter Referral\ng) Legal Referral\nh) Appointment with lawyer\n**a)** **Hospitalization Procedures**i. Most hospitals accept Guarantee of Payments from all international insurancecompanies once the insured provides them with a valid health or overseas\ntravel insurance policy.ii. Hospitals start the treatment immediately. If there is insurance cover theinsurance policy pays or the patient person has to pay. The hospitals tend to\ninflate charges since payments are delayed.iii. Information regarding network hospitals and the procedures is available tothe insured on the toll free numbers provided by the assistance companies.iv. In event of the necessity of a hospitalization the insured needs to intimatethe same at the call centre and proceed to a specified hospital with the valid\ntravel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officer inIndia: Past history, current treatment and further planned course in hospitaland request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee (INR),", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "e68", "section": "Test Yourself 4", "chunk_id": "IC 38 -IA- Eng-Health_042", "metadata": {"file_size": 4590, "chunk_index": 42, "chunk_tokens": 994, "has_examples": false, "has_tables": false, "key_concepts": ["Assistance companies – Role in overseas claims", "Claims services essentially include:", "Test Yourself 4", "Hospitalization Procedures", "Claims Management- Overseas Travel Insurance"]}}
{"chunk": "travel insurance policy.v. Hospitals usually contact the assistance companies/ insurers on the callcentre numbers to check the validity of the policy and verify coverages.vi. Once the policy is accepted by the hospital the insured would undergotreatment in the hospital on a cashless basis.vii. Some basic information required by the insurer/ assistance provider todetermine admissibility are:1. Details of ailment2. In case of any previous history,details of hospital, local medical officer inIndia: Past history, current treatment and further planned course in hospitaland request for immediate sending of\n Claim form along with attending physicians statement\n Passport copy\n Release of medical information form**b)** **Reimbursement of medical expenses and other non-medical claims:**Reimbursement claims are normally filed by insured after they return to\nIndia. Upon receipt of the claim papers, claim is processed as per usual\nprocess. Payments for all admissible claims are made in Indian Rupee (INR),\nunlike in cashless claims where payment is made in foreign currency.While processing the reimbursement claims, currency conversion rate is\napplied as on date of loss to arrive at quantum of liability in INR. Then the\npayment is made though cheque or electronic transfer.**c)** **Claim documentation for Medical Accident and Sickness Expenses**i. Claim formii. Doctor’s reportiii. Original Admission/ discharge card69iv. Original Bills/ Receipts/ Prescriptionv. Original X-ray reports/ Pathological/ Investigative reportsvi. Copy of passport/ Visa with Entry and exit stampThe above list is only indicative. Additional information/ documents may be\nrequired depending on specific case details or depending upon claim settlement\npolicy/ procedure followed by particular insurer.**Test Yourself 5**Most hospitals accept Guarantee of Payments from all international insurance\ncompanies once the insured provides them with a valid __________ Insurance policy.I. Legal Liability\nII. Corona RakshakIII. Overseas TravelIV. Endowment**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.\n**Answer 4** - The correct option is IV.\n**Answer 5** - The correct option is III.**Summary**a) Insurance is a ‘promise’ and the policy is a ‘witness’ to that promise. Theoccurrence of insured event leading to a claim under the policy is the true test\nof that promise.b) One of the key rating parameter in insurance is the claims paying ability of theinsurance company.c) Customers, who buys insurance is the primary stakeholder as well as the receiverof the claim.d) In Cashless claim a network hospital provides the medical services based on apre-approval from the insurer/ TPA and later submits the documents for\nsettlement of the claim.e) In reimbursement claim, the customer pays the hospital from his own resourcesand then files claim with Insurer/ TPA for payment.f) Claim intimation is the first instance of contact between the customer and theclaims team.g) If a fraud is suspected by insurance company in case of insurance claim, it issent for investigation. Investigation of a claim could be done in-house by an\ninsurer/ TPA or be entrusted to a professional investigation agency.h) Reserving refers to the amount of provision made for all claims in the books ofthe insurer based on the status of the claims.70i) In case of a denial, the customer has the option, apart from the representationto the insurer, to approach the Insurance Ombudsman or the consumer\nCommissions or even the legal authorities.j) Frauds occur mostly in hospitalization indemnity policies but Personal accidentpolicies also are used to make fraud claims.k) The TPA provides many important services to the insurer and gets remuneratedin the form of fees.71", "source_file": "IC 38 -IA- Eng-Health.md", "chapter": "t2", "section": "Reimbursement of medical expenses and other non-medical claims:", "chunk_id": "IC 38 -IA- Eng-Health_043", "metadata": {"file_size": 4590, "chunk_index": 43, "chunk_tokens": 809, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Test Yourself 5", "Answer 1"]}}
{"chunk": "## IC - 38 **INSURANCE AGENTS** **LIFE****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## INSURANCE AGENTS **LIFE** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nInsurance Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION**|**LIFE INSURANCE **|**LIFE INSURANCE **|\n|L-01|What Life Insurance Involves|2|\n|L-02|Financial Planning|8|\n|L-03|Life Insurance Products: Traditional|22|\n|L-04|Life insurance products: Non-Traditional|32|\n|L-05|Applications of Life Insurance|38|\n|L-06|Pricing and Valuation in Life Insurance|43|\n|L-07|Life Insurance Documentation|52|\n|L-08|Life Insurance Underwriting|65|\n|L-09|Life Insurance Claims <br>|78|iv## SECTION## LIFE INSURANCE1## CHAPTER L-01## WHAT LIFE INSURANCE INVOLVES**Chapter Introduction**We have seen some aspects related to Insurance in the common chapters. However,\nwhen it comes to Life insurance, we need to look at them more deeply. An asset\n The risk insured against\n The principle of pooling\n The contractLet us now examine the features of life insurance. This chapter will take a brief\nlook at the various components of life insurance mentioned above.**Learning Outcomes**2**A.** **Life insurance business – Components, human life value, mutuality****a)** **The Asset – Human Life Value (HLV)**We have already seen that an asset is a kind of property that yields value or a return.\nFor most kinds of property both the value and loss of value amounts can be measured", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "C-46", "section": "INSURANCE AGENTS", "chunk_id": "IC 38 -IA-Eng-Life_000", "metadata": {"file_size": 4771, "chunk_index": 0, "chunk_tokens": 1000, "has_examples": false, "has_tables": true, "key_concepts": ["The Asset – Human Life Value (HLV)", "IC - 38", "INSURANCE AGENTS", "Chapter Introduction", "LIFE"]}}
{"chunk": "|L-05|Applications of Life Insurance|38|\n|L-06|Pricing and Valuation in Life Insurance|43|\n|L-07|Life Insurance Documentation|52|\n|L-08|Life Insurance Underwriting|65|\n|L-09|Life Insurance Claims <br>|78|iv## SECTION## LIFE INSURANCE1## CHAPTER L-01## WHAT LIFE INSURANCE INVOLVES**Chapter Introduction**We have seen some aspects related to Insurance in the common chapters. However,\nwhen it comes to Life insurance, we need to look at them more deeply. An asset\n The risk insured against\n The principle of pooling\n The contractLet us now examine the features of life insurance. This chapter will take a brief\nlook at the various components of life insurance mentioned above.**Learning Outcomes**2**A.** **Life insurance business – Components, human life value, mutuality****a)** **The Asset – Human Life Value (HLV)**We have already seen that an asset is a kind of property that yields value or a return.\nFor most kinds of property both the value and loss of value amounts can be measured\nin precise monetary terms.**Example**If the estimated damage of a car meeting an accident is Rs 50000, the insurer will\ncompensate the owner for this loss.How do we estimate the amount of loss when a person dies?Is he worth Rs. 50,000 or Rs. 5,00,000?An Agent must be able to answer the above question when meeting a customer.\nBased on this the agent can determine how much insurance to recommend to the\ncustomer. It is in fact the first lesson a life insurance agent must learn.Luckily we have a measure, developed almost seventy years ago by Prof. Hubener.\nIt is known as **Human Life Value (HLV)** and is used worldwide.The HLV concept considers human life as a kind of property or asset that earns an\nincome. It thus measures the value of human life based on an individual’s expected\nnet future earnings. Net earnings means the income a person expects to earn each\nyear in the future, less the amount he would spend on himself. It thus indicates the\neconomic loss a family would suffer if the wage earner were to die prematurely.\nThese earnings are capitalised, using an appropriate interest rate to discount them.Although there are multiple parameters used to calculate HLV including taking into\naccount inflation, wage rise, future earning capacity etc., a simple thumb rule to\ncalculate HLV is to determine the amount that would generate the annual income\nthe family would be needing by way of interest. In other words HLV is the annual\ncontribution for the family by the breadwinner divided by the prevailing rate of\ninterest.**Example**Mr. Rajan earns Rs. 1,20,000 a year and spends Rs. 24,000 on himself. The net\nearnings his family would lose, were he to die prematurely, would be Rs. 96,000 per\nyear. Suppose the rate of interest is 8% (expressed as 0.08).**Human-Life-Value (HLV) = Annual Contribution for Dependents ÷ Rate of****Interest**HLV = 96000/ 0.08 = Rs. 12,00,000HLV helps to determine how much insurance one should have for full protection. It\nalso tells us the upper limit beyond which providing life insurance may not be\nreasonable.3In general, the amount of insurance should be around 10 to 15 times one’s annual\nincome. Thus one should grow suspicious if Mr. Rajan was to ask insurance of Rs. 2\ncrores, while earning only Rs. 1.2 lakhs a year. The actual amount of insurance\npurchased would depend on factors like how much insurance one can afford and\nwould like to buy.**B.** **Risk and Life Insurance**As we have seen above, life insurance provides protection against those risk events\nthat can destroy or reduce the value of human life as an asset. There are three kinds\nof situations where such loss can occur. They are typical concerns which ordinary\npeople face.**Diagram 1:** Typical concerns faced by ordinary peopleGeneral insurance on the other hand typically deals with risks that affect property\n– like fire, loss of cargo while at sea, theft and burglary and motor accidents. They\nalso cover events leading to loss of name and goodwill. These are covered by liability\ninsurance.Finally there are risks that can affect the person. Termed as personal risks, these\nmay also be covered by general insurance.**Example**Accident insurance which protects against losses suffered due to an accident.**a)** **How exactly does life insurance differ from general insurance?**|General Insurance|Life Insurance|", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "L-05", "section": "Chapter Introduction", "chunk_id": "IC 38 -IA-Eng-Life_001", "metadata": {"file_size": 4771, "chunk_index": 1, "chunk_tokens": 1009, "has_examples": true, "has_tables": true, "key_concepts": ["The Asset – Human Life Value (HLV)", "Interest", "Diagram 1:", "Example", "Chapter Introduction"]}}
{"chunk": "income. Thus one should grow suspicious if Mr. Rajan was to ask insurance of Rs. 2\ncrores, while earning only Rs. 1.2 lakhs a year. The actual amount of insurance\npurchased would depend on factors like how much insurance one can afford and\nwould like to buy.**B.** **Risk and Life Insurance**As we have seen above, life insurance provides protection against those risk events\nthat can destroy or reduce the value of human life as an asset. There are three kinds\nof situations where such loss can occur. They are typical concerns which ordinary\npeople face.**Diagram 1:** Typical concerns faced by ordinary peopleGeneral insurance on the other hand typically deals with risks that affect property\n– like fire, loss of cargo while at sea, theft and burglary and motor accidents. They\nalso cover events leading to loss of name and goodwill. These are covered by liability\ninsurance.Finally there are risks that can affect the person. Termed as personal risks, these\nmay also be covered by general insurance.**Example**Accident insurance which protects against losses suffered due to an accident.**a)** **How exactly does life insurance differ from general insurance?**|General Insurance|Life Insurance|\n|---|---|\n| Indemnity: General insurance policies,<br>with the exception of Personal Accident<br>Insurance, are usually contracts of<br>indemnity i.e. after an event like fire, the<br>insurer assesses the exact amount of loss<br>that has occurred and compensates only<br>that amount of loss – no more, no less.| **Assurance:** Life insurance policies are<br>contracts of assurance.<br> The amount of benefit to be paid in<br>the event of death is fixed at the<br>beginning of the contract.<br> An assured sum is paid to the<br>nominees or beneficiaries of the<br>insured when he dies.|\n| Duration: The contract is generally short<br>period or for one year renewable basis| The contract is generally long term<br>though some one year renewable<br>contracts are also prevalent|\n| Uncertainty: In general insurance<br>contracts, the concerned risk event is| There is no such question Death is<br>certain once a person is born. What is|4|uncertain. No one can be certain about<br>whether a house would catch fire or a car<br>meet an accident.|uncertain is the time of death. Life<br>insurance offers protection against<br>the risk of premature death.|\n|---|---|\n| Increase in probability: In case of General<br>insurance perils like fire or earthquake,<br>the probability of happening of the event<br>does not increase with time.| In life insurance the probability of<br>death increases with age.|**b)** **Nature of life insurance risk**Since probability of death increases with age, lower premiums are charged for those\nwho are young and higher premiums for older people. One result was that old\nindividuals who were in good health, tended to withdraw while unhealthy members\nremained in the scheme. Insurance companies faced serious problems as a result.\nTheir attempts to develop life insurance policies that people could afford led to the\ndevelopment of level premiums.**c)** **Level premiums**The level premium is fixed such that it does not increase with age but remains\nconstant throughout the contract period. This means premiums collected in early\nyears is more than the amount needed to cover death claims of those dying when\nyoung, while premiums collected in later years are less than what is needed to meet\nclaims of those dying at higher ages. The level premium is an average of both. The\nexcess premiums of earlier ages compensate for the deficit of premiums in later\nages. The level premium feature is illustrated below.**Diagram 2:** **Level Premium**Level premiums are required because life insurance contracts are long term\ninsurance contracts that run for 10, 20 or many more years. The concept of level\npremiums, do not arise for general insurance policies, which are typically short term\nand expire annually.5**Example**The level premium rate is arrived at by the insurers based on the mortality\n(probability of death) during the term of the policy as the age of the insured would\nincrease every year. The rate once decided shall be constant for the entire term of\nthe policy.**d)** **The Principle of Risk Pooling and Life Insurance**We have already discussed the Principle of Pooling and Mutuality earlier. The\npooling principle plays two specific roles in life insurance.i. It **provides protection against the economic loss arising as a result of one’s****untimely death** . This is done by creating a fund that pools the contributions of", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "B.", "chunk_id": "IC 38 -IA-Eng-Life_002", "metadata": {"file_size": 4771, "chunk_index": 2, "chunk_tokens": 1005, "has_examples": true, "has_tables": true, "key_concepts": ["Nature of life insurance risk", "Level premiums", "Diagram 1:", "Example", "Assurance:"]}}
{"chunk": "claims of those dying at higher ages. The level premium is an average of both. The\nexcess premiums of earlier ages compensate for the deficit of premiums in later\nages. The level premium feature is illustrated below.**Diagram 2:** **Level Premium**Level premiums are required because life insurance contracts are long term\ninsurance contracts that run for 10, 20 or many more years. The concept of level\npremiums, do not arise for general insurance policies, which are typically short term\nand expire annually.5**Example**The level premium rate is arrived at by the insurers based on the mortality\n(probability of death) during the term of the policy as the age of the insured would\nincrease every year. The rate once decided shall be constant for the entire term of\nthe policy.**d)** **The Principle of Risk Pooling and Life Insurance**We have already discussed the Principle of Pooling and Mutuality earlier. The\npooling principle plays two specific roles in life insurance.i. It **provides protection against the economic loss arising as a result of one’s****untimely death** . This is done by creating a fund that pools the contributions of\nmany who have purchased a life insurance contract.**e)** **The Life Insurance Contract**The Policy document is the **evidence of the insurance contract** which a details all\nthe terms and conditions of the **insurance** .The contract states the sum assured of the life insurance policy. Life insurance is\nregarded a **financial security** as the sum Insured is guaranteed by the contract. The\nguarantee implies that life insurance is managed efficiently and conservatively;\nstrongly regulated and strictly supervised.Since Life insurance contracts involve both risk cover and savings, they are often\ncompared with financial products. They are also seen as a way of holding wealth\nthan as protection. Indeed, many life insurance products have a large cash value or\nsavings component which can form a significant part of an individual’s savings. Some\ndo argue that it may be better to buy only Term Insurance from an insurance\ncompany and invest the balance premiums in instruments that yield higher returns.Let us consider the arguments for and against traditional cash value insurance\ncontracts.**a)** **Advantages**i. Insurance has historically been proven as a **safe and secure investment**\n**offering** a minimum guaranteed rate of return, which may increase with\ncontract duration.ii. Regularity of premium payments requires compulsory planning of one’s\nsavings and results in savings **discipline** .iii. The Insurer takes care of professional investment management and **frees** the**individual** of this responsibilityiv. Insurance **provides liquidity** . The insured can take a loan on or surrenderthe policy and convert it into cash.v. Both cash value type life insurance and annuities may enjoy some **income**\n**tax advantages.**vi. Insurance may be **safe from creditors’ claims**, generally in the event of theinsured’s bankruptcy or death.6**b)** **Disadvantages**i. As insurance gives relatively fixed and stable returns, it can be seriously\naffected by inflation.ii. High marketing and other initial costs reduces the amount of cash value\naccumulated in earlier years of life insurance policies.iii. The guaranteed yield may be below that of other financial instruments**Test Yourself 1**How does diversification reduce risks in financial markets?I. Collecting funds from multiple sources and investing them in one placeII. Investing funds across various asset classesIII. Maintaining time difference between investmentsIV. Investing in safe assets**Summary**a) Asset is a kind of property that yields value or a return.b) The HLV concept considers human life as a kind of property or asset that earnsan income. It thus measures the value of human life based on an individual’s\nexpected net future earnings.c) The level premium is a premium fixed such that it does not increase with agebut remains constant throughout the contract period.d) Mutuality is one of the important ways to reduce risk in financial markets, theother being diversification.e) The element of guarantee in a life insurance contract implies that life insuranceis subject to stringent regulation and strict supervision.**Key Terms**1. Asset2. Human Life Value3. Level premium4. Mutuality5. Diversification**Answers to Test Yourself****Answer 1** - The correct answer is II.7## CHAPTER L-02## FINANCIAL PLANNING**Chapter Introduction**In previous chapters we discussed life insurance and its role in providing financial\nprotection. Security is only one of the concerns of individuals who seek to allocate\ntheir income and wealth to meet various needs of the present and the future. Life\ninsurance must be understood in the wider context of “Personal Financial Planning”.", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "t2", "section": "Diagram 2:", "chunk_id": "IC 38 -IA-Eng-Life_003", "metadata": {"file_size": 4771, "chunk_index": 3, "chunk_tokens": 982, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Diagram 2:", "Test Yourself 1", "Example", "Chapter Introduction"]}}
{"chunk": "expected net future earnings.c) The level premium is a premium fixed such that it does not increase with agebut remains constant throughout the contract period.d) Mutuality is one of the important ways to reduce risk in financial markets, theother being diversification.e) The element of guarantee in a life insurance contract implies that life insuranceis subject to stringent regulation and strict supervision.**Key Terms**1. Asset2. Human Life Value3. Level premium4. Mutuality5. Diversification**Answers to Test Yourself****Answer 1** - The correct answer is II.7## CHAPTER L-02## FINANCIAL PLANNING**Chapter Introduction**In previous chapters we discussed life insurance and its role in providing financial\nprotection. Security is only one of the concerns of individuals who seek to allocate\ntheir income and wealth to meet various needs of the present and the future. Life\ninsurance must be understood in the wider context of “Personal Financial Planning”.\nThe purpose of this chapter is to introduce the subject of financial planning.**Learning Outcomes**8**A.** **Financial planning and the individual life cycle****1.** **What is financial planning?**Most of us spend a major part of our lives working to make money. Financial planning\nis a smart way to make money work for us.**Definition**Financial planning is a process of identifying one’s life’s goals, translating these\ngoals into financial goals and managing one’s finances to achieve those goals.Financial planning involves preparing a roadmap to meet both current and future\nneeds, which may be unforeseen. It plays a crucial role in building a life with less\nworry. Careful planning can help to set one’s priorities and work to achieve your\nvarious goals.**Diagram 1:** **Types of Goals**i. Goals may be **short term** : Buying an LCD TV set or a family vacationii. They could be **medium term** : Buying a house or a vacation abroadiii. The **long term** goals may include: Education or marriage of one’s child orpost retirement provision**2.** **Individual’s life cycle**From the day a person is born till the day of his/ her death, he/ she goes through\nvarious stages in life, during which he/ she is expected to play a series of roles\nThese stages are illustrated in the diagram given below.**Diagram 2:** **The Economic Life Cycle**9**Life Stages and Priorities****a)** **Learner (till say age 20 -25)** :The stage when one is preparing for hisfuture byimproving his or her knowledge and skills. Funds are required\nfor financing one’s education. For instance, meeting the high cost of\nfees for Medical or Management Education.**b)** **Earner (from 25 onwards)** :When one has found employment andperhaps earns enough to meet his or her needs and has some surplus to\nspare.There are family responsibilities and one may also save and invest\nin order to have money to meet the needs that may arise in the\nimmediate future.For instance, a young man takes a housing loan and\ninvests in a house.**c)** **Partner(on getting marriage at say 28 - 30)** : The stage when one ismarried and has a family of one’s own.This creates new needs like\nhaving a house of one’s own, perhaps a car, consumer durables,\nplanning for children’s future etc.**d)** **Parent(say 28 to 35)** : The years when one becomes the parent of oneor more children.One now has to worry about their health and\neducation - getting them into good schools etc.**e)** **Provider(say age 35 to 55)** : The stage when children have grown intoteenagers, and includes their high school and college years. One is\nconcerned about the high cost of education to make the child qualified\nto face the challenges of life.For instance, consider the amount that\nneeds to be set up to finance a medical course that runs for five years.In\nmany Indian homes, making provision for marriage and settlement of\ngirl children is a critical area of concern.Indeed, marriage and\neducation of children is a prime motive for savings for most Indian\nfamilies today.**f)** **Empty Nester(age 55 to 65):** The term ‘empty nester’ implies that theoffspring have flown away leaving the nest [the household] empty.This\nis the period when children have married and sometimes have migrated\nto other places for work, leaving the parents.Hopefully by this stage,\none has liquidated one’sliabilities [like housing loan and other\nmortgages] and has built up a fund for reirement.It is also the period\nwhen ailments like BP and Diabetes begin to manifest and plague one’s\nlife.Health care,financial independence and security of income become", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "t2", "section": "Key Terms", "chunk_id": "IC 38 -IA-Eng-Life_004", "metadata": {"file_size": 4771, "chunk_index": 4, "chunk_tokens": 1017, "has_examples": true, "has_tables": false, "key_concepts": ["Financial planning and the individual life cycle", "Empty Nester(age 55 to 65):", "Key Terms", "What is financial planning?", "The Economic Life Cycle"]}}
{"chunk": "concerned about the high cost of education to make the child qualified\nto face the challenges of life.For instance, consider the amount that\nneeds to be set up to finance a medical course that runs for five years.In\nmany Indian homes, making provision for marriage and settlement of\ngirl children is a critical area of concern.Indeed, marriage and\neducation of children is a prime motive for savings for most Indian\nfamilies today.**f)** **Empty Nester(age 55 to 65):** The term ‘empty nester’ implies that theoffspring have flown away leaving the nest [the household] empty.This\nis the period when children have married and sometimes have migrated\nto other places for work, leaving the parents.Hopefully by this stage,\none has liquidated one’sliabilities [like housing loan and other\nmortgages] and has built up a fund for reirement.It is also the period\nwhen ailments like BP and Diabetes begin to manifest and plague one’s\nlife.Health care,financial independence and security of income become\nvery important at this stage.**g)** **Retirement – the twilight years (age 60 and beyond):** The age whenone has retired from active work and spends one’s savings to meet the\nneeds of life.The living needs of the husband and wife as long as both\nare alive is the focus.One is concerned abouthealth\nissues,adequateincome and loneliness.This is also the period when one\nwould seek to enhance the quality of life and enjoy many of the things\nthat one had dreamt of but could not achieve – like pursuing a hobby or\ngoing on a vacation or a pilgrimage.Whether one ages gracefully or in\npoverty would depend on how much one has provided for these years.10As we can see above, the economic life cycle has three phases: a student or Pre –\njob phase; the working phase that begins between ages 18 to 25 and lasts for 35 to\n40 years; and the retirement years that begin after one has stopped working.**3.** **Why does one need to save and purchase various financial assets?**The reason is that during each stage in an individual’s life, when one performs a\nparticular role, a number of needs come up for which funds have to be provided.**Example**When a person gets married and starts a family of his own, he may need to have his\nown house. As children grow older, funds are needed for their higher education. As\nan individual goes well past middle age, the concern is for having money to meet\nhealth costs and post retirement savings so that one does not need to depend on\none’s children and become a burden. Living with independence and dignity becomes\nimportant.The Savings – Investment process may be considered as being made of two decisions.**i.** **Postponement of consumption:** an allocation of resources between present andfuture consumption.**ii.** **Parting with liquidity** (or ready purchasing power) in exchange for less liquidassets. For instance, purchase of a life insurance policy would mean exchanging\nmoney for a contract which is less liquid.Financial planning includes both kinds of decisions. One needs to plan in order to\nsave for the future and also must invest wisely in appropriate assets to meet the\nvarious needs that will arise in future.**4.** **Individual needs**If we look at the stages of the life cycle that has been discussed above, we would\nsee that three types of needs can arise. These give rise to three types of financial\nproducts.a) **Enabling future transactions**The first set of needs arise from funds for meeting a range of anticipated\nexpenditures that are expected to arise at different stages of the life cycle.\nThere are two types of such needs:**i.** **Specific transaction needs** : that are linked to specific life events whichrequire a commitment of resources. For instance making a provision for\nhigher education/ marriage of dependents; or purchase of a house or\nconsumer durables**ii.** **General transaction needs:** Amounts set aside from current consumptionwithout being earmarked for any specific purposes – these are popularly\ntermed as ‘future provisions’**b)** **Meeting contingencies**Contingencies are unforeseen life events that may call for large funds. These\ncannot met from current income and need to be pre-funded. Some of these11events, like death and disability or unemployment, lead to a loss of income.\nOthers, like a fire, may result in a loss of wealth.Such needs may be addressed through insurance, if the probability of their\noccurrence is low but cost impact is high. One may alternatively meet them by\nsetting aside a large amount of liquid assets as a reserve.**c)** **Wealth accumulation**The accumulation motive refers to an individual’s desire to invest for\naccumulating wealth, taking advantage of favourable market opportunities.", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "e11", "section": "Empty Nester(age 55 to 65):", "chunk_id": "IC 38 -IA-Eng-Life_005", "metadata": {"file_size": 4771, "chunk_index": 5, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Wealth accumulation", "Individual needs", "Empty Nester(age 55 to 65):", "Parting with liquidity", "Example"]}}
{"chunk": "There are two types of such needs:**i.** **Specific transaction needs** : that are linked to specific life events whichrequire a commitment of resources. For instance making a provision for\nhigher education/ marriage of dependents; or purchase of a house or\nconsumer durables**ii.** **General transaction needs:** Amounts set aside from current consumptionwithout being earmarked for any specific purposes – these are popularly\ntermed as ‘future provisions’**b)** **Meeting contingencies**Contingencies are unforeseen life events that may call for large funds. These\ncannot met from current income and need to be pre-funded. Some of these11events, like death and disability or unemployment, lead to a loss of income.\nOthers, like a fire, may result in a loss of wealth.Such needs may be addressed through insurance, if the probability of their\noccurrence is low but cost impact is high. One may alternatively meet them by\nsetting aside a large amount of liquid assets as a reserve.**c)** **Wealth accumulation**The accumulation motive refers to an individual’s desire to invest for\naccumulating wealth, taking advantage of favourable market opportunities.\nSome individuals may take a cautious approach while investing, while some may\nbe willing to take more risks, with a view to earn a higher return. Higher return\nis desired because it helps to increase one’s wealth or net worth more rapidly.\nWealth is linked with independence, enterprise, power and influence.**5.** **Financial products**Corresponding to the above sets of needs there are three types of products in the\nfinancial market:|Transactional<br>products|Bank deposits and other savings instruments that enable one<br>to have adequate purchasing power (liquidity) at the right<br>time and quantum.|\n|---|---|\n|**Contingency**<br>**products like**<br>**insurance**|These provide protection against large losses that may be<br>suffered in the event of sudden unforeseen events.|\n|**Wealth**<br>**accumulation**<br>**products**|Shares and high yielding bonds or real estate are examples of<br>such products. Here the investment is made with a view to<br>committing money for making more money.|An individual would typically have a mix of all of the above needs and thus may\nneed to have all three types of products. In a nutshell one may say there is:i. A need to save – For cash requirementsii. A need to insure – Against uncertaintiesiii. A need to invest – For wealth creation**6.** **Risk profile and investments**As an individual moves through various stages in the life cycle, from young earner\ntowards middle ages and then towards the final years of one’s work life, the risk\nprofile, or approach towards taking risks also changes.When one is young, one may be quite aggressive and willing to take risks in order to\naccumulate as much wealth as possible. As the years pass however, one may become\nmore prudent and careful about investing. One is now concerned to secure and\nconsolidate one’s investments.Finally, as one nears retirement one may be more conservative. The focus is now to\nhave a corpus from which one can spend in the post retirement years. One may also\nthink about making donations for one’s children, for gifting to charity etc.12**One’s investment style also changes to keep pace with the risk profile.** This is\nindicated below:**Diagram 3:** **Risk Profile and Investment Style****Risk Profile** **Investment Style****Test Yourself 1**Which among the following gives specific protection against unforeseen events?I. InsuranceII. Transactional products like bank Fixed DepositsIII. SharesIV. Debentures**B.** **Role of financial planning****1.** **Financial planning**Financial planning is the process of carefully evaluating a ~~c~~ lient’s current and future\nneeds along with his or her risk profile and income, to chart out a road map for\nmeeting various anticipated/ unforeseen needs through recommending appropriate\nfinancial products.Elements of financial planning include: Investing - allocating assets based on one’s risk taking appetite, Risk management, Retirement planning, Tax and estate planning, and Financing one’s needsTo put it in a nutshell financial planning involves 360 degrees planning.13**Diagram 4:** **Elements of Financial Planning****2.** **Role of Financial planning**Financial planning is not a new discipline. It was practiced in simple form by our\nfore fathers. There were limited investment options then. A few decades ago many\nconsidered equity investment as akin to gambling. Savings were largely channelled\nin bank deposits, postal savings schemes and other fixed income instruments. The\nchallenges facing our society and our customers are far different today. Some of", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "e11", "section": "Specific transaction needs", "chunk_id": "IC 38 -IA-Eng-Life_006", "metadata": {"file_size": 4771, "chunk_index": 6, "chunk_tokens": 1008, "has_examples": true, "has_tables": true, "key_concepts": ["Wealth accumulation", "Financial products", "Contingency", "Risk profile and investments", "Risk Profile"]}}
{"chunk": "needs along with his or her risk profile and income, to chart out a road map for\nmeeting various anticipated/ unforeseen needs through recommending appropriate\nfinancial products.Elements of financial planning include: Investing - allocating assets based on one’s risk taking appetite, Risk management, Retirement planning, Tax and estate planning, and Financing one’s needsTo put it in a nutshell financial planning involves 360 degrees planning.13**Diagram 4:** **Elements of Financial Planning****2.** **Role of Financial planning**Financial planning is not a new discipline. It was practiced in simple form by our\nfore fathers. There were limited investment options then. A few decades ago many\nconsidered equity investment as akin to gambling. Savings were largely channelled\nin bank deposits, postal savings schemes and other fixed income instruments. The\nchallenges facing our society and our customers are far different today. Some of\nthem are:**i.** **Disintegration of the joint family**The joint family has given way to the nuclear family, consisting of father,\nmother and children. The typical head and earning member of this family has to\nbear the responsibility for taking care of oneself and one’s immediate family.\nThis may call for a lot of proper planning and advice from a professional financial\nplanner.**ii.** **Multiple investment choices**A large number of investment instruments are available today for wealth\ncreation, each offering varying degrees of risk and return. To achieve financial\ngoals, one has to choose wisely and make the right investment decisions based\non one’s risk taking appetite. Financial planning can help with one’s asset\nallocation.**iii.** **Changing lifestyles**Instant pleasure seems to be the order of the day. Individuals want to have the\nlatest mobile phones, cars, large homes, memberships of prestigious clubs, etc.\nTo satisfy these desires, people often borrow heavily and spend a good part of\ntheir income to pay off loans, leaving little scope to save. Financial planning\nhelps to plan and one’s expenditure so that one can cut down unnecessary\nexpenses so as to maintain one’s present standard of living while upgrading it\nover time.**iv.** **Inflation**Inflation is a rise in the general level of prices of goods and services in an\neconomy over a period of time. This leads to a fall in the value of money. As a\nresult, the purchasing power of money gets reduced. Inflation can play havoc14post retirement. Financial planning can help to ensure that one is equipped to\ndeal with inflation, especially in later years.**v.** **Other contingencies and needs**Financial planning also enables individuals to meet a number of other needs and\nchallenges like medical emergencies and tax liabilities. Individuals also need to\nensure that their estate consisting of their wealth and properties, smoothly pass\non to their loved ones after their death. There are other needs like the need to\ndo charity or meet certain social and religious obligations during one’s lifetime\nand even thereafter. Financial planning is the means to achieve all this.3. **When is the right time to start financial planning?****Financial planning** is not meant only for the wealthy. Indeed, Planning should\nideally start one earns one’s first salary. There is no trigger point to tell when one\nshould begin to plan.**There is however an important principle that should guide us – the longer the**\n**time period of our investments, the more they will multiply.**Hence one should start early. One’s investments would then get the maximum\nbenefit of time. Again, planning is not only for wealthy individuals. It is for\neveryone. To achieve one’s financial goals, one must follow a disciplined approach.\nAn unplanned, impulsive approach to financial planning is one of the prime causes\nof financial distress of individuals.**Test Yourself 2**When is the best time to start financial planning?I. Post retirement\nII. As soon as one gets his first salary\nIII. After marriage\nIV. Only after one gets rich**C.** **Financial planning - Types**Let us now look at the various types of financial planning exercises that an individual\nmay need to do.15**Diagram 5:** **Financial Planning Advisory Services**Consider the various advisory services that may be provided. There are six such\nareas that are taken up Cash planning Investment planning Insurance planning Retirement planning Estate planning Tax planning**1.** **Cash planning**Managing cash flows has two purposes.i. To manage income and expenditures flow including establishing andmaintaining a reserve of liquid assets to meet unanticipated needs.ii. To systematically create and maintain a surplus of cash for capitalinvestment.Cash Planning involves a number of steps. One must prepare a budget and analyse\none’s income and expenditure flows to check on what regular and lump sum costs", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "c14", "section": "Diagram 4:", "chunk_id": "IC 38 -IA-Eng-Life_007", "metadata": {"file_size": 4771, "chunk_index": 7, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Financial Planning Advisory Services", "Multiple investment choices", "Role of Financial planning", "Elements of Financial Planning", "Changing lifestyles"]}}
{"chunk": "An unplanned, impulsive approach to financial planning is one of the prime causes\nof financial distress of individuals.**Test Yourself 2**When is the best time to start financial planning?I. Post retirement\nII. As soon as one gets his first salary\nIII. After marriage\nIV. Only after one gets rich**C.** **Financial planning - Types**Let us now look at the various types of financial planning exercises that an individual\nmay need to do.15**Diagram 5:** **Financial Planning Advisory Services**Consider the various advisory services that may be provided. There are six such\nareas that are taken up Cash planning Investment planning Insurance planning Retirement planning Estate planning Tax planning**1.** **Cash planning**Managing cash flows has two purposes.i. To manage income and expenditures flow including establishing andmaintaining a reserve of liquid assets to meet unanticipated needs.ii. To systematically create and maintain a surplus of cash for capitalinvestment.Cash Planning involves a number of steps. One must prepare a budget and analyse\none’s income and expenditure flows to check on what regular and lump sum costs\nhave been incurred. While fixed expenses cannot be controlled easily, one can\nreduce, postpone and manage expenses that are variable. The next step is to\n**predict future monthly income and expenses over the whole year and** design a\nplan for managing these cash flows.Another part of the cash planning process is to design strategies for maximizing\ndiscretionary income.**Example**One can restructure one’s outstanding debts.One can meet outstanding credit card debts through consolidating them and paying\nthem off through a bank loan with lower interest.16One may reallocate one’s investments to make them earn more income.**2.** **Insurance planning**There are certain risks to which individuals are exposed that can keep them from\nattaining their personal financial goals. Insurance planning involves constructing a\nplan of action to provide adequate insurance against such risks.The task here is to estimate how much insurance is needed and determining what\ntype of policy is best suited.**i.** **Life insurance** may be decided by estimating the income and expenserequirements of the dependents in the event of premature death of the\nbread winner.**ii.** **Health insurance** requirements may be assessed in terms of thehospitalisation expenses that are likely to be incurred in any family medicalemergency.a. Finally **insurance for one’s assets** may be considered in terms of thetype and quantum of cover required to protect one’s home/ vehicle/\nfactory etc. from the risk of loss.**3.** **Investment planning**There is no one right way to invest. What is appropriate would vary from individual\nto individual. Investment planning is a process of determining the most suitable\ninvestment and asset allocation strategies based on an individual’s risk taking\nappetite, financial goals and the time horizon to meet those goals.**a)** **Investment parameters****Diagram 6:** **Investment Parameters**The first step here is to define certain investment parameters. These include:17**i.** **Returns** : Returns on Investment is often the most important parameter thatpeople look for when they invest their money. The rate of return determines\nhow fast one’s wealth from investments would grow over time. The role of\nreturns can be appreciated when one considers the ‘Power of compounding’.\nFor instance, if an amount of Rs 1000 is invested today at 8% rate of interest,\nat the end of five years, it would accumulate to Rs 1469 and at the end of\n10 years it would more than double to reach Rs 2159. This expectation of\nreturns which helps to accumulate wealth is one of the prime motives of\ninvestment. At the same time, one must note that higher rates of return may\nbe typically accompanied with higher levels of risk. One has to make a tradeoff between return and risk. This depends on an individual’s risk tolerance.**ii.** **Risk tolerance** : A measure of how much risk someone is willing to take inpurchasing an investment.**iii.** **Time horizon** : This is the amount of time available to attain a financialobjective. The longer the time horizon, the less concern is there about short\nterm liability. One can invest in longer term, in less liquid assets that earn\na higher return.**iv.** **Liquidity** : Individuals with limited investment capacity, or uncertain incomeand expenditure flows, or who are investing for meeting a particular\npersonal or business expenditure, would be concerned with liquidity [This", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Test Yourself 2", "chunk_id": "IC 38 -IA-Eng-Life_008", "metadata": {"file_size": 4771, "chunk_index": 8, "chunk_tokens": 958, "has_examples": true, "has_tables": false, "key_concepts": ["Financial Planning Advisory Services", "Health insurance", "Investment planning", "Returns", "Time horizon"]}}
{"chunk": "For instance, if an amount of Rs 1000 is invested today at 8% rate of interest,\nat the end of five years, it would accumulate to Rs 1469 and at the end of\n10 years it would more than double to reach Rs 2159. This expectation of\nreturns which helps to accumulate wealth is one of the prime motives of\ninvestment. At the same time, one must note that higher rates of return may\nbe typically accompanied with higher levels of risk. One has to make a tradeoff between return and risk. This depends on an individual’s risk tolerance.**ii.** **Risk tolerance** : A measure of how much risk someone is willing to take inpurchasing an investment.**iii.** **Time horizon** : This is the amount of time available to attain a financialobjective. The longer the time horizon, the less concern is there about short\nterm liability. One can invest in longer term, in less liquid assets that earn\na higher return.**iv.** **Liquidity** : Individuals with limited investment capacity, or uncertain incomeand expenditure flows, or who are investing for meeting a particular\npersonal or business expenditure, would be concerned with liquidity [This\nrefers to the ability to convert investment into cash without loss of value.]**v.** **Marketability** : The ease with which an asset can be bought or sold.**vi.** **Diversification** : The extent to which one seeks to diversify or spread theinvestments to reduce the risks.**vii.** **Taxes** : Many investments confer certain income tax benefits and one maylike to consider the post-tax returns of various investments.**b)** **Selection of appropriate investment vehicles**The next step is selection of appropriate investment vehicles based on the above\nparameters. The actual selection would depend on the individual’s expectations\nabout return and risk.In India there are a variety of products that may be considered for the purpose of\ninvestments. These include: Fixed deposits of banks/ corporates, Small savings schemes of post office, Public issues of shares, Debentures or other securities, Mutual funds Unit linked policies that are issued by life insurance companies etc.18**4.** **Retirement planning**It is the process of determining the amount of money that an individual needs to\nmeet his needs post retirement and deciding on various retirement options for\nmeeting these needs. Retirement planning involves three phases**a)** **Accumulation:** Accumulation of funds is done through various kinds ofstrategies to set aside money for investment with this purpose.**b)** **Conservation:** Conservation refers to the efforts made to ensure that one’sinvestments are put to hard work and that the principal gets maximised during\nthe individual’s working years.**c)** **Distribution:** Distribution refers to the optimal method of converting the corpusor principal into withdrawals/ annuity payments for meeting income needs\nafter retirement.**5.** **Estate planning**It is a plan for the devolution and transfer of one’s estate after one’s demise. There\nare various processes like nomination and assignment or preparation of a will. The\nbasic idea is to ensure that one’s property and assets are smoothly distributed and\nor utilised according to one’s wishes after one is no more.**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full\nadvantage of the tax breaks. As per the tax laws in India, life insurance premium\npaid by an individual on a life insurance policy on his/ her own life, on the life of\nhis/ her spouse and children is eligible for deduction under Section 80C of the\nIncome Tax Act for calculating the taxable income. Currently, this deduction is\nallowed up to Rs.1,50,000 subject to conditions. The maturity proceeds (sum\nassured plus bonus) of such policies are also exempted under Section 10 (10D).\nSimilarly, Death Claim amounts are exempt from Income Tax at the hands of the\nrecipient. One must note that the purpose here is to minimise and not evade taxes.Life insurance agents may be often required by their clients and prospective\ncustomers to advise them not only about meeting their insurance needs but also for\nsupport in meeting their other financial needs as well. A sound knowledge of", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Risk tolerance", "chunk_id": "IC 38 -IA-Eng-Life_009", "metadata": {"file_size": 4771, "chunk_index": 9, "chunk_tokens": 920, "has_examples": true, "has_tables": false, "key_concepts": ["Time horizon", "Estate planning", "Tax planning", "Risk tolerance", "Retirement planning"]}}
{"chunk": "or utilised according to one’s wishes after one is no more.**6.** **Tax planning**Tax planning is done to determine how to gain maximum tax benefit from existing\ntax laws and also for planning of income, expenses and investments taking full\nadvantage of the tax breaks. As per the tax laws in India, life insurance premium\npaid by an individual on a life insurance policy on his/ her own life, on the life of\nhis/ her spouse and children is eligible for deduction under Section 80C of the\nIncome Tax Act for calculating the taxable income. Currently, this deduction is\nallowed up to Rs.1,50,000 subject to conditions. The maturity proceeds (sum\nassured plus bonus) of such policies are also exempted under Section 10 (10D).\nSimilarly, Death Claim amounts are exempt from Income Tax at the hands of the\nrecipient. One must note that the purpose here is to minimise and not evade taxes.Life insurance agents may be often required by their clients and prospective\ncustomers to advise them not only about meeting their insurance needs but also for\nsupport in meeting their other financial needs as well. A sound knowledge of\nfinancial planning would be of great value to any insurance agent.**Test Yourself 3**Which among the following is not an objective of tax planning?I. Maximum tax benefitII. Reduced tax burden as a result of prudent investmentsIII. Tax evasionIV. Full advantage of tax breaks19**Summary**Financial planning is a process of: Identifying one’s life’s goals, Translating these identified goals into financial goals and Managing one’s finances in ways that will help one to achieve those goalsBased on the individual life cycle three types of financial products are needed.\nThese help in: Enabling future transactions, Meeting contingencies and Wealth accumulationThe need for financial planning is further increased by the changing societal\ndynamics like disintegration of the joint family, multiple investment choices\nthat are available today and changing lifestyles etc.The best time to start financial planning is right after one receives the first\nsalary.Financial planning advisory services include: Cash planning,\n Investment planning,\n Insurance planning,\n Retirement planning,\n Estate planning and\n Tax planning**Key Terms**1. Financial planning\n2. Life stages\n3. Risk profile\n4. Cash planning\n5. Investment planning\n6. Insurance planning\n7. Retirement planning\n8. Estate planning\n9. Suitability information\n10. Tax planning20**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is II.\n**Answer 3** - The correct option is III.21## CHAPTER L-03## LIFE INSURANCE PRODUCTS: TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of life insurance products. It begins by\ntalking about products in general and then proceeds to discussing the need for life\ninsurance products and the role they play in achieving various life goals. Finally we\nlook at some traditional life insurance products.**Learning Outcomes**22**A.** **Overview of life insurance products****1.** **What is a product?**To begin with, let us understand what is meant by a ‘product’. In popular terms a\nproduct is normally just considered as a commodity or good that is brought and sold\nin the market.It is necessary to understand that every Product is a bundle of features or attributes\nthat confer certain benefits.All Companies try to differentiate their products by making them more attractive\nto customers and offering different kinds of features and benefits. A life insurance\nagent’s role is to understand and pitch on these features and benefits to make the\nproducts of their companies unique and attractive compared to others.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the\nfeatures of each brand is different from the other.Products may be:**i.** **Tangible** : refers to physical objects that can be directly seen or felt by touch\n(for instance a car or a television set)**ii.** **Intangible:** refers to products that can only be perceived indirectly.Life insurance is a product that is intangible.**2.** **Purpose of Life Insurance products.**Human beings possess **an immensely valuable asset** - **human capital – which is the**\n**source of our productive earning capacity.** However, there is an uncertainty about\nlife and human well-being. Events like death and disease can destroy our Earning\ncapabilities and life savings. Insurance provides protection for such situations.Life insurance products offer protection against the loss of economic value of an\nindividual’s productive abilities, as a result of death or disability. The moment an\nindividual takes a life insurance policy and pays the first premium, **an immediate**", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "s19", "section": "Tax planning", "chunk_id": "IC 38 -IA-Eng-Life_010", "metadata": {"file_size": 4771, "chunk_index": 10, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Tangible", "Answer 3", "Intangible:"]}}
{"chunk": "agent’s role is to understand and pitch on these features and benefits to make the\nproducts of their companies unique and attractive compared to others.**Example**Colgate, Close up and Promise are all different brands of toothpastes. But the\nfeatures of each brand is different from the other.Products may be:**i.** **Tangible** : refers to physical objects that can be directly seen or felt by touch\n(for instance a car or a television set)**ii.** **Intangible:** refers to products that can only be perceived indirectly.Life insurance is a product that is intangible.**2.** **Purpose of Life Insurance products.**Human beings possess **an immensely valuable asset** - **human capital – which is the**\n**source of our productive earning capacity.** However, there is an uncertainty about\nlife and human well-being. Events like death and disease can destroy our Earning\ncapabilities and life savings. Insurance provides protection for such situations.Life insurance products offer protection against the loss of economic value of an\nindividual’s productive abilities, as a result of death or disability. The moment an\nindividual takes a life insurance policy and pays the first premium, **an immediate**\n**estate is created** in his/ her name and its proceeds are available to his/ her\ndependents or loved ones.Life insurance provides peace of mind and protection to the near and dear ones of\nan individual, in case of one’ unfortunate death. Beyond providing such protection,\nlife insurance fulfils other needs of the market, such as savings, wealth\naccumulation, safety and security of investment and certain rates of return, which\nare not discussed in this course.Life insurance industry has seen enormous innovations in product offerings over the\nlast two centuries. The journey began with death benefit products but over the\nperiod, multiple living benefits like endowment, disability benefits, dreaded disease\ncovers and so on were added.23One of the major innovations of recent years was the creation of market linked\npolicies where the insured was invited to participate in choosing and managing his\ninvestment assets. Another major innovation was the evolution of flexible\nunbundled products, in which different benefits as well as cost components could\nbe varied by the policy holder as per changing needs, affordability and life-stages.**3.** **Suitability Information**In order to make insurance intermediaries including agents and brokers more\naccountable and reduce instances of mis-selling, IRDAI has created a concept of\n‘product suitability’. ‘Suitability information’ is the information of a prospect on\nage, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, etc. That is, before selling an insurance\npolicy to a client, an Agents should be able to justify the suitability of the product\nfor the client’s needs.In other words, the Agent takes into account the particular prospect’s risk profile age, income, family status, life stage, financial and family goals, investment\nobjectives, insurance portfolio already held, insurance needs etc. and decides\nwhether the product is suitable for that prospect. The nature of product, the\namount of premium, the mode of premium payment and tenure of the policy as well\nas the manner of premium payment are also part of the parameters of ‘Suitability’.IRDAI mandates that the suitability information collected should be signed by the\nprospect and the agent; and preserved by the Insurer as part of the policy records\nand made available for inspection by the Authority.**4.** **Riders in Life Insurance Products**A rider is a provision typically added through an endorsement, which becomes part\nof the contract. Riders are commonly used to provide supplementary benefits like\nincreasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different\nrequirements of a person into a single plan.Riders provide a means to provide benefits like Disability cover, accident cover and\nCritical Illness cover as additional benefits in a standard life insurance contract.\nPolicy holders can avail of them by paying an extra premium.**Test Yourself 1**Which among the following is an intangible product?\nI. CarII. HouseIII. Life insurance\nIV. Soap24**B.** **Traditional life insurance products**We shall now learn about some of the traditional types of life insurance products.**Diagram 1:** **Traditional Life Insurance Products****1.** **Term insurance plans**Term insurance is a contract that is valid only during a certain time period. This\nmay range from the short time required to complete an airplane trip to multiple\nyears. Protection may extend up to age 65 or 70. One-year term policies are quite\nsimilar to property and casualty insurance contracts. There is no savings or cash", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "p24", "section": "Example", "chunk_id": "IC 38 -IA-Eng-Life_011", "metadata": {"file_size": 4771, "chunk_index": 11, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Riders in Life Insurance Products", "Tangible", "Test Yourself 1", "Diagram 1:", "Suitability Information"]}}
{"chunk": "of the contract. Riders are commonly used to provide supplementary benefits like\nincreasing the amount of death benefit provided by a policy, say, because of\naccidents. Life insurance companies offer a number of riders through which the\nvalue of their offerings get enhanced Riders help to customise different\nrequirements of a person into a single plan.Riders provide a means to provide benefits like Disability cover, accident cover and\nCritical Illness cover as additional benefits in a standard life insurance contract.\nPolicy holders can avail of them by paying an extra premium.**Test Yourself 1**Which among the following is an intangible product?\nI. CarII. HouseIII. Life insurance\nIV. Soap24**B.** **Traditional life insurance products**We shall now learn about some of the traditional types of life insurance products.**Diagram 1:** **Traditional Life Insurance Products****1.** **Term insurance plans**Term insurance is a contract that is valid only during a certain time period. This\nmay range from the short time required to complete an airplane trip to multiple\nyears. Protection may extend up to age 65 or 70. One-year term policies are quite\nsimilar to property and casualty insurance contracts. There is no savings or cash\nvalue element in this policy.In October 2020, IRDAI has introduced a Standard Individual Term Life Insurance\nProduct called, “Saral Jeevan Bima” (the Insurer’s name shall be prefixed to the\nproduct name), a non-linked non-participating individual pure risk premium life\ninsurance plan, which provides for payment of Sum Assured in lump sum to the\nnominee in case of the Life Assured’s unfortunate death during the policy term.Apart from certain benefits and riders specified by the Regulator, no other riders/\nbenefits/ options/ variants are allowed to be offered. Also, there shall be no\nexclusions under the product other than the suicide exclusion. Saral Jeevan Bima is\nto be offered to individuals without restrictions on gender, place of residence,\ntravel, occupation or educational qualifications.**a)** **Purpose**A Term Life insurance plan fulfils the main and basic idea behind life insurance,\nwhich is to provide an assured sum of money to the dependents of the insured\non his/ her death.**The policy works as an income replacement plan also.** Here the payment of a\nlump-sum amount is replaced by a series of monthly, quarterly or similar\nperiodical payments to the dependent beneficiaries.**b)** **Disability**\nNormally a Term insurance policy covers only death. However, it is possible to\nbuy a Disability Protection Rider on the main policy. In such a case, if the insured\nsuffers from a specified disability during the term of the contract, a disability25benefit would be paid to the beneficiaries/ insured person. The benefits will\ncontinue till the death of the insured person.**Diagram 2:** **Disability****c)** **Term insurance as a rider**Protection under Term Life is usually provided as a stand-alone policy but it\ncould also be provided through a rider in a policy.**Example**A rider to a pension plan provides for a death benefit to be payable if one dies\nbefore the date when pension is to start.**d)** **Convertibility**Convertible term insurance policies allow a policyholder to change or convert a\nterm insurance policy into a permanent plan like “Whole Life” without providing\nfresh evidence of insurability. This privilege helps those who wish to have\npermanent cash value insurance but are unable to afford its high premiums.\nWhen the term policy is converted into permanent insurance the new premium\nrate would be higher.**e)** **Unique Selling Proposition** ( **USP)**The unique selling proposition (USP) of term assurance is its low price, enabling\none to buy relatively large amounts of life insurance on a limited budget.**f)** **Variants**A number of variants of term assurance are possible.**Diagram 3:** **Variants of Term Assurance****i.** **Decreasing Term Assurance**\nThese plans typically consist of decreasing term insurance which provides an\namount of death benefit that is equal to the balance that is due on a loan, if the\nborrower dies before the loan is paid. These are often marketed as Mortgage\nRedemption (discussed in Chapter 15) or Credit Life Insurance. The plans are26usually sold to lending institutions as group insurance to cover the lives of their\nborrowers. Purchase of mortgage redemption insurance is often a condition of\nthe mortgage loan. Such plans may also be available for automobile or other\npersonal loans.**ii.** **Increasing term assurance**\nAs the name suggests, the plan provides a death benefit, which increases along\nwith the term of the policy. Premium generally increases as the amount of\ncoverage increases.**iii.** **Term insurance with return of premiums**", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "p24", "section": "Test Yourself 1", "chunk_id": "IC 38 -IA-Eng-Life_012", "metadata": {"file_size": 4771, "chunk_index": 12, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Convertibility", "Test Yourself 1", "Diagram 3:", "Term insurance with return of premiums", "Increasing term assurance"]}}
{"chunk": "one to buy relatively large amounts of life insurance on a limited budget.**f)** **Variants**A number of variants of term assurance are possible.**Diagram 3:** **Variants of Term Assurance****i.** **Decreasing Term Assurance**\nThese plans typically consist of decreasing term insurance which provides an\namount of death benefit that is equal to the balance that is due on a loan, if the\nborrower dies before the loan is paid. These are often marketed as Mortgage\nRedemption (discussed in Chapter 15) or Credit Life Insurance. The plans are26usually sold to lending institutions as group insurance to cover the lives of their\nborrowers. Purchase of mortgage redemption insurance is often a condition of\nthe mortgage loan. Such plans may also be available for automobile or other\npersonal loans.**ii.** **Increasing term assurance**\nAs the name suggests, the plan provides a death benefit, which increases along\nwith the term of the policy. Premium generally increases as the amount of\ncoverage increases.**iii.** **Term insurance with return of premiums**\nAnother type of policy (quite popular in India) is term assurance with return of\npremiums. Though the premium paid would be much higher than for a similar\nterm insurance plan without return of premiums, some customers may need such\npolicies.**g)** **Relevant scenarios**Term insurance may have relevance in the following situations:\ni. Where the need for insurance protection is purely temporary, as in case ofmortgage redemption\nii. As an additional supplement to a savings plan.\niii. As part of a “buy term and invest the rest” philosophy, where one seeks onlycheap term insurance protection from the insurance company and wants to\ninvest the difference of premiums in other attractive investments.**Important****Limitations of term plans:** Term Insurance plans are available only for specific\nperiods and one may not be able to continue the coverage beyond a certain age,\nsay 65 or 70.**2.** **Whole life insurance**Whole life insurance is an example of a permanent life insurance policy. Here, the\nlife insurer offers to pay the agreed death benefit when the insured dies, no matter\nwhen the death might occur. The premiums can be paid throughout one’s life or for\na limited time as specified.Whole life premiums are much higher than term premiums as whole life policies are\ndesigned to remain in force until the death of the insured, and pay the death benefit\nanytime. The Plan also provides for a cash value in the policy holder’s account. He/\nshe can withdraw cash in the form of a policy loan from this cash value or even\nredeem it by surrendering the policy for its cash value.In case of outstanding loans, the amount of loan and interest get deducted from the\npay-out to the beneficiaries upon death.**A whole life policy is a good plan for the main earner of the family who wishes**\n**to protect his/ her loved ones in the event of premature death and preserve his/**\n**her capital against erosion from various events like terminal illness.** One can also\nuse the cash value of the whole life insurance policy for retirement needs, if27required. Whole life insurance thus plays an important role in household saving and\ncreating wealth to be passed on to the next generation.**3.** **Endowment Assurance**It is a contract in which the sum assured is payable to the nominees of the insured\nin case of the death of the insured during the term of the policy. If the insured\nsurvives the term the sum assured is paid to the insured.**The product has both death and survival benefit components.** Endowment\nAssurance links one’s insurance and savings programmes by offering a safe and\ncompulsory method of savings accumulation.People buy endowment plans as a sure method of providing against old age or for\nmeeting specific purposes like having a fund for (a) educational purposes, (b)\nmeeting children’s marriage expenses or(c) paying a mortgage (housing) loan.**Government usually offers tax benefits on the premiums paid, which make it**\n**attractive.** Many endowment policies mature at ages 55 to 65, when the insured is\nplanning for his/ her retirement. In such cases such policies can supplement\nretirement savings.**Variants:** Endowment assurance has certain variants - discussed below.**4.** **Money Back Policy**\nThe Money Back policy is a popular endowment plan in India. It has a provision for\nreturning some part of the sum assured in instalments during the term and the\nbalance sum assured at the end of the term.**Example**A Money Back policy for 20 years may provide for paying survival benefits of 20% of\nthe sum assured each at the end of the 5 [th], 10 [th] and 15 [th] years and the balance 40%", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "e26", "section": "Variants", "chunk_id": "IC 38 -IA-Eng-Life_013", "metadata": {"file_size": 4771, "chunk_index": 13, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Whole life insurance", "Variants", "Variants:", "Limitations of term plans:", "Example"]}}
{"chunk": "compulsory method of savings accumulation.People buy endowment plans as a sure method of providing against old age or for\nmeeting specific purposes like having a fund for (a) educational purposes, (b)\nmeeting children’s marriage expenses or(c) paying a mortgage (housing) loan.**Government usually offers tax benefits on the premiums paid, which make it**\n**attractive.** Many endowment policies mature at ages 55 to 65, when the insured is\nplanning for his/ her retirement. In such cases such policies can supplement\nretirement savings.**Variants:** Endowment assurance has certain variants - discussed below.**4.** **Money Back Policy**\nThe Money Back policy is a popular endowment plan in India. It has a provision for\nreturning some part of the sum assured in instalments during the term and the\nbalance sum assured at the end of the term.**Example**A Money Back policy for 20 years may provide for paying survival benefits of 20% of\nthe sum assured each at the end of the 5 [th], 10 [th] and 15 [th] years and the balance 40%\nat the end of the full term of 20 years. If the life assured dies at the end of, say 18\nyears, the full sum assured and bonuses (explained in the next section) accrued are\npaid as death benefit, even though the insured would have been paid a benefit of\n60% of the face value already, as money back.Money Back plans have been popular because of their liquidity (cash back) element,\nwhich make them attractive for meeting short and medium term needs. Such plans\nprovide full death protection also, if the individual dies at any point during the term\nof the policy.**5.** **Participating (Par) and Non-Participating (Non-Par)Plans**The Life Insurance products can also be classified as Participating (Par) and Nonparticipating (Non-Par) products. The term “Par” implies policies which are\nparticipating in the profits of the life insurer. “Non–Par”, on the other hand,\nrepresents policies which do not participate in the profits. Both kinds are present\nin traditional life insurance. Under all traditional plans, the pooled life funds, which\nare derived from policyholders’ premiums, are invested as per regulatory norms.\nPolicy holders who opt for ‘par products’ are eligible to receive, in addition to a28guaranteed sum assured, a share in the surpluses( bonuses) that are generated by\nthe insurer. These are known as ‘With Profit’ plans.**6.** **Non-participating products**The Policy holders who buy non-linked without profit [non par] plans are paid a\nbenefit that is fixed and guaranteed at the beginning of the contract and nothing\nmore. Non-participating products may be offered either under a ‘linked platform’\nor a ‘non-linked platform’. These are known as ‘Without Profits’ plans.**Example**One may have an endowment policy of twenty years providing a guaranteed addition\nof 2% of sum assured for each year of term, so that the maturity benefit is sum\nassured plus a total addition of 40% of the sum assured.Under the IRDAI’s guidelines on traditional non-par policies, the benefits to be paid\non the happening of a specified event, have to be explicitly stated at the outset and\nnot linked to an index or benchmark. The same applies to additional benefits that\nare accrued at regular intervals. This means that the return on these policies must\nbe disclosed at the time of taking the policy.**Important**Death benefits are subject to regulations of IRDAI issued from time to time. At\npresent, as per the new Regulation 9 of IRDAI (Non-linked) Products Regulation,\n2019 pertaining to traditional products, the minimum death cover is as follows:For all non-linked individual life insurance products, the minimum Sum Assured on\ndeath during the entire term of the policy shall not be less than 7 times the\nannualized premium, for limited or regular premium products, and 1.25 times the\nsingle premium for single premium products.For participating products, in addition to the sum assured on death, the bonus and\nadditional benefits as stated in the policy and accrued till the date of death shall\nbecome payable on death as part of the death benefit, if not paid earlier. In\nessence, there are **two variants**, participating and non-participating plans.i. For **participating polices** the bonus is linked to the investment performanceof the fund and is not declared or guaranteed before. The **bonus, once it is**\n**announced, becomes a guarantee** . It is usually paid in case of death of the", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "a28", "section": "Government usually offers tax benefits on the premiums paid, which make it", "chunk_id": "IC 38 -IA-Eng-Life_014", "metadata": {"file_size": 4771, "chunk_index": 14, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Non-participating products", "Variants:", "Example", "Important", "Money Back Policy"]}}
{"chunk": "be disclosed at the time of taking the policy.**Important**Death benefits are subject to regulations of IRDAI issued from time to time. At\npresent, as per the new Regulation 9 of IRDAI (Non-linked) Products Regulation,\n2019 pertaining to traditional products, the minimum death cover is as follows:For all non-linked individual life insurance products, the minimum Sum Assured on\ndeath during the entire term of the policy shall not be less than 7 times the\nannualized premium, for limited or regular premium products, and 1.25 times the\nsingle premium for single premium products.For participating products, in addition to the sum assured on death, the bonus and\nadditional benefits as stated in the policy and accrued till the date of death shall\nbecome payable on death as part of the death benefit, if not paid earlier. In\nessence, there are **two variants**, participating and non-participating plans.i. For **participating polices** the bonus is linked to the investment performanceof the fund and is not declared or guaranteed before. The **bonus, once it is**\n**announced, becomes a guarantee** . It is usually paid in case of death of the\npolicyholder or maturity benefit. This bonus is also called **reversionary**\n**bonus** .\nii. In case of **non-participating policies**, the return on the policy is disclosed inthe beginning of the policy itself.**7.** **Pension Plans and Annuities**A pension plan is typically a fund into which money is paid during a person’s\nemployment years and from which money is drawn to support the person after his\n[retirement from work in the form of periodic payments.](https://en.wikipedia.org/wiki/Retirement)29Pension plans are designed on group (usually employer driven) or individual basis. A\ngroup pension may be a \"defined benefit plan\", where a fixed sum is paid regularly\nto a person, or a \"defined contribution plan\", under which a fixed sum is invested\n[which becomes available at retirement age. Pensions are essentially guaranteed life](https://en.wikipedia.org/wiki/Life_annuity)\n[annuities, thus insuring against the risk of longevity. A pension created by an](https://en.wikipedia.org/wiki/Life_annuity)\nemployer for the benefit of an employee is commonly referred to as an occupational\nor employer pension.On retirement, the money in the member's account is used to provide retirement\nbenefits, typically by purchasing an annuity which then provides a regular income.\nAn annuity is a long-term investment issued by an insurance company designed to\nhelp protect one from the risk of outliving one’s income. Through annuitization,\none’s contributions are converted into periodic payments that can last for life.Individuals can avail of pension benefits by purchasing pension plans from insurance\ncompanies. Pension plans can be **on accumulation or deferred** **basis** which allows\na person to contribute in two ways, (i) in lump sum, or (ii) over a period of time; so\nthat he/ she can get a pension from the desired age/ date (called as the ‘vesting’\ndate). One can opt to receive pensions/ annuities on monthly, quarterly, half-yearly\nor annual modes. Pension plans are available on an **immediate basis** also, from the\nvery next month of purchase, on payment of a lump sum amount, called as\nimmediate annuity.The Indian insurance industry has several deferred and immediate annuity products\nmarketed by Life Insurers. Each product has its own features, terms, conditions and\nannuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly\nmeet the needs of an average customer, in January 2021, IRDAI mandated all Life\nInsurers to introduce a standard, immediate annuity product, with simple features\nand standard terms and conditions on an individual (not group) basis. Such a\nstandard product will make it easier for the customers to make an informed choice,\nenhance the trust between the Insurers and the insured, and reduce mis-selling as\nwell as potential disputes.The standard individual immediate annuity product is called, “Saral Pension”,\nprefixed by the Insurer’s name. The product offer two (and only two) annuity\noptions as follows:a) Life annuity with 100% Return of Purchase Price; andb) Joint Life annuity with a provision of 100% annuity to the secondary annuitant\non death of the primary annuitant and return of 100% Purchase Price on death\nof last survivor.Mode of Annuity payment would be Monthly, Quarterly, Half-Yearly and Yearly.", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Important", "chunk_id": "IC 38 -IA-Eng-Life_015", "metadata": {"file_size": 4771, "chunk_index": 15, "chunk_tokens": 1002, "has_examples": false, "has_tables": false, "key_concepts": ["Pension Plans and Annuities", "Saral Pension:", "Important"]}}
{"chunk": "annuity options.**Saral Pension:** To provide uniformity across Insurers, to reduce confusion in the\nmarket about annuity schemes, and to make available a product that will broadly\nmeet the needs of an average customer, in January 2021, IRDAI mandated all Life\nInsurers to introduce a standard, immediate annuity product, with simple features\nand standard terms and conditions on an individual (not group) basis. Such a\nstandard product will make it easier for the customers to make an informed choice,\nenhance the trust between the Insurers and the insured, and reduce mis-selling as\nwell as potential disputes.The standard individual immediate annuity product is called, “Saral Pension”,\nprefixed by the Insurer’s name. The product offer two (and only two) annuity\noptions as follows:a) Life annuity with 100% Return of Purchase Price; andb) Joint Life annuity with a provision of 100% annuity to the secondary annuitant\non death of the primary annuitant and return of 100% Purchase Price on death\nof last survivor.Mode of Annuity payment would be Monthly, Quarterly, Half-Yearly and Yearly.\nDetails are available on IRDAI’s website at the following link\n=\n[https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1) PageNo43\n[53&flag=1](https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo4353&flag=1)30**Test Yourself 2**The premium paid for whole life insurance is _____________ than the premium paid\nfor term assurance.I. Higher\nII. Lower\nIII. Equal\nIV. Substantially higher**Summary**Life insurance products offer protection against the loss of economic value of\nan individual’s productive abilities, which is available to his/ her dependents or\nto the self.A life insurance policy, at its core, provides peace of mind and protection to the\nnear and dear ones of the individual in case something unfortunate happens to\nhim or her.Term insurance provides valid cover only during a certain time period that has\nbeen specified in the contract.The unique selling proposition (USP) of term assurance is its low price, enabling\none to buy relatively large amounts of life insurance on a limited budget.While term assurance policies are examples of temporary assurance, where\nprotection is available for a temporary period of time, whole life insurance is an- example of a permanent life insurance policy.**Key Terms**1. Term insurance2. Whole life insurance3. Endowment assurance\n4. Money back policy\n5. Par and non-par schemes\n6. Reversionary bonus**Answers to Test Yourself****Answer 1** -The correct option is III.\n**Answer 2** - The correct option is I.31## CHAPTER L-04## LIFE INSURANCE PRODUCTS: NON-TRADITIONAL**Chapter Introduction**The chapter introduces you to the world of non-traditional life insurance products.\nWe start by examining the limitations of traditional life insurance products and then\nhave a look at the appeal of non-traditional life insurance products. Finally we look\nat some of the different types of non-traditional life insurance products available\nin the market.**Learning Outcomes**32**A.** **Overview of non-traditional life insurance products****1.** **Non-traditional life insurance products – Purpose and need**In the previous chapters we have considered some of the traditional life insurance\nproducts which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to\nprovide a rate of return comparable to other assets in the financial market. Issues\nhave also been raised about the way they are structured into a single package of\nbenefits and premiums.**2.** **Limitations of traditional products**a) A critical examination would reveal the following areas of concern:b) **Cash value component:** The savings or cash value component in traditional policies\nis not well defined. This makes it less transparent about mortality, interest rates,\nexpenses and other parameters that are made.c) **Rate of return:** It is not easy to ascertain the rate of return on traditional policies\nbecause the value of the benefits under “With Profit policies” can be known only\nwhen the contract ends. This makes it difficult to compare these policies with other\nfinancial instruments.d)e)f) **Surrender value:** The method of arriving at the cash and surrender values (at any\npoint of time), are set by the life insurer and not transparent.**Yield:** The yield on these policies are much lower than those from other", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "o4353", "section": "Saral Pension:", "chunk_id": "IC 38 -IA-Eng-Life_016", "metadata": {"file_size": 4771, "chunk_index": 16, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Yield:", "Chapter Introduction", "Surrender value:"]}}
{"chunk": "products which have insurance as well as a savings element in them.People have been questioning the ability of traditional life insurance policies to\nprovide a rate of return comparable to other assets in the financial market. Issues\nhave also been raised about the way they are structured into a single package of\nbenefits and premiums.**2.** **Limitations of traditional products**a) A critical examination would reveal the following areas of concern:b) **Cash value component:** The savings or cash value component in traditional policies\nis not well defined. This makes it less transparent about mortality, interest rates,\nexpenses and other parameters that are made.c) **Rate of return:** It is not easy to ascertain the rate of return on traditional policies\nbecause the value of the benefits under “With Profit policies” can be known only\nwhen the contract ends. This makes it difficult to compare these policies with other\nfinancial instruments.d)e)f) **Surrender value:** The method of arriving at the cash and surrender values (at any\npoint of time), are set by the life insurer and not transparent.**Yield:** The yield on these policies are much lower than those from other\ninvestments.**3.** **Features of Non-Traditional Policies:** Life insurance companies starteddesigning policies with certain innovative features, some of which are given\nbelow:a) **Direct linkage with investment gains:** Policies with direct linkage with thecapital market were designed in an attempt to make investment gains.\nb) **Policies that can beat inflation:** Policies were designed to give returnscloser to the inflation rates. The change was that insurers started thinking\nthat life policies need to match if not beat inflation.\nc) **Policies with Flexibility:** Policies which allowed customers to decide (withincertain limits) the amount of premium they wanted to pay; and the amount\nof death benefits and cash values they wanted, got designed.\nd) **Surrender value:** Policies that gave better surrender values available undertraditional policies were also designed by insurers.These policies became very popular and even began to replace traditional products\nin many countries, including India.33**Test Yourself 1**Which among the following is a non-traditional life insurance product?I. Term assuranceII. Universal life insuranceIII. Endowment insuranceIV. Whole life insurance**B.** **Non-traditional life insurance products****Some non-traditional products**We shall discuss some of the non-traditional products which have emerged in the\nIndian market and elsewhere.**1.** **Universal Life and Variable Life**Universal Life policy was introduced in the United States in 1979 and quickly became\nvery popular. Its features are **flexible premiums, flexible face amount and death**\n**benefit amounts.** Unlike traditional policies, where fixed premiums have to be paid\nperiodically to keep the contract in force, universal life policies allow the\npolicyholder (within limits) to decide the amount of premiums he or she wants to\npay for the coverage.Variable Life was introduced in the United States in 1977.It is a typeof “Whole Life”\npolicy where the death benefit and cash value of the policy fluctuates according to\nthe investment performance of a special investment account into which premiums\nare credited.The design and sale of the above two kinds of products, both of which were called\nVariable Insurance Products, have been discontinued and are not allowed in India\nsince2019,further to the issue of IRDAI (ULIP) Regulations, 2019.**2.** **Unit linked insurance**Unit Linked Plans, also known as ULIPs were first introduced in UK during the\n1960s.They have today emerged as one of the most popular and significant products,\ndisplacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.\nThe premium paid by the policyholder gets divided into two major portionsthe first portion which is utilised for providing insurance cover, andthe second portion that gets invested into the fund opted by the insured.The benefits under such contracts are wholly or partially determined by the value\nof units credited to the policyholder’s account at the date when payment is due.34In many markets these policies were positioned and sold as investment vehicles with\nan attached insurance component.Unlike traditional savings policies that are bundled, Unit linked contracts are\nunbundled. Their structure is transparent with the charges to pay for the insurance\nand expenses component being clearly specified.**Diagram 1:** **Premium break-up**After deducting the charges from the premium, the balance of the account and\nincome are invested in **units** .**The Value of Units**The value of units is defined by a rule or formula, which is outlined in advance.\nTypically the value of the units is given by the Net Asset Value (NAV), which reflects\nthe market value of the assets in which the fund is invested. Different persons could", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "e2019", "section": "Limitations of traditional products", "chunk_id": "IC 38 -IA-Eng-Life_017", "metadata": {"file_size": 4771, "chunk_index": 17, "chunk_tokens": 1002, "has_examples": false, "has_tables": false, "key_concepts": ["Features of Non-Traditional Policies:", "Yield:", "Test Yourself 1", "Universal Life and Variable Life", "Diagram 1:"]}}
{"chunk": "displacing traditional plans in many markets.Unit linked policies help to overcome the limitations of traditional products.\nThe premium paid by the policyholder gets divided into two major portionsthe first portion which is utilised for providing insurance cover, andthe second portion that gets invested into the fund opted by the insured.The benefits under such contracts are wholly or partially determined by the value\nof units credited to the policyholder’s account at the date when payment is due.34In many markets these policies were positioned and sold as investment vehicles with\nan attached insurance component.Unlike traditional savings policies that are bundled, Unit linked contracts are\nunbundled. Their structure is transparent with the charges to pay for the insurance\nand expenses component being clearly specified.**Diagram 1:** **Premium break-up**After deducting the charges from the premium, the balance of the account and\nincome are invested in **units** .**The Value of Units**The value of units is defined by a rule or formula, which is outlined in advance.\nTypically the value of the units is given by the Net Asset Value (NAV), which reflects\nthe market value of the assets in which the fund is invested. Different persons could\narrive at the same benefits payable by following the formula.The Formula is as follows:Net Asset Value [NAV] = Market Value of Assets of the fund/ Number of units of the\nfundsThus, Policyholder benefits do not depend on the assumptions of the life insurancecompany.Unit linked policies allow policy holders to choose between different kinds of funds.\nEach fund would have a different portfolio mix. The investor gets to choose between\na broad option of debt, balanced and equity funds, defined below. Even within these\nbroad categories there may be other types of options.|Equity Fund|Debt Fund|Balanced Fund|Money Market Fund|\n|---|---|---|---|\n|~~This fund invests~~<br>the major portion of<br>the money in equity<br>and equity related<br>instruments.<br>|~~This fund invests~~<br>major portion of the<br>money in Govt.<br>Bonds, Corporate<br>Bonds, Fixed<br>Deposits etc.<br>|~~This fund~~<br>invests in a mix<br>of equity and<br>debt<br>instruments<br>|~~This fund invests~~<br>money mainly in<br>instruments such as<br>Treasury Bills,<br>Certificates of Deposit,<br>Commercial Paper etc.<br>|There is also provision to switch from one kind of fund to another if performance of\none or more funds is not found to be up to the mark.35Some of the specific features of ULIP Policies are given below:**i.** **Unitising**Benefits under ULIP policies are determined by the value of units credited to the\npolicyholder’s account at the date when the claim payment is due to be made. A\nunit is created by dividing an investment fund into a number of equal parts.**ii.** **Transparent structure**The charges for insurance cover and expenses in ULIPs are clearly specified. Once\nthese charges are deducted from the premium, the balance of the account and\nincome from it are invested in units.**iii.** **Pricing**Under ULIPs, the insured decides the amount of premium that he/ she can\ncontribute at regular intervals.In all Life Insurance policies, the initial costs are very high. Under traditional\npolicies, the premium charges for meeting these costs are spread throughout the\npolicy term.In the case of ULIPs, they are deducted from the initial premiums itself. This\nsignificantly reduces the amount allocated for investment. This is why the value of\nthe benefits, vis-à-vis the premiums paid, would be very low and even less than the\npremiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy, the\nbeneficiary would be paid the higher of the Sum Assured [which is a multiple of the\npremium] or the Fund Value (unit price multiplied by the number of units) standing\nto his or her account.**v.** **The bearing of investment risk**The value of the units depends on the value of the life insurer’s investments, which\nare not guaranteed.The life insurer, though expected to manage the portfolio efficiently, does not give\nany guarantee about unit values. Hence, the investment risk is borne by the\npolicyholder/ unit holder.36**Test Yourself 2**Which of the following statements is/ are incorrect?I. Variable life insurance is a temporary life insurance policy\nII. Variable life insurance is a permanent life insurance policy\nIII. The policy has a cash value account", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Diagram 1:", "chunk_id": "IC 38 -IA-Eng-Life_018", "metadata": {"file_size": 4771, "chunk_index": 18, "chunk_tokens": 1009, "has_examples": false, "has_tables": true, "key_concepts": ["Transparent structure", "Diagram 1:", "Unitising", "Death Benefit", "The Value of Units"]}}
{"chunk": "the benefits, vis-à-vis the premiums paid, would be very low and even less than the\npremiums paid in the early years of the contract.**iv.** **Death Benefit**Unlike in traditional policies, the amount of death benefit in ULIP policies is a\nmultiple of the premiums paid. In case of death during the term of the policy, the\nbeneficiary would be paid the higher of the Sum Assured [which is a multiple of the\npremium] or the Fund Value (unit price multiplied by the number of units) standing\nto his or her account.**v.** **The bearing of investment risk**The value of the units depends on the value of the life insurer’s investments, which\nare not guaranteed.The life insurer, though expected to manage the portfolio efficiently, does not give\nany guarantee about unit values. Hence, the investment risk is borne by the\npolicyholder/ unit holder.36**Test Yourself 2**Which of the following statements is/ are incorrect?I. Variable life insurance is a temporary life insurance policy\nII. Variable life insurance is a permanent life insurance policy\nIII. The policy has a cash value account\nIV. The policy provides a minimum death benefit guarantee**Summary**A critical concern with respect to life insurance policies was giving a competitive\nrate of return comparable to other assets in the financial marketplace.Some of the trends that led to the increase in non-traditional life products\ninclude unbundling, investment linkage and transparency.Universal life insurance is a form of permanent life insurance characterised by\nits flexible premiums, flexible face amount and death benefit amounts, and the\nunbundling of its pricing factors.ULIPs became one of the most popular and significant products, replacing\ntraditional plans in many markets.ULIPs provide the means for directly and immediately cashing on the benefits of\na Life Insurer’s investment performance.**Key Terms**1. Universal life insurance2. Variable life insurance3. Unit linked insurance4. Net asset value**Answers to Test Yourself****Answer 1** -The correct option is II.**Answer 2** - The correct option is I.37## CHAPTER L-05## APPLICATIONS OF LIFE INSURANCE**Chapter Introduction**Life insurance does not merely seek to protect individuals from premature death. It\nhas other applications as well. It can be applied to the creation of trusts with\nresultant insurance benefits; it can be applied for creating a policy covering key\npersonnel of industries and also for redeeming mortgages. We shall briefly describe\nthese various applications of life insurance.**Learning Outcomes**38N’s\n**A.** **Applications of Life insurance****1.** **Married Women’s Property Act**Section 6 of the Married Women’s Property Act, 1874 tries to ensure that the\nbenefits under a life insurance policy will pass on in a secure manner to the wife\nand children through creation of a trust for the purpose.**Diagram 1:** **Beneficiaries under MWP Act**The section provides that when a married man takes a policy on his own life and\nclearly expresses on the face of such policy that it is for the benefit of his wife or\nhis wife and children, and to be held in a trust for their benefit only, the proceeds\nof such a policy shall not, so long as the objects of the trust remains, be subject to\nthe control of the husband or to his creditors or form part of his estate.**Features of a policy under the MWP Act**i. Each policy will remain a separate Trust. Either the wife or child (over 18years of age) can be a trustee.ii. The policy shall be beyond the control of court attachments, creditors andeven the life assured.iii. The claim money shall be paid to the trustees.iv. The policy cannot be surrendered and neither nomination nor assignment isallowed.v. If the policyholder does not appoint a special trustee to receive andadminister the benefits under the policy, the sum secured under the policy\nbecomes payable to the Official Trustee of the State in which the office at\nwhich the insurance was effected is situated.39**Benefits**The Trust is set up under a deed that cannot be revoked or amended. It can contain\none or more insurance policies. It is important to appoint a trustee who would be\nresponsible for administering the trust property, including investing the insurance\nproceeds, on behalf of the beneficiaries. These benefits are secured from passing\nto future creditors**2.** **Key-man Insurance**Keyman insurance is an important form of business insurance.**Definition**Key-man Insurance can be described as an insurance policy taken out by a business\nto compensate that business for financial losses that would arise from the death or\nextended incapacity of an important member of the business.Many businesses have key persons responsible for a major part of its profits or has", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "e2", "section": "Death Benefit", "chunk_id": "IC 38 -IA-Eng-Life_019", "metadata": {"file_size": 4771, "chunk_index": 19, "chunk_tokens": 1010, "has_examples": false, "has_tables": false, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Diagram 1:", "Death Benefit"]}}
{"chunk": "becomes payable to the Official Trustee of the State in which the office at\nwhich the insurance was effected is situated.39**Benefits**The Trust is set up under a deed that cannot be revoked or amended. It can contain\none or more insurance policies. It is important to appoint a trustee who would be\nresponsible for administering the trust property, including investing the insurance\nproceeds, on behalf of the beneficiaries. These benefits are secured from passing\nto future creditors**2.** **Key-man Insurance**Keyman insurance is an important form of business insurance.**Definition**Key-man Insurance can be described as an insurance policy taken out by a business\nto compensate that business for financial losses that would arise from the death or\nextended incapacity of an important member of the business.Many businesses have key persons responsible for a major part of its profits or has\nknowledge and skills that are vital to the organisation and difficult to replace. Key\nman insurance is taken by employers on the life of such key persons to facilitate\nbusiness continuity and offset the costs and losses which are likely to be suffered in\nthe event of the loss of a key person. Keyman insurance does not indemnify the\nactual losses incurred but compensates with a fixed monetary sum as specified on\nthe insurance policy.Keyman insurance is allowed as a term insurance policy where the sum assured is\nlinked to the profitability of the company rather than the key person’s own income.\nThe premium is paid by the company. In case the key person dies, the benefit is\npaid to the company. The proceeds of Keyman insurance is taxable at the hands of\nthe company.**a)** **Who can be a key-man?**A key person can be anyone directly associated with the business whose loss can\ncause financial strain to the business. For example, the person could be a\ndirector of the company, a partner, a key sales person, key project manager, or\nsomeone with specific skills or knowledge which is especially valuable to thecompany.**b)** **Insurable losses**The following are the losses for which key person insurance can provide\ncompensation:i. Losses related to the extended period when a key person is unable to work,to provide temporary personnel and, if necessary to finance the recruitment\nand training of a replacement40ii. Insurance to protect profits. For example, offsetting lost income from lostsales, losses resulting from the delay or cancellation of any business project\nthat the key person was involved in, loss of opportunity to expand, loss of\nspecialised skills or knowledge**3.** **Mortgage Redemption Insurance (MRI)**A person taking a loan to buy a property, may be required to pay for mortgage\nredemption insurance by the bank, as part of the loan arrangement. “Mortgage\nRedemption Insurance” is popularly referred to “Credit Life Insurance policy”.**a)** **What is MRI?**It is an insurance policy that provides financial protection for home loan\nborrowers. It is basically a decreasing term life insurance policy taken by\nmortgagor to repay the balance on a mortgage loan if he/ she dies before its full\nrepayment. It can be called a loan protector policy. This plan is suitable for\npeople whose dependents may need assistance in clearing their debts in case of\nthe unexpected demise of the policyholder.**b)** **Features**The insurance cover under this policy decreases each year unlike a term\ninsurance policy where insurance cover is constant during the policy period.**Test Yourself 1**What is the objective behind Mortgage Redemption Insurance?I. Facilitate cheaper mortgage rates\nII. Provide financial protection for home loan borrowers\nIII. Protect value of the mortgaged property\nIV. Evade eviction in case of default**Summary**Section 6 of the Married Women’s Property Act, 1874 provides for security of\nbenefits under a life insurance policy to the wife and children.The policy effected under MWP Act shall be beyond the control of court\nattachments, creditors and even the life assured.Keyman insurance is an important form of business insurance. It can be\ndescribed as an insurance policy taken out by a business to compensate at for\nfinancial losses that would arise from the death or extended capacity of an\nimportant member of the business.41Mortgage redemption insurance is basically a decreasing term life insurance\npolicy taken by a mortgagor to repay the balance on a mortgage loan if he/ she\ndies before its full repayment.**Key Terms**1. Married Women’s Property Act\n2. Keyman insurance\n3. Mortgage Redemption Insurance**Answers to Test Yourself****Answer 1** - The correct option is II.42## CHAPTER L-06## PRICING AND VALUATION IN LIFE INSURANCE**Chapter Introduction**The objective of this chapter is to introduce to the learner the basic elements that\nare involved in the pricing and benefits of life insurance contracts. We shall first", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "t40", "section": "Benefits", "chunk_id": "IC 38 -IA-Eng-Life_020", "metadata": {"file_size": 4771, "chunk_index": 20, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Mortgage Redemption Insurance (MRI)", "Test Yourself 1", "What is MRI?", "Chapter Introduction"]}}
{"chunk": "IV. Evade eviction in case of default**Summary**Section 6 of the Married Women’s Property Act, 1874 provides for security of\nbenefits under a life insurance policy to the wife and children.The policy effected under MWP Act shall be beyond the control of court\nattachments, creditors and even the life assured.Keyman insurance is an important form of business insurance. It can be\ndescribed as an insurance policy taken out by a business to compensate at for\nfinancial losses that would arise from the death or extended capacity of an\nimportant member of the business.41Mortgage redemption insurance is basically a decreasing term life insurance\npolicy taken by a mortgagor to repay the balance on a mortgage loan if he/ she\ndies before its full repayment.**Key Terms**1. Married Women’s Property Act\n2. Keyman insurance\n3. Mortgage Redemption Insurance**Answers to Test Yourself****Answer 1** - The correct option is II.42## CHAPTER L-06## PRICING AND VALUATION IN LIFE INSURANCE**Chapter Introduction**The objective of this chapter is to introduce to the learner the basic elements that\nare involved in the pricing and benefits of life insurance contracts. We shall first\ndiscuss the elements that constitute the premium and then discuss the concept of\nsurplus and bonus.**Learning Outcomes**43**A.** **Insurance pricing – Basic elements****1.** **Premium**In ordinary language, the term premium denotes the price that is paid by an insured\nfor purchasing an insurance policy. It is normally expressed as a rate of premium\nper thousand rupees of sum assured. The premium rates depend on the age of the\nprospect and the plan.These premium rates are available in the form of tables of rates that are available\nwith insurance companies.**Diagram 1:** PremiumThe rates printed in these tables are known as “Office Premiums”. They are in most\ncases the same throughout the term and are expressed as an annual rate.**Example**If the premium for a twenty year endowment policy for a given age is Rs. 4,800, it\nmeans that Rs. 4,800 has to be paid each year for twenty years.However it is possible to have some policies in which the premiums are payable only\nin the first few years. Companies also have single premium contracts in which only\none premium is payable at the beginning of the contract. These policies are usually\ninvestment oriented.**2.** **Rebates**Life insurance companies may also offer certain types of rebates on the premium\nthat is payable. Two such rebates are: For sum assured\n For mode of premum44**Rebate for sum assured**The rebate **for sum assured** is offered to those who buy policies with higher\namounts of sum assured. It is offered as a way of passing on to the customer,\nthe gains that the insurer may make when servicing higher value policies. The\nlogic is that the effort and cost required to process a policy of Rs 50,000 or\n5,00,000 remains the same. But higher sum assured policies yield more premium\nand so more profits.**Rebate for mode of premium**Similarly a rebate may be offered **for the mode of premium** . Life insurance\ncompanies may allow premiums to be paid on annual, half yearly, quarterly or\nmonthly basis. More frequent the mode, more the administrative costs for\ncollecting and accounting the premium. Again, in the yearly mode, the insurer\ncan utilise this amount during the entire year and earn interest on it. Insurers\nwould hence encourage payment via yearly and half yearly modes by allowing a\nrebate on these. They may also charge a little extra for monthly mode of\npayments, to cover additional administrative expenses involved.**3.** **Extra charges**The tabular premium is charged for those individuals who are not subject to any\nsignificant factors that would pose an extra risk. They are known as **standard**\n**lives** and the rates charged are known as ordinary rates.If a person proposing for insurance suffers from certain health problems like\nheart ailments or diabetes that can pose a hazard to his life, he or she is\nconsidered to be sub-standard. The insurer may decide to impose an extra\npremium by way of a health extra. Similarly an occupational extra may be\nimposed on those engaged in a hazardous occupation, like a circus acrobat.\nThese extras would result in the premium being more than the tabular premium.Again, an insurer may offer certain extra benefits under a policy, which are\navailable on payment of an extra premium.**Example**A life insurer may offer a Double Accident Benefit or DAB (where double the sum\nassured is payable as a claim if death is a result of accident). For this it may", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "L-06", "section": "Summary", "chunk_id": "IC 38 -IA-Eng-Life_021", "metadata": {"file_size": 4771, "chunk_index": 21, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Extra charges", "Rebates", "Diagram 1:", "Insurance pricing – Basic elements"]}}
{"chunk": "would hence encourage payment via yearly and half yearly modes by allowing a\nrebate on these. They may also charge a little extra for monthly mode of\npayments, to cover additional administrative expenses involved.**3.** **Extra charges**The tabular premium is charged for those individuals who are not subject to any\nsignificant factors that would pose an extra risk. They are known as **standard**\n**lives** and the rates charged are known as ordinary rates.If a person proposing for insurance suffers from certain health problems like\nheart ailments or diabetes that can pose a hazard to his life, he or she is\nconsidered to be sub-standard. The insurer may decide to impose an extra\npremium by way of a health extra. Similarly an occupational extra may be\nimposed on those engaged in a hazardous occupation, like a circus acrobat.\nThese extras would result in the premium being more than the tabular premium.Again, an insurer may offer certain extra benefits under a policy, which are\navailable on payment of an extra premium.**Example**A life insurer may offer a Double Accident Benefit or DAB (where double the sum\nassured is payable as a claim if death is a result of accident). For this it may\ncharge an extra premium of one rupee per thousand sum assured.Similarly a benefit known as Permanent Disability Benefit (PDB) may be availed\nby paying an extra per thousand sum assured.**4.** **Determining the premium**Let us now examine how life insurers arrive at the rates that are presented in\nthe premium tables. This task is performed by an actuary. The process of setting45the premium in case of traditional life insurance policies like term insurance,\nwhole life and endowment considers following elements: Mortality\n Interest\n Expenses of management\n Reserves\n Bonus loading**Diagram 2:** **Components of Premium**The first two elements give us the Net premium. By adding [also called ‘loading’]\nthe other elements to the net premium we get the gross or office premium**a)** **Mortality and Interest**Mortality is the first element in premiums. It is the chance or likelihood that a\nperson of a certain age would die during a given year. To find out the expected\nMortality of a person, “Mortality Tables” are used.**Example**If the mortality rate for age 35 is 0.0035 it implies that out of every 1000 people\nwho are alive as on age 35, 3.5 (or 35 out of 10,000) are expected to die between\nage 35 and 36.The table may be used to calculate mortality cost for different ages. For\nexample the rate of 0.0035 for age 35 implies a cost of insurance of 0.0035 x\n1000 (sum assured) = Rs. 3.50 per thousand sum assured.The above cost may be also called the “Risk Premium”. For higher ages the risk\npremium would be higher.46**Example**If we need to have Rs. 5 per thousand to meet the cost of insurance after five\nyears and if we assume a rate of interest of 6%, the present value of Rs. 5 payable\nafter five years would be 5 x 1/ (1.06) [5 ] = 3.74.If instead of 6% we were to assume 10%, the present value would be only 3.10.\nIn other words the higher the rate of interest assumed, the lower the present\nvalue.From our study of mortality and interest there are two major conclusions we can\nderive Higher the mortality rate in the mortality table, higher the premiumswould be\n Higher the interest rate assumed, lower the premium**Net premium**\nThe estimates of mortality and interest give the “Net Premium”**Gross premium**\nGross premium is the net premium plus an amount called loading. There are\nthree considerations or guiding principles that needs to be borne in mind when\ndetermining the amount of loading:**b)** **Expenses and reserves**Life insurers have to incur various types of operating expenses including: Agents training and recruitment,\n Commissions of agents,\n Staff salaries,\n Office accommodation,\n Office stationery,\n Electricity charges,\n Other miscellaneous etc.All these have to be paid from premiums that are collected by insurers.\nThese expenses are suitably loaded to the net premium.**c)** **Lapses and contingencies**In addition to expenses, there are other factors that can make the calculations\nof life insurers go wrong.One source of risk is that of lapses and withdrawals. A lapse means that the\npolicyholder discontinues payment of premiums. In case of withdrawals, the", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "g45", "section": "Extra charges", "chunk_id": "IC 38 -IA-Eng-Life_022", "metadata": {"file_size": 4771, "chunk_index": 22, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Extra charges", "Net premium", "Example", "Lapses and contingencies", "Expenses and reserves"]}}
{"chunk": "derive Higher the mortality rate in the mortality table, higher the premiumswould be\n Higher the interest rate assumed, lower the premium**Net premium**\nThe estimates of mortality and interest give the “Net Premium”**Gross premium**\nGross premium is the net premium plus an amount called loading. There are\nthree considerations or guiding principles that needs to be borne in mind when\ndetermining the amount of loading:**b)** **Expenses and reserves**Life insurers have to incur various types of operating expenses including: Agents training and recruitment,\n Commissions of agents,\n Staff salaries,\n Office accommodation,\n Office stationery,\n Electricity charges,\n Other miscellaneous etc.All these have to be paid from premiums that are collected by insurers.\nThese expenses are suitably loaded to the net premium.**c)** **Lapses and contingencies**In addition to expenses, there are other factors that can make the calculations\nof life insurers go wrong.One source of risk is that of lapses and withdrawals. A lapse means that the\npolicyholder discontinues payment of premiums. In case of withdrawals, the\npolicyholder surrenders the policy and receives an amount from the policy’s\nacquired cash value.47Lapses usually happen within the first three years, especially in the first year of\nthe contract.**d)** **With Profit (participating) policies and Bonus loading**The concept of ‘With Profit’ policies originated when Life insurers started the\npractice of charging a high loading in advance to create a buffer to keep them\nsolvent even in adverse situations. If subsequent experience proved to be more\nfavourable, the life insurer would share some of the profits it made as a result\nwith policy holders by way of bonus.In sum we can say that:**Gross premium = Net premium + Loading for expenses + Loading for**\n**contingencies + Bonus loading****Test Yourself 1**What does a policy lapse mean?I. Policyholder completes premium payment for a policy\nII. Policyholder discontinues premium payment for a policy\nIII. Policy attains maturity\nIV. Policy is withdrawn from the market**B.** **Surplus and bonus****1.** **Determination of surplus and bonus**Every life insurance company is expected to undertake a periodic valuation of its\nassets and liabilities. Such a valuation has two purposes:i. To assess the financial state of the life insurer and determine if it is solventor insolvent\nii. To determine the surplus available for distribution among policyholders/share holders**Definition**Surplus is the excess of value of assets over value of liabilities. If it is negative, it is\nknown as a strain.Let us now see how the concept of surplus in life insurance is different from that of\nprofit of a firm.48Firms in general look at profits in two ways. Firstly, profit is the **excess of income**\n**over outgo** for a given accounting period, as it appears in the profit and loss\naccount. Profit also forms part of the balance sheet of a firm - it may be defined as\nthe **excess of assets over liabilities** . In both instances, profits are determined at\nthe end of the accounting period.**Surplus = Assets - Liabilities**Let us understand what liabilities mean in life insurance. For a given block of life\ninsurance policies, the life insurer has to make provision for meeting future claims,\nexpenses and other expected pay-outs that may arise. The insurer also expects to\nreceive premiums in future for these policies.Liabilities are thus the present value of all payments that have to be made less the\npresent value of premiums expected to be received on these policies. The present\nvalue is arrived at by applying a suitable rate of discount [the interest rate]\nSurplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed. Life insurers are obliged to share the benefits arising as a\nresult with holders of it’s with profit policies.**Example**The profits of XYZ firm as on 31 [st] March 2013, is given as its income less expenses or\nits assets less liabilities as on that date.In both instances, the profit is clearly defined and is known.**2.** **Bonus**Insurers have to declare and distribute its divisible surplus among the policy holders\nand shareholders of the company [if any] in the form of a bonus. In India, the United\nKingdom and many other countries, distribution of surplus is popular.Bonus is paid as an addition to the basic benefit payable under a contract. Typically\nit may appear as an addition to basic sum assured or basic pension per annum. It is", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Net premium", "chunk_id": "IC 38 -IA-Eng-Life_023", "metadata": {"file_size": 4771, "chunk_index": 23, "chunk_tokens": 977, "has_examples": true, "has_tables": false, "key_concepts": ["Surplus and bonus", "Net premium", "Test Yourself 1", "Example", "Lapses and contingencies"]}}
{"chunk": "receive premiums in future for these policies.Liabilities are thus the present value of all payments that have to be made less the\npresent value of premiums expected to be received on these policies. The present\nvalue is arrived at by applying a suitable rate of discount [the interest rate]\nSurplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed. Life insurers are obliged to share the benefits arising as a\nresult with holders of it’s with profit policies.**Example**The profits of XYZ firm as on 31 [st] March 2013, is given as its income less expenses or\nits assets less liabilities as on that date.In both instances, the profit is clearly defined and is known.**2.** **Bonus**Insurers have to declare and distribute its divisible surplus among the policy holders\nand shareholders of the company [if any] in the form of a bonus. In India, the United\nKingdom and many other countries, distribution of surplus is popular.Bonus is paid as an addition to the basic benefit payable under a contract. Typically\nit may appear as an addition to basic sum assured or basic pension per annum. It is\nexpressed, for example, as Rs. 60 per thousand sum assuredThe most common form of bonus is the **reversionary bonus** . Once declared these\nbonus additions, made each year, get attached to the policy and cannot be taken\naway. They are called ‘Reversionary’ bonuses because they are received only at the\ntime of a claim by death or maturity. Bonuses may also be payable on surrender\nprovided the contract is eligible through having run for a minimum term [say 5 years]49**Types of reversionary bonuses****Diagram 3:** **Types of Reversionary Bonuses****i.** **Simple Reversionary Bonus**This is a bonus expressed as a percentage of the basic cash benefit under the\ncontract. In India for example, it is declared as amount per thousand sum\nassured.**ii.** **Compound Bonus**Here the company expresses a bonus as a percentage of basic benefit and\nalready attached bonuses. It is thus a bonus on a bonus. A way to express it may\nbe as @ 8% of basic sum assured plus attached bonus.**iii.** **Terminal Bonus**As the name suggests, this bonus attaches to the contract only at the time of its\ntermination [by death or maturity]. It is applicable only for the claims arising in\nthe ensuing year. Thus terminal bonus declared for 2013 would only apply to\nclaims that have arisen during 2013-14 and not for subsequent years. Terminal\nbonuses depend on the time duration of the contract and increase with it. A\ncontract that has run for 25 years would have higher terminal bonus than one\nwhich has run for 15 years.**3.** **The Contribution Method**Another method of distribution of surplus adopted in North America is the\n“Contribution” method. Here, the surplus, i.e. the difference between what was\nexpected to happen and what actually happened over the year with respect to\nmortality, interest and expenses is declared and distributed as dividends.The dividends can be paid in cash, by way of adjustments/ reductions in future\npremiums, by allowing purchase of non-forfeitable paid up additions to the policy\nor as accumulations to the credit of the policy.50**4.** **Unit Linked Policies**The Principles of Pricing and other features of ULIP Policies have already been\ncovered in an earlier chapter.**Summary**In ordinary language, the term premium denotes the price that is paid by an\ninsured for purchasing an insurance policy.The process of setting the premium for life insurance policies involves\nconsideration of mortality, interests, expense management and reserves.Gross premium is the net premium plus an amount called loading.A lapse means that the policyholder discontinues payment of premiums. In case\nof withdrawals, the policyholder surrenders the policy and receives an amount\nfrom the policy’s acquired cash value.Surplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed.Surplus allocation could be towards maintaining solvency requirements,\nincreasing free assets etc.The most common form of bonus is the reversionary bonus.**Key Terms**1. Premium2. Rebate3. Bonus\n4. Surplus\n5. Reserve\n6. Loading\n7. Reversionary bonus**Answers to Test Yourself****Answer 1** - The correct option is II.51## CHAPTER L-07## LIFE INSURANCE DOCUMENTATION**Chapter Introduction**We have seen that the insurance industry deals with a large number of forms and\ndocuments in Chapter 7. There are some documents specific to life insurance, which\nare discussed in this chapter. Here, we are also discussing the main provisions", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "m2", "section": "Example", "chunk_id": "IC 38 -IA-Eng-Life_024", "metadata": {"file_size": 4771, "chunk_index": 24, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Unit Linked Policies", "Answers to Test Yourself", "Compound Bonus", "Simple Reversionary Bonus", "Example"]}}
{"chunk": "insured for purchasing an insurance policy.The process of setting the premium for life insurance policies involves\nconsideration of mortality, interests, expense management and reserves.Gross premium is the net premium plus an amount called loading.A lapse means that the policyholder discontinues payment of premiums. In case\nof withdrawals, the policyholder surrenders the policy and receives an amount\nfrom the policy’s acquired cash value.Surplus arises as a result of the life insurer’s actual experience being better than\nwhat it had assumed.Surplus allocation could be towards maintaining solvency requirements,\nincreasing free assets etc.The most common form of bonus is the reversionary bonus.**Key Terms**1. Premium2. Rebate3. Bonus\n4. Surplus\n5. Reserve\n6. Loading\n7. Reversionary bonus**Answers to Test Yourself****Answer 1** - The correct option is II.51## CHAPTER L-07## LIFE INSURANCE DOCUMENTATION**Chapter Introduction**We have seen that the insurance industry deals with a large number of forms and\ndocuments in Chapter 7. There are some documents specific to life insurance, which\nare discussed in this chapter. Here, we are also discussing the main provisions\nincorporated in a policy document. Provisions related to grace period, policy lapse\nand non-forfeiture and certain other privileges are also discussed.**Learning Outcomes**52**A. Proposal stage documentation**Further to the common points discussed about the Prospectus and the Proposal Form\nin Chapter 7, there are some additional points that Life Insurers need to understand.**Prospectus:** In insurance, ‘Prospectus’ means a document in physical, electronic or\nany other format issued by the insurer to sell or promote the insurance product.\nThe prospectus of an insurance product shall clearly state(a) the Unique Identification Number (UIN) allotted by the Authority for theconcerned insurance product:\n(b) the scope of benefits;\n(c) the extent of insurance cover;\n(d) the warranties, exclusions/exceptions and conditions of the insurance coveralong with explanations.\nThe prospectus should also provide:(a) a description of the contingency or contingencies to be covered by insurance;\n(b) the class or classes of lives or property eligible for insurance under the termsof such prospectus.\nIn Life insurance, the prospectus should also mention about the Riders (also called\nAdd-on covers in Health and General Insurance) allowable on the product and their\nbenefits.**Proposal Form:** In respect of Life insurance, the details of the proposers’ family\nmembers (including parents) indicating their longevity, status of health and\nailments suffered by any of them, are collected through the Proposal form.\nDepending on the product, the medical details of the life proposed for insurance,\nhis/ her personal history of disease and personal characteristics may also be asked\nfor. The Proposal Form is the document by which insurers get all the information\nthat they need from the prospect.Section 45 of the Insurance Act, provides that the Policy shall not be called in\nquestion on the ground of mis-statement after three years. Agents have an\nimportant role in guiding the prospect to give answers to all the questions in the\nProposal Form/ Medical Forms etc. truthfully and advising them of the implications\nof not doing so in terms of Section 45.Proposal Forms for Life Insurance should state the requirements of Section 45 of the\nAct. While answering the questions in the Proposal Form for obtaining life insurance\ncover, the prospect is to be guided by the provisions of Section 45 of the Act.Similarly, Section 39 of the Act is about the provision of nomination. Wherever the\nfacility of Nomination is available to the proposer, the Agent shall inform him/ her\nof the provisions of Section 39 of the Act and encourage the proposer to avail the\nfacility.Aspects related to the personal financial planning of the life proposed including his/\nher work span, projected income and expenses, as well as needs for savings and\ninvestment, health, retirement and insurance may also be asked in the Life\nInsurance Proposal Form.53**Age Proof:** Age being an important factor for assessing the risk profile of the life to\nbe insured, Life insurers collect documentary evidence to verify correct age. Valid\nage proofs may be standard or non-standard, as discussed in Chapter 7.Life insurers look into the following documents as well.**a)** **Agent’s Confidential Report**The agent is the primary underwriter. All material facts and particulars about the\npolicyholder, relevant to risk assessment, need to be revealed by the agent in his/\nher report. This means that matters of health, habits, occupation, income and\nfamily details need to be mentioned in the report.**b)** **Medical Examiner’s report**In many cases, the life to be insured has to be medically examined by a doctor who", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "m2", "section": "Key Terms", "chunk_id": "IC 38 -IA-Eng-Life_025", "metadata": {"file_size": 4771, "chunk_index": 25, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Prospectus:", "Proposal Form:", "Chapter Introduction", "Key Terms"]}}
{"chunk": "facility of Nomination is available to the proposer, the Agent shall inform him/ her\nof the provisions of Section 39 of the Act and encourage the proposer to avail the\nfacility.Aspects related to the personal financial planning of the life proposed including his/\nher work span, projected income and expenses, as well as needs for savings and\ninvestment, health, retirement and insurance may also be asked in the Life\nInsurance Proposal Form.53**Age Proof:** Age being an important factor for assessing the risk profile of the life to\nbe insured, Life insurers collect documentary evidence to verify correct age. Valid\nage proofs may be standard or non-standard, as discussed in Chapter 7.Life insurers look into the following documents as well.**a)** **Agent’s Confidential Report**The agent is the primary underwriter. All material facts and particulars about the\npolicyholder, relevant to risk assessment, need to be revealed by the agent in his/\nher report. This means that matters of health, habits, occupation, income and\nfamily details need to be mentioned in the report.**b)** **Medical Examiner’s report**In many cases, the life to be insured has to be medically examined by a doctor who\nis empanelled by the insurance company. Details of physical features like height,\nweight, blood pressure, cardiac status etc. are recorded and mentioned by the\ndoctor in his report called the medical examiner’s report. The underwriter of the\ninsurance company thereby gets an account of the current health position of the\nlife to be insured.Many proposals are underwritten and accepted for insurance without calling for a\nmedical examination. They are known as non–medical cases. The medical\nexaminer’s report is required typically when the proposal cannot be considered\nunder non-medical underwriting because the sum proposed or the age of the\nproposed life is high or there are certain characteristics which are revealed in the\nproposal, which call for examination and report by a medical examiner.**c)** **Moral Hazard report**Moral Hazard is the likelihood that a client's behaviour might change as a result of\npurchasing a life insurance policy and such a change would increase the chance of\na loss. This is one factor that Life insurance underwriters take into account seriously\nwhen assessing the risk.Life insurance companies seek to guard against the possibility of individuals seeking\nto make a profit from the purchase of life insurance through actions like ending\none’s own life or the life of another. Life insurance underwriters would thus look\nfor any factors which might suggest such hazard. For this purpose, the company may\nrequire that a Moral Hazard Report has to be submitted by an official of the\ninsurance company.**Example**Vikas recently purchased a life insurance policy. He then decided to go on a skiing\nexpedition at a site which was touted to be one of the most dangerous skiing places\non earth. In the past he had refused to undertake such expeditions.54**B. Policy Stage Documentation****1.** **First Premium Receipt**An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR).\n**The FPR is the evidence that the policy contract has begun.** The first premium\nreceipt contains the following information:i. Name and address of the life assured\nii. Policy number\niii. Premium amount paid\niv. Method and frequency of premium payment\nv. Next due date of premium payment\nvi. Date of commencement of the risk\nvii. Date of final maturity of the policy\nviii.Date of payment of the last premium\nix. Sum assuredAfter the issue of the FPR, the insurance company will issue subsequent premium\nreceipts when it receives further premiums from the proposer. These receipts are\nknown as renewal premium receipts (RPR). The RPRs act as proof of payment in the\nevent of any disputes related to premium payment.**2.** **Policy Document**The policy document is the most important document associated with insurance. **It**\n**is evidence of the contract between the assured and the insurance company.** It\nis not the contract itself. If the policy document is lost by the policy holder, it does\nnot affect the insurance contract. The insurance company will issue a duplicate\npolicy without making any changes to the contract. The policy document has to be\nsigned by a competent authority and should be stamped according to the Indian\nStamp Act. Life insurers are very careful while designing the policy document\nbecause they bear onus of responsibility for any ambiguity or confusion that may\narise in the interpretation of its wordings.The standard policy document typically has three parts:**a)** **Policy Schedule**The policy schedule forms the first part. It is usually found on the face page of\nthe policy. The schedules of life insurance contracts would be generally similar.", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Age Proof:", "chunk_id": "IC 38 -IA-Eng-Life_026", "metadata": {"file_size": 4771, "chunk_index": 26, "chunk_tokens": 991, "has_examples": true, "has_tables": false, "key_concepts": ["Moral Hazard report", "Policy Schedule", "B. Policy Stage Documentation", "Example", "Policy Document"]}}
{"chunk": "receipts when it receives further premiums from the proposer. These receipts are\nknown as renewal premium receipts (RPR). The RPRs act as proof of payment in the\nevent of any disputes related to premium payment.**2.** **Policy Document**The policy document is the most important document associated with insurance. **It**\n**is evidence of the contract between the assured and the insurance company.** It\nis not the contract itself. If the policy document is lost by the policy holder, it does\nnot affect the insurance contract. The insurance company will issue a duplicate\npolicy without making any changes to the contract. The policy document has to be\nsigned by a competent authority and should be stamped according to the Indian\nStamp Act. Life insurers are very careful while designing the policy document\nbecause they bear onus of responsibility for any ambiguity or confusion that may\narise in the interpretation of its wordings.The standard policy document typically has three parts:**a)** **Policy Schedule**The policy schedule forms the first part. It is usually found on the face page of\nthe policy. The schedules of life insurance contracts would be generally similar.\nThey would normally contain the following information:55**Diagram 1:** **Policy document components**i. Name of the insurance companyii. Some common details of a policy are: Policy owner’s name and address\n Date of birth and age last birthday\n Plan and term of policy contract\n Sum assured\n Amount of premium\n Premium paying term\n Date of commencement, date of maturity and due date of last premium\n Whether policy is with or without profits\n Name of nominee\n Mode of premium payment – yearly; half yearly; quarterly; monthly; viadeduction from salary\n The policy number – which is the unique identity number of the policycontractiii. The insurer’s promise to pay. The events on the happening of which and theamounts that are promised to be paid. This forms the heart of the insurance\ncontractiv. The signature of the authorised signatory and policy stampv. The address of the local Insurance Ombudsman.**b)** **Standard Provisions**The second component of the policy document is made up of standard policy\nprovisions, such as relating to proof of age, premium payment grace period etc.\nwhich are normally present in all life insurance contracts. Some of these\nprovisions may not be applicable in the case of certain kinds of contracts, like\nterm, single premium or non-participating (with profits) policies. These standard\nprovisions define the rights and privileges and other conditions, which are\napplicable under the contract.**c)** **Specific Policy Provisions**The third part of the policy document consists of specific policy provisions that\nare specific to the individual policy contract. These may be printed on the face\nof the document or inserted separately in the form of an attachment.56While standard policy provisions, like days of grace or non-forfeiture in case of\nlapse, are often statutorily provided under the contract, specific provisions are\ngenerally linked to the particular contract between the insurer and the insured.**Example**A clause precluding death due to pregnancy for a lady who is expecting at the time\nof writing the contract.**Test Yourself 1**What does a first premium receipt (FPR) signify? Choose the most appropriate\noption.I. Free-look period has ended\nII. It is evidence that the policy contract has begun\nIII. Policy cannot be cancelled now\nIV. Policy has acquired a certain cash value.**C. Policy conditions and privileges****Grace Period**As mentioned in Chapter 4, the Grace Period provision enables a policy that would\notherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period. Every life insurance contract undertakes to pay the death benefit on\nthe condition that the premiums have been paid up to date and the policy is in\nforce. The “Grace Period” clause grants the policyholder an additional period of\ntime to pay the premium after it has become due.The premium however remains due and if the policyholder dies during this period,\nthe insurer deducts the premium from the death benefit. If premiums remain unpaid\neven after the grace period is over, the policy would then be considered lapsed and\nthe company is not under obligation to pay the death benefit. The only amount\npayable would be whatever is applicable under the non-forfeiture provisions.**Important****Lapse and Reinstatement/ Revival**We have already seen that a policy may be said to be in lapse condition if premium\nhas not been paid even during the days of grace. The good news is that most lapsed\nlife insurance policies can be reinstated [revived]. As per IRDAI Product Regulations,", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Policy Document", "chunk_id": "IC 38 -IA-Eng-Life_027", "metadata": {"file_size": 4771, "chunk_index": 27, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Grace Period", "Policy Schedule", "Diagram 1:", "Specific Policy Provisions", "Example"]}}
{"chunk": "otherwise have lapsed for non-payment of premium, to continue in force during the\ngrace period. Every life insurance contract undertakes to pay the death benefit on\nthe condition that the premiums have been paid up to date and the policy is in\nforce. The “Grace Period” clause grants the policyholder an additional period of\ntime to pay the premium after it has become due.The premium however remains due and if the policyholder dies during this period,\nthe insurer deducts the premium from the death benefit. If premiums remain unpaid\neven after the grace period is over, the policy would then be considered lapsed and\nthe company is not under obligation to pay the death benefit. The only amount\npayable would be whatever is applicable under the non-forfeiture provisions.**Important****Lapse and Reinstatement/ Revival**We have already seen that a policy may be said to be in lapse condition if premium\nhas not been paid even during the days of grace. The good news is that most lapsed\nlife insurance policies can be reinstated [revived]. As per IRDAI Product Regulations,\na Non-Linked Policy can be revived within 5 years from the date of unpaid premium,\nwhereas a Linked Policy can be revived within 3 years.**Definition**Reinstatement is the process by which a life insurance company puts back into force\na policy that has either been terminated because of non-payment of premiums or\nhas been continued under one of the non-forfeiture provisions.A revival of the policy cannot however be an unconditional right of the insured. It\ncan be accomplished only under certain conditions:57**i.** **Revival application within specific time period:** The policy owner must\ncomplete the revival application within the time frame stated in the\nprovision for such reinstatement, say five years from the date of lapsation.**ii.** **Satisfactory evidence of continued insurability:** The insured must presentto the insurance company satisfactory evidence of continued insurability of\nthe insured. Not only must her health be satisfactory but other factors such\nas financial income and morals must not have deteriorated substantially.**iii.** **Payment of overdue premiums with interest:** The policy owner is requiredto make payment of all overdue premiums with interest from due date of\neach premium.**iv.** After having evaluated the evidence of continued insurability the insurermay decide to revive the policy as per existing terms and premium or even\noffer revival with increase in premium or reduced risk cover or both.**Perhaps the most significant of the above conditions is that which requires**\n**evidence of insurability at revival.** The type of evidence called for would depend\non the circumstances of each individual policy. If the policy has been in a lapsed\nstate for a very short period of time, the insurer may reinstate the policy without\nany evidence of insurability or may only require a simple statement from the insured\ncertifying that he is in good health.The company may however require a medical examination or other evidence of\ninsurability under certain circumstances:i. If the grace period has expired since long and the policy is in a lapsedcondition for say, nearly a year.ii. If the insurer has reason to suspect that a health or other problem may bepresent. Fresh medical examination may also be required if the sum assured\nor face amount of the policy is large.**Important**Revival of lapsed policies is an important service function that life insurers seek to\nactively encourage since policies in lapsed state may do little good to either insurer\nor policyholder.**Non-forfeiture provisions**The Insurance Act, 1938 (Section 113) protects policies (which have acquired\nsurrender value), from lapsation, by keeping them alive to the extent of paid-up\nsum assured even without payment of further premiums. This is because the\npolicyholder has a claim to the cash value accumulated under the policy.**a)** **Surrender values**Surrender value is the amount you stand to get when you decide to make a\npremature exit from the plan, i.e. when you have decided to completely withdraw\nor terminate the policy before its maturity.Life insurers normally have a chart that lists the surrender values at various times\nand also the method that will be used for calculating the surrender values. The58formula takes into account the type and plan of insurance, age of the policy and\nthe length of the policy premium-paying period.The actual amount of cash one gets in hand on surrender may be different from the\nsurrender value amount prescribed in the policy. The actual amount may differ on\naccount of any accrued bonuses, recoveries etc.**Guaranteed Surrender Value [GSV]:** The law in India as per IRDAI Guidelines\n(revised in 2019) provides for a Guaranteed Surrender Value [GSV] to be payable if", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "e58", "section": "Important", "chunk_id": "IC 38 -IA-Eng-Life_028", "metadata": {"file_size": 4771, "chunk_index": 28, "chunk_tokens": 1012, "has_examples": true, "has_tables": false, "key_concepts": ["Non-forfeiture provisions", "Payment of overdue premiums with interest:", "Important", "Satisfactory evidence of continued insurability:", "Definition"]}}
{"chunk": "surrender value), from lapsation, by keeping them alive to the extent of paid-up\nsum assured even without payment of further premiums. This is because the\npolicyholder has a claim to the cash value accumulated under the policy.**a)** **Surrender values**Surrender value is the amount you stand to get when you decide to make a\npremature exit from the plan, i.e. when you have decided to completely withdraw\nor terminate the policy before its maturity.Life insurers normally have a chart that lists the surrender values at various times\nand also the method that will be used for calculating the surrender values. The58formula takes into account the type and plan of insurance, age of the policy and\nthe length of the policy premium-paying period.The actual amount of cash one gets in hand on surrender may be different from the\nsurrender value amount prescribed in the policy. The actual amount may differ on\naccount of any accrued bonuses, recoveries etc.**Guaranteed Surrender Value [GSV]:** The law in India as per IRDAI Guidelines\n(revised in 2019) provides for a Guaranteed Surrender Value [GSV] to be payable if\nall premiums have been paid for at least two consecutive years. This Value arrived\nas a percentage (say 30%) of premiums paid is called Guaranteed Surrender Value.\nThe value depends on the duration of premium paid. The GSV is required to be\nmentioned in the policy document.**b)** **Policy loans**Life insurance policies that accumulate a cash value also have a provision to grant\nthe policyholder the right to borrow money from the insurer by using the cash value\nof the policy as a security for the loan. The policy loan is usually limited to a\npercentage of the policy’s surrender value (say 90%). Note that the policyholder\nborrows from his own account. He or she would have been eligible to get the amount\nif the policy had been surrendered. In that case the insurance would have been\nterminated.Insurers charge interest on policy loans, which are payable semi-annually or\nannually. Although loan and interest are repayable periodically, If the loan has not\nbeen repaid, the insurer deducts the amount of outstanding (unpaid) loan and\ninterest from the policy benefit that is payable. A loan provides relief to\npolicyholder in case of financial emergencies while keeping the insurance alive.Since the loan is granted on the policy being kept as security, the policy has to be\nassigned (explained in later para) in favour of the insurer. Where the policyholder\nhas nominated (explained in later para) someone to receive the money in the event\nof death of the insured, this nomination shall not be cancelled but the nominee’s\nright will be affected to the extent of the insurer’s interest in the policy.**Example**Arjun bought a life insurance policy wherein the total death claim payable under\nthe policy was Rs. 2.5 lakhs. Arjun’s total outstanding loan and interest under the\npolicy amounts to Rs. 1.5 lakhs. Hence in the event of Arjun’s death, the nominee\nwill be eligible to get the balance of Rs. 1 lakh.**Special policy provisions and endorsements****a)** **Nomination**i. Under Section 39 of the Insurance Act 1938, the holder of a policy on his/her own life may nominate the person or persons to whom the money secured\nby the policy shall be paid in the event of his/her death.\nii. The life assured can **nominate one or more than one person** as nominees.\niii. Nominees are entitled for **valid discharge** and have to **hold the money as a****trustee** on behalf of those entitled to it.\niv. Nomination can be done either **at the time the policy is bought or later** atany time before the maturity of the Policy.59v. Nomination may be incorporated in the text of the Policy itself or by anendorsement on the Policy. Nominations need be communicated to the\ninsurer and registered by the insurer in the records relating to the Policy.\nvi. Nomination can be cancelled or changed at any time before Policy matures,by an endorsement or a further endorsement or a will as the case may be.**Important**Nomination only gives the nominee the right to receive the policy monies from\nthe insurer in the event of the death of the life assured. However, the money\nwould be belonging to the legal heir only. **A nominee does not have any right**\n**to the whole (or part) of the claim.** However vide Section 39(7) of Insurance\nAct,1938, in respect of all policies maturing for payment after 26 [th] December,\n2014, nomination in favour of parents, spouse, children or spouse and children", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "e58", "section": "Surrender values", "chunk_id": "IC 38 -IA-Eng-Life_029", "metadata": {"file_size": 4771, "chunk_index": 29, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Policy loans", "Special policy provisions and endorsements", "Example", "Important", "A nominee does not have any right"]}}
{"chunk": "iv. Nomination can be done either **at the time the policy is bought or later** atany time before the maturity of the Policy.59v. Nomination may be incorporated in the text of the Policy itself or by anendorsement on the Policy. Nominations need be communicated to the\ninsurer and registered by the insurer in the records relating to the Policy.\nvi. Nomination can be cancelled or changed at any time before Policy matures,by an endorsement or a further endorsement or a will as the case may be.**Important**Nomination only gives the nominee the right to receive the policy monies from\nthe insurer in the event of the death of the life assured. However, the money\nwould be belonging to the legal heir only. **A nominee does not have any right**\n**to the whole (or part) of the claim.** However vide Section 39(7) of Insurance\nAct,1938, in respect of all policies maturing for payment after 26 [th] December,\n2014, nomination in favour of parents, spouse, children or spouse and children\nby the owner of the policy on his/ own life makes the nominees beneficially\nentitled to the amount payable by the insurance company.Where the nominee is a minor, the policy holder needs to appoint an appointee.\nThe appointee needs to sign the policy document to show his or her consent to\nacting as an appointee. The appointees lose their status when the nominee\nreaches majority age. The policy holder can change the appointee at any time.\nIf no appointee is given, and the nominee is a minor, then on the death of the\nlife assured, the death claim is paid to the legal heirs of the policyholder.Where more than one nominee is appointed, the death claim will be payable to\nthem jointly, or to the survivor or survivors. Nominations made after the\ncommencement of the policy have to be intimated to the insurers to be\neffective.Section 39(11) of the Insurance Act says that where a policyholder dies after the\nmaturity of the policy but the proceeds and benefit of his policy has not been\nmade to him because of his death, his nominee shall be entitled to the proceeds\nand benefit of his policy.**Diagram 2:** **Provisions related to nomination****b)** **Assignment**Since life insurance policy carries a promise or a debt that the insurance\ncompany owes the insured, it is considered a security for money or property.60We have seen that loan is advanced against by the insurers against the surrender\nvalue of the policy. Similarly, many financial institutions including banks\nadvance loan against the security of the insurance policy by having it assigned\nit in their favour.The term assignment ordinarily refers to transfer of property by writing in favour\nof another person.The assignment of a life insurance policy implies the act of transferring the\nrights, title and interest in the policy (as property) from one person to another.\nThe person who transfers the rights is called **assignor** and the person to whom\nproperty is transferred is called **assignee** . On assignment, the ownership of the\npolicy changes and hence nomination is cancelled, except when assignment is\nmade to the insurance company for a policy loan.There are two types of assignments.**Diagram 3:** **Types of Assignment**|Conditional Assignment|Absolute Assignment|\n|---|---|\n|Conditional assignment<br>provides that the policy<br>shall revert back to the<br>life assured on his or<br>her surviving the date of<br>maturity or on death of<br>the assignee.| Absolute assignment provides that all rights, title and<br>interest which the assignor has in the policy are<br>transferred to the assignee without reversion to the<br>former or his/ her estate in any event.<br> The policy thus vests absolutely with the assignee. The<br>latter can deal with the policy in whatever manner he or<br>she likes without the consent of the assignor.|Absolute assignment is more commonly seen in many commercial situations\nwhere the policy is typically mortgaged against a debt assumed by the", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Important", "chunk_id": "IC 38 -IA-Eng-Life_030", "metadata": {"file_size": 4771, "chunk_index": 30, "chunk_tokens": 857, "has_examples": true, "has_tables": true, "key_concepts": ["Types of Assignment", "Provisions related to nomination", "Important", "Diagram 3:", "A nominee does not have any right"]}}
{"chunk": "The person who transfers the rights is called **assignor** and the person to whom\nproperty is transferred is called **assignee** . On assignment, the ownership of the\npolicy changes and hence nomination is cancelled, except when assignment is\nmade to the insurance company for a policy loan.There are two types of assignments.**Diagram 3:** **Types of Assignment**|Conditional Assignment|Absolute Assignment|\n|---|---|\n|Conditional assignment<br>provides that the policy<br>shall revert back to the<br>life assured on his or<br>her surviving the date of<br>maturity or on death of<br>the assignee.| Absolute assignment provides that all rights, title and<br>interest which the assignor has in the policy are<br>transferred to the assignee without reversion to the<br>former or his/ her estate in any event.<br> The policy thus vests absolutely with the assignee. The<br>latter can deal with the policy in whatever manner he or<br>she likes without the consent of the assignor.|Absolute assignment is more commonly seen in many commercial situations\nwhere the policy is typically mortgaged against a debt assumed by the\npolicyholder, like a housing loan.**Conditions for valid assignment**Let us now look at the conditions that are necessary for a valid assignment.i. The assignor must have **absolute right and title or assignable interest** tothe policy being assigned.ii. The assignment should **not be opposed to any law in force** .iii. Assignee can do another assignment, but cannot do nomination becauseassignee is not the life assured.**Important** : A life insurance policy can be assigned wholly or partially The assignment must be signed by the transferor or assignor or dulyauthorized agent and attested by at least one witness.61 The transfer of title has to be specifically set forth in the form of anendorsement on the policy or a separate instrument.\n The policyholder must give notice of the assignment to the insurer,without which the assignment will not be valid. Section 38(2) specifies that an insurer may accept the assignment, ordecline the same, if it has sufficient reason to believe that such\nassignment is not bona fide or is not in the interest of the policyholder\nor in public interest or is for the purpose of trading of insurance policy. However, the insurer shall, before refusing to act upon the endorsement,record in writing the reasons for such refusal and communicate the same\nto the policyholder not later than thirty days from the date of the\npolicyholder giving notice of such transfer or assignment.**Diagram 4:** **Provisions related to assignment of insurance policies****Commonly extended privileges to policyholders**a) **Duplicate Policy:**A life insurance policy document is only an evidence of a promise. Loss or\ndestruction of the policy document does not in any way absolve the company of\nits liability under the contract. Life insurance companies generally have\nstandard procedures to be followed in case of loss of the policy document.Normally the office would examine the case to see if there is any reason to doubt\nthe alleged loss. Satisfactory proof may need to be produced that the policy has\nbeen lost and not dealt with in any manner. Generally the claim may be settled\non the claimant furnishing an indemnity bond with or without surety.If payment is shortly due and the amount to be paid is high, the office may also\ninsist that an advertisement be placed in a national paper with wide circulation,\nreporting the loss. A duplicate policy may be issued on being sure that there is\nno objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year of62the policy, except for change in the mode of premium or alterations which are\nof a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a separate\npaper. Other alterations, which require a material change in policy conditions,\nmay require the cancellation of existing policies and issue of new policies.Some of the main types of alterations that are permitted arei. Change in certain classes of insurance or term [where risk is not increased]\nii. Reduction in the sum assured\niii. Change in the mode of payment of premium\niv. Change in the date of commencement of the policy\nv. Splitting up of the policy into two or more policies", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "f62", "section": "Diagram 3:", "chunk_id": "IC 38 -IA-Eng-Life_031", "metadata": {"file_size": 4771, "chunk_index": 31, "chunk_tokens": 1009, "has_examples": false, "has_tables": true, "key_concepts": ["Commonly extended privileges to policyholders", "Types of Assignment", "Conditions for valid assignment", "Important", "Diagram 3:"]}}
{"chunk": "no objection from anyone else.b) **Alteration**Policyholders may seek to effect alterations in policy terms and conditions.\nThere is provision to make such changes subject to consent of both the insurer\nand assured. Normally alterations may not be permitted during the first year of62the policy, except for change in the mode of premium or alterations which are\nof a compulsory nature – like change in name or/ address;\n readmission of age in case it is proved higher or lower;\n request for grant of double accident benefit or permanent disabilitybenefit etc.Alterations may be permitted in subsequent years. Some of these alterations\nmay be affected by placing a suitable endorsement on the policy or on a separate\npaper. Other alterations, which require a material change in policy conditions,\nmay require the cancellation of existing policies and issue of new policies.Some of the main types of alterations that are permitted arei. Change in certain classes of insurance or term [where risk is not increased]\nii. Reduction in the sum assured\niii. Change in the mode of payment of premium\niv. Change in the date of commencement of the policy\nv. Splitting up of the policy into two or more policies\nvi. Removal of an extra premium or restrictive clause\nvii. Change from without profits to with profits plan\nviii. Correction in name\nix. Settlement option for payment of claim and grant of double accident benefitThese alterations generally do not involve an increase in the risk. There are\nother alterations in policies that are not allowed. These may be alterations that\nhave the effect of lowering the premium. Examples are extension of the\npremium paying term; change from with profit to without profit plans; change\nfrom one class of insurance to another, where it increases the risk: and increase\nin the sum assured.**Test Yourself 2**Under what circumstances would the policyholder need to appoint an appointee?I. Insured is minorII. Nominee is a minor\nIII. Policyholder is not of sound mind\nIV. Policyholder is not married**Summary**Matters of health, habits and occupation, income and family details need to be\nmentioned by the agent in the agent’s report.Details pertaining to physical features like height, weight, blood pressure,\ncardiac status etc. are recorded and mentioned by the doctor in his/ her report\ncalled the medical examiner’s report.Moral hazard is the likelihood that a client's behaviour might change as a result\nof purchasing a life insurance policy and such a change would increase the\nchance of a loss.An insurance contract commences when the life insurance company issues a first\npremium receipt (FPR). The FPR is the evidence that the policy contract has\nbegun.63The policy document is the most important document associated with insurance.\nIt is the evidence of the contract between the assured and the insurancecompany.The standard policy document typically has three parts which are the policy\nschedule, standard provisions and the policy’s specific provisions.The grace period clause grants the policyholder an additional period of time to\npay the premium after it has become due.Reinstatement is the process by which a life insurance company puts back into\nforce a policy that has either been terminated because of non-payment of\npremiums or has been continued under one of the non-forfeiture provisions.A policy loan is different from an ordinary commercial loan in two respects,\nfirstly the policy owner is not legally obligated to repay the loan and the insurer\nneed not perform a credit check on the insured.Nomination is where the life assured proposes the name of the person(s) to\nwhich the sum assured should be paid by the insurance company after their\ndeath.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except for\nsome simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period\n10. Policy lapse\n11. Policy revival\n12. Surrender value13. Nomination\n14. Assignment**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.64## CHAPTER L-08## LIFE INSURANCE UNDERWRITING**Chapter Introduction**A life insurance agent’s work does not stop once a proposal is secured from a\nprospective customer. The proposal must also be accepted by the insurance", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "f62", "section": "Alteration", "chunk_id": "IC 38 -IA-Eng-Life_032", "metadata": {"file_size": 4771, "chunk_index": 32, "chunk_tokens": 1003, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Chapter Introduction", "Key Terms", "Answer 1"]}}
{"chunk": "death.The assignment of a life insurance policy implies the act of transferring the\nrights right, title and interest in the policy (as property) from one person to\nanother. The person who transfers the rights is called assignor and the person\nto whom property is transferred is called assignee.Alteration is subject to consent of both the insurer and assured. Normally\nalterations may not be permitted during the first year of the policy, except for\nsome simple ones.**Key Terms**1. Agents Confidential Report\n2. Medical Examiner’s Report\n3. Moral Hazard Report\n4. First Premium Receipt (FPR)\n5. Policy document\n6. Policy schedule\n7. Standard provisions\n8. Special Provisions\n9. Grace period\n10. Policy lapse\n11. Policy revival\n12. Surrender value13. Nomination\n14. Assignment**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.64## CHAPTER L-08## LIFE INSURANCE UNDERWRITING**Chapter Introduction**A life insurance agent’s work does not stop once a proposal is secured from a\nprospective customer. The proposal must also be accepted by the insurance\ncompany and result in a policy.Every life insurance proposal has to pass through a gateway where the life insurer\ndecides whether to accept the proposal and if so, on what terms. In this chapter we\nshall know more about the process of underwriting and the elements involved in theprocess.**Learning Outcomes**65**A.** **Underwriting – Basic concepts****1.** **Underwriting purpose**Underwriting has two purposesi. To assess the risk, classify the risk and decide the terms of acceptance or todecline the risk.\nii. To prevent anti-selection against the insurer**Definition**The term **underwriting** refers to the process of evaluating each proposal for life\ninsurance in terms of the degree of risk it represents and then deciding whether or\nnot to grant insurance and on what terms.**Anti-selection** is the tendency of people, who suspect or know that their chance of\nexperiencing a loss is high, to seek out insurance with a view to gain in the process.**Example**If life insurers were to be not selective about whom they offered insurance, there\nis a chance that people with serious ailments like heart problems or cancer, who\ndid not expect to live long, would seek to buy insurance.In other words, if an insurer did not exercise underwriting discretion, it would be\nselected against and may suffer losses in the process.**2.** **Equity among risks**The term “Equity” means that applicants who are exposed to similar degrees of risk\nmust be placed in the same premium class. The Mortality table, used to determine\npremiums, represents the mortality experience of standard lives or average risks.\nThey include the vast majority of individuals who propose to take life insurance.**a)** **Risk classification**To usher equity, the underwriter engages in a process known as **risk classification**\ni.e. individual lives are categorised and assigned to different risk classes depending\non the degree of risks they pose. There are four such risk classes.**Diagram 1:** **Risk classification**66**i.** **Standard lives**\nThese consist of those whose anticipated mortality corresponds to the standard\nlives represented by the mortality table.**ii.** **Preferred risks**\nThese are the ones whose anticipated mortality is significantly lower than\nstandard lives and hence could be charged a lower premium.**iii.** **Substandard lives**\nThese are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable cost.\nSometimes an individual’s proposal may also be temporarily declined if he or\nshe has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes\ninformation gathering by an agent or company representative to decide whether\nan applicant is suitable for granting insurance coverage. The agent plays a\ncritical role as primary underwriter. He is in the best position to know the life\nto be insured.Many insurance companies may require that agents complete a statement or a\nconfidential report, asking for specific information, opinion and", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "e13", "section": "Key Terms", "chunk_id": "IC 38 -IA-Eng-Life_033", "metadata": {"file_size": 4771, "chunk_index": 33, "chunk_tokens": 986, "has_examples": true, "has_tables": false, "key_concepts": ["Key Terms", "Field or Primary level", "Equity among risks", "Substandard lives", "Chapter Introduction"]}}
{"chunk": "These are the ones whose anticipated mortality is higher than the average or\nstandard lives, but are still considered to be insurable. They may be accepted\nfor insurance with higher (or extra) premiums or subjected to certain\nrestrictions.**iv.** **Declined lives**\nThese are the ones whose impairments and anticipated extra mortality are so\ngreat that they could not be provided insurance coverage at an affordable cost.\nSometimes an individual’s proposal may also be temporarily declined if he or\nshe has been exposed to a recent medical event, like an operation.**3.** **Underwriting process**Underwriting process takes place at two levels: At Field level\n At Underwriting department level**a)** **Field or Primary level**Field level underwriting is also known as **primary underwriting** . It includes\ninformation gathering by an agent or company representative to decide whether\nan applicant is suitable for granting insurance coverage. The agent plays a\ncritical role as primary underwriter. He is in the best position to know the life\nto be insured.Many insurance companies may require that agents complete a statement or a\nconfidential report, asking for specific information, opinion and\nrecommendations to be provided by the agent with respect to the proposed life.**Fraud monitoring and role of agent as primary underwriter**Much of the decision with regard to acceptance of a risk depends on the facts\nthat have been disclosed by the proposer in the proposal form. It may be difficult\nfor an underwriter who is sitting in the underwriting department to know\nwhether these facts are untrue and have been fraudulently misrepresented with\ndeliberate intent to deceive.The agent plays a significant role here. He or she is in the best position to ensure\nthat the facts that have been represented are true, due to his/ her direct and\npersonal contact with the proposed life.67**b)** **Underwriting at the Department level**The main level of Underwriting is at the Department or Office level. It involves\nspecialists and persons who consider all the relevant data on the case to decide\nwhether to accept a proposal for Life insurance and on what terms.**4.** **Methods of underwriting****Diagram 2:** **Methods of Underwriting**Underwriters may use two types of methods for the purpose:|Judgment Method|Numerical Method|\n|---|---|\n|~~Under~~<br>~~this~~<br>~~method~~<br>subjective judgment is used,<br>especially when deciding on<br>a case that is complex.<br>|~~Under this method underwriters assign positive~~<br>rating points for all negative or adverse factors<br>(negative points for any positive or favourable<br>factors).<br>|\n|~~**Example:**Deciding whether~~<br>life insurance can be given to<br>a <br>person<br>staying<br>in<br>a <br>disturbed country/ area.<br>|~~**Example:** A person with history of cardiac~~<br>ailments and/ or early deaths in the family may<br>be assigned positive points. The total number of<br>points so assigned will help an underwriter in<br>deciding the extent of risk involved.<br>|\n|~~In such situations, the~~<br>department may get the<br>expert opinion of a medical<br>doctor who is also called a<br>medical referee.|~~The sum total of these positive/negative points,~~<br>and/or is referred to as Extra Mortality Rating<br>(EMR). Higher EMR indicates that the life is<br>substandard.<br>If<br>the<br>EMR<br>is<br>very<br>high,<br>underwriters may decline insurance.|**Underwriting Decisions**Let us now consider the various kinds of decisions that underwriters may take with\nregard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. This ratingindicates that the risk is accepted at the same rate of premium as would\napply to an ordinary or standard life.68**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing with thelarge majority of sub-standard risks. It involves charging an extra over the\ntabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount of\nbenefit it has to pay in the event of a claim.\n**Example: Consider the case of an insured who** has suffered and recovered\nfrom a certain disease like TB. Imposition of Lien would imply that if this\nperson were to die from a relapse of the TB, within a given period, only a", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Declined lives", "chunk_id": "IC 38 -IA-Eng-Life_034", "metadata": {"file_size": 4771, "chunk_index": 34, "chunk_tokens": 1007, "has_examples": true, "has_tables": true, "key_concepts": ["Example: Consider the case of an insured who", "Underwriting at the Department level", "Methods of Underwriting", "Methods of underwriting", "Acceptance with a lien on the sum assured:"]}}
{"chunk": "regard to a life proposed for underwriting.**a)** **Acceptance at ordinary rates (OR)** is the most common decision. This ratingindicates that the risk is accepted at the same rate of premium as would\napply to an ordinary or standard life.68**Diagram 3:** **Underwriting decisions****b)** **Acceptance with an extra:** This is the most common way of dealing with thelarge majority of sub-standard risks. It involves charging an extra over the\ntabular rate of premium.**c)** **Acceptance with a lien on the sum assured:** A lien is a kind of hold whichthe life insurance company can exercise (in part or whole) on the amount of\nbenefit it has to pay in the event of a claim.\n**Example: Consider the case of an insured who** has suffered and recovered\nfrom a certain disease like TB. Imposition of Lien would imply that if this\nperson were to die from a relapse of the TB, within a given period, only a\ndecreased amount of death benefit may be payable.**d)** **Acceptance with a restrictive clause:** For certain kinds of hazards arestrictive clause may be applied which limits death benefit in the event of\ndeath under certain circumstances.**Example** is a pregnancy clause imposed on pregnant ladies that limits\ninsurance payable in the event of pregnancy related deaths occurring within\nsay three months of delivery.\n**e)** **Decline or postpone:** Finally, a life insurance underwriter may decide todecline or reject a proposal for insurance. This would happen when there\nare certain health/ other features which are so adverse that they\nconsiderably increase the risk.\n**Example:** An individual who suffers from cancer and has little chance of\nremission, would be a candidate for rejection,Similarly in some cases it may be prudent to postpone acceptance of the risk\nuntil such time as the situation has improved and become more favourable.69**Example**A lady who has just had a hysterectomy operation may be asked to wait for a few\nmonths before insurance on her life is allowed, to allow any post operation\ncomplications that may have arisen to disappear.**Test Yourself 1**Which of the following cases is likely to be declined or postponed by a life insurer?I. A healthy 18 year old\nII. A sports person\nIII. A person suffering from AIDS\nIV. A housewife with no income of her own**B.** **Non-medical underwriting****1.** **Non-medical underwriting**A large number of life insurance proposals may typically get selected for insurance\nwithout conducting a medical examination to check the insurability of a life to be\ninsured. Such cases are termed as **non-medical proposals** .In view of multiple reasons including the costs involved, in some types of policies,\nLife insurers grant insurance without insisting on a medical examination**2.** **Conditions for non-medical underwriting**However non-medical underwriting calls for conditions like applicability to certain\nclass of lives, certain plans of insurance, certain upper limits of sum insured, entry\nage limits, maximum term of insurance etc.to be followed.\n**3.** **Rating factors in underwriting**Rating factors refer to various aspects related to financial situation, life style,\nhabits, family history, personal history of health and other personal circumstances\nin the prospective insured’s life that may pose a hazard and increase the risk.\nUnderwriting involves identifying these hazards and their likely impact and\nclassifying the risk accordingly.Rating factors may be broadly divided into two – those which contribute to moral\nhazard and those which contribute to physical [medical] hazards. Life insurance\ncompanies often divide their underwriting into categories accordingly. Factors like\nincome, occupation, lifestyle and habits, which contribute to moral hazard, are\nassessed as part of **financial underwriting**, while medical aspects of health fall\nunder **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face some\nproblems with respect to moral hazard. This is because many women in Indian\nsociety are victims of male domination and social exploitation. Evils like dowry\ndeaths exist even today. Longevity of women can also be affected from problems\nconnected with pregnancy.70Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only to\nthose who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**\nMinors have no contracting power of their own. Hence a proposal on the life of\na minor has to be submitted by another person who is related to the minor in\nthe capacity of a parent or legal guardian. It would also be necessary to ascertain", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Acceptance at ordinary rates (OR)", "chunk_id": "IC 38 -IA-Eng-Life_035", "metadata": {"file_size": 4771, "chunk_index": 35, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Example: Consider the case of an insured who", "Acceptance with a restrictive clause:", "Minors", "Acceptance with a lien on the sum assured:", "Test Yourself 1"]}}
{"chunk": "companies often divide their underwriting into categories accordingly. Factors like\nincome, occupation, lifestyle and habits, which contribute to moral hazard, are\nassessed as part of **financial underwriting**, while medical aspects of health fall\nunder **medical underwriting** .**a)** **Female insurance**Women generally have greater longevity than men. However they may face some\nproblems with respect to moral hazard. This is because many women in Indian\nsociety are victims of male domination and social exploitation. Evils like dowry\ndeaths exist even today. Longevity of women can also be affected from problems\nconnected with pregnancy.70Insurability of women is governed by need for insurance and capacity to pay\npremiums. Insurance companies may thus decide to grant full insurance only to\nthose who have earned income of their own and may impose limits on other\ncategories of women. Similarly some conditions may be levied on pregnantwomen.**b)** **Minors**\nMinors have no contracting power of their own. Hence a proposal on the life of\na minor has to be submitted by another person who is related to the minor in\nthe capacity of a parent or legal guardian. It would also be necessary to ascertain\nthe need for insurance, since minors usually have no earned income of their\nown. Three conditions would generally be sought when considering insurance for\nminors:**i.** **Whether they have a properly developed physique**Poor physique can be a result of malnutrition or other health problems posing\ngrave risks.\n**ii.** **Proper family history and personal history**If there are adverse indicators here, it may pose risks.\n**iii.** **Whether the family is adequately insured**It is necessary to check if the family has a culture of insurance. One must be\non guard if no other member of the minor’s family has been insured. Amount\nof insurance is generally linked to that of parents.\n**c)** **Large sums assured**\nAn underwriter needs to be wary when the amount of insurance is very large\nrelative to annual income of the proposed insured. Generally sum assured may\nbe assumed to be around ten to twelve times one’s annual income. If the ratio\nis much higher than this, it raises the possibility of selection against the insurer.**Example**\nIf an individual has an annual income of Rs. 5 lakhs and proposes for a life\ninsurance cover of Rs. 3 crores, it raises a cause for concern.Typically concerns can arise in such instances because of the possibility that\nsuch a large amount of insurance is being proposed in anticipation of suicide or\nas a result of expected deterioration in health. A third reason for such large\nsums could be excessive misselling by the sales person.Large sums assured would also mean premiums increasing in proportion and raise\nthe question of whether the payment of such premiums would be continued. In\ngeneral, the premium payable should be within one third of an individual’s\nannual income**d)** **Age**\nMortality risk is closely related to age. The underwriter needs to be careful when\nconsidering insurance for people of advanced ages.**Example**\nIf the insurance is being proposed for the first time after age 50, there is a need\nto suspect moral hazard and enquire about why such insurance was not taken\nearlier.71We must also note that chances of occurrence of degenerative diseases like\ndiseases of the heart and kidney failure increase with age and become higher at\nolder ages. Life insurers may also seek for some special reports when proposals\nare submitted for high sums assured/ advanced ages or a combination of both.**Example**\nExamples of such reports are ECG; EEG; X-Ray of the chest and Blood Sugar test.\nThese tests may reveal deeper insights about the health of the proposed life\nthan the answers given in the proposal or an ordinary medical examination can\nprovide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of the\nlife proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Female insurance", "chunk_id": "IC 38 -IA-Eng-Life_036", "metadata": {"file_size": 4771, "chunk_index": 36, "chunk_tokens": 997, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Minors", "Occupation", "Accidental hazards", "Example"]}}
{"chunk": "These tests may reveal deeper insights about the health of the proposed life\nthan the answers given in the proposal or an ordinary medical examination can\nprovide.**Examples**\nWhen a proposal is submitted at a branch located far away from the place of\nresidence of the proposed insuredA medical examination is done elsewhere even when a qualified medical\nexaminer is available near one’s place of residence.A third case is when a proposal is made on the life of another without having\nclear insurable interest, or when the nominee is not the near dependent of the\nlife proposed.In each such case an enquiry may be made. Finally, when the agent is related\nto the life assured a moral hazard report may be called from a branch official\nlike the agency manager/ development officer.**e)** **Occupation**Occupational hazards can arise from three sources: Accident\n Health hazard\n Moral hazard**Diagram 4:** **Sources of Occupational Hazards****i.** **Accidental hazards** arise because certain kinds of jobs expose one to the\nrisk of accident. There is any number of jobs in this category – like circus\nartistes, scaffolding workers, demolition experts and film stunt artistes.**ii.** **Health hazards** arise when the nature of the job is such as to give rise to\npossibility of medical impairment. There are various kinds of health hazards.72 Some jobs like that of **rickshaw pullers** involve a lot of physical strain andimpact the respiratory system. Situations where one may be exposed to **toxic substances** like mining dustor carcinogenic substances (that cause cancer) like chemicals and nuclear\nradiation. Working in **high pressure environments** like underground tunnels or deepsea, can cause acute decompression sickness. Finally, **overexposure** to certain job situations (like sitting crampedbefore a computer or working in a high noise setting) can impair\nfunctioning of certain body parts in the longer run.**iii.** **Moral hazard** can arise when a job involves proximity or can cause\npredisposition towards criminal elements or to drugs and alcohol. An example\nis that of a dancer in a nightclub or an enforcer in a liquor bar or the\n‘bodyguard’ of a businessman with suspected criminal links. Again the job\nprofiles of certain individuals like superstar entertainers may lead them to\nintoxicating lifestyles, which sometimes come to tragic ends.When an occupation falls under any such hazardous category, the applicant for\ninsurance may need to complete an occupational questionnaire that asks for\nspecific details of the job, duties involved and risks exposed to. A rating may\nalso be imposed for occupation in the form of a flat extra (for example Rupees\ntwo per thousand sums assured.) Such extra may be reduced or removed when\nthe insured’s occupation changes.**f)** **Lifestyle and habits**Lifestyle and habits are terms, covering a wide range of individual lifestyle\ncharacteristics, which may be brought out in the agent’s confidential reports\nand moral hazard reports, suggesting an exposure to risk. In particular three\nfeatures are important:**Smoking and tobacco use** : Use of tobacco is not only a risk in itself but also\ncontributes to increasing other medical risks. Companies charge differential\nrates today for smokers and non-smokers and users of other forms of tobacco\nusage like _gutkha_ and _paan masala_ .**Alcohol:** Drinking alcohol occasionally or in modest quantities is not considered\na hazard. However, long term heavy drinking can impair liver functioning, affect\nthe digestive system and lead to mental disorders. Alcoholism is also linked with\naccidents, violence, family abuse, depression and suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants. Some\nof these are even illegal and their use indicates criminal disposition and moral\nhazard.73**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical underwriting.\nThey may often call for a medical examiner’s report. Let us look at some of the\nfactors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision****a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Examples", "chunk_id": "IC 38 -IA-Eng-Life_037", "metadata": {"file_size": 4771, "chunk_index": 37, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Examples", "Moral hazard", "Health hazards", "Occupation", "Accidental hazards"]}}
{"chunk": "accidents, violence, family abuse, depression and suicides.**Substance abuse** : Substance abuse refers to the use of various kinds of\nsubstances like drugs or narcotics, sedatives and other similar stimulants. Some\nof these are even illegal and their use indicates criminal disposition and moral\nhazard.73**Test Yourself 2**Which of the following is an example of moral hazard?I. Stunt artist dies while performing a stunt\nII. A person drinking copious amounts of alcohol because he is insured\nIII. Insured defaulting on premium payments\nIV. Proposer misplacing policy document**C.** **Medical underwriting****1.** **Medical underwriting**Let us now consider some of the medical factors that would influence an\nunderwriter’s decision. These are generally assessed through medical underwriting.\nThey may often call for a medical examiner’s report. Let us look at some of the\nfactors that are checked.**Diagram 5:** **Medical Factors that influence an Underwriter’s Decision****a)** **Family history**The impact of family history on mortality risk has been studied from three\nangles.**i.** **Heredity** : Certain diseases can be transmitted from one generation to\nanother, say from parents to children.**ii.** **Average longevity of the family** : When the parents have died early onaccount of certain diseases like heart trouble or cancer, it may be a pointer\nthat the offspring may also not live long.**iii.** **Family environment** : Thirdly, the environment in which the family lives cancause exposure to infection and other risks.Life insurers have thus to be careful when entertaining cases of individuals with\nadverse family history. They may call for other reports and may impose an extra\nmortality rating in such cases.74**b)** **Personal history**Personal history refers to past impairments of various systems of the human body\nwhich the life to be insured has suffered from. The proposal form for life\ninsurance typically contains a set of questions which enquire whether the life to\nbe insured has been under treatment for any of these.The major kinds of ailments that are considered by the underwriters include\nCardiovascular diseases, diseases of the respiratory system, malignant tumours/\ncancer, ailments of the renal system, impairments of the endocrine system,\ndiseases of the digestive system like gastric ulcers and cirrhosis of the liver and\ndiseases of the nervous system.**c)** **Personal characteristics**These can also be significant indicators of the tendency to disease.**i.** **Build**A person’s build consists of his height, weight, chest and girth of the abdomen.\nFor given age and height, there is a standard weight that has been defined and\nif the weight is too high or low in relation to this standard weight, we can say\nthat the person is overweight or underweight.Similarly, it is expected that the chest should be expanded at least by four\ncentimetres in a normal person and that the abdominal girth should not be more\nthan one’s expanded chest.**ii.** **Blood pressure**Another indicator is a person’s blood pressure. There are two measures of this Systolic DiastolicWhen the actual readings are much higher than the normal values, we say that\nthe person has high blood pressure or hypertension. When it is too low, it is\ntermed as hypotension. The former can have serious consequences.**iii.** **Urine – Specific gravity**Finally, a reading of the specific gravity of one’s urine can indicate the balance\namong various salts in the urinary system. It can indicate any malfunctioning of\nthe system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought it\nin April 2013. You and your insurance company agree to change the policy to\nofficially start it from April, 2013. In this case, you have backdated the policy.\nUsually, no interest is charged if the policy is backdated by less than a month.Backdating is done for the following purposes:75(i) **Getting a lower premium based on age:** While issuing the policy, insurersconsider the nearest age of the policyholder. It means if you are 32 years\nand 7 months old, the insurer will consider your age as 33 years. This nearest\nage may put you in a higher premium slab. However, if you backdate the\npolicy by 2 months, the insurer will consider your age as 32 years and 5\nmonths only. Now you will be paying lower premiums based on a plan for a", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Substance abuse", "chunk_id": "IC 38 -IA-Eng-Life_038", "metadata": {"file_size": 4771, "chunk_index": 38, "chunk_tokens": 1007, "has_examples": true, "has_tables": false, "key_concepts": ["Substance abuse", "Backdating:", "Getting a lower premium based on age:", "Average longevity of the family", "Blood pressure"]}}
{"chunk": "the system.**d)** **Backdating:**Backdating means changing the start date of the policy to an earlier one. For\nexample, you bought a Life insurance policy on 1st June, 2013 but later you\nthink that the policy would have generated better returns if you had bought it\nin April 2013. You and your insurance company agree to change the policy to\nofficially start it from April, 2013. In this case, you have backdated the policy.\nUsually, no interest is charged if the policy is backdated by less than a month.Backdating is done for the following purposes:75(i) **Getting a lower premium based on age:** While issuing the policy, insurersconsider the nearest age of the policyholder. It means if you are 32 years\nand 7 months old, the insurer will consider your age as 33 years. This nearest\nage may put you in a higher premium slab. However, if you backdate the\npolicy by 2 months, the insurer will consider your age as 32 years and 5\nmonths only. Now you will be paying lower premiums based on a plan for a\n32-year old.(ii) **Set the timing of payment:** There are specific professions where theincome flow is not steady. In such a scenario if an individual accidently buys\na life insurance policy in its off-season then the policy can be backdated to\nthe period of maximum earnings. For instance, a farmer may have a\nseasonal income. He would prefer to make insurance payments only after\nhe has received his crop proceedings. In this case, a farmer could backdate\nthe policy to start it in the harvest season.(iii) **To coincide with special dates:** You can backdate the policy to coincidewith your important dates, such as birthday and anniversary. It keeps easy\nfor you to remember your premium due date.(iv) **Early maturity claims** : Backdating reduces the tenure of a policy andfacilitates early maturity. For instance, if a 30-year life insurance cover\nbought on March 2000 is backdated to April 1999, the policy would mature\non April, 2029 instead of March 2030. In case of endowment policies, this\ncould be beneficial as maturity benefits accrue earlier.**Test Yourself 3**Why is heredity history of importance in medical underwriting?I. Rich parents have healthy kids\nII. Certain diseases can be passed on from parents to children\nIII. Poor parents have malnourished kids\nIV. Family environment is a critical factor**Summary**To bring equity, the underwriter engages in risk classification where individual\nlives are categorised and assigned to different risk classes depending on the\ndegree of risks they pose.Underwriting process may be said to take place at two levels: At field level and At underwriting department levelUnderwriting decisions made by underwriters include acceptance of standard\nrisk at standard rates or charging extra for sub-standard risks. Sometimes there\nis acceptance with lien on sum assured or acceptance is based on restrictive\nclauses. Where the risk is large the proposal is declined or postponed.76A large number of life insurance proposals may typically get selected for\ninsurance without conducting a medical examination. Such cases are termed as\nnon-medical proposals.Some of the rating factors for non-medical underwriting include Age Large sum assured Moral hazard etc.Some of the factors considered in medical underwriting include Family history, Heredity and personal history etc.**Key Terms**1. Underwriting\n2. Standard life\n3. Non-medical underwriting\n4. Rating factor\n5. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.77## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the forms\nto be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**78**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a policy\nresults into a claim. The true value of life insurance is judged by the way a claim is\nsettled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that life\ninsurers, shall process death claims without delay and call for all requirements", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "L-09", "section": "Backdating:", "chunk_id": "IC 38 -IA-Eng-Life_039", "metadata": {"file_size": 4771, "chunk_index": 39, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Set the timing of payment:", "To coincide with special dates:", "Answers to Test Yourself", "Answer 2", "Backdating:"]}}
{"chunk": "3. Non-medical underwriting\n4. Rating factor\n5. Medical underwriting\n6. Anti-selection**Answers to Test Yourself****Answer 1** - The correct option is III.**Answer 2** - The correct option is II.**Answer 3** - The correct option is II.77## CHAPTER L-09## LIFE INSURANCE CLAIMS**Chapter Introduction**This chapter explains the concept of claim and how claims are ascertained. The\nchapter then explains the types of claims. In the end you will learn about the forms\nto be submitted for a death claim and the safeguards in place to protect a\nbeneficiary from claim rejection by the insurer, provided no material information\nhas been suppressed by the insured.**Learning Outcomes**78**A.** **Types of claims and claims procedure****Concept of claims**The real test of an insurance company and an insurance policy comes when a policy\nresults into a claim. The true value of life insurance is judged by the way a claim is\nsettled and benefits are paid.IRDAI’s Protection of Policyholders’ Interests Regulations, 2017 prescribes that life\ninsurers, shall process death claims without delay and call for all requirements\ntogether, within 15 days of the receipt of the death intimation.A death claim shall be paid, rejected or repudiated giving all the relevant reasons,\nwithin 30 days from the date of receipt of all relevant papers/ clarifications.If, in the opinion of the insurer, the claim warrants investigation, it shall complete\nthe same expeditiously, within 90 days from the date of intimation and settle the\nclaim within 30 days thereafter.IRDAI specifies that in respect of Maturity clams, Survival Benefit claims and\nAnnuities, the Life Insurer shall initiate the claim process by sending advance\nintimation, by sending post-dated cheque or by giving direct credit to the bank\naccount of the claimant through any electronic mode approved by RBI, so as to pay\nthe claim on or before the due date.**Definition**A claim is a demand that the insurer should make good the promise specified in the\ncontract.A claim under a life insurance contract is triggered by the happening of one or more\nof the events covered under the insurance contract. While in some claims, the\ncontract continues, in others, the contract is terminated.Claims can be of two types:**i.** survival claims payable when the life assured is alive and**ii.** death claim**Diagram 1:** **Types of claims**While a **death claim** arises only upon the death of the life assured, **survival claims**\nare payable on happening of events specified in the policy.79**Important**In all claims situations, the insurer has to ensure that the identity of the claimant\nis proven and well documented as per KYC norms.**Example**Such specified events where the claims are paid to the insured.i. The insured reaching the maturity period of the policy;\nii. The insured reaching the pre-decided duration(s) under a money-backpolicy, when instalment(s) become payable; or under annuity plans.\niii. Occurrences of Critical illnesses covered under the policy (as a rider benefitor otherwise);\niv. Surrender of the policy either by the policyholder or assignee;**B.** **Ascertaining whether a claim situation has occurred****i.** **Survival claim** is payable to the insured on reaching the period of maturityor fulfilling conditions stipulated in the policy.**ii.** **Maturity claims and money-back instalment claims** are easily establishedas they are based on dates which are determined at the beginning of the\ncontract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy are\nclearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments. Here,unlike other claims, the event is triggered by the decision of the policy\nholder or assignee to cancel the contract and withdraw what is due to him\nor her under the contract. There is typically a penalty for premature\nwithdrawal. The amount paid would be less than what would be due under\na full claim and hence would be less than what would have been due if the\nfull claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned, all", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "L-09", "section": "Answers to Test Yourself", "chunk_id": "IC 38 -IA-Eng-Life_040", "metadata": {"file_size": 4771, "chunk_index": 40, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Survival claim", "Answer 3", "Diagram 1:"]}}
{"chunk": "contract itself. For instance, the date of maturity and the dates when the\ninstalments of survival benefits may be paid under a money back policy are\nclearly laid out at the time of preparing the contract.**iii.** **Surrender value payments** are different from other claim payments. Here,unlike other claims, the event is triggered by the decision of the policy\nholder or assignee to cancel the contract and withdraw what is due to him\nor her under the contract. There is typically a penalty for premature\nwithdrawal. The amount paid would be less than what would be due under\na full claim and hence would be less than what would have been due if the\nfull claim were to be paid.**iv.** **Critical illness** claims are ascertained based on the medical and otherrecords provided by the policyholder in support of his claim.**v.** **Annuities:** In case of annuity payments (pension plans), insured need toprovide life certificates periodically.The purpose of a critical illness benefit is to enable a policy holder to defray his/\nher expenses in the event of a critical illness. If this policy were to be assigned, all\nthe benefits would be payable to the assignee and it would not meet the intended\npurpose of the critical illness benefit. To avoid this situation, policy holders need\nto be educated about the extent of benefits they may assign by way of a conditional\nassignment.A **maturity or death claim** or a surrender leads to termination of the insurance\ncover under the contract and no further insurance cover is available.80**Types of claims:** The following payments may occur during the policy term:\n**a)** **Survival Benefit Payments**Periodical payments are made by the insurer to the insured at specified times\nduring the term of the policy.**I.** **Surrender of Policy**Surrender value reflects the value of investments and depends on various factors\nsuch as sum assured, bonuses, policy term and premiums paid. Premature closing\nof a life insurance policy is a voluntary termination of the policy contract. A\npolicy can be surrendered only if it has acquired paid-up value. The amount\npayable to the insured is the **surrender value** which is usually a percentage of\nthe premiums paid. The actual surrender value paid to the insured is more than\nthe Guaranteed Surrender Value (GSV).**II.** **Rider Benefit**A payment under a rider is made by an insurance company on the occurrence of\na specified event according to the terms and conditions.\nUnder a **critical illness rider**, in the event of diagnosis of a critical illness, a\nspecified amount is paid as per terms. The illness should have been covered in\nthe list of critical illnesses specified by the insurance company.Under **hospital care rider**, the insurer pays the treatment costs in the event of\nhospitalisation of the insured, subject to terms and conditions.The policy contract continues even after the rider payments are made.The following claim payments are made at the end of the policy term specified\nin the insurance contract.**III.** **Maturity Claim**In such claims, the insurer promises to pay the insured a specified amount at\nthe end of the term, if the insured survives the plan’s entire term. This is known\nas a **maturity claim.****i.** **Participating Plan:** The maturity claim amount payable under a participatingplan is the sum assured plus accumulated bonuses less dues such as\noutstanding premium and policy loans and interests thereon.\n**ii.** **Return of Premium (ROP) Plan:** In some cases premiums paid over the termperiod are returned when the policy matures.\n**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which is81paid to the nominee or assignee or legal heir whatever the situation may be. A\ndeath claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "s81", "section": "Surrender value payments", "chunk_id": "IC 38 -IA-Eng-Life_041", "metadata": {"file_size": 4771, "chunk_index": 41, "chunk_tokens": 987, "has_examples": true, "has_tables": false, "key_concepts": ["Maturity Claim", "Participating Plan:", "Rider Benefit", "III.", "Annuities:"]}}
{"chunk": "**iii.** **Unit Linked Insurance Plan (ULIP):** In case of ULIPs, the insurer pays thefund value as the maturity claim.**iv.** **Money-back Plan:** In case of money-back policy, the insurer pays thematurity claim minus the survival benefits already paid during the term of\nthe policy.The insurance contact terminates after the claim is paid.**b)** **Death Claim**If the insured expires during the term of his/ her policy, accidentally or\notherwise, the insurer pays the sum assured plus accumulated bonuses, if\nparticipating, less dues to be recovered by the insurer [like outstanding policy\nloan and interest or premiums plus interest]. This is the **death claim**, which is81paid to the nominee or assignee or legal heir whatever the situation may be. A\ndeath claim generally marks the end of the contract as a result of death.A death claim may be: Early (less than three years policy duration) or\n Non-early (more than three years)The nominee or assignee or legal heir has to intimate the insurer of the cause,\ndate and place of death.**i.** **Forms to be submitted for death claim**Usually, the following forms are to be submitted by the beneficiary to the insurer\nto facilitate processing of the claim: Claim form by nominee\n Certificate of burial or cremation\n Treating physician’s certificate\n Hospital’s certificate\n Employer’s certificate\n Death certificate issued by municipal authorities etc., as proof of death\n Certified court copies of police reports like First Information Report(FIR), Inquest Report, Post-Mortem Report, and Final Report - these\nreports are required in case of death by accident.**Diagram 2:** **Forms to be submitted for Death Claim****ii.** **Repudiation of death claim**The death claim may be paid or repudiated. If, while processing the claim, the\ninsurer detects that the proposer had made any incorrect statements or had\nsuppressed material facts relevant to the policy, the contract would be declared\nas void. All benefits under the policy are forfeited.**iii.** **Section 45: Indisputability Clause**However this penalty is subject to **Section 45** of the Insurance Act, 1938.82**Important****Section 45 states:**“No policy of life insurance shall be called in question on any ground whatsoever\nafter the expiry of three years from the date of the policy, i.e. from the date of\nissuance of the policy or the date of commencement of risk or the date of revival\nof the policy or the date of the rider to the policy, whichever is later”.**C.** **Claim Procedure for Life Insurance Policy****Although there is no laid down standard claims procedure for all insurers,**\n**the IRDAI has laid down guidelines for insurers in the matter of claim**\n**settlement.****Regulation 8: Claims procedure in respect of a life insurance policy**i. A life insurance policy shall state the **primary documents** which are normallyrequired to be submitted by a claimant in support of a claim.ii. A life insurance company, upon receiving a claim, shall process the claimwithout delay. Any queries or requirement of additional documents, to the\nextent possible, shall be raised all at once and not in a piece-meal manner,\nwithin a period of 15 days of the receipt of the claim.iii. As per the IRDAI (Protection of Policyholders’ Interests) Regulations, 2017, adeath claim under a life insurance policy shall be paid, rejected or\nrepudiated giving all the relevant reasons, within 30 days from the date of\nreceipt of all relevant papers and required clarifications. However, if the\ninsurer needs the claim to be investigated, it shall initiate and complete the\ninvestigation at the earliest, in any case not later than 90 days from the date\nof receipt of claim intimation. The claim should be settled within 30 days of\ncompleting the investigation.iv. Where a claim is ready for payment but the payment cannot be made due toany reasons of proper identification of the payee, the life insurer shall hold\nthe amount for the benefit of the payee and it shall earn interest at the rate\napplicable to a savings bank account with a scheduled bank (effective from\n30 days following the submission of all papers and information).v. Where there is a delay on the part of the insurer in processing a claim for areason other than the one covered by sub-regulation (iv), the life insurance\ncompany shall pay **interest on the claim amount at a rate which is 2%**\n**above the bank rate** prevalent at the beginning of the financial year in", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": "s81", "section": "Unit Linked Insurance Plan (ULIP):", "chunk_id": "IC 38 -IA-Eng-Life_042", "metadata": {"file_size": 4771, "chunk_index": 42, "chunk_tokens": 1005, "has_examples": false, "has_tables": false, "key_concepts": ["Repudiation of death claim", "Section 45", "Section 45: Indisputability Clause", "Unit Linked Insurance Plan (ULIP):", "Important"]}}
{"chunk": "repudiated giving all the relevant reasons, within 30 days from the date of\nreceipt of all relevant papers and required clarifications. However, if the\ninsurer needs the claim to be investigated, it shall initiate and complete the\ninvestigation at the earliest, in any case not later than 90 days from the date\nof receipt of claim intimation. The claim should be settled within 30 days of\ncompleting the investigation.iv. Where a claim is ready for payment but the payment cannot be made due toany reasons of proper identification of the payee, the life insurer shall hold\nthe amount for the benefit of the payee and it shall earn interest at the rate\napplicable to a savings bank account with a scheduled bank (effective from\n30 days following the submission of all papers and information).v. Where there is a delay on the part of the insurer in processing a claim for areason other than the one covered by sub-regulation (iv), the life insurance\ncompany shall pay **interest on the claim amount at a rate which is 2%**\n**above the bank rate** prevalent at the beginning of the financial year in\nwhich the claim is reviewed by it.**Role of an agent**An agent shall render all possible service to the nominee/ legal heir or the\nbeneficiary in filling up of claim forms accurately and assisting in submission of\nthese at the insurer’s office.83Apart from discharging obligations, goodwill is generated from such a situation\nwhereby there exists ample opportunity for the agent to procure business or\nreferrals in future from the family of the deceased.**Test Yourself 1**Which of the below statement best describes the concept of claim? Choose the most\nappropriate option.I. A claim is a request that the insurer should make good the promise specified inthe contract\nII. A claim is a demand that the insurer should make good the promise specified inthe contract\nIII. A claim is a demand that the insured should make good the commitmentspecified in the agreement\nIV. A claim is a request that the insured should make good the promise specified inthe agreement**Summary**A claim is a demand that the insurer should make good the promise specified in\nthe contract.A claim can be survival claim or death claim. While a death claim arises only\nupon the death of the life assured, survival claims can be caused by one or more\neventsFor payment of a survival claim, the insurer has to ascertain that the event has\noccurred as per the conditions stipulated in the policy.The following payments may occur during the policy term:\n Survival Benefit Payments\n Surrender of Policy\n Rider Benefit\n Maturity Claim\n Death ClaimSection 45 (Indisputability Clause) of the Insurance Act offers protection against\nrejection of claim by the insurer on flimsy grounds provided and sets a time limit\nof 3 years for the Insurer for calling a policy into question.Under the IRDAI (Protection of Policyholders Interests) Regulations, 2017, the\nIRDAI has laid down regulations to safeguard/ protect the insured or beneficiary\nin case of claims.**Answers to Test Yourself****Answer 1** The correct option is II.84", "source_file": "IC 38 -IA-Eng-Life.md", "chapter": null, "section": "Role of an agent", "chunk_id": "IC 38 -IA-Eng-Life_043", "metadata": {"file_size": 4771, "chunk_index": 43, "chunk_tokens": 672, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 1", "Answer 1", "Role of an agent", "Summary"]}}
{"chunk": "## IC - 38 **INSURANCE AGENTS** **SECTION-GENERAL****ACKNOWLEDGEMENT****This course is based on revised syllabus prescribed by Insurance Regulatory and**\n**Development Authority of India (IRDAI) and prepared by Insurance Institute of**\n**India, Mumbai.****AUTHORS/ REVIEWERS (in Alphabetical order)**Dr. R. K. Duggal\nDr. Shashidharan K. Kutty\nCA P. Koteswara Rao\nDr. Pradip Sarkar\nProf. Madhuri Sharma\nDr. George E. Thomas\nProf. Archana VazeG – Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051.i## INSURANCE AGENTS **SECTION-GENERAL** **IC - 38****Year of Edition: 2023****ALL RIGHTS RESERVED**This course material is the copyright of Insurance Institute of India (III). This course\nis designed for providing academic inputs for students appearing for the\nexaminations of Insurance Institute of India. This course material may not be\nreproduced for commercial purpose, in part or whole, without prior express written\npermission of the Institute.The contents are based on prevailing best practices and not intended to give\ninterpretations or solutions in case of disputes, legal or otherwise.This is only an indicative study material. Please note that the questions in the\nexamination shall not be confined to this study material only.Published by: Secretary General, Insurance Institute of India, G- Block, Plot C-46,\nBandra Kurla Complex, Bandra (E) Mumbai – 400 051 and Printed atAny communication regarding this study material may be addressed to ctd@iii.org.in\nmentioning the subject title and unique publication number mentioned on the coverpageii## PREFACEInsurance Institute of India, (the Institute) has developed this course material for\nInsurance Agents based on the syllabus prescribed by Insurance Regulatory and\nDevelopment Authority of India (IRDAI). Industry experts were involved in preparingthe course material.The course provides basic knowledge of Life, General and Health insurance to\nenable agents in the respective line of business to understand and appreciate their\nprofessional career in the right perspective.The course is structured as four sections. (1) Overview - a Common section that\ncovers Insurance Principles, Legal Principles and Regulatory matters that Insurance\nagents need to know. Separate sections are provided for those aspiring to become\n(2) Life Insurance Agents, (3) General Insurance Agents and (4) Health Insurance\nAgents.A set of model questions are included in the course to give students an idea of the\nexamination format and the types of objective questions that may be asked. The\nmodel questions will also help them in revising what they have learnt.Insurance operates in a dynamic environment. Agents need to be up to date about\nchanges in the market. They should actively pursue knowledge through personal\nstudy and participation in the in-house training programmes arranged by the\nrespective insurers.The Institute thanks IRDAI for entrusting this work to the Institute. The Institute\nwishes all interested in studying the material a successful career in insurance\nmarketing.iii## CONTENTS|Chapter no.|Title|Page no.|\n|---|---|---|\n|**SECTION **|**GENERAL INSURANCE **|**GENERAL INSURANCE **|\n|G-01|General Insurance Documentation|2|\n|G-02|Underwriting and Rate Making|17|\n|G-03|Personal and Retail Insurance|26|\n|G-04|Commercial Insurance|36|\n|G-05|General Insurance Claims|59|\n|**SECTION **|**ANNEXURES**|**ANNEXURES**|\n|A-1|Annexures – Specimen Proposal forms and Claims Forms for filling up<br>|68|iv## SECTION **GENERAL INSURANCE**1## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful for\nthe insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.2**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance company\nto accept the risk offered for insurance. The principle of utmost good faith and the", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "C-46", "section": "INSURANCE AGENTS", "chunk_id": "IC 38 -IA-Eng-Non-Life_000", "metadata": {"file_size": 4549, "chunk_index": 0, "chunk_tokens": 1004, "has_examples": false, "has_tables": true, "key_concepts": ["SECTION-GENERAL", "IC - 38", "INSURANCE AGENTS", "Proposal forms", "ANNEXURES"]}}
{"chunk": "|**SECTION **|**ANNEXURES**|**ANNEXURES**|\n|A-1|Annexures – Specimen Proposal forms and Claims Forms for filling up<br>|68|iv## SECTION **GENERAL INSURANCE**1## CHAPTER G-01## GENERAL INSURANCE DOCUMENTATION**Chapter Introduction**As discussed in Chapter 7, the Proposal form contains information which are useful for\nthe insurance company to accept the risk offered for insurance.We have seen that in different branches of insurance, the documentation needs are\ndifferent based on the subject matter insured, type of insurance coverage and the\ntypes of claims that can arise.**Learning Outcomes**After studying this chapter, you should be able to:a) Explain the contents of a Proposal form.\nb) Describe the importance of Prospectus\nc) Understand the premium receipt.\nd) Explain terms and wordings in insurance policy document.\ne) Discuss policy conditions and warranties.\nf) Appreciate why endorsements are issued.\ng) Appreciate why renewal notices are issued.2**A.** **Proposal forms**The Proposal form contains information which are useful for the insurance company\nto accept the risk offered for insurance. The principle of utmost good faith and the\nduty of disclosure of material information begin with the proposal form forinsurance.**Example**If the insured was required to maintain an alarm or had stated that he has an\nautomatic alarm system in his gold jewellery showroom, then not only is he\nrequired to disclose it, he has to ensure the same remains in a working condition\nthroughout the policy period. The existence of the alarm is a material fact for the\ninsurer who will be accepting the proposal based on these facts and pricing the risk\naccordingly.**1.** **Nature of questions in a proposal form**The number and nature of questions in a proposal form vary according to the classof insurance concerned.**i.** **Fire insurance** proposal forms are usually used for relatively simple/ standardrisks like houses, shops etc. For large industrial risks, inspection of the risk is\narranged by insurer before acceptance of the risk. Special questionnaire are\nsometimes used in addition to the proposal form to gather specific information.Fire insurance proposal form seeks, among other things, the description of the\nproperty which would include the following information: Construction of external walls and roof, number of story\n Occupation of each portion of the building\n Presence of hazardous goods\n Process of manufacture including raw material and finished goods\n The sums proposed for insurance\n The period of insurance, etc.**ii.** **For motor insurance,** questions are asked about the vehicle, its operations,make and carrying capacity, how it is managed by the owner and related\ninsurance history.**iii.** **In personal lines** like health, personal accident and travel insurance, proposalforms are designed to get information about the proposer’s health, way of life\nand habits, pre-existing health conditions, medical history, hereditary traits,\npast insurance experience etc.**iv.** **In other miscellaneous insurances,** proposal forms are compulsory and theyincorporate a declaration which extends the common law duty of good faith.3**2.** **Elements of a proposal****i.** **Proposer’s name in full**The proposer should be able to identify himself/ herself unambiguously. It is\nimportant for the insurer to know with whom the contract has been entered, so\nthat the benefits under the policy would be received only by the insured.**ii.** **Proposer’s address and contact details**The reasons stated above are applicable for collecting the proposer’s address andcontact details as well.**iii.** **Proposer’s profession, occupation or business**In some cases like health and personal accident insurance, the proposer’s\nprofession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposed forinsurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose] or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to the", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "A-1", "section": "SECTION", "chunk_id": "IC 38 -IA-Eng-Non-Life_001", "metadata": {"file_size": 4549, "chunk_index": 1, "chunk_tokens": 1006, "has_examples": true, "has_tables": true, "key_concepts": ["Proposal forms", "Sum insured", "Elements of a proposal", "ANNEXURES", "Example"]}}
{"chunk": "profession, occupation or business are of importance as they could have a\nmaterial bearing on the risk.**iv.** **Details and identity of the subject matter of insurance**The proposer is required to clearly state the subject matter that is proposed forinsurance.**Example**The proposer is required to state if it is:**i.** A private car [with its identification like engine number, chassis number,registration number] or**ii.** A residential house [with its full address and identification numbers] or**iii.** An overseas travel [by whom, when, to which country, for what purpose] or**iv.** A person’s health [with person’s name, address and identification] etc.depending on the case**v.** **Sum insured** indicates limit of liability of the insurer under the policy andhas to be indicated in all proposal forms.**vi.** **Previous and present insurance** : As seen in the common chapters, theproposer is required to inform the details about his previous insurances to the\ninsurer.In property insurance, there is a chance that insured may take policies from\ndifferent insurers and when a loss happens, claim from more than one insurer.\nThis information is required to ensure that the principle of contribution is\napplied so that the insured is indemnified and does not gain/ profit due to\nmultiple insurance policies for the same risk.Further, in personal accident insurance an insurer would like to restrict the\namount of coverage (sum insured) depending on the sum insured under other\nPA policies taken by the same insured.4**vii.** **Loss experience**The proposer is asked to declare full details of all losses suffered by him/ her,\nwhether or not they were insured. This will give the insurer information about\nthe subject matter of insurance and how the insured has managed the risk in the\npast. Underwriters can understand the risk better from such answers and decide\non conducting risk inspections or collecting further details.**viii.** **Declaration by insured**As the purpose of the proposal form is to provide all material information to the\ninsurers, the form **includes a declaration by the insured that the answers are**\n**true and accurate and he agrees that the form shall be the basis of the**\n**insurance contract.** Any wrong answer will give the right to insurers to avoid the\ncontract. Other sections common to all proposal forms relate to **signature, date**\n**and in some cases agent’s recommendation.****B.** **Acceptance of the Proposal (underwriting)**As seen earlier, a completed proposal form broadly gives the following information: Details of the insured Details of the subject matter Type of cover required Details of the physical features both positive and negative - including typeand quality of construction, age, presence of fire-fighting equipment, the\ntype of security etc., Previous history of insurance and lossIn the case of property, motor or cargo insurance, the insurer may also arrange for\npre-inspection survey of the risk before acceptance, depending on the nature andvalue of the risk. Insurers take their decision based on the information available inthe proposal, the risk inspection report, answers to the additional questionnaire and\nother documents (as may be called for by the insurer). The insurer then decides\nabout the rate to be applied to the risk factor and calculates the premium based on\nvarious parameters, which is then conveyed to the insured. Proposals are processed\nby the insurer with speed and efficiency and all decisions thereof are communicated by it\nin writing within a reasonable period.**Definition****Underwriting:** As per Protection of Policyholders’ Interests) Regulations, 2017, the\ncompany has to process the proposal within 15 days’ time. The agent is expected to\nkeep track of these timelines, follow up internally and communicate with the\nprospect/ insured as and when required by way of customer service. This entire\nprocess of scrutinizing the proposal and deciding about acceptance is known as\nunderwriting.5**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As discussed\nin Chapter 4, the Agent should be always mindful that the **premium is to be paid**\n**in advance, before the inception date of the insurance contract** as per Section\n64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed to", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "t-1938", "section": "Details and identity of the subject matter of insurance", "chunk_id": "IC 38 -IA-Eng-Non-Life_002", "metadata": {"file_size": 4549, "chunk_index": 2, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Premium Receipt", "Declaration by insured", "Test Yourself 1", "Sum insured", "Example"]}}
{"chunk": "company has to process the proposal within 15 days’ time. The agent is expected to\nkeep track of these timelines, follow up internally and communicate with the\nprospect/ insured as and when required by way of customer service. This entire\nprocess of scrutinizing the proposal and deciding about acceptance is known as\nunderwriting.5**Test Yourself 1**As per Protection of Policyholders’ Interests) Regulations, 2017, an insurance\ncompany has to process an insurance proposal within __________.I. 7 daysII. 15 daysIII. 30 daysIV. 45 days**C.** **Premium Receipt****Premium** is the consideration or amount paid by the insured to the insurer for\ninsuring the subject matter of insurance, under a contract of insurance. As discussed\nin Chapter 4, the Agent should be always mindful that the **premium is to be paid**\n**in advance, before the inception date of the insurance contract** as per Section\n64 VB of the Insurance Act **.****Important**a) Section 64 VB of the Insurance Act-1938 provides that no insurer shall assumeany risk unless and until the premium is received in advance or is guaranteed to\nbe paid or a deposit is made in advance in the prescribed manner. Insurance\nRules 58 and 59 provide certain exceptions to this condition of advance payment\nof premium in some situations.b) Where an insurance agent collects a premium on a policy of insurance on behalfof an insurer, he shall deposit with or dispatch by post to the insurer the\npremium so collected in full without deduction of his commission within twentyfour hours of the collection excluding bank and postal holidays.c) It is also provided that the risk may be assumed only from the date on which thepremium has been paid in cash or by cheque.d) Where the premium is tendered by postal or money order or cheque sent bypost, the risk may be assumed on the date on which the money order is booked\nor the cheque is posted as the case may be.e) Any refund of premium which may become due to an insured on account of thecancellation of policy or alteration in its terms and conditions or otherwise, shall\nbe paid by the insurer directly to the insured by a crossed or order cheque or by\npostal/ money order or by Electronic Mode and a proper receipt shall be\nobtained by the insurer from the insured, and such refund shall in no case be\ncredited to the account of the agent.**D.** **Cover Notes/ Certificate of Insurance/ Policy Document**After underwriting is completed it may take some time before the policy is issued. **Pending**\n**the preparation of the policy or when the negotiations for insurance are in**\n**progress and it is necessary to provide cover on a provisional basis or when the**\n**premises are being inspected for determining the actual rate applicable,** a cover\nnote is issued to confirm protection under the policy. It gives description of cover.\nSometimes, insurers issue a letter confirming the provisional insurance cover instead of a\ncover note.6Although the cover note is not stamped, the wording of the cover note makes it clear\nthat it is subject to the usual terms and conditions of the insurers' policy for the class of\ninsurance concerned. If the risk is governed by any warranties, then the cover note would\nstate that the insurance is subject to such warranties. The cover note is also made subject\nto special clauses, if applicable e.g. Agreed Bank Clause, Declaration Clause etc.**A cover note would incorporate the following:**a) Name and address of insuredb) Sum insuredc) Period of insuranced) Risk coverede) Rate and premium: if rate is not known, the provisional premiumf) **Description of the risk covered** : for example a fire cover note wouldindicate identification particulars of the building, its construction andoccupancy.g) Serial number of the cover noteh) Date of issuei) **Validity of cover note** is usually for a period of a fortnight and rarely up to60 days**Cover notes are used predominantly in marine and motor classes of business.****1.** **Marine Cover Notes**These are normally issued when details required for the issue of policy such as name\nof the steamer, number of packages, or exact value etc. are not known. Even in\nrespect of exports, a cover note may be issued e.g. a certain quantity of cargo\nmeant for shipment is sent by the exporter to the docks. It may happen that, owing\nto difficulty of securing adequate shipping space, shipment of the cargo by the\nintended vessel does not take place. The quantity therefore, that may be sent by a\nparticular vessel cannot be known. In the circumstances, a cover note may be\nrequired which is to be followed subsequently by the issue of regular policy when", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "t-1938", "section": "Test Yourself 1", "chunk_id": "IC 38 -IA-Eng-Non-Life_003", "metadata": {"file_size": 4549, "chunk_index": 3, "chunk_tokens": 994, "has_examples": true, "has_tables": false, "key_concepts": ["A cover note would incorporate the following:", "Pending", "Premium Receipt", "Description of the risk covered", "Test Yourself 1"]}}
{"chunk": "of the steamer, number of packages, or exact value etc. are not known. Even in\nrespect of exports, a cover note may be issued e.g. a certain quantity of cargo\nmeant for shipment is sent by the exporter to the docks. It may happen that, owing\nto difficulty of securing adequate shipping space, shipment of the cargo by the\nintended vessel does not take place. The quantity therefore, that may be sent by a\nparticular vessel cannot be known. In the circumstances, a cover note may be\nrequired which is to be followed subsequently by the issue of regular policy when\nfull details are available and made known to the insurance company.Marine cover note may be worded along the following lines:i. Marine Cover Note Numberii. Date of issueiii. Name of the insurediv. Valid up to“As requested, you are hereby held covered subject to usual conditions of the\ncompany's policy to the extent of Rs. _____________.”**a)** **Clauses:** Institute Cargo Clauses A, B or C including War SRCC risks as per InstituteClauses, but subject to 7 days’ notice of cancellation.**b)** **Conditions:** Details of shipment to be supplied on receipt of shipping documentsfor issue of policy. In the event of loss or damage prior to declaration and/ or\nshipment on board the steamer, it is hereby agreed that the basis of valuation7shall be prime cost of the goods plus charges actually incurred and for which the\nassured is liable.With regard to inland transit normally all relevant data required for issue of policy\nare available and therefore a cover note is rarely required. There may however, be\nsome occasions when cover notes are issued and substituted later on by policies\ncontaining full description of the cargo, transit etc.**2.** **Motor Cover Notes**These are to be issued in the form prescribed by the respective companies the\noperative clause of a motor cover note may read as follows:“The insured described in the form, referred to below, having proposed for\ninsurance in respect of the Motor Vehicle(s) described therein and having paid the\nsum of Rs….as premium the risk is hereby held covered under the terms of the\ncompany’s usual form of……Policy applicable thereto (subject to any Special\nConditions mentioned below) unless the cover be terminated by the Company by\nnotice in writing in which case the insurance will thereupon cease and a\nproportionate part of the premium otherwise payable for such insurance will be\ncharged for the time the company had been on risk.”**The Motor Cover Note generally contains the following particulars:**a) Registration mark and number, or description of the vehicles insured/ cubiccapacity/ carrying capacity/ make/ year of manufacture, engine number,\nchassis number\nb) Name and address of the insured\nc) Effective date and time of commencement of insurance for the purpose of theAct. Time……, Date……\nd) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if anyThe Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act, 1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days at a\ntime, but in, but in no case the total period of validity of a Cover Note shall exceed\nsixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day technology\nfacilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof may\nbe required. For instance in motor insurance, in addition to the policy, a certificate\nof insurance is issued as required by the Motor Vehicles Act. **This certificate**8**provides evidence of insurance to the Police and Registration Authorities.** A", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "n7", "section": "Clauses:", "chunk_id": "IC 38 -IA-Eng-Non-Life_004", "metadata": {"file_size": 4549, "chunk_index": 4, "chunk_tokens": 835, "has_examples": true, "has_tables": false, "key_concepts": ["Certificate of Insurance – Motor Insurance", "Note:", "Important", "Clauses:", "Conditions:"]}}
{"chunk": "d) Date of expiry of insurance\ne) Persons or classes of persons entitled to drive\nf) Limitations as to use\ng) Additional risks, if anyThe Motor Cover Note incorporates a certificate to the effect that it is issued in\naccordance with the provisions of Chapters X and XI of the Motor Vehicles Act, 1988.**Important**The validity of the Cover Note may be extended for a further period of 15 days at a\ntime, but in, but in no case the total period of validity of a Cover Note shall exceed\nsixty days.**Note:** The wordings of the cover note may vary from insurer to insurerUse of cover notes is being discouraged by most companies. Present day technology\nfacilitates issuance of policy document immediately.**3.** **Certificate of Insurance – Motor Insurance**A certificate of insurance provides existence of insurance in cases where proof may\nbe required. For instance in motor insurance, in addition to the policy, a certificate\nof insurance is issued as required by the Motor Vehicles Act. **This certificate**8**provides evidence of insurance to the Police and Registration Authorities.** A\nspecimen certificate for private cars is reproduced below, showing salient features.**MOTOR VEHICLES ACT, 1988****CERTIFICATE OF INSURANCE**Certificate No. Policy No.1. Registration mark and Number, Place of registration, Engine No./Chassis No./ Make/Year of manufacture.2. Type of Body/ C.C/ Seating capacity/ Net Premium/ Name of Registration Authority,3. Geographical area – India. `4. Insured declared value (IDV)5. Name and address of the Insured, Business or profession.6. Effective date of commencement of Insurance for the purpose of the Act. From………. 'O'clock on ………7. Date of expiry of insurance: midnight on ……………8. Persons or classes of persons entitled to drive.Any of the following:(a) The insured:(b) Any other person who is driving on the insured's order or with his permissionProvided that the person driving holds an effective driving license at the time of the accident\nand is not disqualified from holding or obtaining such a license. Provided also that the person\nholding an effective learner's license may also drive the vehicle and such a person satisfies\nthe requirement of Rule 3 of Central Motor Vehicles Rules 1989.**LIMITATIONS AS TO USE**The policy covers use for any purpose other than:(a) Hire or reward;(b) Carriage of goods (other than personal luggage)(c) Organised racing,(d) Race making,(e) Speed testing(f) Reliability Trials(g) Any purpose in connection with Motor Trade.I/ we hereby certify that the Policy to which this Certificate relates as well as this Certificate of\nInsurance are issued in accordance with the provisions of Chapter X and Chapter XI of the Motor\nVehicles Act, 1988.Examined .........(Authorized Insurer)**Motor certificate of Insurance is required to be carried in the vehicle at all times for**\n**the scrutiny of the relevant authorities.****4.** **Policy Document****The policy is a formal document which provides an evidence of the contract of**\n**insurance.** This document has to be stamped in accordance with the provisions of the9Indian Stamp Act, 1899.A general insurance policy usually contains:a) The name(s) and address(es) of the insured and any other person havinginsurable interest in the subject matter;\nb) Full description of the property or interest insured;\nc) The location/ s of the property or interest insured under the policy andwhere appropriate, with respective insured values;\nd) Period of insurance;\ne) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likely togive rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter of insuranceupon occurrence of an event giving rise to a claim and the rights of the\ninsurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman**Test Yourself 1**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "e9", "section": "Important", "chunk_id": "IC 38 -IA-Eng-Non-Life_005", "metadata": {"file_size": 4549, "chunk_index": 5, "chunk_tokens": 998, "has_examples": true, "has_tables": false, "key_concepts": ["Certificate of Insurance – Motor Insurance", "Test Yourself 1", "Note:", "CERTIFICATE OF INSURANCE", "Important"]}}
{"chunk": "e) Sums insured;\nf) Perils covered and exclusions ;\ng) Any excess/ deductible applicable;\nh) Premium payable and where the premium is provisional subject toadjustment, the basis of adjustment of premium ;\ni) Policy terms, conditions and warranties;\nj) Action to be taken by the insured upon occurrence of a contingency likely togive rise to a claim under the policy;\nk) The obligations of the insured in relation to the subject-matter of insuranceupon occurrence of an event giving rise to a claim and the rights of the\ninsurer in the circumstances;\nl) Any special conditions ;\nm) Provision for cancellation of the policy on grounds of misrepresentation,fraud, non-disclosure of material facts or non-cooperation of the insured;\nn) The address of the insurer to which all communications in respect of thepolicy should be sent;\no) The details of Add–on covers and/ or Endorsements if any;\np) Details of Grievance Redressal mechanism and address of Ombudsman**Test Yourself 1**Which of the following statements is true with regards to cover notes?I. Cover notes are predominantly used in life insurance\nII. Cover notes are predominantly used in all classes of general insurance\nIII. Cover notes are predominantly used in health insurance\nIV. Cover notes are predominantly used in marine and motor classes of generalinsurance**E.** **Warranties****A warranty is a condition expressly stated in the policy which has to be literally**\n**complied with for validity of the contract. Warranty is not a separate document.**\n**It is part of both cover notes and policy document.** It is a condition precedent to\nthe contract. It must be observed and complied with strictly and literally,\nirrespective of the fact whether it is material to the risk or not. If a warranty is\nbreached, the policy becomes voidable at the option of the insurers even when it is\nclearly established that the breach has not caused or contributed to a particular\nloss. However, in practice, if the breach of warranty is of a purely technical nature\nand does not, in any way, contribute to or aggravate the loss, insurers at their\ndiscretion may process the claims according to norms and guidelines as per company\npolicy.10**1.** **Fire Insurances warranties (some examples) are as given below**Warranted, that no hazards goods shall be stored in the insured premises during the\ncurrency of policy.**Silent Risk:** Warranted that no manufacturing activity is carried out in the insured\npremises for consecutive period of 30 days or more.**Cigarette Filter Manufacturing:** Warranted that no solvents having flash point\nbelow 30 [0] C are used/ stored in the premises**2.** In **Marine Insurance, a warranty** is defined as follows: “a promissory warranty,that is to say, a warranty by which the assured undertake that some particular\nthing shall or shall not be done, or that some condition will be fulfilled, or\nwhereby he affirms or negates the existence of a particular state of facts”In **Marine Cargo Insurance, a warranty** is inserted to the effect that goods (e.g.\ntea) are packed in tin-lined cases. In **Marine Hull insurance by inserting a warranty**\nthat the insured vessel will not navigate in a certain area, gives an idea to the\ninsurer about the extent of risk he has agreed to provide cover for. If the warranty\nis breached, the risk agreed to initially is altered and the insurer is allowed to\ndischarge himself from further liability from the date of breach**3.** In **Burglary Insurance**, it is warranted that the property is guarded by awatchman for twenty four hours. The rates, terms and conditions of the policy\ncontinue to be the same only if the warranties attached to the policy are\ncomplied with.**Test Yourself 2**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.11**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through a\ndocument called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nconstitute the evidence of the contract. Endorsements may also be issued during the", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Test Yourself 1", "chunk_id": "IC 38 -IA-Eng-Non-Life_006", "metadata": {"file_size": 4549, "chunk_index": 6, "chunk_tokens": 1004, "has_examples": true, "has_tables": false, "key_concepts": ["Marine Cargo Insurance, a warranty", "Warranties", "Burglary Insurance", "Test Yourself 1", "Endorsements"]}}
{"chunk": "continue to be the same only if the warranties attached to the policy are\ncomplied with.**Test Yourself 2**Which of the following statements is correct with regards to a warranty?I. A warranty is a condition which is never stated in the policy\nII. A warranty forms part of a policy document\nIII. A warranty is always communicated to the insured separately and cannot be partof the policy document\nIV. Claims will be payable even if a warranty is breached.11**F.** **Endorsements**It is the practice of insurers to issue policies in a standard form; covering certain perils\nand excluding certain others.**Definition**If certain terms and conditions of the policy need to be modified at the time of issuance,\nor during the policy tenure, it is done by setting out the amendments/ changes through a\ndocument called endorsement.It is attached to the policy and forms part of it. The policy and the endorsement together\nconstitute the evidence of the contract. Endorsements may also be issued during the\ncurrency of the policy to record changes/ amendments.Whenever material information changes, the insured has to advice the insurance\ncompany who will take note of this and incorporate the same as part of the\ninsurance contract through the endorsement.Endorsements normally required under a policy related to:a) Variations/ changes in sum insured\nb) Change of insurable interest by way of sale, mortgage, etc.\nc) Extension of insurance to cover additional perils/ extension of policy period\nd) Change in risk, e.g. change of construction, or occupancy of the building in fireinsurance\ne) Transfer of property to another location\nf) Cancellation of insurance\ng) Change in name or address etc.**Specimen**For the purpose of illustration, specimen wordings of some endorsements are\nreproduced below:**Cancellation**At the request of the insured the insurance by this Policy is hereby declared to be\ncancelled as from ………. The insurance having been in force for a period over ………….\nMonths, no refund is due to the Insured.12The total insurance now stands at Rs …….Subject otherwise to the terms, provisions and conditions of this policy.**Test Yourself 3**If certain terms and conditions of the policy need to be modified at the time of issuance, or\nduring the policy tenure it is done by setting out the amendments through __________.I. Warranty\nII. EndorsementIII. Alteration\nIV. Modifications are not possible**G.** **Interpretation of policies**Contracts of insurance are expressed in writing and the insurance policy wordings\nare drafted by insurers. These policies have to be interpreted according to certain\nwell-defined rules of construction or interpretation which have been established by\nvarious courts. **The most important rule of construction is that the intention of**\n**the parties must prevail and this intention is to be looked for in the policy itself.**\nIf the policy is issued in an ambiguous manner, it will be interpreted by the courts\nin favour of the insured and against the insurer on the general principle that the\npolicy was drafted by the latter.**Policy wordings** are understood and interpreted as per the following rules:a) An express condition overrides an implied condition except where there isinconsistency in doing so.\nb) In the event of a contradiction in terms between the standard printed policyform and the typed or handwritten parts, the typed or handwritten part is\ndeemed to express the intention of the parties in the particular contract,\nand their meaning will overrule those of the original printed words.\nc) If an endorsement contradicts other parts of the contract the meaning of theendorsement will prevail as it is the later document.\nd) Clauses in italics over-ride the ordinary printed wording where they areinconsistent.13e) Clauses printed or typed in the margin of the policy are to be given moreimportance than the wording within the body of the policy.\nf) Clauses attached or pasted to the policy override both marginal clauses andthe clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wording impressedby an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts as\nin the case of other contracts.The principal rule of construction is that the intention of the parties of the contract\nmust prevail, that intention must be gathered from the policy document itself and\nthe proposal form, clauses, endorsements, warranties etc. attached to it and\nforming a part of the contract.**2.** **Meaning of wordings**", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Test Yourself 2", "chunk_id": "IC 38 -IA-Eng-Non-Life_007", "metadata": {"file_size": 4549, "chunk_index": 7, "chunk_tokens": 1006, "has_examples": true, "has_tables": false, "key_concepts": ["Meaning of wordings", "Construction of policies", "Specimen", "Endorsements", "Interpretation of policies"]}}
{"chunk": "d) Clauses in italics over-ride the ordinary printed wording where they areinconsistent.13e) Clauses printed or typed in the margin of the policy are to be given moreimportance than the wording within the body of the policy.\nf) Clauses attached or pasted to the policy override both marginal clauses andthe clauses in the body of the policy.\ng) Printed wording is over-ridden by typewritten wording or wording impressedby an inked rubber stamp.\nh) Handwriting takes precedence over typed or impressed wording.\ni) Finally, the ordinary rules of grammar and punctuation are applied if thereis any ambiguity or lack of clarity.**Important****1.** **Construction of policies**An insurance policy is evidence of a commercial contract and the general rules of\nconstruction and interpretation adopted by courts apply to insurance contracts as\nin the case of other contracts.The principal rule of construction is that the intention of the parties of the contract\nmust prevail, that intention must be gathered from the policy document itself and\nthe proposal form, clauses, endorsements, warranties etc. attached to it and\nforming a part of the contract.**2.** **Meaning of wordings**\nThe words used are to be construed in their ordinary and popular sense. **The**\n**meaning to be used for words is the meaning that the ordinary man in the street**\n**would construe. Thus, “fire” means flame or actual burning.**On the other hand, **words which have a common business or trade meaning will**\n**be construed with that meaning unless the context of the sentence indicates**\n**otherwise** . Where words are defined by statute, the meaning of that definition will\nbe used, such as “theft” as in the Indian Penal Code.Many words used in insurance policies have been the subject of previous legal\ndecisions and those decisions of a higher court will be binding on a lower court\ndecision. Technical terms must always be given their technical meaning, unless\nthere is an indication to the contrary.**H.** **Renewal Notice****Most of the non-life insurance policies are insured on annual basis.**Although there is no legal obligation on the part of insurers to advise the insured\nthat his policy is due to expire on a particular date, yet as a matter of courtesy and\nhealthy business practice, insurers issue a renewal notice in advance of the date of\nexpiry, inviting renewal of the policy. The notice incorporates all the relevant\nparticulars of the policy such as sum insured, the annual premium, etc. It is also the14practice to include a note advising the insured that he should intimate any material\nalterations in the risk.**In motor renewal notice, for example, the insured’s attention is to be drawn to**\n**revise the sum insured (i.e. the Insured’s Declared Value of the vehicle) in the**\n**light of current requirements.**The insured’s attention is also to be invited to the statutory provision that no risk\ncan be assumed unless the premium is paid in advance.**Test Yourself 4**Which of the following statements is correct with regards to renewal notice?I. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 30 days before the expiry of the policy\nII. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 15 days before the expiry of the policy\nIII. As per regulations there is a legal obligation on insurers to send a renewal noticeto insured, 7 days before the expiry of the policy\nIV. As per regulations there is no legal obligation on insurers to send a renewalnotice to insured before the expiry of the policy**Summary**a) The first stage of documentation is essentially the proposal forms through whichthe insured informs about himself/ herself\nb) The duty of disclosure of material information arises prior to the inception ofthe policy, and continues even after the conclusion of the contract\nc) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance is knownas underwriting.", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "e14", "section": "Important", "chunk_id": "IC 38 -IA-Eng-Non-Life_008", "metadata": {"file_size": 4549, "chunk_index": 8, "chunk_tokens": 962, "has_examples": true, "has_tables": false, "key_concepts": ["On the other hand,", "The", "Meaning of wordings", "Construction of policies", "Renewal Notice"]}}
{"chunk": "IV. As per regulations there is no legal obligation on insurers to send a renewalnotice to insured before the expiry of the policy**Summary**a) The first stage of documentation is essentially the proposal forms through whichthe insured informs about himself/ herself\nb) The duty of disclosure of material information arises prior to the inception ofthe policy, and continues even after the conclusion of the contract\nc) Insurance companies usually add a declaration at the end of the Proposal formto be signed by the insurer\nd) Elements of a proposal form include:i. Proposer’s name in full\nii. Proposer’s address and contact details\niii. Proposer’s profession, occupation or business\niv. Details and identity of the subject matter of insurance\nv. Sum insured\nvi. Previous and present insurance\nvii. Loss experience\nviii.Declaration by the insured\ne) An agent, who acts as the intermediary, has the responsibility to ensure allmaterial information about the risk is provided by the insured to insurer.\nf) The process of scrutinising the proposal and deciding about acceptance is knownas underwriting.\ng) Premium is the consideration or amount paid by the insured to the insurer forinsuring the subject matter of insurance, under a contract of insurance.15h) Payment of premium can be made by cash, any recognised banking negotiableinstrument, postal money order, credit or debit card, internet, e-transfer, direct\ncredit or any other method approved by IRDAI from time to time.\ni) A cover note is issued when preparation of policy is pending or when negotiationsfor insurance are in progress and it is necessary to provide insurance cover on\nprovisional basis.\nj) Cover notes are used predominantly in marine and motor classes of business.\nk) A certificate of insurance provides existence of insurance in cases where proofmay be required\nl) The policy is a formal document which provides an evidence of the contract ofinsurance.\nm) A warranty is a condition expressly stated in the policy which has to be literallycomplied with for validity of the contract.\nn) If certain terms and conditions of the policy need to be modified at the time ofissuance or during the policy tenure, it is done by setting out the amendments/\nchanges through a document called endorsement.\no) The most important rule of construction is that the intention of the parties mustprevail and this intention is to be looked for in the policy itself.**Key Terms**a) Policy form\nb) Advance payment of premium\nc) Cover note\nd) Certificate of Insurance\ne) Renewal notice\nf) Warranty**Answers to Test Yourself****Answer 1** - The correct option is II.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is II.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is IV.16## CHAPTER G-02## UNDERWRITING AND RATE MAKING**Chapter Introduction**We have learnt various concepts and principles related to general insurance.\nUnderwriting is the process by which the Insurer decides whether to accept a risk\nor not. For this, the underwriters analyse the risk. They understand how risky the\nrisk is. Also, how much of money should be collected as premium. Again, sometimes\nthe risks can be accepted only subject to conditions to improve the risk. All these\nangles are discussed in this chapter.**Learning Outcomes**After studying this chapter, you should be able to:1. Understand Physical hazards\n2. Appreciate Underwriting as a function\n3. Methods used by underwriters to reduce the risk\n4. Understand how the Sum Insured is fixed.17**A.** **Physical Hazards**A thorough knowledge of various hazards to which property and persons are exposed\nis most essential for underwriting.Physical hazard can be ascertained from the information given in a proposal form.\nIt can be better ascertained by a survey or inspection of the risk. The following are\nsome examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in walls androof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors involve\nrisk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower floors", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "G-02", "section": "Summary", "chunk_id": "IC 38 -IA-Eng-Non-Life_009", "metadata": {"file_size": 4549, "chunk_index": 9, "chunk_tokens": 954, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Physical Hazards", "Nature of flooring:"]}}
{"chunk": "2. Appreciate Underwriting as a function\n3. Methods used by underwriters to reduce the risk\n4. Understand how the Sum Insured is fixed.17**A.** **Physical Hazards**A thorough knowledge of various hazards to which property and persons are exposed\nis most essential for underwriting.Physical hazard can be ascertained from the information given in a proposal form.\nIt can be better ascertained by a survey or inspection of the risk. The following are\nsome examples of physical hazard in various classes of insurance.**a)** **Fire****i.** **Construction:** Construction refers to the building materials used in walls androof. A concrete building is superior to a timber building.**ii.** **The height:** Greater the number of storey’s, the greater the hazard becauseof difficulties of extinguishing fire. Besides, a greater number of floors involve\nrisk of collapse of the upper floors causing heavy impact damage.**iii.** **Nature of flooring:** Wooden floors add fuel to fire. Besides, wooden floorscollapse easily in the event of fire, causing damage to property on lower floors\nthrough falling machinery or goods from upper floors.**iv.** **Occupancy:** The occupancy of a building, and the purpose for which it is used.Various types of hazards arise from occupancy.**v.** **Ignition hazard:** Buildings in which chemicals are produced or used in largequantity involve a considerable **ignition hazard** . A timber yard presents a **high**\n**combustibility hazard** because once a fire starts, timber burns quickly. The\ncontents may be highly susceptible to damage in the event of fire.For example, paper, clothing etc. are susceptible not only to fire damage but\nalso to damage by water, heat etc.**vi.** **The process of manufacture:** If work is carried during the night, the hazardis increased due to the use of artificial lights, continuous use of machinery\nleading to friction and the likely carelessness of workers due to fatigue.**vii.** **Situation/ location of risk:** Location in a congested area, exposure tohazardous adjacent premises and distance from the fire brigade is an example\nof physical hazard.**b)** **Marine****i.** **The age and condition of vessel: Older vessels are inferior risks.****ii.** **The voyage to be undertaken: The route of the voyage, loading and****unloading conditions and warehousing facilities at the ports are factors.****iii.** **The nature of the stocks: Articles of high value are exposed to theft;****machinery is liable to breakage in transit.****iv.** **The method of packing: Cargo packed in bales is considered to be better****than cargo in bags. Again, double bags are safer than single bags. Liquid**\n**cargo in second-hand drums constitute bad physical hazard.**18**c)** **Motor****i.** **The age and condition of the vehicle:** Older vehicles are more prone toaccidents.**ii.** **The type of vehicle:** Sports cars involve greater physical hazard etc.**d)** **Burglary****i.** **The nature of the stocks:** Articles of high value in small bulk (e.g. Jewellery)and easily disposable are considered to be bad risks.**ii.** **Situation:** Ground floor risks are inferior to upper floor risks: privatedwellings situated in isolated areas are hazardous.**iii.** **Constructional hazard** : Too many doors and windows constitute bad physicalhazard.**e)** **Personal accident****i.** **The age of the person:** Very old persons are accident prone; besides theywill take longer to recover in the event of an accident.**ii.** **Nature of occupation:** Jockeys, mining engineers, manual workers areexamples of bad physical hazard.**iii.** **Health and physical condition:** A person suffering from Diabetes may notrespond to surgical treatment in the event of accidental bodily injury.**B.** **Physical Hazards – Importance of Risk Management, Clauses and Rating**Underwriters use the following methods to deal with physical hazards: Loading of premium Applying warranties on the policy Applying certain clauses Imposition of excess/ deductibles Restricting the cover granted Declinature of cover**a)** **Loading of premium**There may be some adverse features in a risk exposure for which the underwriters\nmay decide to charge an extra premium before acceptance of the same. By loading\nthe premium the higher probability of claims or occurrence of large claims is taken\ninto consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.In personal accident insurance if the insured is engaged in hazardous pursuits like", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "A.", "chunk_id": "IC 38 -IA-Eng-Non-Life_010", "metadata": {"file_size": 4549, "chunk_index": 10, "chunk_tokens": 1016, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "The age of the person:", "The type of vehicle:", "Nature of flooring:", "Situation:"]}}
{"chunk": "may decide to charge an extra premium before acceptance of the same. By loading\nthe premium the higher probability of claims or occurrence of large claims is taken\ninto consideration.**Example**Normal rate of premium is charged for cargo shipped by liners or other vessels,\nwhich comply with the prescribed standards. However, if an over-aged or undertonnage vessel ships the cargo then extra premium is charged.In personal accident insurance if the insured is engaged in hazardous pursuits like\nmountaineering, racing on wheels, big game hunting etc. extra premium is charged.19Sometimes loading of premium is also done for adverse claims ratio, as in case of\nmotor insurance or health insurance policies.**b)** **Imposition of warranties**Insurers incorporate appropriate warranties to reduce the physical hazard. Some\nexamples are provided below.**Example****i.** **Marine cargo:** A warranty is inserted to the effect that goods (e.g. Tea) arepacked in tin lined cases.**ii.** **Burglary:** It is warranted that the property is guarded by a watchman for twentyfour hours.**iii.** **Fire:** In fire insurance, it is warranted the premises would not be used beyondnormal working hours.**iv.** **Motor:** It is warranted that the vehicle will not be used for speed testing orracing.**Example****Marine cargo:** Small damage to parts may cause costly machinery to be a\nconstructive total loss. Such machinery are subject to the Replacement Clause,\nwhich limits underwriter’s liability only to the cost of replacing, forwarding and\nrefitting any broken part.Cast pipes, hard board sometimes get damaged only at the edges. Marine policies\non cast pipes, hardboard etc., are subject to the cutting clause warranting that the\ndamaged portion should be cut off and the balance utilised.**c)** **Deciding on Excess/ Deductibles and Restricting the Cover**When the loss amount exceeds the deductible/ excess mentioned the balance is\npaid under 'excess' clause. Loss below the limit is not payable.The object of these clauses is to eliminate small claims. As the insured is made to\npay part of a loss, he is encouraged to exercise more care and to practice loss\nprevention.**Example****i.** **Motor** : A proposal for an old motor vehicle will not be accepted oncomprehensive terms but insurers will offer a restricted cover i.e. against third\nparty risks only.**ii.** **Personal accident** : A personal accident proposer who has crossed themaximum acceptance age limit may be covered for death risk only instead of\non comprehensive terms i.e. including disablement benefits.20**d)** **Discounts**Lower rates are charged or a discount is given in the normal premium if the risk is\nfavourable. The following features are considered to contribute to improvement of\nrisk in fire insurance.i. Installation of sprinkler system within the premisesii. Installation of hydrant system in the compoundiii. Installation of hand appliances consisting of buckets, portable extinguishersand manual fire pumpsiv. Installation of automatic fire alarm**Example**Under **motor insurance** a discount in the premium is provided if the motor cycle is\nalways used with a side-car attached, as this feature contributes to improved risk\nbecause of the greater stability of the vehicle.In **marine insurance**, the insurer may consider giving discounts on premium for “Full\nLoad” container as this reduces the incidence of theft and shortage.Under a **group personal accident** cover, discounts would be given for coverage of a\nlarge group, which reduces the administrative work and expenses of the insurer.**e)** **No claim bonus (NCB)**A certain percentage is given as bonus for every claim free renewal year with a limit\nto the maximum bonus that can be availed. It is allowed by way of deduction on the\ntotal premium at renewal only, depending upon the incurred claim ratio for the\nentire group or to Motor vehicle Own damage policy holders for claim free years.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of moral\nhazard in the insured. It rewards the insured for not lodging claims either by\nadopting better driving skills as in motor insurance or taking better care of his health\nin Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.**C.** **Moral hazard**Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Example", "chunk_id": "IC 38 -IA-Eng-Non-Life_011", "metadata": {"file_size": 4549, "chunk_index": 11, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["Personal accident", "Discounts", "Moral hazard", "Imposition of warranties", "Fire:"]}}
{"chunk": "to the maximum bonus that can be availed. It is allowed by way of deduction on the\ntotal premium at renewal only, depending upon the incurred claim ratio for the\nentire group or to Motor vehicle Own damage policy holders for claim free years.**No claim bonus is a powerful strategy to improve underwriting experience and**\n**forms an integral part of rating systems** . This bonus recognises the factor of moral\nhazard in the insured. It rewards the insured for not lodging claims either by\nadopting better driving skills as in motor insurance or taking better care of his health\nin Health policies.**f)** **Declinature**If the physical hazard involved is considerably bad, the risk becomes uninsurable\nand is declined. Based on their past loss experience, knowledge of hazards and\noverall underwriting policy, insurers have formulated a list of risks to be declined\nin each class of insurance.**C.** **Moral hazard**Moral hazard could arise in the following ways:**a)** **Dishonesty**An extreme example of bad moral hazard is that an insured taking insurance\nwith deliberate intention of creating or making a loss to collect a claim. Even,\nan honest insured may be tempted to stage a loss, if he happens to be in financial\ndifficulties.21**b)** **Carelessness**Indifference towards loss is an example of carelessness. Because of the\nexistence of insurance, the insured may tend to adopt a careless attitude\ntowards the insured property.If the insured does not take the same care of the property as a prudent and\nreasonable man would if he were uninsured the moral hazard is unsatisfactory.**c)** **Industrial relations**Employer-employee relationship may involve an element of bad moral hazard.**d)** **Wrong claims**This kind of moral hazard arises when claims occur. An insured may not\ndeliberately bring about a loss but once a loss occurs, he would attempt to\ndemand unreasonably high amount of compensation, in total disregard of the\nprinciple of indemnity.**Information****Sub-limits:** The insurer may impose a limit on the total pay-out separately each for\nroom expenses, surgical procedures or doctor fees to check the inflated bills.**Where the moral hazard of the insured is suspected, the agent should not**\n**entertain or bring such proposals to the insurance company. S/ he should also**\n**bring such issues before the insurance company officials.****1.** **Short period scales**Normally, premium rates are quoted for a period of twelve months. If a policy is\ntaken for a shorter period, the premium is charged according to a special scale,\nknown as short period scale. The premium chargeable for short period insurance is\nnot on proportionate basis.**Need for short period scales**a) These rates are applied because the expenses involved in the issue of the policywhether for a 12 months period or a shorter period, are almost the same.b) Further, an annual policy requires renewal procedure only once during a yearwhereas short period insurances involve more frequent renewals. If a\nproportionate premium is allowed, there would be a tendency on the part of the\ninsured to go on taking short period policies and thereby, in effect, pay\npremiums in instalments.c) Besides, some insurance are seasonal in character and the risk is greater duringthat season. Insurances are sometimes taken during such period when the risk is\ngreatest and thereby selection takes place against the insurers. Short period\nscales are evolved to prevent such selection against the insurers. They are also\napplicable when annual insurance is cancelled by the insured. In that case\nrefund is made keeping the premium on short period scale for the period Insurer\nwas in risk.22**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "No claim bonus is a powerful strategy to improve underwriting experience and", "chunk_id": "IC 38 -IA-Eng-Non-Life_012", "metadata": {"file_size": 4549, "chunk_index": 12, "chunk_tokens": 1002, "has_examples": true, "has_tables": false, "key_concepts": ["Carelessness", "Sub-limits:", "Information", "Moral hazard", "Need for short period scales"]}}
{"chunk": "refund is made keeping the premium on short period scale for the period Insurer\nwas in risk.22**Minimum premium**It is the practice to charge minimum premium under each policy so that\nadministrative expenses of issuing the policy are covered.**Test Yourself 1**What is expected of an agent when she detects a moral hazard?I. Continue with the insurance as beforeII. Report the same to the insurerIII. Ask for a share in the claimsIV. Turn a blind eye**D.** **Fixing the Sum Insured**It’s the maximum amount that an insurance company will indemnify as per policy\ncondition. An insured has to be very careful in choosing the limit of indemnity,\nbecause that is the maximum amount that would be reimbursed at the time ofclaim.The sum insured is always fixed by the insured. It is an amount on which rate is\napplied to arrive at the premium under the policy.It should be representative of the actual value of the property. If there is over\ninsurance, no benefit accrues to the insured and in case of under insurance, the\nclaim gets proportionately reduced.**Deciding the sum insured**Under each class of business the insured should be advised of the following points\nwhich have to be borne in mind while deciding the sum insured:**a)** **Personal accident insurance** : The sum insured offered by a company can be afixed amount or it can also be based on the insured’s income. Some insurance\ncompanies may give a benefit equal to 60 times or 100 times of the insured’s\nmonthly income for a particular disability. There could be an upper limit or ‘cap’\non the maximum amount. Compensations can vary from company to company. In\ngroup personal accident policies the sum insured may be fixed separately for\neach insured person or may be linked to emoluments payable to the insuredperson.**b)** **Motor insurance** : In case of motor insurance the sum insured is the insured'sdeclared value [IDV]. It is the value of the vehicle, which is arrived at by adjusting\nthe current manufacture's listed selling price of the vehicle with depreciation\npercentage as prescribed in the erstwhile India Motor Tariff. Manufacturer's listed\nselling price will include local duties/ taxes excluding registration and insurance.IDV = (Manufacturer’s listed selling price – depreciation) + (Accessories that are\nnot included in listed selling price-depreciation) and excludes registration and\ninsurance costs.The IDV of vehicles that are obsolete or aged over 5 years is calculated by mutual\nagreement between insurer and the insured. Instead of depreciation, IDV of old23cars is arrived at by assessment of vehicle’s condition done by surveyors, car\ndealers etc.IDV is the amount of compensation given in case a vehicle is stolen or suffers\ntotal loss. It is highly recommended to get IDV which is near the market value of\nthe car. Insurers provide a range of 5% to 10% to decrease IDV to the insured.\nLess IDV would mean lesser premium.**c)** **Fire insurance:** In fire insurance the sum insured may be fixed on the basis ofindemnity or reinstatement value for buildings/ plant and machinery and\nfixtures. Contents are covered on the basis of their market value which is cost of\nthe item less depreciation. (Reinstatement value is explained in detail in Chapter\n28 - Commercial Insurance)**d)** **Stocks insurance:** In case of stocks, sum insured is their market value. Theinsured will be reimbursed at the cost at which these stocks can be purchased in\nthe market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured is asper the agreement between insurer and insured at the time of contract. Normally\nit would consist of the sum of cost of the commodity plus Insurance + freight i.e.\nCIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "d23", "section": "Minimum premium", "chunk_id": "IC 38 -IA-Eng-Non-Life_013", "metadata": {"file_size": 4549, "chunk_index": 13, "chunk_tokens": 957, "has_examples": false, "has_tables": false, "key_concepts": ["Fire insurance:", "Marine cargo insurance:", "Test Yourself 1", "Motor insurance", "Minimum premium"]}}
{"chunk": "the market to replace the damaged raw material, after the loss.**e)** **Marine cargo insurance:** It is an agreed valued policy and the sum insured is asper the agreement between insurer and insured at the time of contract. Normally\nit would consist of the sum of cost of the commodity plus Insurance + freight i.e.\nCIF value.**f)** **Marine hull insurance:** In marine hull insurance, the sum insured is the value,agreed between the insured and the insurer at the beginning of the contract.\nThis value would be arrived at by a certified valuer after an inspection of the\nhull/ ship.**g)** **Liability insurance:** In case of liability policies, the sum insured is the liabilityexposure of the industrial units based on the degree of exposure, geographical\nspread. Additional legal costs and expenses may also form part of claim\ncompensation. The sum insured is decided by the insured based on the above\nparameters.**Test Yourself 2**Suggest an insurance scheme for a doctor to protect himself from any claims of\nnegligence against him.I. Personal accident insuranceII. Professional Liability insuranceIII. Marine hull insuranceIV. Health insurance24**Summary**a) Process of classifying risks and deciding into which category they fall isimportant for rate making.b) Underwriting is the process of determining whether a risk offered for insuranceis acceptable, and if so, at what rate, terms and conditions the insurance cover\nwill be accepted.c) A rate is the price of a given unit of insurance.d) The basic objective of rate making is to ensure that price of insurance should beadequate and reasonable.e) ‘Pure premium’ is suitably loaded or increased by adding percentages to providefor expenses, reserves and profits.f) The term hazard in insurance language refers to those conditions or features orcharacteristics which create or increase the chance of loss arising from a given\nperil.g) The objective of imposing deductible/ excess clauses is to eliminate smallclaims.h) No claim bonus is a powerful strategy to improve underwriting experience andforms an integral part of rating systems.i) Sum insured is the maximum amount that an insurance company will indemnifyas per policy condition.**Key terms**a) Underwritingb) Rate makingc) Physical hazardsd) Moral hazardse) Indemnityf) Loading of premiumg) Warrantiesh) Deductiblesi) Excess**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is II.25## CHAPTER G-03## PERSONAL AND RETAIL INSURANCE**Chapter Introduction**In the previous chapters we have learnt various concepts and principles related to\ngeneral insurance. General insurance products are classified differently in different\nmarkets. Some classify them as property, casualty and liability. Elsewhere, they are\ngrouped as fire, marine, motor and miscellaneous. In this chapter, common products\nsuch as personal accident, travel, home and shop keepers and motor insurance that\nare bought by such retail customers are discussed.**Learning Outcomes**After studying this chapter, you should be able to:1. Explain householder’s insurance\n2. Prepare shop insurance cover\n3. Discuss motor insurance26**A.** **Retail Insurance Products**There are some insurance products that are purchased for individuals for covering\ncertain interests. Though small commercial or business interests could be there for\nsuch insurances, these are generally sold to individuals. In some markets these are\ncalled ‘small ticket’ policies or ‘retail policies’ or ‘retail products’. Insurances of\nthe home, motor cars, two-wheelers, small businesses like shops etc. fall under this\ncategory. These products are usually sold by the same agents/ distribution channels\nthat deal with personal lines of insurance as the buyers also are essentially from the\nsame consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’s Policy,Office Package Policy etc. that, under one policy, seek to cover various physical\nassets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "e24", "section": "Marine cargo insurance:", "chunk_id": "IC 38 -IA-Eng-Non-Life_014", "metadata": {"file_size": 4549, "chunk_index": 14, "chunk_tokens": 1015, "has_examples": true, "has_tables": false, "key_concepts": ["Summary", "Answers to Test Yourself", "Answer 2", "Retail Insurance Products", "Marine cargo insurance:"]}}
{"chunk": "that deal with personal lines of insurance as the buyers also are essentially from the\nsame consumer segment.**B.** **'All Risks' and ‘Named Perils’ Insurance Policy**Non-life insurance policies can be broadly classified into two categories: Named peril policies\n All risk policiesi. \"All risks\" typically means that any risk that the insurance contract does notspecifically exclude is covered, subject to terms and conditions.ii. All-risks insurance is the most comprehensive type of coverage available. It istherefore priced proportionately higher than other types of policies, and the\ncost of this type of insurance is measured against the probability of a claim.iii. Named peril policies are those where the perils covered are specifically listedand defined.**C.** **Package policies**i. Package covers give, under a single document, a combination of covers.\nii. For instance there are covers such as Householder’s Policy, Shopkeeper’s Policy,Office Package Policy etc. that, under one policy, seek to cover various physical\nassets including buildings, contents etc.\niii. Such policies may also include certain personal lines or liability covers.\niv. Package covers could have common terms and conditions for all sections as alsospecific terms for specific sections of the policy.I.**D.** **Shopkeeper’s Insurance**A shop owner is not a corporate house that has large reserves of money to restart\nbusiness. A single mishap may lead to closure of her/ his shop and could probably\nruin her/ his family. There may be bank loans also to repay. There is always the\npossibility that a member of the public suffers a personal injury or damage to her/\nhis property, caused by the shop owner’s operations and a court holds the shop\nowner liable to pay the damages. Such situations can also ruin a shopkeeper.\nTherefore, it's very essential to secure this means of livelihood.27**Shopkeeper’s Insurance policies are devised to cover many of such aspects of**\n**commercial shop/ retail business.** There are policies that are customised to cover\nspecific interests of many types of shops such as antique shop, barbershop, beauty\nparlour, bookstore, department store, dry cleaners, gift shop, pharmacy, stationery\nshop, toy shop, apparel store etc.**1.** **What does shopkeeper’s insurance cover?**The policy can be tailored to provide cover to protect the specific areas of retail\nbusiness. It usually covers damage to the shop structure and contents due to fire,\nearthquake, flooding or malicious damage; and burglary. Shop insurance can also\ninclude business interruption protection. This will cover any loss of income or\nadditional expenditure in the event of operation of unexpected peril causing\ninterruption of business operation. The coverage can be selected by the insured\ndepending on her/ his range of activities.The additional covers the insured can opt may vary from insurer to insurer and can\nbe verified from the respective websites of the non-life insurance companies. These\ncould be:**i.** **Burglary and Housebreaking:** Cover for housebreaking, theft, and larceny of\noffice content\n**ii.** **Machinery Breakdown:** Cover for breakdown of electrical/ mechanicalappliances\n**iii.** **Electronic Equipment and Appliances:** Provides all-risk cover for electronic appliances\n Cover for loss of electronic installations\n**iv.** **Money Insurance** : Provides coverage against loss of money due to an accidentwhile it is in: Transit from the business premises to bank and vice versa\n A safe at the business premises\n A till (box/ drawer/ counter) at the business premises\n**v.** **Baggage** : Compensates for loss of baggage while on travel for official purposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course of employment\n Provides cover for legal liability to third parties\nFire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be taken\nseparately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.28**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is usually", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "B.", "chunk_id": "IC 38 -IA-Eng-Non-Life_015", "metadata": {"file_size": 4549, "chunk_index": 15, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Machinery Breakdown:", "Personal Accident", "Shopkeeper’s Insurance", "Baggage", "What does shopkeeper’s insurance cover?"]}}
{"chunk": "**v.** **Baggage** : Compensates for loss of baggage while on travel for official purposes\n**vi.** **Fixed Plate Glass and Sanitary Fittings covers accidental loss of damage to:** Fixed plate glass\n Sanitary fittings\n Neon Sign/ Glow Sign/ Hoarding\n**vii.** **Personal Accident**\n**viii.** **Infidelity/ Dishonesty of employees** : Covers loss or damage caused bydishonest acts of employees\n**ix.** **Legal Liability:** Compensation for accidents arising out of and in the course of employment\n Provides cover for legal liability to third parties\nFire/ Burglary/ Baggage/ Plate Glass/ Fidelity Guarantee/ Workmen\nCompensation and Public Liability Polices (dealt with next chapter) can be taken\nseparately also.\nTerrorism cover may also be extended. The exclusions are generally the same\nas in householder’s insurance.28**E.** **Householder’s Insurance**The coverages under a Householder’s Insurance Policy can be quite wide. It is usually\na package of all the needs of a Householder.Losses normally covered include fire, lightning, explosion and aircraft fall/ impact\ndamage (commonly known as FLEXA); storm, tempest, flood and inundation\n(commonly known as STFI); and burglary. Coverage differs from company to\ncompany and from policy to policy.Apart from the structure, it covers the contents of the house against burglary,\nhousebreaking, larceny and theft. Jewellery whilst being worn or kept in locked safe\ncan also be insured under Householder’s Insurance. Cover is also given for electrical\nand mechanical failure of domestic and electronic appliances.Similarly, Householder’s insurance Package also provides coverage for loss of\npersonal baggage, lost during travel, or liabilities to neighbours/ visitors may also\nbe part of Householders’ insurance package. Some insurers also provide coverage\nfor pedal cycle, personal accident and workmen’s compensation.IRDAI has introduced a standard product with effect from 1st April, 2021 – Bharat\nGriha Raksha policy with a tenure of upto 10 years, which shall be mandatorily\noffered by all general insurers carrying on Fire and allied perils insurance business.**Bharat Griha Raksha (meant for Home Building and Home Contents) policy** offers\ncover against a wide range of perils, namely Fire, Natural Catastrophe, Forest,\nJungle and Bush fires, Impact Damage of any kind, Riot, Strike, Malicious Damages,\nActs of terrorism, Bursting and overflowing of water tanks, apparatus and pipes,\nLeakage from automatic sprinkler installations and Theft within 7 days from the\noccurrence of any of the aforesaid events. This policy can be for a period of 1 to 10years.In addition to the Home Building, the policy covers General Home Contents\nautomatically (without any need for declaration of details) for 20% of the Sum\nInsured of the Building subject to a maximum of Rs.10 lakhs. One can also opt for a\nhigher Sum Insured for general contents by declaring the details.The policy offers two optional covers, namely (i) Insurance for Valuable Contents\nlike jewellery and curios; and (ii) Personal Accident of the insured and spouse due\nto an insured peril under the policy.The policy gives complete waiver of underinsurance. That is, if the Sum Insured\ndeclared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.29**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value of\nassets, therefore, it may not be difficult to arrive at the sum insured. In the case of\nshop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two methods\nof fixing the sum insured, viz. market value and reinstatement/ replacement value.For additional coverage like money, baggage, personal accident the premium would\ndepend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the case\nof M.V., in the event of a loss, depreciation is levied on the asset depending on\nits age. Under this method, the insured is not paid amount sufficient to replace", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Baggage", "chunk_id": "IC 38 -IA-Eng-Non-Life_016", "metadata": {"file_size": 4549, "chunk_index": 16, "chunk_tokens": 983, "has_examples": false, "has_tables": false, "key_concepts": ["Personal Accident", "Baggage", "Householder’s Insurance", "Legal Liability:", "Sum Insured and Premium"]}}
{"chunk": "declared by a policyholder is less than what ought to have been declared for the\nproperty in question, the policyholder’s claim will not be settled proportionately\nbut upto the Sum Insured that is declared.29**F.** **Sum Insured and Premium**Industrial units or offices will maintain books of accounts showing therein value of\nassets, therefore, it may not be difficult to arrive at the sum insured. In the case of\nshop and house this may not be always possible.As already stated under householder’s insurance, generally, there are two methods\nof fixing the sum insured, viz. market value and reinstatement/ replacement value.For additional coverage like money, baggage, personal accident the premium would\ndepend on the sum insured and the covers opted for.**How does one fix the Sum Insured?**i. Generally, for fire insurance, there are two methods of fixing the Sum Insured.One is Market Value (MV) and the other is Reinstatement Value (RIV). In the case\nof M.V., in the event of a loss, depreciation is levied on the asset depending on\nits age. Under this method, the insured is not paid amount sufficient to replace\nthe property.ii. In the RIV method, the insurance company will pay the cost of replacementsubject to ceiling of sum insured. Under this method, no depreciation is levied.\nOne condition is that the damaged asset should be repaired/ replaced in order\nto get the claim. It may be noted that RIV method is allowed only for fixed assets\nand not for other assets like stocks and stocks in process.Most policies insure the structure of the home for its reconstruction, which is called\n‘reinstatement value’ (and not on ‘market value’). Reinstatement value is the cost\nincurred to reconstruct the home if it is damaged. On the other hand, market value\ndepends on factors like age of the property, depreciation, etc.Sum insured is generally calculated by multiplying the built up area of insured's\nhome with the construction rate per square foot. The contents of the home furniture, durables, clothes, utensils, etc. - are valued on market value basis i.e.\nthe current market value of similar items after depreciation.Premium would depend on the value insured and the coverage taken.**Test Yourself 1**Which of the below statements is correct with regards to a package policy?I. Package Policy provide a combination of covers under a single document\nII. Package Policy can cover only physical assets like buildings\nIII. A named peril policy or package policy comes at the same price.\nIV. Only named peril policies can be bought and package policies are not available.V.30**Definition****Some important definitions****a)** **Burglary** means the unforeseen and unauthorised entry to or exit from theinsured premises by aggressive and detectable means with the intent to steal\ncontents there from.**b)** **Housebreaking** is said to have taken place when a house trespass has beencommitted by entering it for the purpose of committing an offence.**c)** **Robbery** means the theft of contents at the insured’s premises using aggressiveand violent means against the Insured and/ or insured’s employees.**d)** **Safe** means a strong cabinet within the insured’s premises designed for the safeand secure storage of valuable items, and access to which is restricted.**e)** **Theft** is a generic term for all crimes in which a person intentionally andfraudulently takes the property of another without permission or consent and\nwith the intent to convert it to the taker’s use or potential sale. Theft is\nsynonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed plate\nglass and sanitary fittings’ cover. This will cover accidental loss of damage to which of the\nfollowing?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and taken\nit for a drive. Out of nowhere, a dog comes in the way and to avoid hitting it, Revathi\nswerves sharply, breaks and goes over the divider, hits another car and injures a\nperson walking on the road. The outcome of a single incident has resulted in damage\nto Revathi’s own car, public property, another car and also caused injury to anotherperson.In this scenario, if Revathi does not have a car insurance, she may end up paying far\nmore than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "F.", "chunk_id": "IC 38 -IA-Eng-Non-Life_017", "metadata": {"file_size": 4549, "chunk_index": 17, "chunk_tokens": 999, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Housebreaking", "Burglary", "Motor Insurance", "Theft"]}}
{"chunk": "synonymous with ‘larceny’.**Test Yourself 2**Under the shopkeeper package policy, the insured may opt for an additional ‘Fixed plate\nglass and sanitary fittings’ cover. This will cover accidental loss of damage to which of the\nfollowing?I. Fixed plate glass\nII. Sanitary fittings\nIII. Neon signs\nIV. All of the above**G.** **Motor Insurance**Think of this situation: Revathi has bought a new car using all her savings and taken\nit for a drive. Out of nowhere, a dog comes in the way and to avoid hitting it, Revathi\nswerves sharply, breaks and goes over the divider, hits another car and injures a\nperson walking on the road. The outcome of a single incident has resulted in damage\nto Revathi’s own car, public property, another car and also caused injury to anotherperson.In this scenario, if Revathi does not have a car insurance, she may end up paying far\nmore than what it cost her to purchase the car. Will Revathi or similar people have that much money to pay?\n Should the other party’s insurance pay for Revathi’s actions?\n What if they don't have insurance?31That is why the laws of the land make it mandatory to have third-party liability\ninsurance. While motor insurance does not prevent these things from happening, it\nprovides a financial security blanket for the owner.Apart from an accident, the car can also be stolen, damaged by an accident or\ndestroyed by fire and the owner would suffer financially.Motor insurance must be taken by a vehicle owner (i.e. the person in whose name\nthe vehicle is registered with the Regional Transport Authority in India.)**Important****Mandatory Third Party Insurance**As per the Motor Vehicles Act, 1988, it is mandatory for every owner of a vehicle\nplying on public roads, to take an insurance policy, to cover the amount, which the\nowner becomes legally liable to pay as damages to third parties as a result of\naccidental death, bodily injury or damage to property. A Certificate of Insurance\nmust be carried in the vehicle as a proof of such insurance.**1.** **Motor insurance coverage**The country has a large vehicle population. A number of new vehicles keep coming\non to the road every day. Many of them are very costly as well. People say that in\nIndia, vehicles do not get junked, but only keep changing hands. This means that\nold vehicles continue to be on the road and new vehicles get added. The area of the\nroads (the space for driving) is not growing correspondingly with the number of\nvehicles. The number of people walking on the road is also increasing. Police and\nhospital statistics say that the number of road accidents in the country is increasing.\nThe amount of compensations awarded to accident victims by Courts of Law are\nincreasing. Even vehicle repair costs are going up. **All these show the importance**\n**of motor insurance in the country.**Motor insurance covers the loss of vehicles and the damages to them due to\naccidents and some other reasons. Motor insurance also covers the legal liability of\nvehicle owners to compensate the victims of the accidents caused by their vehicles.Despite, the government mandate, all the vehicles in the country are not insured.**Motor Insurance covers all types of vehicles plying on public roads such as:** Two wheelers\n Private cars\n All types of commercial vehicles: Goods carrying and passenger carrying\n Miscellaneous type of vehicles e.g. cranes,\n Motor Trade (Vehicles in Showrooms and Garages)32**‘Third-Party Insurance’**An insurance policy purchased for protection against the legal actions of another\nparty. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any vehicle\nplying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury caused\nby a motor accident are to be filed by the complainant in Motor Accident Claim\nTribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident cover", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Test Yourself 2", "chunk_id": "IC 38 -IA-Eng-Non-Life_018", "metadata": {"file_size": 4549, "chunk_index": 18, "chunk_tokens": 1013, "has_examples": true, "has_tables": false, "key_concepts": ["All these show the importance", "Motor insurance coverage", "Motor Insurance", "Important", "Mandatory Third Party Insurance"]}}
{"chunk": "party. Third-party insurance is purchased by the insured (first party) from an\ninsurance company (second party) for protection against another party's claims\n(third party) for liability arising out of the action of the insuredThird party insurance is called ‘Liability Insurance’ as well.**Two important types of covers that are popular in the market are discussed**\n**below:****Act [Liability] Only Policy:** As per Motor Vehicles Act it is mandatory for any vehicle\nplying in public place to insure liabilities towards third parties.The policy only covers the vehicle owner's legal liability to pay compensation for: Third party bodily injury or death\n Third party property damageLiability is covered for an unlimited amount in respect of death or injury and\ndamage.\nThe claims for compensation to third party victims in case of death or injury caused\nby a motor accident are to be filed by the complainant in Motor Accident Claim\nTribunal (MACT).\n**‘Compulsory Personal Accident (CPA) Insurance’**IRDAI permitted the issuance of a stand-alone Compulsory Personal Accident cover\nfor Owner-Driver effective 1st January, 2019. The Cover is provided to the OwnerDriver whilst driving the vehicle including mounting into/ dismounting from or\ntraveling in the insured vehicle as a co-driver. However, the policyholder can choose\nto opt for the CPA cover as part of the Liability Only policy or the Package policy.\nIn the event the policyholder chooses to take a stand-alone CPA policy, the CPA\ncover offered as part of Liability only or Package policy shall be deleted.**Package/ Comprehensive Policy: (Own Damage + Third Party Liability)**In addition to the above, the loss or damage to the vehicle insured by specified\nperils (known as own damage to motor vehicles) is also covered subject to the value\ndeclared (called IDV – discussed above) other terms and conditions in the policy.\nSome of these perils are fire, theft, riot and strike, earthquake, flood, accident etc.Some insurers may also pay for towing charges from the place of accident to the\nworkshop. A restricted cover is also available covering the risk of fire and/ or theft\nonly, in addition to the compulsory cover granted under Act (Liability) Only Policy.The policy can also cover loss or damage to accessories fitted in the vehicle,\npersonal accident cover under private car policies for passengers, paid driver; legal\nliability to employees and non-fare paying passengers in commercial vehicles.\nInsurers also provide free emergency services or use of alternative car in case of\nbreakdown.33**2.** **Exclusions**Some of the important exclusions under the policies are wear and tear, breakdowns,\nconsequential loss, and loss due to driving with invalid driving license or under the\ninfluence of alcohol. Use of vehicle not in accordance with `limitations as to use '\n(e.g. private car being used as a taxi) is not covered.**3.** **Sum Insured and Premium**The sum insured of a vehicle in a Motor Policy is referred to as Insured's Declared\nValue (IDV).In case of theft of vehicle or total damage beyond repairs in an accident, the claim\namount will be determined on the basis of the IDV.Rating/ premium calculation depends on factors like the Insured's Declared Value,\ncubic capacity, geographical zone, age of the vehicle etc.**Test Yourself 3**Motor insurance should be taken in whose name?I. In the name of the vehicle owner whose name is registered with RegionalTransport Authority\nII. If the person who will be driving the vehicle is different from the owner, thenin the name of the person who will be driving the vehicle, subject to approval\nfrom Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primary policyshould be in the name of the vehicle owner and additional policies should be\npurchased in the names of all the people who will be driving the vehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred to aninsured property from hazards or events named in the policy. The perils covered\nwill be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire, riots,bursting of pipes, earthquakes etc. Apart from the structure, it covers the\ncontents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Two important types of covers that are popular in the market are discussed", "chunk_id": "IC 38 -IA-Eng-Non-Life_019", "metadata": {"file_size": 4549, "chunk_index": 19, "chunk_tokens": 998, "has_examples": false, "has_tables": false, "key_concepts": ["Exclusions", "Test Yourself 3", "Sum Insured and Premium", "Summary", "Act [Liability] Only Policy:"]}}
{"chunk": "from Regional Transport Authority\nIII. In the name of any family member of the vehicle owner, including the vehicleowner, subject to approval from the Regional Transport Authority\nIV. If the vehicle will be driven by anyone other than the owner, then primary policyshould be in the name of the vehicle owner and additional policies should be\npurchased in the names of all the people who will be driving the vehicle.**Summary**a) A householder’s insurance policy only provides coverage on losses incurred to aninsured property from hazards or events named in the policy. The perils covered\nwill be clearly spelt out.\nb) Householder’s insurance covers the structure and its contents against fire, riots,bursting of pipes, earthquakes etc. Apart from the structure, it covers the\ncontents against burglary, housebreaking, larceny and theft.\nc) Package covers give, under a single document, a combination of covers.\nd) For a householder’s insurance policy generally there are two methods of fixingthe sum insured: Market Value (MV) and Reinstatement Value (RIV).\ne) Shopkeeper’s insurance usually covers damage to the shop structure andcontents due to fire, earthquake, flooding or malicious damage; and burglary.\nShop insurance can also include business interruption protection.\nf) Motor insurance covers the loss of vehicles and the damages to them due toaccidents and some other reasons. Motor insurance also covers the legal liability34of vehicle owners to compensate the victims of the accidents caused by their\nvehicles. Compulsory Personal Accident cover for Owner-Driver is provided to\nwhilst driving the vehicle including mounting into/ dismounting from or traveling\nin the insured vehicle as a co-driver.**Key terms**a) Householder’s insurance\nb) Shopkeeper’s insurance\nc) Motor insurance**Answers to Test Yourself****Answer 1** - The correct option is I.\n**Answer 2** - The correct option is IV.\n**Answer 3** - The correct option is I.35## CHAPTER G-04## COMMERCIAL INSURANCE**Chapter Introduction**In the previous chapter we considered various kinds of insurance products that cover\nthe risks faced by individuals and households. There is another set of customers who\nhave other needs for protection. These are the commercial or business enterprises\nor firms, who are engaged in or deal with of various kinds of goods and services. In\nthis chapter we shall consider the insurance products available to cover the risks\nfaced by this segment.**Learning Outcomes**After studying this chapter, you should be able to understand the importance and\nbasic purposes of the 11 types of insurances discussed.36**A.** **Property/ Fire Insurance**Commercial enterprises are broadly divided into two types: Small and Medium Enterprises [SMEs]Bharat Sookshma PolicyBharat Laghu Policy Large Business Enterprises-Standard fire and Special Perils Policy (SFSP), IAR etc.Historically, general insurance sector has largely developed by catering to the needs\nof these customers.Selling general insurance products to commercial enterprises calls for a careful\nmatching of insurance products with their needs. Agents must have a proper\nunderstanding of the products available. Let us briefly consider some of these\ngeneral insurance products.**1. Standard Fire and Special Perils Policy (SFSP)**Fire insurance policy is suitable for commercial establishments as well as for the\nowner of property, one who holds property in trust or in commission and for,\nindividuals/ financial institutions who have financial interest in the property.All immovable and movable property located at a particular premises such as\nbuildings, plant and machinery, furniture, fixtures, fittings and other contents,\nstocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild and\nrenew the property damaged to bring back the business to its normal course. It is\nhere that fire insurance plays its role.**1.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile All\nIndia Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood and inundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation\n Bush fire37There are two important features which differentiate commercial insurance from", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "y34", "section": "Summary", "chunk_id": "IC 38 -IA-Eng-Non-Life_020", "metadata": {"file_size": 4549, "chunk_index": 20, "chunk_tokens": 1010, "has_examples": true, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Answer 2", "Answer 3", "Chapter Introduction", "Answer 1"]}}
{"chunk": "stocks and stock in process, including stocks at suppliers/ customer's premises,Stocks held in trust, if specifically declared, machinery temporarily removed from\nthe premises for repairs can be insured. Monetary relief is essential to rebuild and\nrenew the property damaged to bring back the business to its normal course. It is\nhere that fire insurance plays its role.**1.1.** **What does the Standard Fire policy cover?**Some of the perils traditionally covered by the Fire policy (as per the erstwhile All\nIndia Fire Tariff) are discussed below.The fire policy for commercial risks covers the perils of: Fire\n Lightning\n Explosion/ implosion\n Riot strike and malicious damage\n Impact damage\n Aircraft damage\n Storm, tempest, cyclone, typhoon, hurricane, tornado, flood and inundation\n Subsidence and landslide including rock slide\n Bursting and overflowing of water tanks, apparatus and pipes\n Missile testing operations\n Leakages from automatic sprinkler installation\n Bush fire37There are two important features which differentiate commercial insurance from\nindividual and retail lines.a) The insurance needs of firms or business enterprises are much larger than thatof individuals. The reason is that the value of the assets of a commercial\nenterprise is much larger than that of an individual’s assets. Their loss or damage\ncould adversely impact the very survival and future of the company.b) The demand for insurance of commercial enterprise is often mandated or madenecessary by legal or other requirements. For instance, when plants and assets\nare set up through a bank loan, their insurance may be a condition of the loan.\nMany corporate enterprises in India are professionally run companies and a\nnumber of them are multinationals.They are required to maintain global quality standards, including the adoption\nof appropriate risk management strategies and insurance for protecting their\nassets.Any loss arising out of the above perils is covered by the policy subject to some\nexclusion.**1.2.** **Revised Standard Fire and Special Perils (SFSP) Policies:**IRDAI has issued guidelines with effect from 1st April, 2021 whereby the Standard\nFire and Special Perils (SFSP) Policy will be replaced by the following two standard\nproducts **for the risks** given **below** that shall be mandatorily offered by all general\ninsurers carrying on Fire and allied perils insurance business.**i.** **Bharat Sookshma Udyam Suraksha (meant for enterprises where the total****value at risk is upto Rs. 5 Crore)** - designed for financial protection of MSMEsThis policy provides cover for the Building/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value at risk across all insurable\nasset classes at one location is up to Rs. 5 Crore. This policy also offers cover against\na wide range of perils, quite similar to the policy meant for Dwellings.The policy has many in-built covers in addition to the basic coverage — Cover for\nalterations, additions or extensions, Cover for stocks on a floater basis, Cover for\ntemporary removal of stocks, Cover for Specific Contents, Cover for start-up\nexpenses (following a loss), Cover for payment of professional fees for Architects,\nSurveyors and Consulting Engineers, Cost for removal of debris and Costs compelled\nby Municipal Regulations.The policy can be taken by micro level enterprises such as offices, hotels, industries,\nstorage risks and so on. The policy underinsurance to the extent of 15% is waived.\nBharat Sookshma Udyam Policies allow increase in Sum Insurer during the policy\ntenure by endorsement.38**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total value****at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for financial\nprotection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value of risk across all insurable\nasset classes at one location exceeds Rs.5 Crore but does not exceed Rs. 50 Crore\nat the policy commencement date. This policy also has all the in-built covers offered\nby the policy for micro level enterprises mentioned above. The perils against which\ninsurance is offered are also similar to the policy meant for micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "e37", "section": "What does the Standard Fire policy cover?", "chunk_id": "IC 38 -IA-Eng-Non-Life_021", "metadata": {"file_size": 4549, "chunk_index": 21, "chunk_tokens": 983, "has_examples": true, "has_tables": false, "key_concepts": ["What does the Standard Fire policy cover?"]}}
{"chunk": "storage risks and so on. The policy underinsurance to the extent of 15% is waived.\nBharat Sookshma Udyam Policies allow increase in Sum Insurer during the policy\ntenure by endorsement.38**ii.** **Bharat Laghu Udyam Suraksha(meant for enterprises where the total value****at risk is more than Rs. 5 Crore and upto Rs. 50 crore)** designed for financial\nprotection of MSMEsThis policy provides cover for the Buildings/ Structures, Plant and Machinery, Stock\nand other assets of enterprises where the total value of risk across all insurable\nasset classes at one location exceeds Rs.5 Crore but does not exceed Rs. 50 Crore\nat the policy commencement date. This policy also has all the in-built covers offered\nby the policy for micro level enterprises mentioned above. The perils against which\ninsurance is offered are also similar to the policy meant for micro level enterprises.The policy, again, can be taken for all types of risks such as offices, hotels,\nindustries, storage risks and so on. Bharat Laghu Udyam Policies allow increase in\nSum Insurer during the policy tenure by endorsement.**iii.** **Exclusions under Fire Policies**Insurers traditionally exclude the following from the scope of Fire policies.**Losses due to excepted perils like**i. War and war like activities.\nii. Nuclear perils\niii. Ionisation and radiationiv. Pollution and contamination losses**Perils that are covered by other policies in General Insurance**i. Machinery Breakdown,\nii. Business Interruptioniv. **Add-on Covers**However some perils can be covered by payment of additional premium like earth\nquake, fire and shock; deterioration of stock in the cold storages following power\nfailure as a result of insured peril, additional expenditure involved in removal of\ndebris, architect, consulting engineers’ fee over and above the amount covered by\nthe policy, forest fire, spontaneous combustion and impact damage due to own\nvehicles; terrorism.v. **Variants of Fire policy**Fire policies are generally issued for a period of 12 months. Only for dwellings,\ninsurance companies offer long term policies, i.e. for a period over 12 months. In\nsome cases short period policies are also issued, to which the short period scales\nare applicable.a. **Market Value and Reinstatement Value Policies:** In the event of a loss, theinsurer would normally pay the market value [which is the depreciated value].\nUnder Reinstatement Value Policy, however, the insurers would pay cost of\nreplacement of the damaged property, by new property of the same kind.39Reinstatement value policies are issued for covering buildings, plant,\nmachinery and furniture, fixture, fittings. Reinstatement value policies are not\nissued to cover stocks, which are usually covered on market value basis.b. **Declaration Policy:** To take care of frequent fluctuations in stocks values inwarehouse, Declaration Policy is granted subject to certain conditions. The sum\ninsured should be the highest value that is expected to be stored in the godown\nduring the period of policy. On this value a provisional premium is charged. The\ninsured has to declare the value of his stocks at agreed intervals, during the\ncurrency of policy. This is adjustable along with the premium at the end of the\npolicy period.c. **Floater Policies:** Floater policies may be issued for stocks of goods which arestored at various specified locations under one sum insured. Unspecified\nlocations are not covered. The premium rate is the highest rate applicable to\ninsured’s stocks at any one location with a loading of 10%. These are also called\nfire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on the natureof occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and flood groupperils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Bharat Laghu Udyam Suraksha(meant for enterprises where the total value", "chunk_id": "IC 38 -IA-Eng-Non-Life_022", "metadata": {"file_size": 4549, "chunk_index": 22, "chunk_tokens": 1006, "has_examples": false, "has_tables": false, "key_concepts": ["Market Value and Reinstatement Value Policies:", "Premium rating depends on:", "Test Yourself 1", "Losses due to excepted perils like", "Declaration Policy:"]}}
{"chunk": "fire floater policies as the sum insured ‘floats’ over multiple locations.**vi.** **Premium rating depends on:**a) The type of occupancy, whether industrial or otherwise.\nb) All property located in an industrial complex will be charged one ratedepending on the product(s) made.\nc) Facilities outside industrial complexes will be rated depending on the natureof occupancy at individual location.\nd) Storage areas will be rated based on the hazardous nature of goods held.e) Additional premium is charged to include \"Add on\" covers.\nf) Discount in premium is given based on past claims history & fire protectionfacilities provided at the premises.\ng) One can also opt out of riot, strike, malicious damage covers and flood groupperils for reduction in premium.The rating pattern may again vary from insurer to insurer.**Test Yourself 1**A fire policy for commercial risks covers the peril of ________I. Vehicle burning on highway\nII. Fire on ship\nIII. Explosion in factory\nIV. Hospitalization due to fire**B.** **Business Interruption Insurance**Business Interruption insurance is also known as Consequential Loss Insurance or\nLoss of Profit Insurance.Fire insurance provides indemnity against material or property damage or loss\nsuffered to building, plant, machinery fixtures, fittings, merchandise goods, etc. by40insured perils. **This may result in total or partial interruption of the insured’s**\n**business**, resulting in various economic losses, during the period of interruption.**Coverage under Business Interruption Policy**Consequential Loss (CL) Policy [Business Interruption (BI)] provides indemnity for\nloss of what is termed as gross profit – which includes Net Profit plus Standing\nCharges along with the increased cost of working incurred by the insured to get the\nbusiness back to normalcy, as soon as possible to reduce the final loss. The perils\ncovered and conditions are the same as those covered under the fire policy.**Example**If a Fire results in damage to the car manufacturer's plant, the production loss will\nresult in loss of income to the manufacturer. This loss of income along with extra\nexpenses incurred can be insured provided it has resulted from a peril insured.This policy can be taken only in conjunction with standard fire and special perils\npolicy as claims under this policy are admissible only if there is a claim under\nstandard fire and special perils policy.**Test Yourself 2**A business interruption insurance policy can be taken only in conjunction with____________.I. Standard fire and special perils insurance policy\nII. Standard marine insurance policy\nIII. Standard motor insurance policy\nIV. Standard health insurance policy**C.** **Burglary Insurance**The policy is meant for business premises like factories, shops, offices, warehouses\nand godowns which may contain stocks, goods, furniture fixtures and cash in a\nlocked safe which can be stolen. The scope of cover is clearly expressed in the\npolicy.**Risks covered under burglary insurance**a) Loss of property following actual forcible and violent entry into the premises orloss followed by actual, forcible and violent exit from the premises or hold up.b) Damage to insured property or premises by burglars. Property insured is coveredonly when it is lost from the insured premises and not from any other premises.**Cash cover:** An important part of burglary cover is cash cover. It operates only when\nthe cash is secured in a safe, which is burglar proof and is of an approved make and\ndesign. The common conditions applicable for granting cash cover are given below:a) Cash lost from the safe following the use of the original key to open, it is coveredonly where such key has been obtained by violence or threats of violence or\nthrough means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some place otherthan the safe. The liability of the insurer is limited to the amount actually shown\nby such records.41**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales, grain,\nsugar etc.) the risk of losing the entire stock on a single occasion is considered\nremote. The value that can be burgled is ascertained as probable maximum loss\n(PML) and the full premium is charged for this maximum probable loss and\ncertain percentage of full premium is charged on rest amount of stock as PML\nfloats over the entire stock. It is assumed that a second burglary may not follow\nimmediately or the insured may take additional security measures from itsrecurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other persons", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "y40", "section": "Premium rating depends on:", "chunk_id": "IC 38 -IA-Eng-Non-Life_023", "metadata": {"file_size": 4549, "chunk_index": 23, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Premium rating depends on:", "Burglary Insurance", "Exclusions", "Test Yourself 1", "Example"]}}
{"chunk": "through means of force. This is generally known as “key clause”.b) A complete list of the amounts of cash in safe is kept secure in some place otherthan the safe. The liability of the insurer is limited to the amount actually shown\nby such records.41**1.** **First Loss Insurance**In the cases, which are of low value in high bulk, (such as cotton in bales, grain,\nsugar etc.) the risk of losing the entire stock on a single occasion is considered\nremote. The value that can be burgled is ascertained as probable maximum loss\n(PML) and the full premium is charged for this maximum probable loss and\ncertain percentage of full premium is charged on rest amount of stock as PML\nfloats over the entire stock. It is assumed that a second burglary may not follow\nimmediately or the insured may take additional security measures from itsrecurrence.**2.** **Declaration cover and floater cover is also possible in respect of stocks,****similar to fire insurance.****3** . **Exclusions**The policy does not cover theft by employees, family members or other persons\nwho are lawfully on the premises, nor does it cover larceny or ordinary theft. It\nalso excludes losses that are covered by a fire or plate glass policy.**4.** **Extensions**The policy can be extended to cover riot, strikes and terrorism risks at extra\npremium.**5.** **Premium**Rates of premium for burglary policy depend upon the nature of insured\nproperty, the moral hazard of the insured himself, construction and location of\npremises, safety measures ( _e.g. watchmen, burglar alarm)_, previous claims\nexperience etc.In addition to details given in the proposal form, a pre-acceptance inspection is\ndone by insurers where high values are involved.**Test Yourself 3**The premium for burglary policy depends on ______________.I. Nature of insured property\nII. Moral hazard of the insured himself\nIII. Construction and location of the premises\nIV. All of the above**D.** **Money Insurance**Handling of cash is an integral part of any business. The Money Insurance policy is\nintended to protect banks and industrial business establishments against loss of\nmoney. Money is at risk in the premises as well as outside. It can be unlawfully taken\naway while withdrawing, depositing, making payments or collections.**1.** **Coverage of Money Insurance**Money insurance policy is designed to cover the losses that may occur while cash,\ncheques/ postal orders/ postal stamps are being handled. The policy normally\nprovides cover under two sections42**a)** **Transit section:** It covers loss of money as a result of robbery or theft or otherfortuitous cause whilst it is carried outside by the insured or her authorised\nemployees.The transit section specifies two amounts:**i.** **Limit per carrying** : This is the maximum amount that insurers may berequired to pay in respect of each loss.**ii.** **Estimated amount in transit during the policy period:** It represents theamount to which the rate of premium is to be applied to arrive at the amount\nof premium.Policies can be issued on “ **declaration basis”**, similar to the practice in fire\ninsurance. Insurers thus charge a provisional premium on the estimated amount\nin transit and adjust this premium at the time of expiry of the policy, based on\nactual amount in transit during the policy period, as declared by the insured.**b)** **Premises section:** This section covers loss of cash from one’s premises/ lockedsafe due to burglary, housebreaking, hold up etc. Other features of the policy\nare normally the same as of burglary insurance (of business premises) that this\nwas discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized person andc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risksc) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried\nthroughout the year based on declaration made within 30 days of expiry of the\npolicy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission\nII. Loss of cash from one’s premises due to burglary\nIII. Loss of money that has been entrusted to other than authorized person", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "s42", "section": "First Loss Insurance", "chunk_id": "IC 38 -IA-Eng-Non-Life_024", "metadata": {"file_size": 4549, "chunk_index": 24, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Exclusions", "Extensions", "Test Yourself 4", "First Loss Insurance", "Test Yourself 3"]}}
{"chunk": "are normally the same as of burglary insurance (of business premises) that this\nwas discussed under Learning Outcome C above.**2.** **Important exclusions**These include:a) Shortage due to error or omission,b) Loss of money that has been entrusted to other than authorized person andc) Riot, strike and terrorism**3.** **Extensions**On payment of additional premium the policy may be extended to cover:a) Dishonesty of persons carrying cash,b) Riot, strike and terrorism risksc) Disbursement risk, which is the loss suffered during payment of wages toemployees**4.** **Premium**Premium rate is fixed depending on the insured, cash carrying liability of the\ncompany at any one time, the mode of conveyance, distance involved, safety\nmeasures taken etc. Premium is adjustable according to actual cash carried\nthroughout the year based on declaration made within 30 days of expiry of the\npolicy.**Test Yourself 4**Which of the below is covered under a money insurance policy?I. Shortage due to error or omission\nII. Loss of cash from one’s premises due to burglary\nIII. Loss of money that has been entrusted to other than authorized person\nIV. Riot, strike and terrorism43**E.** **Fidelity Guarantee Insurance**Companies suffer financial loss due to what are termed as white collar crimes like\nfraud or dishonesty of their employees. Fidelity guarantee insurance indemnifies\nemployers against the financial loss suffered by them due to fraud or dishonesty of\ntheir employees by forgery, embezzlement, larceny, misappropriation and default.**1.** **Coverage under Fidelity Guarantee Insurance**Cover is granted against a direct pecuniary loss and does not include consequential\nlosses.a) The loss should be in respect of moneys, securities or goodsb) The act should be committed in the course of the duties specified;c) The loss has be discovered within 12 months of expiry of the policy or deathretirement resignation or dismissal of the employee, whichever is earlierd) No cover is provided in respect of a dishonest employee who has been re\nemployed**2.** **Types of Fidelity Guarantee Policy**There are various types of fidelity guarantee policies, as discussed below:**a)** **Individual policy:** This type of policy is used where only one individual is tobe guaranteed. Name, designation of the employee and amount of guarantee\nhas to be specified.**b)** **Collective policy:** This policy comprises a schedule listing out the names ofthose employees to whom the guarantee applies, along with a note on the\nduties of each employee and separate individual sums insured.**c)** **Floating policy or floater:** In this policy, the names and duties of theindividuals to be covered are inserted in a schedule, but instead of individual\namounts of guarantee, a specified amount of guarantee is “floated” over the\nwhole group. A claim in respect of any one employee will, therefore, reduce\nthe floated guarantee, unless the original sum is reinstated by payment of an\nextra premium.**d)** **Positions policy:** This is similar to a collective policy with the difference thatonly the schedule lists out \"positions’ (say, Cashier, Account Officer Etc.) that\nare to be guaranteed for a specified amount and the name are not mentioned.**e)** **Blanket policy:** This policy covers the entire staff without showing names orpositions. No enquiries about the employees are made by the insurers. Such\npolicies are only suitable for an employer with a large staff and the\norganization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers in\nthe event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.44**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud or dishonestyof their employees\nII. Employees against the financial loss suffered by them due to fraud or dishonestyof their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate\nIV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions\nwho deal with operations involving money, considering the special risks faced by\nthem regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "m43", "section": "Important exclusions", "chunk_id": "IC 38 -IA-Eng-Non-Life_025", "metadata": {"file_size": 4549, "chunk_index": 25, "chunk_tokens": 982, "has_examples": true, "has_tables": false, "key_concepts": ["Bankers Indemnity Insurance", "Extensions", "Types of Fidelity Guarantee Policy", "Test Yourself 4", "Coverage under Fidelity Guarantee Insurance"]}}
{"chunk": "organization makes adequate enquiries into the antecedents of employees.\nThe references that the employer obtains must be available to the insurers in\nthe event of a claim. The policy is granted only to large firms of repute.**3.** **Premium**The rate of premium depends upon the type of business occupation, status of the\nemployee, the system of check and supervision.44**Test Yourself 5**Fidelity Guarantee Insurance indemnifies ________________.I. Employers against the financial loss suffered by them due to fraud or dishonestyof their employees\nII. Employees against the financial loss suffered by them due to fraud or dishonestyof their employer\nIII. Third parties against the financial loss suffered by them due to fraud ordishonesty of the corporate\nIV. Shareholders against the financial loss suffered by them due to fraud ordishonesty of the company management**F.** **Bankers Indemnity Insurance**This comprehensive cover was drafted for the banks, NBFC's and other institutions\nwho deal with operations involving money, considering the special risks faced by\nthem regarding money and securities.**1.** **Coverage under Bankers Indemnity Insurance**\nThere are different variations to this policy based on the requirement of banker.a) Money securities lost or damaged whilst within the premises due to fire,burglary, riot and strike.b) Loss suffered due to any cause whatsoever including negligence of theemployees, when the property is carried outside the premises in the hands\nof authorized employees.c) Forgery or alteration of cheques, drafts, fixed deposit receipts etc.d) Dishonesty of employees with reference to money/ securities or in respectof goods pledged.e) Dispatches by registered post parcels.f) Dishonesty of appraisers.g) Money lost while in the hands of agents of the bank like ‘Janata Agents’,‘Chhoti Bachat Yojana Agents’.The cover is issued on discovery basis, this means the policy will respond to a period\nduring which a loss is discovered and not necessarily the period when it occurred.\nBut a cover should have been in existence when the loss actually occurred.Conventionally losses within a period of 2 years prior to date of discovery only are\npayable, subject to the cover having been continuous, from a date earlier than that\nwhen the loss has occurred.**2.** **Important exclusions**\nMajor exclusions are Trading losses, Negligence, Software crimes and dishonesty of\nthe partners/ directors45**3.** **Scope**\nThe policy comprises of 7 sections viz.:1. On Premises2. In Transit\n3. Forgery or Alteration\n4. Dishonesty\n5. Hypothecated Goods\n6. Registered Postal Service\n7. Appraisers\n8. Janata Agents**4.** **Sum insured**The bank has to fix the **sum insured** which would usually float over the first 5\nsections. This is termed as ‘basic sum insured’. Additional sum insured can be\npurchased for section (1) and (2) if the basic sum insured is not sufficient. The policy\nalso allows one compulsory and automatic reinstatement of sum insured by payment\nof an extra premium**5.** **Rating**The premium calculation is based on:a) Basic sum insured\nb) Additional sum insured\nc) Number of staff\nd) Number of branches.**Test Yourself 6**Which of the below can be covered under a bankers indemnity insurance policy?I. Money securities lost or damaged whilst within the premises due to fire\nII. Forgery or alteration of cheques\nIII. Dishonesty of employees with reference to money\nIV. All of the above**G.** **Jewelers’ Block Policy**In recent years India has emerged as a leading centre in world trade for jewellery,\nespecially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in large\nquantity and moving them between different premises.46**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are allowed\nto avail of other sections at their option. It is also the market practice to include\nsome more sections to cover other assets like Electronic equipment, Plate glass,\nSignage etc. and liabilities like Employees Compensation, Infidelity of employees.Fidelity guarantee cover should also be taken by the insured for full protection if\nthere is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for each\nsection with discounts for exclusive round the clock watchman, close circuit TV/", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "s45", "section": "Premium", "chunk_id": "IC 38 -IA-Eng-Non-Life_026", "metadata": {"file_size": 4549, "chunk_index": 26, "chunk_tokens": 1011, "has_examples": true, "has_tables": false, "key_concepts": ["Rating", "Jewelers’ Block Policy", "Bankers Indemnity Insurance", "Sum insured", "Test Yourself 5"]}}
{"chunk": "especially diamonds. Imported raw diamonds are cut, polished and exported. It\ntakes care of all risks of a jeweller whose business involves sale of articles of high\nvalue in small bulk like jewellery gold &silver articles, diamonds and precious\nstones, wrist watches etc. The trade involves stocking these expensive items in large\nquantity and moving them between different premises.46**1.** **Coverage of Jeweller’s Block Policy**Jewellers block policy is a package policy, traditionally divided into 4 sections.\nCoverage under Section 1 is usually made compulsory while the insured are allowed\nto avail of other sections at their option. It is also the market practice to include\nsome more sections to cover other assets like Electronic equipment, Plate glass,\nSignage etc. and liabilities like Employees Compensation, Infidelity of employees.Fidelity guarantee cover should also be taken by the insured for full protection if\nthere is no separate section for this cover.Risks are rated on merits of each case. Different premium rates are applied for each\nsection with discounts for exclusive round the clock watchman, close circuit TV/\nalarm system, exclusive strong room and for any other safety expedient etc.**Test Yourself 7**In case of a Jeweller’s Block Policy, there are traditionally multiple sections, of\nwhich one is usually compulsory while the remaining sections are ____________.I. Mandatory\nII. Retrospective\nIII. Optional\nIV. Compensatory**H.** **Engineering Insurance**Engineering insurance is a branch of general insurance that developed parallel with\nthe growth of fire insurance. Its origins can be traced to the development of\nindustrialization, which highlighted the need for a separate cover for plant and\nmachinery. Concept of **All Risks** cover was also developed with regard to\nengineering projects - covering damage due to any cause except those specifically\nexcluded. The products covered various stages – from construction to testing till the\nplant became operational. The customers for this insurance are both large and small\nindustrial units. This also includes units having electronic equipment and\ncontractors doing big projects. There are two types of engineering insurance\npolicies:1) Annual Policies-Generally of one year duration\na. Machinery Breakdown Policy\nb. Boiler Pressure Plant policy\nc. Electronic Equipment Policy\nd. Contractor’s Plant & Machinery Policy\ne. Deterioration of Stock Policy\nf. Civil Engineering Completed Risk\n2) Project Policies with variable duration based on project period\na) Contractors All Risk Policy\nb) Erection All Risk Policy47There are two “Consequential Loss” policies associated with Engineering Policies:a) Machinery Breakdown Loss of Profit Policy (MBLOP) taken with Machinery\nBreakdown Policy or with Boiler and Pressure Plant policy andb) Advance loss of Profit (ALOP) or Delay in Startup (DSU) Policy taken with\nproject policy.Let us briefly consider the policies:\n**A.** **Annual Policies****1.** **Machinery Breakdown Policy (MB):** This policy is suitable for every industrywhich operates on machines and for whom breakdown of plant and machinery is\nof serious consequence. This policy covers machines like generators,\ntransformer and other electrical, mechanical and lifting equipment.The policy covers unforeseen and sudden physical damage by mechanical or\nelectrical breakdown by any cause (subject to excepted risks) to the insured\nproperty:a) While it is at work or at rest.\nb) While being dismantled for cleaning or overhauling\nc) During cleaning or overhauling operations and during reassembly thereafter.\nd) When being shifted within the premise.Premium is charged on the reinstatement/ replacement value of individual\nmachinery. The machine as a whole should be insured. Rates depend on the type of\nmachine; the industry in which it is used and its value. Discounts are offered based\non factors such as stand-by facilities, spares available and claims experience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plant andto surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for adequate**\n**cover, both the policies need to be taken. Sum insured under all Engineering**\n**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronic equipment,which includes the entire computer system consisting of CPU, keyboards,\nmonitors, printers, UPS, system software etc. Auxiliary equipment such as airconditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and burglary", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "y47", "section": "Coverage of Jeweller’s Block Policy", "chunk_id": "IC 38 -IA-Eng-Non-Life_027", "metadata": {"file_size": 4549, "chunk_index": 27, "chunk_tokens": 1009, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 7", "Boiler and Pressure Plant Policy:", "Engineering Insurance", "Annual Policies", "Electronic Equipment Policy:"]}}
{"chunk": "machine; the industry in which it is used and its value. Discounts are offered based\non factors such as stand-by facilities, spares available and claims experience.**2.** **Boiler and Pressure Plant Policy:** This covers boilers and pressure vessels,against:a) Damage, other than by fire, to the boilers and/ or other pressure plant andto surrounding property of the insured; and\nb) Legal liability of the insured on account of bodily injury to the person, ordamage to the property, of third parties, caused by explosion or collapse\ndue to internal pressures of such boiler and/ or pressure plant.**Since fire policy and boiler insurance policy are mutually exclusive, for adequate**\n**cover, both the policies need to be taken. Sum insured under all Engineering**\n**Policies should be the current replacement value.****3.** **Electronic Equipment Policy:** This covers various kinds of electronic equipment,which includes the entire computer system consisting of CPU, keyboards,\nmonitors, printers, UPS, system software etc. Auxiliary equipment such as airconditioning, heating and power conversion, etc. are also covered.This policy is a combination of fire policy, machinery insurance policy and burglary\npolicy. The policy covers the contingencies such as defective design (not covered\nunder a warranty), effects of natural phenomena; defective functioning due to48voltage fluctuations, impact shock etc., burglary, housebreaking & theft are also\ncovered.The policy is available to the owner, lessor or hirer, depending upon the\nresponsibility or liability in each case. It has usually three sections that cover various\ntypes of losses:**a)** **Section 1:** Loss and damage to equipment\n**b)** **Section 2:** Loss and damage to external data media like computer externalhard disks\n**c)** **Section 3:** Increased cost of working - to ensure continued data processingon substitute equipment up to 12, 26, 40 or 52 weeks.**4.** **Contractors Plant & Machinery (CPM) Policy:** Suitable for contractors involvedin construction business for covering all kinds of machinery like cranes,\nexcavators from unforeseen and sudden physical loss or damage from any cause\nincluding:a) Burglary, Theft, Riot, Storm, Malicious Damage, Tempest\nb) Fire and lightning, external explosion, earthquake and other Acts of Godperils\nc) Accidental damage while at work due to faulty manhandling, dropping orfalling, collapse, collision and impact; can be extended for third party\ndamage.The Premium to be charged depends on the type of equipment and the location\nat which it operates.**The cover is operative whilst the equipment is at work or at rest or being**\n**dismantled for cleaning or overhauling or re-assembling thereafter. The**\n**cover also applies while the same are lying at contractors own premises.**\n**However floater policy covering the equipment “Anywhere in India basis” is**\n**also available by charging 10% extra premium and with certain conditions.****5.** **Deterioration of Stock Policy:** This policy is suitable for the owner of the coldstorage (individual or a cooperative society) or those who take the cold storage\non lease or hire for storage of perishable commodities. The cover is against the\nrisk of deterioration and contamination following breakdown of the refrigeration\nplant and machinery and also due to rise in temperature and sudden and\nunforeseen escape of refrigerants into the cold storage rooms.**6.** **Civil Engineering Completed Risk:** It is generally taken by contractors who hasto maintain the civil projects after completion. The civil projects like – Bridges,\nDry docks, Harbours, Jetties Railway lines, Rock Filled dams, Concrete dams,\nEarthen dams, Canals, Irrigation system are considered under this policy. Risks\ncovered are –1. Fire\n2. Lightning\n3. Explosion/ Implosion494. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami\n9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be on\nan annual basis.\n**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small\nbuildings to massive dams, buildings, bridges, tunnels, etc. The policy provides\nan “All Risk” cover – thus providing indemnity against any sudden and unforeseen", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "o48", "section": "Boiler and Pressure Plant Policy:", "chunk_id": "IC 38 -IA-Eng-Non-Life_028", "metadata": {"file_size": 4549, "chunk_index": 28, "chunk_tokens": 1000, "has_examples": true, "has_tables": false, "key_concepts": ["Boiler and Pressure Plant Policy:", "Project Policies", "Section 1:", "Civil Engineering Completed Risk:", "Contractors Plant & Machinery (CPM) Policy:"]}}
{"chunk": "Dry docks, Harbours, Jetties Railway lines, Rock Filled dams, Concrete dams,\nEarthen dams, Canals, Irrigation system are considered under this policy. Risks\ncovered are –1. Fire\n2. Lightning\n3. Explosion/ Implosion494. Riot, Strike, Malicious Damage\n5. Impact by any Rail/ Road or water borne vehicle or animal\n6. Storm Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood andInundation, Wave action of water\n7. Subsidence and Landslide (Including Rockslide) damage\n8. Earthquake Fire and Shock (Including flood due to earthquake), Tsunami\n9. Frost, avalanche, ice.**B.** **Project Policies**These policies are typically issued for the period of the project and may not be on\nan annual basis.\n**1.** **Contractors All Risks (C.A.R.) Policy:** This is designed to protect the interestsof contractors and principals engaged in civil engineering projects from small\nbuildings to massive dams, buildings, bridges, tunnels, etc. The policy provides\nan “All Risk” cover – thus providing indemnity against any sudden and unforeseen\nloss or damage that occurs to property insured at the construction site. This can\nbe extended to cover third party liability and other exposures. Premium\nchargeable depends on the nature of the project, the project cost, the project\nperiod, geographic location and the period of testing.**2.** **Erection All Risks (EAR) Policy:** This policy is also known as Storage-cum\nErection (SCE) policy. It is suitable for the principal or contractors of a project\nwhereas plant and machinery is being erected as it is exposed to various external\nrisks. This is a comprehensive insurance policy that covers any sort of\ncontingency right from the moment the materials are unloaded at the project\nsite and continues during the entire project period until the project is tested,\ncommissioned and handed over.Premium chargeable depends on the nature of the project, the cost, the project\nperiod, geographic location, and the period of testing.**If required a marine cover can be issued along with the erection policy for**\n**providing coverage to the equipment and materials during the transit phase**\n**till delivered at the project site.****C.** **Consequential Loss Policies**These type of policies are issued to cover losses consequential to other losses. These\nare also called ‘Business Interruption’ policies or ‘Loss of Profits’ policies.\n**3.** **Machinery Loss of Profits (MLOP) Policy**This policy is suitable for industries where interruptions or delays as a result of\nmachinery breakdown or boiler explosion result in huge consequential losses.Where the time lag between the breakdown or loss and the restoration is large, this\npolicy compensates for the loss of profits during the intervening period due to\nreduction in turnover and increase in cost of working. The terms and conditions and50coverage of business interruption policy is the same as the business interruption\npolicy following a fire policy loss, which has been discussed earlier in this chapter.**4.** **Advance Loss of Profit Cover (ALOP) or Delay in Start-up Policy (D.S.U.)**This covers financial consequences of a project being delayed because of accidental\ndamages during the project. It is suitable for the insured who is deprived of the\nanticipated earning and for the financial institutions to the extent of their interest\nin the project. It is issued as an extension to the MCE/ EAR/ CAR Policy before the\nactual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated\nnet profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are also\ncritical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both\nmanufacturing and storage facilities, anywhere in India under one policy. It provides\nindemnification against material damage and business interruption.\nUsually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,\nii. Burglary (except larceny)\niii. Machinery breakdown/ boiler explosion/ electronic equipment", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "n494", "section": "B.", "chunk_id": "IC 38 -IA-Eng-Non-Life_029", "metadata": {"file_size": 4549, "chunk_index": 29, "chunk_tokens": 987, "has_examples": true, "has_tables": false, "key_concepts": ["Project Policies", "Test Yourself 8", "Erection All Risks (EAR) Policy:", "Contractors All Risks (C.A.R.) Policy:", "Consequential Loss Policies"]}}
{"chunk": "actual commencement of project.The policy also covers financial losses in the form of continuing expenses such as\ninterest on term loan, debentures, wages and salaries etc. and on the anticipated\nnet profit which the business could have earned if it had commenced on the\nscheduled date.Premium rating depends on various critical factors and on re-insurance support\navailable. The anticipated gross profit or turnover and the indemnity period are also\ncritical factors in deciding the premium payable.**Test Yourself 8**Delay in start-up policy is also known as ______________.I. Machinery Loss of Profits cover\nII. Advance Loss of Profits coverIII. Contractors All Risk cover\nIV. Contractors Plant & Machinery cover**I.** **Industrial All Risks Insurance**The Industrial All Risks Policy was designed to cover, industrial properties – both\nmanufacturing and storage facilities, anywhere in India under one policy. It provides\nindemnification against material damage and business interruption.\nUsually, the policy provides cover for the following:i. Fire and specified perils as per fire insurance practice,\nii. Burglary (except larceny)\niii. Machinery breakdown/ boiler explosion/ electronic equipment\niv. Business interruption following operation of perils mentioned above(Note: Business interruption following perils under (iii) above is usually not included\nin the package cover but available as optional cover) The policy offers widest range of cover compared to that provided byindividual operational policies.\n Premium rates for the policy depend on the cover opted, claims experience,and deductibles opted, risk assessment report for MLOP etc.51**Test Yourself 9**Which of the following is not covered under Industrial All Risks insurance?I. Fire and special perils as per fire insurance practice\nII. Larceny\nIII. Machinery breakdown\nIV. Electronic equipment**J.** **Marine Insurance**Marine insurance is classified into two types: marine cargo and marine hull**1.** **Marine Cargo Insurance**Though the term ‘marine’ may indicate only losses due to sea (marine)\nmisadventures, **marine cargo insurance** covers much more. It provides indemnity\nin respect of loss of or damage to goods during transit by rail, road, sea, air or\nregistered post, within the country as well as abroad. Type of goods may range from\ndiamonds to household goods, bulk items like cement, grains, over dimensional\ncargoes for projects etc.Cargo insurance plays an important role in domestic trade as well as in international\ntrade. Most contracts of sale require that the goods must be covered, either by the\nseller or the buyer, against loss or damage.**Who effects the insurance:** The seller or the buyer of the goods [consignment] may\ninsure the cargo depending upon the contract of sale.Marine insurance contract needs to have provisions that apply internationally. This\nis because it covers goods that are in transit beyond any country’s borders. The\ncovers are accordingly governed by international conventions and certain clauses\nattached to the policy.While the basic policy document contains general conditions, the scope of cover and\nexceptions and special exclusions are attached by separate clauses known as\nInstitute cargo Clauses (ICC). These are drafted by the Institute of London\nUnderwriters.**a)** **Coverage under Marine Cargo Insurance**\nCargo policies are essentially voyage policies, i.e. they cover the subject matter\nwhilst in transit from one place to another. However, the insured is required to\nalways act with reasonable care in all circumstances within his control. The main\nfeature of this policy is that it's an Agreed Value Policy. The valuation is agreed\nbetween the insurer and insured and is not subject to revaluation later unless fraud\nis suspected. The convention for the Sum Insured is CIF + 10% (Cost Insurance &\nFreight + 10%). Another unique feature is that the policy is freely assignable.52The cover normally commences from the time the goods leave the warehouse at the\nplace named in the policy and terminates at the destination named in the policy,\ndepending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit\nii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due to\naccident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle\niii. Stranding, grounding or sinking of the vessel (in case of ship)\niv. Collision with an external object\nv. Discharge of cargo at a port of distress\nvi. General average sacrifice", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Test Yourself 8", "chunk_id": "IC 38 -IA-Eng-Non-Life_030", "metadata": {"file_size": 4549, "chunk_index": 30, "chunk_tokens": 997, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 8", "Coverage under Marine Cargo Insurance", "Marine Insurance", "Test Yourself 9", "Industrial All Risks Insurance"]}}
{"chunk": "between the insurer and insured and is not subject to revaluation later unless fraud\nis suspected. The convention for the Sum Insured is CIF + 10% (Cost Insurance &\nFreight + 10%). Another unique feature is that the policy is freely assignable.52The cover normally commences from the time the goods leave the warehouse at the\nplace named in the policy and terminates at the destination named in the policy,\ndepending on the terms of the contract of sale.The terms and conditions applicable are governed by either;i. Inland Transit Clause (ITC) A, B or C for inland transit\nii. Institute Cargo Clause (ICC) A, B, or C for voyage by sea\niii. Institute Cargo (Air) Clause – A for transport by airInstitute Cargo Clause C grants the minimum cover, which is loss or damage due to\naccident to the vehicle or vessel carrying the cargo due to:i. Fire or explosion\nii. Derailment or overturning of the vehicle\niii. Stranding, grounding or sinking of the vessel (in case of ship)\niv. Collision with an external object\nv. Discharge of cargo at a port of distress\nvi. General average sacrifice\nvii. Jettison.Institute Cargo Clause B is wider than C. Apart from the perils covered in C it also\ncovers loss or damage due to:i. Act of God (AOG) perils like earthquake, volcanic eruption and lightning\nii. Collapse of bridges in Inland transit\niii. Washing overboard and sling loss in case of ocean transit\niv. Entry of water into the vessel.Institute Cargo Clause A is the widest cover as it covers all perils of B and C and loss\nor damage due to any other risk except some exclusion specified such as:i. Loss or damage due to wilful conduct of the insured\nii. Ordinary leakage, breakage, wear and tear or ordinary loss in weight/volume\niii. Insufficiency in packing\niv. Inherent vice\nv. Delays\nvi. Loss due to insolvency of owners\nvii. Nuclear perilsThese exclusions are common to all clauses of inland, air and sea. There are\nseparate clauses also for trading of specific commodities like coal, bulk oil and tea\netc. Marine cover can be extended by paying additional premium to cover War,\nStrikes, Riots, Civil Commotion and Terrorism. Marine and Aviation policies are the\nonly branches of insurance that offer cover against War perils.53**Important**Risks covered under a marine policy, under the standard policy form and under the\nvarious clauses attached to the policy broadly fall into three categories:i. Marine perils,\nii. Extraneous perils and\niii. War, strike riot, civil commotion and terrorism risks.**b)** **Different types of marine policies****i.** **Specific Policy**This policy covers a single shipment. It is valid for the particular voyage or\ntransit. Merchants who are engaged in regular import and export trade or\nwho are sending consignments regularly by inland transit would find it\nconvenient to arrange insurances under special arrangements like the open\npolicy.**ii.** **Open Policy**The carriage of goods within the country can be covered under an open\npolicy. The policy is valid for one year and all consignments during this period\nhave to be declared by the insured to the insurer as agreed between them\non a fortnightly, monthly or quarterly basis.**iii.** **Open Cover**The open cover is a contract for a year giving the Insured continuous\nprotection to cover a large number of shipments/ despatches. The premium\non the consignments would be adjusted from the respective cash deposit\naccount maintained by the Insured. Open covers are issued to large exporters\nand importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for transactions\nof marine dispatches for one-year. The open cover is not a policy and it is\nnot stamped. A certificate of insurance is issued for each declaration duly\nstamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is increased\ndue to payment of customs duty or increase in the market value of the goods\nat the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across different\ncountries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Important", "chunk_id": "IC 38 -IA-Eng-Non-Life_031", "metadata": {"file_size": 4549, "chunk_index": 31, "chunk_tokens": 976, "has_examples": false, "has_tables": false, "key_concepts": ["Duty and increased value insurance", "Specific Policy", "Open Policy", "Institute Voyage Clauses", "Different types of marine policies"]}}
{"chunk": "protection to cover a large number of shipments/ despatches. The premium\non the consignments would be adjusted from the respective cash deposit\naccount maintained by the Insured. Open covers are issued to large exporters\nand importers who have continuous tradeOpen covers set out the terms of cover and rates of premium for transactions\nof marine dispatches for one-year. The open cover is not a policy and it is\nnot stamped. A certificate of insurance is issued for each declaration duly\nstamped for appropriate value.**iv.** **Duty and increased value insurance**These policies provide extra insurance if the value of the cargo is increased\ndue to payment of customs duty or increase in the market value of the goods\nat the destination on the date of the landing.**2.** **Marine Hull insurance**The term ‘Hull’ refers to the body of a ship or other water transport vessel.Marine hull insurance is done as per international clauses applicable across different\ncountries. Marine hull covers are essentially of two types:**a)** **Covering a particular Voyage: The set of clauses used here are called****Institute Voyage Clauses**\n**b)** **Covering a period of time: Usually one year. The set of clauses used here****are called Institute (Time) Clauses**54**c)** War risks are governed by special regulations and the premiums collected willbe credited to the Central Government.**Information**Hull insurance also includes the following insurances:i. Inland vessels such as barges, launches, passenger vessels etc.\nii. Dredgers (Mechanized or non-mechanized)\niii. Fishing Vessels (Mechanized or non-mechanized)\niv. Sailing Vessels (Mechanized or non-mechanized)\nv. Jetties and Wharvesvi. Vessels in the course of construction**The ship owner has insurable interest not only in the ship, but also in the freight**\n**to** be earned during the period of insurance. In addition to freight the ship owner\nhas insurable interest in the amount spent by him in fitting out the vessel, including\nprovisions and stores. **These expenses are termed disbursements and are insured**\n**concurrently with the hull policy for a period of time.****Important****Aviation insurance:** A comprehensive policy is also available for aircraft which\ncovers loss or damage to the aircraft as also the legal liability to third parties and\nto passengers arising out of the operation of the aircraft.**Test Yourself 10**Which branch of insurance offers cover against war perils?I. Marine policies\nII. Aviation policies\nIII. Both of the aboveIV. None of the above**K.** **Liability Policies**Accidents cannot be avoided altogether, however careful a person is. This could\nresult in injury to oneself and damage to one’s property and also may simultaneously\ncause injury to third parties and damage to their property. The persons thus\naffected would claim compensation for such loss.A liability could also arise from a defect in a product manufactured and sold, say\nchocolates or medicines, causing harm to the consumer. Similarly, liability could\narise from wrong diagnosis/ treatment of a patient or from a case improperly\nhandled by a lawyer for his client.In all such cases, where a third party, consumer or the patient would demand\ncompensation for the alleged wrong doing, it would raise a need for payment of\ncompensation or meeting expenses involved in defending the suits filed by the\nclaimants. In other words there is a financial loss arising from a liability to pay. The\nexistence of such a liability and the amount of compensation to be paid would be\ndecided by a civil court which would go into the aspect of alleged negligence/ fraud.\nLiability insurance policies provide coverage of such liabilities. Let us look at some\nof the liability policies.**Statutory liability**55There are certain laws or statutes which provide for the payment of compensation.\nThe laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010\nInsurance policies are available for protection in respect of such liabilities. Let us\nlook at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation payable\nper person is fixed as shown below.|Compensation payable|Col2|\n|---|---|\n|Fatal Accident|Rs. 25,000|\n|Permanent Total Disability|Rs. 25,000|", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "l2", "section": "Duty and increased value insurance", "chunk_id": "IC 38 -IA-Eng-Non-Life_032", "metadata": {"file_size": 4549, "chunk_index": 32, "chunk_tokens": 994, "has_examples": false, "has_tables": true, "key_concepts": ["Duty and increased value insurance", "Test Yourself 10", "Information", "Institute Voyage Clauses", "Important"]}}
{"chunk": "existence of such a liability and the amount of compensation to be paid would be\ndecided by a civil court which would go into the aspect of alleged negligence/ fraud.\nLiability insurance policies provide coverage of such liabilities. Let us look at some\nof the liability policies.**Statutory liability**55There are certain laws or statutes which provide for the payment of compensation.\nThe laws are: Public Liability Insurance Act, 1991 and\n Employees Compensation Act 1923 amended in 2010\nInsurance policies are available for protection in respect of such liabilities. Let us\nlook at some of them.1. **Compulsory Public Liability Policy**The Public Liability Insurance Act, 1991 imposes liability on no fault basis on those\nwho handle hazardous substances if a third party is injured or his property is\ndamaged during the course of such handling. The names of hazardous substances\nand the quantity of each, is listed in the 'Act’. The amount of compensation payable\nper person is fixed as shown below.|Compensation payable|Col2|\n|---|---|\n|Fatal Accident|Rs. 25,000|\n|Permanent Total Disability|Rs. 25,000|\n|Permanent Partial Disability|% of Rs. 25,000 based on % of disability|\n|Temporary Partial Disablement|Rs. 1000 per month, maximum 3 months|\n|Actual Medical Expenses|Up to a maximum of Rs. 12,500|\n|Actual damage to property up to|Rs. 6,000|The premium is based on the AOA (Any One Accident) limit and the turnover of the\nclient. A special feature of this policy is that the insured has to pay compulsorily an\namount equal to the premium as contribution to Environment Relief Fund. If large\nnumbers of third parties are affected and the total amount of relief payable exceeds\nA.O.A. limit, the balance amount will be paid by the fund.**2.** **Public Liability Policy (Industrial/ Non-industrial Risks)**This type of policy covers liability arising out of fault/ negligence of the insured\ncausing third party personal injury or property destruction [TPPI OR TPPD].There are separate policies covering industrial risks as well as non-industrial risks\nlike those affecting hotels, cinema halls, auditoriums, residential premises, offices,\nstadiums, godowns and shops. It covers the legal liability to pay compensation\nincluding claimant’s costs, fees and expense according to Indian Law, in respect of\nTPPI/ TPPD **.**The policy does not cover:a) Products liabilityb) Pollution liabilityc) Transportation andd) Injuries to workmen/ employees**3.** **Products Liability Policy**The demand for products liability insurance has arisen because of the wide variety\nof products (e.g. canned food stuff, aerated waters, medicines and injections,56electrical appliances, mechanical equipment, chemicals etc.) that are today\nmanufactured and sold to the public. If a defect in the product causes death, bodily\ninjury or illness or even damage to the property of third parties, it could cause a\nclaim to arise. Product liability policies cover this liability of the insured.Cover is available for exports as well as domestic sales.4. **Lift (Third Party) Liability Insurance**The policy provides indemnity to owners of buildings in respect of liabilities arising\nout of the use and operation of lifts. It covers legal liabilities for:a) Death/ bodily injury of any person (excluding employees of the insured)b) Damage to property (excluding insured’s own or employee’s property)The premium rates depend upon the limit of indemnity, any one person, any one\naccident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are available\nfor doctors hospitals; engineers, architects; chartered accountants, financial\nconsultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility. They\nmay become liable to pay damages to shareholders, employees, creditors and other\nstakeholders of the company, for wrongful acts committed by them in the\nsupervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to pay\ncompensation to his employees who sustain personal injury by accident or disease\narising out of and in the course of his employment. This is also called **Workman’s**", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "l2", "section": "Statutory liability", "chunk_id": "IC 38 -IA-Eng-Non-Life_033", "metadata": {"file_size": 4549, "chunk_index": 33, "chunk_tokens": 993, "has_examples": false, "has_tables": true, "key_concepts": ["Directors' and Officers' Liability Policy", "Lift (Third Party) Liability Insurance", "Workman’s", "Statutory liability", "Employee’s Compensation Insurance"]}}
{"chunk": "accident and any one year.5. **Professional Liability**Professional indemnities are designed to provide insurance protection to\nprofessional people against their legal liability to pay damages arising out of\nnegligence in the performance of their professional duties. Such covers are available\nfor doctors hospitals; engineers, architects; chartered accountants, financial\nconsultants, lawyers, insurance brokers.6. **Directors' and Officers' Liability Policy**Directors and Officers of a company hold positions of trust and responsibility. They\nmay become liable to pay damages to shareholders, employees, creditors and other\nstakeholders of the company, for wrongful acts committed by them in the\nsupervision and management of the affairs of the company. A policy has been\ndevised to cover such liability and is issued to the company covering all their\ndirectors.7. **Employee’s Compensation Insurance**This policy provides indemnity to the insured in respect of his legal liability to pay\ncompensation to his employees who sustain personal injury by accident or disease\narising out of and in the course of his employment. This is also called **Workman’s**\n**Compensation Insurance.**Two forms of insurance are prevalent in the market:**a)** **Table A:** Indemnity against legal liability for accidents to employees underthe Employees Compensation Act, 1923, (Workman’s Compensation Act,\n1923), Fatal Accident Act, 1855 & Common Law.**b)** **Table B** : Indemnity against legal liability under Fatal Accidents Act, 1855and Common law.The premium rate is applied on the estimated wages of employees as declared in\nthe proposal form.The policy may be extended to cover:i. Medical and hospital expenses incurred by the insured for treatment ofemployee injuries, up to specific amounts57ii. Liability for occupational diseases listed in the Actiii. Liability towards employees of contractors**Test Yourself 11**Under the Public Liability Insurance Act, 1991, how much is the compensation\npayable for actual medical expenses for non-fatal accidents?I. Rs. 6,250\nII. Rs, 12,500\nIII. Rs. 25,000\nIV. Rs. 50,000**Answers to Test Yourself****Answer 1** - The correct option is III.\n**Answer 2** - The correct option is I.\n**Answer 3** - The correct option is IV.\n**Answer 4** - The correct option is II.\n**Answer 5** - The correct option is I.\n**Answer 6** - The correct option is IV.\n**Answer 7** - The correct option is III.\n**Answer 8** - The correct option is II.\n**Answer 9** - The correct option is II.\n**Answer 10** - The correct option is III.\n**Answer 11** - The correct option is II.58## CHAPTER G-05## GENERAL INSURANCE CLAIMS**Chapter Introduction**At the core of any insurance contract is the promise made at the beginning i.e. to\nindemnify the insured in the event of a loss. This chapter talks about the procedures\nand documents involved, from the time loss takes place, making it easier to\ncomprehend the entire process of claims settlement. It also explains the method of\ndealing with disputed claims either by insured or insurer.After studying this chapter, you should be able to:1. Argue the importance of claim settlement functions2. Describe the procedures for intimation of loss3. Appraise claim investigation and assessment4. Explain the importance of surveyors and loss assessors5. Illustrate the contents of claim forms6. Define claims adjustment and settlement59**A.** **Claims settlement process****1.** **Importance of settling claims**The most important function of an insurance company is to settle claims of\npolicyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble business ofinsurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon as\nthe possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "s57", "section": "Professional Liability", "chunk_id": "IC 38 -IA-Eng-Non-Life_034", "metadata": {"file_size": 4549, "chunk_index": 34, "chunk_tokens": 989, "has_examples": false, "has_tables": false, "key_concepts": ["Test Yourself 11", "Answer 10", "Answer 6", "Answer 5", "Answer 7"]}}
{"chunk": "policyholders on the happening of a loss event. Insurer fulfils this promise by\nproviding prompt, fair and equitable service in either paying the policyholder or\npaying claims made against the insured by a third party.One of the non-life insurance companies had the inscription “Pay if you can;\nrepudiate if you must” in its board room. That is the spirit of the noble business ofinsurance.**Settling claims professionally is regarded the biggest advertisement for an**\n**insurance company.**a) **Promptness**Prompt settlement of claims, whether the insured is a corporate client or an\nindividual or whether the size of the loss is big or small is very important. It\nmust be understood that the insured needs insurance compensation as soon as\nthe possible after the loss.If he gets the money promptly, it is of maximum use to him. It is insurance\ncompany’s duty to pay the claim amount when insured needs it most – as early\nas possible after the loss.b) **Professionalism**The insurance officials consider each and every claim on its merits and do not\napply prejudicial or pre-conceived notions to reject the claim without examining\nall the documents that would answer the following questions.i. Did the loss really happen?ii. If so, did the loss making event really cause the damage?iii. The extent of damage out of this event.iv. What was the reason for the loss?v. Was the loss covered under the policy?vi. Is the claim payable as per the contract/ policy conditions?vii. If so, how much is payable?The answers to all these questions need to be found out by the insurance company.Processing claims is an important activity. All claims forms, procedures and\nprocesses have been carefully designed by the company to ensure that all claims\n‘payable’ under the policy are promptly paid and those that are not payable are not\npaid.The agent, being the representative of the company known to the insured, has to\nensure that all the relevant forms are properly filled up with correct information,60all documents evidencing the loss are attached and all prescribed procedures are\nfollowed in a timely manner and duly submitted to the company. The role of the\nagent at the time of loss has already been discussed earlier.2. **Intimation or Notice of Loss**Policy conditions provide that the loss be intimated to the insurer immediately. The\npurpose of an immediate notice is to allow the insurer to investigate a loss at its\nearly stages. Delays may result in loss of valuable information relating to the loss.\nIt would also enable the insurer to suggest measures to minimise the loss and to\ntake steps to protect salvage. The notice of loss is to be given as soon as reasonably\npossible.After this initial check/ scrutiny, the claim is allotted a number and entered in the\nclaims register, with details like policy number, name of insured, estimate of\namount of loss, date of loss, the claim is now ready to be processed.**Under certain types of policies (e.g. Burglary) notice is also to be given to police**\n**authorities. Under cargo rail transit policies, notice has to be served on the**\n**Railways.**3. **Investigation and assessment****a)** **Overview**On receipt of the claim form, from the insured, the insurers decide about\ninvestigation and assessment of the loss. If the claim amount is small, the\ninvestigation to determine the cause and extent of loss is done, by an officer of theinsurers.**The investigation** of other claims is entrusted to independent licensed professional\nsurveyors who are specialists in loss assessment. The assessment of loss by\nindependent surveyors is based on the principle that since both the insurers and\ninsured are interested parties, the unbiased opinion of an independent professional\nperson should be acceptable to both the parties as well as to a court of law in the\nevent of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with supporting\ndocuments. Where necessary Police report/ fire Brigade report, Investigator’s\nreport are also obtained. For personal accident claims, the insured is required to\nsubmit a report from the attending doctor specifying the cause of accident or the\nnature of illness as the case may be, and the duration of disablement.Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of the", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": null, "section": "Settling claims professionally is regarded the biggest advertisement for an", "chunk_id": "IC 38 -IA-Eng-Non-Life_035", "metadata": {"file_size": 4549, "chunk_index": 35, "chunk_tokens": 943, "has_examples": true, "has_tables": false, "key_concepts": ["Railways.", "Professionalism", "Overview", "Investigation and assessment", "Promptness"]}}
{"chunk": "investigation to determine the cause and extent of loss is done, by an officer of theinsurers.**The investigation** of other claims is entrusted to independent licensed professional\nsurveyors who are specialists in loss assessment. The assessment of loss by\nindependent surveyors is based on the principle that since both the insurers and\ninsured are interested parties, the unbiased opinion of an independent professional\nperson should be acceptable to both the parties as well as to a court of law in the\nevent of any dispute.**b)** **Claims assessment**In case of fire, claim is assessed on the basis of survey report along with supporting\ndocuments. Where necessary Police report/ fire Brigade report, Investigator’s\nreport are also obtained. For personal accident claims, the insured is required to\nsubmit a report from the attending doctor specifying the cause of accident or the\nnature of illness as the case may be, and the duration of disablement.Under policy conditions, the insurers reserve the right to arrange an independent\nmedical examination. Medical evidence is also required in support of “Workmen’s\nCompensation” claims. Livestock and cattle claims are assessed on the basis of the\nreport of a veterinary doctor.61**Information**On receipt of intimation of loss or damage insurers check whether:1. The insurance policy is in force on the date of occurrence of the loss or damage2. The loss or damage is caused by an insured peril3. The property (subject matter of insurance) affected by the loss is the same asinsured under the policy4. Notice of loss has been received without delay.Motor third party claims involving death and personal injuries are assessed on the\nbasis of doctor’s report. These claims are dealt by Motor Accident Claims Tribunal\nand the amount to be paid is decided by factors like the age and income of theclaimant.Claims involving third party property damage are assessed on the basis of a surveyreport. Motor own damage claim is assessed on the basis of surveyors report. It may require police report if third party damage is involved.**Information**Investigation is different from the assessment of loss. Investigation is done to ensure\nthat a valid claim has been made and verify the important details and doubts like\nabsence of insurable interest, suppression or misrepresentation of material facts,\ndeliberately creating the loss, etc. are ruled out.Insurance surveyors undertake the work of investigation also. It helps if a surveyor\ngets on to the job as early as possible. Therefore, the practice is to appoint the\nsurveyor, as soon as possible after the intimation of the claim is received.**B.** **Role of Surveyors and Loss Assessors****a)** **Surveyors**Surveyors are professionals licensed by IRDAI. They are experts in inspecting and\nevaluating losses in specific areas. Surveyors are generally paid fees by the\ninsurance company, engaging them. Surveyors and loss assessors are hired by\ngeneral insurance companies normally, at the time of a claim. They inspect the\nproperty in question, examine and verify the causes and circumstances of the loss.\nThey also estimate the quantum of the loss and submit reports to the insurancecompany.They also advise insurers, regarding appropriate measures to prevent further\nlosses. Surveyors are governed by provisions of the Insurance Act, 1938, Insurance\nRules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open Cover’\nfor exports, are assessed by the claims settling agents abroad named in the policy.\nThese agents may assess the loss and make payment, which is reimbursed by the62insurers along with their settling fees. Alternatively, all the claims papers are\ncollected by the insurance claim settling agents and submitted to the insurers,\nalong with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons (not\nbeing a person disqualified for the time being for being employed as a surveyor or\nloss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other questions", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "e2", "section": "The investigation", "chunk_id": "IC 38 -IA-Eng-Non-Life_036", "metadata": {"file_size": 4549, "chunk_index": 36, "chunk_tokens": 936, "has_examples": false, "has_tables": false, "key_concepts": ["Surveyors", "Information", "Section 64 UM of Insurance Act", "Important", "Role of Surveyors and Loss Assessors"]}}
{"chunk": "Rules 1939 and specific regulations issued by IRDAI.Claims made outside the country in case of ‘Travel Policy’ or ‘Marine Open Cover’\nfor exports, are assessed by the claims settling agents abroad named in the policy.\nThese agents may assess the loss and make payment, which is reimbursed by the62insurers along with their settling fees. Alternatively, all the claims papers are\ncollected by the insurance claim settling agents and submitted to the insurers,\nalong with their assessment.**Important****Section 64 UM of Insurance Act**For the claim more than Rupees fifty thousand for Motor Own Damage and Rupees\nOne lakh for other property damage, Insurers need to appoint surveyors for\nassessment of such claims. For other claims Insurers may employ other persons (not\nbeing a person disqualified for the time being for being employed as a surveyor or\nloss assessor) for assessment.**5.** **Claim forms**The contents of the claim form vary with each class of insurance. In general the\nclaim form is designed to get full information regarding the circumstances of the\nloss, such as date of loss, time, cause of loss, extent of loss, etc. The other questions\nvary from one class of insurance to another.**Example**An example of information sought in a fire claim form is given here under:i. Name of the insured, policy number and addressii. Date, time, cause and circumstances of the fireiii. Details of damaged propertyiv. Sound value of the property at the time of fire. Where the insurance consists ofseveral items under which the claim is made. [The claim must be based on actual\nvalue of property at the place and time of occurrence after allowance for\ndepreciation, wear and tear (unless the policy in respect of building, plant and\nmachinery is on “reinstatement value” basis). It shall not include profit]v. Amount claimed after deduction of salvage valuevi. Situation and occupancy of the premises in which the fire occurredvii. Capacity in which the insured claims, whether as owner, mortgage or the likeviii. If any other person is interested in the property damagedix. If any other insurance is in force upon such property if so, details thereofThis is followed by the declaration as to the truth and accuracy of the statement of\nin the form and signature of the insured and the date.The issuance of claim form by the insurance company does not imply or mean that\nliability for the claim is admitted by insurers. Claim forms are issued with the\nremark ‘without prejudice’.63**Supporting documents**In addition to the claim form, certain documents are required to be submitted by\nthe claimant or secured by the insurers to substantiate the claim.i. For fire claims, a report from the Fire Brigade would be necessary.ii. For cyclone damage, a report from the Meteorological office may be called foriii. In burglary claims, a report from the Police may be necessary.iv. For fatal accident claims, reports may be necessary from the Coroner and thePolice.v. For motor claims, the insurer may like to examine driving license, registrationbook, police report etc.vi. In marine cargo claims, the nature of documents varies according to the type ofloss i.e. total loss, particular average, inland or overseas transit claims etc.**Test Yourself 1**Which of the following activities is not considered as professional in settlement ofclaims?I. Seeking information relating to the cause of the lossII. Approaching the claim with a prejudiceIII. Ascertaining whether the loss was a result of an insured perilIV. Quantifying the amount payable under the claim**Test Yourself 2**Raj is involved in a car accident. His car is insured under a motor insurance\ncomprehensive policy. Which among the following is most appropriate for Raj to do?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage**Test Yourself 3**Which of the following statements about claims investigation and claims assessmentis correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether there\nwas any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the loss64IV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "e62", "section": "Important", "chunk_id": "IC 38 -IA-Eng-Non-Life_037", "metadata": {"file_size": 4549, "chunk_index": 37, "chunk_tokens": 1005, "has_examples": true, "has_tables": false, "key_concepts": ["Test Yourself 1", "Test Yourself 4", "Example", "Section 64 UM of Insurance Act", "Test Yourself 5"]}}
{"chunk": "comprehensive policy. Which among the following is most appropriate for Raj to do?I. Notify the insurer of the loss as soon as reasonably possibleII. Notify the insurer at the time of insurance renewalIII. Damage the car further so as to receive a bigger compensationIV. Ignore the damage**Test Yourself 3**Which of the following statements about claims investigation and claims assessmentis correct?I. Claims Investigation and Claims Assessment are the sameII. Claims Investigation is to determine the validity of the claim whereasassessment is whether the loss was caused by an insured peril and whether there\nwas any breach of warrantyIII. Claims Assessment tries to determine the validity of the claim whereasinvestigation is more concerned with the cause and extent of the loss64IV. Claims Investigation is done before the claim is paid and Claims Assessment isdone after the claim is paid**Test Yourself 4**Who is the licensing authority for surveyors?I. Surveyor Association of IndiaII. Surveyor Regulatory and Development AuthorityIII. Insurance Regulatory and Development Authority of IndiaIV. Government of India**Test Yourself 5**Which among the following documents is most likely to be requested while\nexamining a cyclone damage claim?I. Coroner’s reportII. Report from Fire BrigadeIII. Police reportIV. Report from Meteorological Department**Test Yourself 6**Under which principle can the insurer assume the rights of the insured in order to\nrecover from a third party the loss paid under a policy?I. ContributionII. DischargeIII. SubrogationIV. Indemnity**Test Yourself 7**If the insurer decides that a certain loss is not payable because it is not covered\nunder the policy then who decides on such matters?I. Insurer’s decision is finalII. UmpireIII. ArbitratorIV. Court of Law**Summary**a) Settling claims professionally is regarded as the biggest advertisement for aninsurance company.b) Policy conditions provide that the loss be intimated to the insurer immediately.65c) If the claim amount is small, the investigation to determine the cause and extentof loss is done by an officer of the insurer. But for other claims it is entrusted\nto independent licensed professional surveyors who are specialists in lossassessment.d) In general the claim form is designed to get full information regarding thecircumstances of the loss, such as date of loss, time, cause of loss, extent of\nloss, etc.e) Claims assessment is the process of determining whether the cause of the losssuffered by the insured was caused by an insured peril and whether there was\nany breach of warranty. The quantum of loss suffered by the insured and the\ninsurer’s liability under the policy are assessed. This is done before payment ofthe claim.f) Settlement of the claim is made only after obtaining a discharge under thepolicy.**Key terms**a) Intimation of lossb) Investigation and Assessmentc) Surveyors and Loss Assessorsd) Claim formse) Adjustment and Settlement**Answers to Test Yourself****Answer 1** - The correct option is II.**Answer 2** - The correct option is I.**Answer 3** - The correct option is II.**Answer 4** - The correct option is III.**Answer 5** - The correct option is IV.**Answer 6** - The correct option is III.**Answer 7** - The correct option is IV.66## SECTION## ANNEXURES67## CHAPTER A-01## ANNEXURESThese annexures are provided so that the students get a better idea of proposal\nforms used in general insurance.6869**Proposal Forms of Bharat Griha Raksha, Bharat Sookshma & Bharat Laghu Udyam**For a better understanding of standard products and their respective proposal\nforms, i.e. Bharat Griha Raksha, Bharat Sookshma and Bharat Laghu Udyam, please\ncheck the following link to the IRDAI website.https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/StandardProducts/Annex\nure-I-BharatGrihaRaksha.pdf70", "source_file": "IC 38 -IA-Eng-Non-Life.md", "chapter": "s64", "section": "ANNEXURESThese annexures are provided so that the students get a better idea of proposal", "chunk_id": "IC 38 -IA-Eng-Non-Life_038", "metadata": {"file_size": 4549, "chunk_index": 38, "chunk_tokens": 856, "has_examples": false, "has_tables": false, "key_concepts": ["Answers to Test Yourself", "Test Yourself 7", "Answer 2", "Answer 7", "Answer 6"]}}