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Training handbook
Prepared by:
A. Gauri Sankar, Chennai 600042
gausan51@gmail.com
24.12.2014
Insurance business in India can be classified into Life Insurance business and General Insurance
Business
LIC of India is taking care of life insurance business
General Insurance Corporation of India namely GIC Limited is taking care of general insurance
business
United India Insurance Company, Oriental Insurance Company, New India Assurance Company
and National Insurance Company are part and parcel of General Insurance Corporation of India
Insurance sector in India was liberalized in March 2000 by the formation of IRDA
IRDA means Insurance Regulatory and Development Authority
As on 2,2.2011, there were 23 life insurance companies and 24 non life insurance companies in
the market.
Insurance business can be divided in four classes namely: Life Insurance, Fire insurance, Marine
insurance and Miscellaneous insurance
Life insurers transact life insurance business
General insurers transact the rest
No composites are permitted as per law
The specific principles of insurance are uberrima fida(utmost good faith); insurable interest;
indemnity; proximate clause; subrogation
The benefits of life insurance are protection against untimely death, saving for old age,
encourage savings, initiates investment, credit worthiness, social security, tax benefits.
To
To
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Insurance intermediaries
Surveyors
Product pricing
Rural insurance
Regulation of insurance business
Liberalisation
Investment
Restructuring of general insurance
Detariffing
Persons who have insurance interest in different types of properties are as detailed below:
Immovable properties
Movable properties
Business
Ships
Commencement of risk
Cause proxima
Payment of premium
Right to contribution
Mitigation of loss
Life insurance
Non life insurance namely fire
miscellaneous insurance business
Retail insurance
Corporate insurance
Coinsurance
Universal insurance
Direct insurance
Reinsurance
insurance
business,
marine
insurance
business,
Actuary is a technical expert who combines an understanding of the risks involved in insurance
He also understands the mathematical techniques to develop insurance products to manage
these risks
He advises on pricing the insurance products
He calculates the reserves to be held for meeting the financial risks of the insurance products
IRDA has made it compulsory for any life insurance company to appoint an actuary
Without actuary insurance companies cannot carry on their life insurance business
Illegal agreement
Express contract
Implied contract
Executed contract
Executor contract
Unilateral contract
Bilateral contract
Term insurance
Whole life policy
Endowment
Health insurance
Joint life policy
With profit
Without profit
Double accident benefit
Annuity policy
Policies for women
Pension insurance
Postal life insurance
Rural insurance plans
Group life insurance
Insurance policies for children
Money back policy
Unit Linked Policy
A wide range of funds are offered to suit ones investment objectives, risk profile and time
horizons
Different funds have different risk profiles
The potential for returns also varies from fund to fund
Equity funds primarily invested in company stocks with the general aim of capital
appreciation
The risk category in the case of equity funds is found to be medium to high
Income, fixed interest and bond funds invested in corporate bonds, government securities
and other fixed income instruments and the risk category is found to be medium
Cash funds Sometimes known as money market funds; amount is invested in cash, bank
deposits and money market instruments. The risk category is found to be low
Balanced funds Combination of equity investment with fixed interest instruments. The risk
category is found to be medium
Valued policy
Valuable policy
Specific policy
Floating policy
Average policy
Excess policy
Declaration policy
Adaptable policy
Maximum value with dissent policy
Reinstatement policy
Comprehensive policy
Consequential loss policy
Sprinkler leakage policy
28.Paid up value:
Paid up value = (Number of years premium paid/policy term) x sum assured + (bonus/1000) x
sum assured
29.Surrender value:
Surrender value = (surrender value factor x paid up value)/100
30.What do you mean by group insurance?
It is a plan of insurance which provides life cover to a number of persons under single policy
called as master policy
The premium is found to be cheaper on account of low administration cost
A number of group insurance schemes have been designed for various groups
The groups include employer-employee groups; associations of professionals (such as
doctors, lawyers, chartered accountants etc); members of cooperative banks; welfare funds;
credit societies and weaker sections of the society
Individual lives are not assessed. A person will be covered so long as he remains eligible to
be the member of the group
Double accident benefit is available payment of double the sum assured on death due to
accident without permanent disability benefit by payment of extra premium
Provide credit guarantee support to the priority sectors agriculture, retain trade, small
business, professional and self employed persons and education
DICGC provides two types of functions - deposit insurance function and credit guarantee
function
When it comes to deposit insurance function, DICGC provides compensation upto a
maximum amount of Rs. 1.00 lakhs per depositor per bank in the case of insolvency of the
bank
The consumer protection redressal agencies were established by the consumer protection
act in India
Consumer Disputes Redressal forum functions under three capacities namely; District
consumer forum, state consumer forum and national consumer forum
It shall have the jurisdiction to entertain complaints where the value of goods an services
and compensation if any claim exceeds Rs. 5 lakhs
It shall have the administrative control over all district forums within its jurisdiction in all
matters
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Patience
Desire for self improvement
Motivation
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Retention
Transfer
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This is looked to see whether there are factors that make the person susceptible to hereditary
illnesses.
Family history of early deaths of cardiac illnesses or diabetes, could be significant
Increasing extra risk is related to certain impairments or ailments like blood pressure or
diabetes or cancer, which are expected to get worse as days go by.
They do not have to, as modern medicine has ways of containing them. Similarly, some
impairments are expected to wear off as days go by.
These are called decreasing extra risks
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The grace period would be one month, but not less than 30 days for yearly, half yearly or
quarterly modes of premium and 15 days for monthly modes of premium.
Some insurers allow 30 days grace period for monthly modes also
100.
101.
102.
103.
104.
105.
106.
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The insured loses the insurance risk cover for the full amount.
It signifies a reversal of the decision to arrange for the insurance cover and therefore, ,
exposes the policy holder adverse circumstances.
107.
108.
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110.
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111.
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If the assignee dies at any time, the policy moneys would be payable to the heirs of the
assignee
Creditors of the life assured cannot attach the policy moneys unless the assignment is shown
to have been made to defraud the creditors
What do you mean by surrender of a policy?
A surrender is a voluntary termination of the contract by the policyholder
A policyholder can surrender the life insurance policy before it becomes a claim
Surrenders are not allowed unless the policy has run for a minimum period of time, which
may vary from three to seven years.
The amount payable by the insurer to the policyholder on surrender is called the surrender
value or cash value.
Surrender values are published and made known to policyholders by some insurers either as
part of the prospectus or by mention in the policy conditions
What is a surrender value?
It is usually a percentage of the premiums paid or a percentage of the paid up value.
The percentage increases as the duration of the policy increases
The surrender value on a policy will be more after 15 years compared to the surrender value
after ten years.
The percentage decreases as the original term of the policy increases
Between two policies of original term 20 and 30 years, both of which have been in force for
the same fifteen years, the surrender value on the former will be more than on the latter.
What do you mean by foreclosure?
Foreclosure means closure or writing off the policy before its actual maturity
When a loan is granted under a policy, the life assured has a choice to pay the interest or
allow it to accumulate to be adjusted from the policy moneys payable when the claim arises.
This is possible only if the premiums are paid regularly and the policy remains in force.
In case of paid up policies, the surrender value will not grow as fast as the accumulated
interest
The principal loan and accumulated interest could become more than the surrender value at
some time
It is a demand made by the insured or the insureds beneficiary for payment of the benefits as
provided by the policy
118.
119.
What is meant by general insurance?
General insurance is basically an insurance policy that protects the policyholder against the
losses and damages other than those covered by life insurance
The coverage period for most general insurance policies and plans is usually one year, whereby
premiums are normally paid on one time basis
120.
121.
122.
123.
124.
125.
126.
127.
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When a valid insurance claim is made, the insurer makes a payment to the policyholder and
this payment is called as the insurance settlement
128.
129.
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135.
What do you mean by survival benefit?
It is the amount payable at the end of specified durations
These amounts are fixed and predetermined
136.
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139.
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140.
141.
142.
Protection of loss
Provides capital
Increases efficiency
Provides adequate financial cover
Helps in judging the viability of major projects
It
It
It
It
It
Abandonment The insured relinquishes the ownership of the property, covered by the insurance
policy to the insurance company
Additional cover- An insurance policy extended to cover additional risk perils such as strikes,
riots and civil commotion etc., on payment of extra premium
Advolerem duty Duty evaluated on percentage of cargo value
Affreightment- A contract for the carriage of goods by sea for payment expressed in bill of lading
Alien insurance An insurance company domiciled in another country
Annuitant The person who receives the annuity during whose life annuity is payable
Annuity consideration An annuitant making one of the regular periodic payments for an
annuity
Arbitration A form of alternative dispute resolution where an unbiased person or panel gives an
opinion about quantum of loss
Arson The willful and malicious burning of the property often with criminal intent
Assessor The person who estimates the value of goods for the purpose of apportioning the sum
payable by the underwriters to settle the claims. He is also called as the surveyor
Assignment An individuals personal interest in an insurance policy transferred legally to
another person
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Excess The fixed amount of loss borne by the policyholder. When Rs. 1000/- is considered as
excess, the first Rs. 1000 of claim has to be borne by the insured
Exclusions The hazards or perils not covered by a policy of insurance and the loss arising out of
these exclusions is not paid by the insurers
Face amount The amount of insurance provided by an insurance policy and it is also called as
sum assured
Facultative reinsurance A type of reinsurance in which the reinsurer can accept or reject any
risk presented by an insurance company seeking reinsurance
First party claim A demand made by a policyholder reorting an insured event directly to his
company
Fixed annuity Annuity which guarantees a fixed amount for the periodic payments
Flat schedule A type of schedule in group insurance under which everyone is insured for the
same benefits regardless of salary, position or other circumstances
Guaranteed term The insurance company cannot terminate the policy during the period of
coverage under a life insurance policy
Immediate annuity An annuity wherein payment begins immediately
Inchmaree clause A clause included in marine insurance policy by which perils other than the
perils of the sea are covered
Jettison It means throwing off some of the cargo from the ship to save the ship from sinking
Jewellers block insurance Broad policies insuring the jewelers against all losses to their stock
in trade
Juvenile insurance Life insurance policies written on the lives of children within specified age
limits
Key person insurance Insurance designed to protect a business firm against the loss of income
resulting from the death or disability of a key employee
Knock for knock agreement Mutual agreement between insurance companies for simplifying
and reducing administrative costs of settling motor insurance claims
Lapsed policy A policy terminated because of non payment of premium
Level premium A policy whereunder amount of premium remains unchanged during the entire
term of the policy
Limited payment policy Life assured pays the premium for a shorter duration than the term of
the policy i.e. the premiums are limited
Loss adjuster A professional expert engaged by an insurer to establish the cause and amount of
a loss or damage
Limits of liability A sum fixed to be the maximum amount of the liability that an insurer may
pay under a policy
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Renewal term insurance A term policy that can be renewed for another period without
evidence of insurability
Running down clause The clause in an ocean marine hull policy which covers damage done to
another ship by collision and other property damage caused by collision
Salvage Recovery made by an insurance company by the sale of property which has been taken
over from the insured as part of loss settlement and it can be the remains of damaged vehicle or
any other property
Schedule rating Adjusting the premium on the basis of physical conditions which affect the
probability of loss
Self insurance Protecting against losses by settling aside own money instead of using
conventional insurance
Sickness insurance A form of health insurance providing benefits for loss resulting from illness
or disease
Single premium Payment of the entire premium in one instalment at the time of purchasing the
policy
Sprinkler leakage insurance A kind of insurance cover to provide for the damage caused by
accidental flow of water from a sprinkler
Standard risk Person who, according to a companys underwriting standards, is entitled to
insurance protection without extra rating or special restrictions
Substandard risk Person who is considered as under average or impaired insurance risk
because of physical condition, family or personal history of disease, occupation
Sue and labour clause It is a marine insurance clause that requires the policyholder in the
event of loss to take all necessary means to save the property from further loss and recover from
others who caused the loss. The insurer agrees to pay the costs, even if they exceed the policy
limits of liability
Suicide clause A clause included in the life insurance policy which provides for non payment of
sum assured in case of assured commits suicide
Temporary total disablement Disablement suffered following an accident for a specified period
of time
Third party Any person other than the two parties signing an insurance contract
Tort A civil wrong other than a breach of contract for which a court of law will afford legal relief
e.g. harming another by an act of negligence while driving an auto
Total disability As illness or injury that prevents an insured continuously performing every duty
pertaining to his occupation or from engaging in any other type of work for remuneration
Total loss Loss of all the insured property under a given policy, a loss involving the maximum
amount for which policy is liable
Travel accident policy A limited contract covering only accident while an insured person is
travelling
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Treaty An agreement between a reinsurer and a ceding insurer setting forth details of the
reinsurance agreement
Uberrima fidei Utmost good faith; a duty to disclose all material facts
Uninsurable risk That which is not acceptable for insurance due to excessive risk
Valued policy A policy under which an agreed sum is paid to the insured in the event of total
loss without deductions for wear and tear
Variable annuity An annuity where the investment results of a life insurance companys
separate account for the variation in the benefits
Voluntary excess A proposer for insurance agrees to bear a percentage of fixed amount for any
loss generally to reduce the premium such as Es. 2000 excess for car insurance
Warehouse to warehouse clause A clause included in the marine insurance policy which
covers the risks from the originating warehouse to the terminating warehouse
Warranty A statement by the insured on the literal truth of which the insurance contract
depends
Waiver of premium One of the provisions under an insurance policy where, during a period of
continuous total disability lasting for specified period of time, the insured is relieved of premium
payments falling due during that time
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