POS Syllabus

Module -1 Introduction of Insurance
Introduction
Man is afraid of uncertainty and fears, and death, although a reality. One day each one will die; early or later, timely or untimely is
the question, which has no answer. He is afraid of risk & losses in future.
Man is ever in search of security & certainty. In early history man lived in-groups and communities to be secure.
Whenever an earning member would die due to disease or death, the other members of the social group (or family or clan) would
contribute to bail the survivors in the family out of financial difficulties.
This contribution was in the shape of food- clothing and shelter. Even today we donate money, food, clothing and other materials
of life to rehabilitate the family whose breadwinner has left for his heavenly abode, unfortunately, suddenly, sadly. (Also people,
contribute education, healthcare expenses or mishap). towards marriage,
Nature of Insurance:
Insurance may be defined as the transfer of pure risk from the insured to the insurer. The insured is the person or firm or company
confronted by risk and the insurer is a person or firm or company, which specializes in the assumption of risk. The primary
business of the insurer is risk assumption for a fee.
Insurance is a device for reducing risk by combining a sufficient losses shared proportionately by all units in the combination.
Therefore, it implies both that uncertainty is reduced & losses are shared.
It implies the law of large numbers so that the requirements of future funds to cover losses are predictable with reasonable
accuracy.
It provides some definite method for raising these funds by levies against the units covered by the scheme.
Wherever there is accumulation for uncertain losses, or wherever there is transfer of risk, there is one element of Insurance, only
when these are joined with the combination of risk in a group is the Insurance complete. Another way to state this is to say that
“Insurance is a transfer of risk with the added features of (i) combination of risks (ii) an estimate of future losses”.
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How Insurance Works
Example 1:-
It says an event may happen. Say 10 % in a year. For example, in a particular city having a population of 1 lakh on an average- 200
people die in accident, 800 people get injured and disabled, another 2000 die natural death, & 7000 die of disease.
This data as per statistic is certain.

Then what is uncertain?
Uncertainty is as to who will die or get disabled during day to day high risk prone fast life.
Although, number is known, but name, age, time, place and extent is not known. If it is known that 200 persons are prone to
accidental death in a year, it is not known which 200 individuals?
Due to this certainty, that 10,000 people will die in an accident, or get injured and disabled or die natural death or die of disease;
All 1 lakh people will fear accident, possibility of injury or death and its consequences to varying degree as per their age,
behaviour, nature of work, environment hazards and many other factors. Grown ups and breadwinners may fear more and
dependents may fear less.
Human life is a unique income generating asset. When other assets depreciate with age, it appreciates. Creator of all these assets is a
human being, whose efforts have gone a long way in owning them.
Before Assurance or Insurance companies came, there were social arrangements in India which almost played similar role but to an
limited extent as we have already given the examples in the beginning of this chapter which explains how “Many would contribute to
mitigate losses of a few”.
This method of sharing losses of a few by many is the basis or core philosophy of insurance.
Insurance companies started from individual effort i.e. an individual or group of individuals pooled funds in a partnership or company
and started offering a definite payment (called claim) in every case of death or disablement of the participating individuals, against a
small amount received (called premium).
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Example 2:-
Total Population of a city 1,00,000

Death every year 200
Disability every year 800
Compensation on death Rs 1,00,000/-
Compensation on Disability Rs 50,000
Yearly compensation amount 200x1,00,000+800x50000= 6,00,00,000
Contributed by each person 6,00,00,000/1,00,000= Rs 600/-
Human life is a unique income generating asset. When other assets depreciate with age, it appreciates. Creator of all these assets is a
human being, whose efforts have gone a long way in owning them.
Before Assurance or Insurance companies came, there were social arrangements in India which almost played similar role but to an
limited extent as we have already given the examples in the beginning of this chapter which explains how “Many would contribute to
mitigate losses of a few”.
This method of sharing losses of a few by many is the basis or core philosophy of insurance.
Insurance companies started from individual effort i.e. an individual or group of individuals pooled funds in a partnership or company
and started offering a definite payment (called claim) in every case of death or disablement of the participating individuals, against a
small amount received (called premium).
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Role of Insurance in Economic Dev-Elopment
Benefits to Economy
Rapid investment
Improve Quality to Life (New risk covers)
Competition will bring Consumer Friendly Products
Large Scale Mobilisation of Funds
Insurance & Reinsurance Facilities to Major Projects
Export Projects covered at Home
Benefits to Government
Long Term Funds for Infrastructure

Long Term Debt Market Instruments Available
Increased Employment Opportunities & Compensation
Reduced Financial Burden of
Rural, Social & Backward Classes
Contributions in Calamities (Sharing of Social Responsibilities)
Benefits to Industry
Transfer of Technical Expertise

Innovative Products and Pricing Options
Improved Prospects for National Cos.
Domestic Industry will Utilize Technology and Service Customer with Loyalty
Market Driven Economy will Benefit Customer the most.
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Benefits to Consumer
Superior Quality at Lower Prices

Wider Choice of Products
World Class Service to the Consumer
Increased Penetration of Insurance
Benefits to Employee
Human Resource Development

Exposure to "State of the Art Practices"
Greater Job Opportunities
Higher Remuneration
Professional Management Practices
Benefits to Society
Insurance Companies Act as Guardians in number of Ways: -

Risk cover for Large Industry, Trade & Property are offered in Compliance to Law
Environmental Risks get Reduced
Hit – and – Run Compensations
Crop Insurance for Covering Risk of Nature – Poor Rainfall etc
Socio Responsibilities Burden shared
Education
Medical
Health
Accident
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Purpose of Insurance
Every human being has fear in his mind. The fear whether he will be able to meet the basic needs of the life i.e. Food, Clothing
and Housing (Roti, Kapda and Makkan).
He has fear not only for himself but also for his dependents. The source of income to meet his basic needs may be through service
or business.
If he is able to meet his basic needs then he acquires the assets i.e. vehicles, property or jewellery etc.
Then he gets additional fear of saving the assets from destruction. The assets may be destroyed through accident, fire or earthquake
etc. and the income may be cut off due to certainty i.e. old age and death or uncertainty i.e. accident, illness or disability.
As you know, the old age and death is certain for every human being while the accident, illness, disability and destruction of
assets may be by random.
The number of accidents will take place but with whom is uncertain.
Therefore, to overcome this problem, the Insurance plays a very important role.
Source of Income of any person
The principal source of income of an individual comes from the compensation for work performed by him. If this source of income gets
cut off then, Family will make social and economic adjustments like:
Wife may take employment at the cost of the home making responsibilities.
Children may have to go for work at the cost of education.
Family members might have to accept charity from relatives, friends etc. at the cost of their independence and self-respect.
Family standard of living might have to be reduced to a level below the essentials for health and happiness.
The basic threats which all of us may encounter to varied extent and which result in cut off of income or sudden increase in -
uncalled for expenses (beyond our means or higher than our earnings) i.e. dislocates the human life, are: -
Illness (malnutrition, environment, chronic) – uncertain

Accident (uncertain)
Disability – Permanent or Temporary (uncertain)
Old Age (certain)
Death (certain)
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A. What is an arrangement through which a person can plan for the continuation of income when uncertainties and certainties
(i.e.) illness or Accident and death or old age disrupt or destroy his ability to earn his livelihood?
The only method is Life and General Insurance because
The business of insurance is related to protection of human life, human created assets, human disability and business liabilities
possessed by human beings which have a definite value, and
Assets and human life generate benefit and income for the owner and his/her family members, and
Loss of assets / human life for any reason stops the benefits and income to the owner and family members respectively, and
Results in falling of living standards in the family, quality of life and future growth of the associated family members, and
Insurance is a mechanism that helps to reduce such adverse consequences through pooling, spreading and sharing of risk.
Thus life insurance business is complimentary to the Govt. efforts in social management.
B. Need of Insurance
(a) To provide Security and Safety
The Life Insurance provides security against premature death and payment in old age to lead the comfortable life. Similarly in
general Insurance, the property can be insured against any contingency i.e. fire, earthquake etc.
(b) To provide Peace of Mind
The uncertainty due to fire, accident, death, illness, disability in the human life, it is beyond the control of the human beings. By
way of Insurance, he may be compensated financially but not emotionally. The financial compensation provides not only peace of
mind but also motivates to work more and more.
(c) To Eliminate Dependency
On the death of the breadwinner, the consequences need not be explained. Similar to the destruction of property and goods the
family would suffer a lot. It could lead to reduction in the standard of living or economic independence of the family is reduced.
The Insurance is the only way to assist and provider them adequate at the time of sufferings.
(d) To Encourage Savings
General Insurance provides only protection to the human life and property respectively. Life Insurance provides systematic saving
because once the policy is taken then the premium is to be regularly paid otherwise the amount will be forfeited.
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(e) To fulfill the needs of a person
a) Family needs
b) Old age needs
c) Re-adjustment needs
d) Special needs: Education, Marriage, health
e) The clean up needs: After death, ritual ceremonies, payment of wealth tax and income taxes are certain requirements, which
decreases the amount of funds of the family members.
(f) To Reduce the Business Losses: In business the huge amount is invested in the properties i.e. Building and Plant and
Machinery. These properties may be destroyed due to any negligence, if it is not insured no body would like to invest a huge
amount in the business and industry. The Insurance reduced the uncertainty of business losses due to fire or accidents etc.
(g) To Identify the Key man: Key man is a particular man whose capital, expertise, energy and dutifulness make him the most
valuable asset in the business and whose absence well reduce the income of the employer tremendously and upto that time when
such employee is not substituted. The death or disability of such valuable lives will prove a more serious loss than that fire or any
hazard. The potential loss to be suffered and the compensation to the dependents of such employee require an adequate provision,
which is met by purchasing an adequate life policies.
(h) To Enhance the Limit: The business can obtain loan but pledging the policy as collateral for the loan. The insured persons are
getting more loan due to certainty of payment at their death.
(i) Welfare of Employees: The welfare of the employees is the responsibility of the employer. The employer is supposed to took
after the welfare of the employees. The provisions are being made for death, disability and old age. Though these can be insured
through individual life Insurance but an individual may not be insurable due to illness and age. But the group policy will cover his
Insurance and the premium is very low in group Insurance. The expenditure paid on account of premium will be allowable
expenditure.
Risk, Perils & Hazard
Introduction
Risk is a part and parcel of our daily lives. Risks are all around us whether we are aware of them or not. We may be familiar with some
of the risks and then there are others, which may have escaped our attention. There are risks, which we have learned to live with such as
“Will I live to see this year through” and then there are risks, which do not cross the mind like
Examples of Risk
The possibility of house or property getting damaged by an earthquake or lightening.

Whenever you go out of your house the parents are worried that the possibility of accident on roads. Risk of accident is involved.
As & when you go to attend marriage of your relative out of town along with your family members and you lock your house and
your parents always feel risk of theft.
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What is Risk?
Risk has been defined as the possibility of occurrence of an unfavourable deviation from the expected i.e. what you want to
happen does not happen or vice versa what you do not want to happen, happens.
When such unexpected events occur there is invariably a sense of loss, which may or may not be measurable in terms of money.
When your vehicle gets unexpectedly stolen there is a monitory loss but if your favorite pet dies unexpectedly you feel a great loss
but this loss is not measurable.
Since an unfavourable deviation from the expected always results in loss, we can also define risk as the possibility of occurrence
of loss.
Our expectations are mostly positive. We expect our car to be exactly where it was parked in the same condition as when we left it
and are unpleasantly surprised if we find it is not there or that it has been damaged when we return.
Once we realize that our expectations are less than certain and that actual events may differ from what we expected, uncertainty
creeps into the mind and uncertainty is something, which most people are not comfortable with.
The knowledge of risk and its potential to cause loss creates uncertainty and gives rise to a feeling of insecurity which leads to
worry amongst people and once they are worried enough they will give the problem some thought and try to find a solution, and
this is where Insurance comes in.
A man is aware that he may die unexpectedly and is worried that in case such an event does happen his family will have to face a
lot of hardship and so to mitigate his worry he goes in for life Insurance.
Another person may be aware that there is a possibility of his vehicle meeting with an accident and is worried that he may not be
in a position to afford its replacement or repair therefore he opts for Motor Insurance.
Insurance provides a means for reducing the adverse impact of unexpected losses and lessen the worry factor letting a person
breathe more easily.
Worry, insecurity and uncertainty are all very negative factors, which adversely affect the output or performance of individuals or
even business houses.
A worker who is insecure in his job and is worried by this insecurity will be less productive than his counterpart who is secure.
Worry not only leads to reduced production resulting in higher cost but it can also be the cause of accidents as worried workers are
more likely to be careless than those who are concentrating on their duties.
Even Business houses when they are uncertain about the future may not be willing to invest more.
Thus we see that Risk with its resultants uncertainty, insecurity and worry definitely have an economic and a psychological cost.
In the absence of possibility of loss there would be no risk thus it is important to know about the factors, which cause or contribute
towards the occurrence of loss or extent of loss.
There are two such factors and these are “Perils” and “Hazards”.
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What is Perils?
Perils cause the deviation in events from those that we expect. They are the immediate cause of loss. Their very existence ensures that
we are surrounded by risk for example flood, death, sickness, theft, terrorism etc. and these are discussed below.
1. Natural Perils:
Our very existence on the planet earth ensures that we live with risk as the almighty in all his wisdom has although gifted nature
with many sources of energy unbalance or disturbances beyond limits take the form of risk called perils, which can lead to
unexpected losses.
There are unexpected natural phenomena, which year in and year out cause untold misery, loss of life and property. There is no
stopping the fury of nature and the havoc that it plays with mankind. Volcanic eruptions, fire due to lightning, landslides, cyclones,
hurricanes, storms, floods, the vagaries of weather, unseasonal rainfall and prolonged dry spells, hailstorms are some other
examples of natural risks that can cause losses.
These perils are also called Act of God perils, and there is little that mankind can do to stop them, he can only learn to live with
them and devise means to lessen the negative impact.
2. Man Made Perils:
Then there are the manmade perils, which cause loss, these are an outcome of our society and are the violent actions and unethical
practices of people, which result in deviation from the expected. There are many of these but only a few are being discussed to illustrate
their significance.
(a) Theft: - Page No 3 of your daily newspaper provides a fair idea about this rampant malady in our society. The entire Page is full of
incidents of thefts of motorcycles, daylight robberies and burglaries loss to human life by accident, terrorism, enmity, adulteration
murder etc. Not only outsiders but insiders also steal. Employees steal tools, equipments and goods from their employers worth millions
every year.
(b) Riots, Strikes and Malicious Damage: - These are perils, which every property owner faces. During Riots miscreants damage,
Public and Private property, loot stores, inflict injury or death to innocent people and the police personnel and bring business to a
standstill causing untold damage. Similarly strikes sometimes turn violent resulting in damage to life and property. Strikes also result in
loss of production causing huge monetary losses, which may even result in bankruptcy. Vandals target unoccupied houses when the
proprietors are on vacation and damage the property, in some cases setting it on fire. Cars parked in the street are also often vandalized.
(c). Accidents: - Accidents are caused by people and they cause injury to themselves or to others and also damage to property.
Automobile accidents alone contribute the maximum share of losses due to this peril. As per WHO study each year “Road Traffics” take
the lives of 1.2 million men, women & children around the world and seriously injure millions more. In addition to automobile accidents,
accidents due to carelessness of humans result in huge losses to property and life. A carelessly dropped cigarette can lead to fire resulting
in heavy losses to property and even life. Thousands of workers lose their lives and limbs every year in industrial accidents caused by
human error or carelessness.
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3. Economic Perils:
The third category of Perils or cause of Risk is economic in nature and the examples of this type of Risk are Depression, Inflation, Local
fluctuations and the instability of Industrial firms.
A, Depression in the market leads to low production levels and an increase in unemployment. Low production results in reduced profits
or losses for business houses whereas unemployment stops the income of individuals causing mental and physical suffering.
B, When Inflation is there in the economy the buying power of money declines and the real value of savings and income is reduced.
People whose livelihood is based on fixed income such as pensioners (Retired persons) during such periods are the hardest hit and may
find it impossible to make both ends meet.
This fluctuation in the general economy can cause unfavourable deviation from the expectations and create risks for both Industries firms
as well as individuals.
Sometimes it so happens that even though the general economic condition in the country is stable there are some areas, which may
experience recession. These are known as local fluctuations and can effect the Individuals or the business houses in the same manner as
the general fluctuation in economy i.e. Depression & Inflation. When particular area is effected the value of investments made in the area
declines and jobs are also lost.
At stime it is the individual firms which are to blame. The owners lose part or whole of their investment and workers lose their jobs.
There are many towns and communities, which are dependent on one single Industry for their well being and when this Industry fails or
decides to shift operation the entire town or community is exposed to risk.
What is Hazards?
While perils are the direct cause of loss hazards are the underlying factors, which increase the probability of occurrence of loss.
There are conditions, which are more hazardous than others for e.g. working, as an electrician is a more hazardous occupation than that
of a banker as it is more susceptible to accidents. Owning a property on the banks of Ganga is more hazardous than a property in
Chandigarh as it is exposed to the risk of damage due to floods. Similarly dealing in textiles is more hazardous than dealing in hardware
as the risk of loss due to fire is greater. There are three kinds of hazards:
(i) Physical (ii) Moral (iii) Morale
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(i) Physical Hazard: These are hazards, which are related to the physical aspects of the property, which may influence the chances that
the property may be damaged or which may increase or decrease the losses incurred due to a particular risk.
The location of a building affects its vulnerability to losses due to fire, floods, earthquakes etc. A residential building close to a unit
manufacturing crackers will be more susceptible to losses than a building located in a purely residential area.
Construction of a building also affects the extent of loss. A building or the use to which it is being put is another example of a physical
hazard. The same building will be in greater danger of loss by fire if it was used for storing petroleum products than if it was being used
as an office or a departmental store.
(ii) Moral Hazard: Moral hazard also affects the probability of loss occurring and the risk is increased. A dishonest person may set his
own house or property on fire to avail the Insurance benefit. An unscrupulous trader may arrange for a robbery in his own store to get the
benefits. Whenever persons of doubtful integrity buy an Insurance policy the risk increases because loss becomes a certainty.
(iii) Morale Hazard: This is not to be confused with moral hazard, which involves dishonesty but morale hazard is an attitude of lack of
concern about the outcome of his actions. An example of this is a person who is careless about stubbing out cigarettes and just throws
them around not in the least bothered that his action may cause fire. Bad house keeping is another example of a morale hazard as this
also increases the chances of loss occurring.
Types of Risks
Risks can be classified into two categories Pure Risks and Speculative Risks.
To illustrate the difference between the two types of risk let us take the example of a property owner. When a person purchases a
property, he is exposed to the risk of damage or loss to his property due to fire. In the event of a fire occurring he will suffer a loss and
there is no possibility of him gaining anything if a fire occurs. Simultaneously the value of his property may increase or decrease due to
various factors. The areas where the property is located may develop into a prime locality and the value of his property will increase or
alternatively the area may not develop but instead becomes uninhabitable because of pollution and the value of his property may
decrease. Thus by purchasing the property he exposes himself to the risks of either gaining or losing.
In the first case there was only the chance of a loss occurring this is known as pure risks whereas in the second there is a chance of either
gain or loss this is known as speculative risk. Thus we see that in the same instance i.e. the purchasing of a property the owner exposes
himself to both Pure and speculative risk.
Pure risks are those where in case of any unexpected happening the result is only loss whereas in speculative risks an unexpected
occurrence can possibly result in gain or loss.
When a person gambles or he buys shares there is a chance that he may lose or win or that the share prices may go up and he gains or the
share market crashes and he loses. These are speculative risks. Risks as we have mentioned earlier is the possibility of loss but when
there is also a chance of gain then these risks are called speculative risks.
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It is said that the profit that a businessman earns is his reward for bearing a speculative risk. No businessman willingly exposes himself
to pure risk because in pure risk there is no gain. It is a universal fact that if one has to live in this risk prone world, one has to expose
himself to the pure risks. Pure risks are a part of the environment and are all pervading.
Pure risks which every individual families, firms and other organisations are exposed to can be broadly classified as follows:
(i) Personal Risk: Since all losses are ultimately borne by the people it can be said that all risks are personal but there are some losses
such as loss of income, mental or physical suffering etc. which have a direct impact on people. Therefore the risk of premature death,
sickness, disability, unemployment and even dependent old age are put in this category of Personal risk.
(ii) Property Risk: The possibility of loss to an asset such as damage to a building due to fire or damage to a vehicle in an accident or
theft of vehicle. These sort of risks fill in the category of Property Risk.
(iii) Liability Risk: This is the risk of becoming legally bound to compensate or to pay for damage to the person or property of others.
Who faces Risk ?
Risks as we have seen are inevitably a part of our lives and every individual or business/ Industrial house is exposed to the possibility of
loss. The risks faced by the individual or family and the Industry are common but they differ in nature and the extent of loss.
It will be simpler if we discuss the risks faced by the Individual or family separately from the risks faced by the Business houses/
Industries.
1. Family Risks
The term family for all practical purposes henceforth includes an individual who may be living with the family or separately.
(i) Personal Risks
Death: When a person dies the income that he earns with his efforts stops. When death will strike is uncertain and the risk is there at any
age. In addition to the loss of income when the head of family dies the family is subjected to expenses on last illness, funeral expenses
and settlement of estate not to mention the mental and social burden which cannot be measured in monetary terms but is without doubt
very high.
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Disability
This may not be as serious as death but it has definite impact on the income. Expenses will increase due to medical care for the disabled
family member. Poor health as a result of an accident or illness is one of the most important risks which a family has to face.
Retirement
A person may survive pre-mature death or disability but he still faces loss of income to maintain a reasonable standard of living during
retired lifetime.
Unemployment
This risk is also an important one for every family. The current industrial & economic scenario is not very conducive for employment
and a lot of companies industrial houses are downsizing, cutting down on the labour force. Voluntary Retirement Scheme and
Retrenchment are the order of the day.
(ii) Property Risk All families in addition to the risk of loss of income or increased expenses also face the risk of loss to property. Loss
to property results not only in reduction of Assets but also in loss of income. Examples of property risk are innumerable but to illustrate
the extent and nature some are being mentioned here. Homes may be destroyed by fire, floods and storms; cars may be damaged in an
accident, burnt, be lost, stolen or destroyed; Savings may be lost in stock market crashes or failure of banks.
(iii) Liability Risk An individual because of his negligence may become responsible for injury to the person or damage to the property
of others for which he has to pay compensation and expose the family to such a risk. With a greater awareness amongst the common man
the liability risks is ever increasing and the courts in their judgements appreciating the value of human life and right are awarding huge
amounts as compensation which for any individual or family can be beyond imagination and intolerable.
Handling Risks
Now that we know that risks are a part of our daily lives we must know how to handle them. Risk management will be discussed in
detail under “Practice of General Insurance” and here we shall only make a passing reference to this important aspect.
Some of the methods used to handle risks are Risk Avoidance, Loss Prevention and Reduction, Risk Retention and Risk Transfer. For
convenience sake these are briefly being dealt with separately but in practice two or more are used in combination.
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1. Risk Avoidance:
This may not be as serious as death but it has definite impact on the income. Expenses will increase due to medical care for the disabled
family member. Poor health as a result of an accident or illness is one of the most important risks which a family has to face.
The simplest way to deal with risk is to avoid it together. If a factory is to be located on the banks of a river, which is prone to
floods every year then it may be decided to shift the site to a safer location.
Some people avoid the risk of death or injury in an aeroplane crash by traveling by surface transport only. Organisation like the
Armed forces and even some corporate houses restrict the number of their officers traveling in a single aircraft or vehicle together
to avoid the risk of all of them dieing in an acc
2. Loss Prevention and Reduction:
Possible loss due to risks may be eliminated or minimized by Loss Prevention and Reduction measures. Some measures such as
strict enforcement of “No Smoking” regulations may eliminate fire losses whereas measures such as installation of sprinkler
systems and other appliances may reduce the extent of loss due to fire.
Good manufacturing units spend a lot on safety devices and measures and enforce strict rules of conduct within their premises to
eliminate or reduce the occurrence of accidents thus minimise their losses & expense incurred on treatment and compensation to
employees.
Segregation of hazardous processes from others in a manufacturing unit and isolation of hazardous goods such as petroleum
products from non-hazardous goods in a storage facility are some examples of the method of loss Prevention and Reduction.
3. Risk Retention:
It may be consciously decided to retain some risks. Small losses, which may occur frequently may be absorbed by the firm as
normal operating expenses such as minor damage or loss of goods in transit.
A financially sound firm may create an Insurance fund to which regular payments are credited and from which losses are paid as
and when they occur.
This method is used to take care of the domiciliary medical expenses of employees by some large companies having a big
workforce.
Some individuals retain the risk of contracting cancer due to smoking not knowing that smoking causes cancer and other even
though knowing of it rationalize and pretend that the risk does not exist by saying. “It won’t happen to me”.
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4. Transfer of Risk:
Risk transfer occurs when the activity that creates the risks is transferred to another. For example if a particular process of
manufacture is hazardous the firm may decide to get it outsourced i.e. get the job done from a specialized sub-contractor outside
so that the associated risks are transferred.
Similarly when a person hires an equipment the owner may insert a condition in the contract that any damage to the equipment
shall be the responsibility of the hirer. Lease and rental agreements are an example of this method of handling risk. A rental
agreement carries the clause that the equipment shall be returned to the owner in good condition, ordinary wear & tear accepted.
Guarantees are also a form of risks transfer where the buyer transfers the risk of purchasing a defective new item back to the
manufacture. Most consumer goods coming in the market now are sold with the guarantee that in case of any manufacturing defect
or non-performance the equipment will be replaced/ repaired by the manufacturer. Earlier it was not so and the buyer used to
purchase the materials at his own risk and in case of defect had to bear the loss.
There are innumerable ways to transferring the risks and these are only a few illustrations but the most important method of Risk
transfer is Insurance.
The general guidelines for handling risk are given in the table below:
Type of Risk Suitable Method

Low Frequency and Low severity Retention of Risk
High Frequency and Low severity Loss Control
High Frequency and High Severity Risk Avoidance
Low Frequency and High severity Risk Transfer (Insurance)
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Quiz Questions Module - 1
1. Whether Death is certain life?
(a) Yes
(b) No
2. Is the essence of the Insurance scheme is a Social science or Accumulation of funds.
(a) Both
(b) None
3. A & B are travelling in a car who will die in an accident is certain or uncertain.
(a) certain
(b) uncertain
4. Insurance provides benefits to
(a) Society
(b) Govt
(c) Both
(d) None
5. Insurance premium consists of
(a) Claim amount

(b) Expenses
(c) Profit
(d) All
6. What is the basic needs of a person?
(a) Roti
(b) Clothing
(c) Housing
(d) All
7. What is uncertainty in life?
(a) Death
(b) Accident
Quiz Answers Module - 1
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8. What is certainty in life?
(a) Old age

(b) Illness
9. Is insurance encourages savings?
(a) Yes
(b) No
10. Is insurance useful for old age?
(a) certain
(b) uncertain
11. Risk is _______ of occurrence of loss.
(a) Possibility
(b) impossibility
12. Earthquake is ______ perils.
(a) natural
(b) manmade
13. Inflation is _______ perils.
(a) economic
(b) natural
14. There are ______types of hazards
(a) two
(b) two
15. Pure Risks are ____.
(a) Insurable
(b) non-insurable
8 9 10 11 12 13 14 15
aaa a a a a a
[18]
Module-2 Indian Insurance Market
Introduction
Indian Insurance market is consisting of the entities namely Regulator, Insurers, Insurance Agent and Insurance Intermediaries.
Regulator: It acts on behalf of the government and control the insurance sector as per the Insurance Act 1938 as amended till
date. In the Indian Insurance market the regulator is Insurance Regulatory & Development Authority of India whose functions
are defined under Insurance Regulatory and Development Act 1999. It acts on behalf of the government and control the insurance
sector as per the Insurance Act 1938 as amended till date. In the Indian Insurance market the regulator is Insurance Regulatory &
Development Authority of India whose functions are defined under Insurance Regulatory and Development Act 1999.
Insurers: The insurers are classified under three categories i.e. Life Insurers, General Insurers and Reinsurers.
Insurance Agent: It is one of the century old distribution channel of the Insurers and sells the product on behalf of the Insurers. It
includes micro Agent who sells the micro police only.
Insurance Intermediaries: After liberalization of the insurance sector in India various insurance in
Marketing Intermediaries: Corporate Agent, Insurance Marketing Firm and Insurance Brokers, Insurance web Aggregators
Claim settling Intermediaries: Third Party Administrator and Insurance Surveyor and Loss adjuster
POS person: It is also one of the insurance market intermediary who is authorized to sell only defined low cost products
1, Regulator:
In India Government started exercising control on Insurance business by passing two acts in the year 1912 namely
Provident Insurance Societies Act V of 1912 and

Indian Life Insurance Companies Act VI of 1912.
[19]
These acts were later comprehensively amended and a new Act namely Insurance Act 1938 came into existence for controlling
Investment of funds,
Expenditure and
Management of the insurance companies
The Office of Controller was established to implement this act.
Again, this Act was amended in 1950 as per the need of the hour. But in view of growing malpractices in Life Insurance business and
also due to the illiteracy level being high and lack of will for spread of Life Insurance business, it was nationalized by Government of
India.
LIC Act was passed in June’1956, and this Act came into force from 1st Sept.1956. Similarly general insurance business was
nationalized Act came into force w.e.f 1st April 1973 through General Insurance Business Nationalization Act 1972 (GIBNAct 1972).
To implement these acts the Government made some minor changes in the Insurance Act 1938.
In early 90’s, with the world market forces playing with full strength; growing literacy level; better regulatory systems and need for fast
growth in this sector, the need of the hour was to go with the world and throw open Life & General Insurance Sector to private
entrepreneurs once again so that there is no monopoly and the customer/ consumer/ buyer gets more choices than one type of Insurance
product.
To study the liberalization process in Insurance sector in India, Malhotra Committee was formed under the Chairmanship of Late Shri
R.N. Malhotra. The Malhotra committee submitted its report in 1994 which recommended that private companies be allowed to operate
in India.
The Government accepted the Committee’s recommendation and Insurance Regulatory Authority (IRA) was set up in 1996 to show the
path for privatization of insurance Industry.
The main aim was the development of Insurance covering all strata of society (to not only rich but poor, folks from rural, tribal,
unorganized sector, social sector, disabled community, daily wagers, women at large, etc.) gained importance through concerns put forth
by political leaders, trade unionists, social organisations, co-operatives and policy makers; which amended the name IRA to IRDA
(Insurance Regulatory & Development Authority).
Again some amendments were made in the Insurance act 1938 for smooth functioning of IRDA.
[20]
Insurance Regulatory Develpment Authority Act (IRDA) 1999
This Act was passed by Parliament in Dec.1999 & it received presidential assent in Jan.2000. The aim of the Authority is “to protect the
interest of holders of Insurance policies to regulate, promote and ensure orderly growth of Insurance industry & for matters
connected therewith or incidental thereto.”
Under this Act, an authority called IRDA is established which replaces Controller of Insurance under Insurance Act 1938.
Features of Authority
Corporate body by the aforesaid name which means it will act as group of persons ,called members, who will work jointly not as
an individual person like Controller of Insurance
having perpetual succession which means any member may resign or die but the Authority will work
a common seal with power to enter into a contract by affixing a stamp on the documents and
sue or be sued means the Authority can file a case against any person or organization and vice versa.
Composition of Authority
The Authority shall consist of nine persons as per details given below:.
Chairperson
Not more than 5 whole time members
Not more than 4 part time members
Tenure
The Chairman tenure will be for 5 years and eligible for reappointment till he attains the age of 65 years.
The appointment of members will be for 5 years and eligible for reappointment but not exceeding the age 62 years.
[21]
Removal of Members
The Central Government can remove any member of the Authority if he is
a) Declared bankrupt
b) has become physically or mentally incapable of acting as a member
c) has been awarded punishment by any Court
d) has acquired such financial or other interest which affect his function as a member
e) has so abused his position as to render his continuation in office detrimental to the public interest.
But no member can be removed form the office unless & until the reasonable opportunity of being heard is given to such member in the
matter.
Salary & Allowances: The Chairperson and full time members’ shall receive the salary & allowance as prescribed by the Government.
Bar on future employment
The Chairperson and the whole time members cannot accept any appointment without Govt. approval within 2 years from the date on
which he ceases or retires from the office.
Superintendence & Direction
The Chairperson shall have overall control & provide direction in respect of all administrative matters of the Authority. He will chair the
meeting as & when he is present in the meeting.
Meetings of Authority
The meeting of the Authority will be held at the time & place as decided by the Chairperson as per regulation made under this act. If the
Chairperson is unable to attend the meeting then the members will choose the Chairperson from amongst the present members.
All the issues to be discussed in the meeting shall be decided by a majority of votes by the present and voting. In case of equal voting the
decision of Chairperson of that meeting will be final.
Duties, Powers & Functions of Authority
[22]
Duties: The Authority shall have the duty to regulate, promote and ensure orderly growth of the Insurance business and re-insurance
business subject to the provisions of any other provisions of the act.
Powers & Functions to
(a) issue to the applicant (Insurance company or Insurance Agent or Surveyors or Insurance Brokers or Third Party
Administrators) a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;
(b) protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders,
insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of
insurance;
(c) specifying requisite qualifications, code of conduct and practical training for insurance brokers , agents, surveyors, Third Party
Administrator ;
(d) specifying the code of conduct for surveyors and loss assessors (Who assess the loss of policy holder in case of General
Insurance);
(e) promoting efficiency in the conduct of insurance business;
(f) promoting and regulating professional organisations connected with the insurance and re-insurance business;
(g) levying fees and other charges on insurance companies, Agents, Insurance Brokers, Surveyors and Third party Administrator
(h) calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers,
intermediaries, insurance intermediaries and other organisations connected with the Insurance business;
(i) control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general
insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938
(w.e.f 1/1/2007 TAC has ceased to function)
(j) specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by
insurers and other insurance intermediaries;
(k) regulating investment of funds by insurance companies;
(l) regulating maintenance of margin of solvency ie having sufficient funds to pay insurance claim amount ;
(m) to settle the disputes between insurers and intermediaries or insurance intermediaries;
(n) supervising the functioning of the Tariff Advisory Committee ;
(o) specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional
organisations referred to in clause(f);
(p) specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural
or social sector;
(q) exercising such other powers as may be prescribed.
[23]
Accounts and audit
The Authority shall maintain proper accounts and other relevant records and prepare an annual statement of accounts in such form as
may be prescribed by the Central Government in consultation with the Comptroller and Auditor-General of India
Chapter 2 Insurers
1. Life Insurance
2. General Insurance
3. Reinsurance
In India, no life insurance company can do general insurance business except a health insurance product.
Similarly General insurance company cannot do life insurance business.
There is only one insurance company who can do Reinsurance business and to some extend the General Insurance companies can
also accept the Reinsurance business
As on date the following are list of Insurers
Life Insurers
1. Bajaj Allianz Life Insurance Co Ltd
2. Reliace Life Insurance Co Ltd
3. Aviva Life Insurance Co Ltd
4. Birla sunlife Insurance Co Ltd
5. HDFC Life Insurance Co Ltd
6. Life Insurance Co Ltd.
[24]
7. ICICI Pru Life Insurance Co Ltd
8. Exide Life Insurance Co Ltd
9. Max Life Insurance Co Ltd
10. PNBmetlife Insurance Co Ltd
11. Kotak Life Insurance Co Ltd
12. Sahara Life Insurance Co Ltd (IRDA has debarred to under write any life Insurance Business )
13. Sbi Life Insurance Co Ltd
14. Tata -AIA life Insurance Co Ltd
15. Shriram Life Insurance Co Ltd.
16. Bharati Axa Life Insurance Co Ltd
17. Future Generali Insurance co Ltd
18. IDBI Federal Life Insurance Co Ltd
19. Canara HSBC life Insurance Co Ltd

20. Aegon Religare Life Insurance Co Ltd
21. DHFL Pramerica Life Insurance Co Ltd.
22. Star Diachi Life Insurance Co Ltd
23. India First Life Insurance co Ltd
24. Edelwiess Tokio Life Insurance co Ltd
General Insurers
1. The New India Assurance Co Ltd
2. Tata AIG General Insurance Co Ltd
[25]
3. ICICI Lombard General Insurance Co Ltd.
4. Reliance General Insurance Company Ltd.
5. Raheja QBE General Insurance Company Ltd.
6. HDFC ERGO General Insurance Company Ltd.
7. Future Generali Insurance Company Ltd
8. Liberty Videocon General Insurance Co. Ltd
9. Universal Sompo General Insurance Co. Ltd
10. SBI General Insurance Co Ltd
11. General Insurance co ltd
12. Bajaj Allianz General Insurance Co Ltd
13. Iffco Tokio General Insurance Co Ltd
15. Cholamandalm MS General Insurance Co Ltd
16. Magma HDI General Insurance Co Ltd
17. National Insurance Co Ltd
18. Shri Ram General Insurance Company Ltd
19. United India Insurance Co ltd
20. The Oriental Insurance Co Ltd
21. Max Bhupa Health Insurance Co ltd
22. Appolo Health Insurance Co Ltd
23. Star Health Insurance Co Ltd
24. Religare Health Insurance Co Ltd
25. Aditya Birla Health Insurance Co Ltd
26. Kotak Mahinedra General Insurance Co Ltd
27. DHFL General Insurance Co Ltd
28. CIGNA TTK Health Insurance Co Ltd
29. Royal Sundaram General Insurance Co Ltd
30. Export Credit & Guarantee Corporation Ltd
31. Agriculture Insurance Company ltd

[26]
Reinsurance Company
General Insurance Corporation Co Ltd
1. Insurance Compnaies Requirments
No person can carry on Insurance business unless & until he has obtained a certificate from the Authority for a particular class of
Insurance business.
1.1. Capital Requirements
Minimum Capital for Insurance companies : Rs 100 crs
Minimum Capital for Reinsurance companies: Rs 200 crs
1.2. Application for Registration:
Every application in the prescribed form (IRDA/R1) for registration shall be made with the following enclosures.
1. a certified copy of Memorandum and Articles of association if the applicant is a company.

2. The name, address & the occupation of the directors of the company.
3. a statement of the class of insurance business proposed to be carried on.
4. a statement indicating the sources that will contribute the share capital.
On receiving the above documents IRDA will verify the contents and may ask for additional information if any. The Authority may ask
the Principal Officer to appear to their office for any information or clarification.
If the Authority is satisfied with the information and documents provide with the application form (IRDA/R1) ,
the Authority may ask for an additional application in the prescribed form (IRDA/R2) with the following information’s
[27]
i, A declaration verified by an affidavit from the “Principal Officer” that the equity capital of the company has been complied
with.
ii, A certified copy of the published prospects and of the standard policy forms of the insurer
iii, Statement of assured rate, advantages, terms & conditions to be offered in connection with Insurance policies
iv, In the case of the business the certificate from the actuary that such rates are workable & sound.
v, In the case of marine accident & miscellaneous Insurance business other than workmen’s compensation & motor car Insurance
the available forms, prospects & statements to be submitted.
vi, The receipt of deposit of Rs. 50,000/- for each class of business.
vii, if there is any foreign partner, a certified copy of Memorandum of understanding between Indian promoter and Foreign
promoter including details of support comfort letters exchanged between the parties
viii, Any other document as desired by the Authority after scrutiny the application
2A) If on the receipt of an application for registration and the authority is satisfied that
a) the financial condition & the general character of management of the applicant are sound
b) the volume of business likely to be available to & the capital structure & earning prospects of the applicant will be adequate.
c) The interest of the general public will be served if the certificate of registration is granted to the applicant.
then the certificate of registration is granteds
1.3. Refusal of Registration
If the Authority refuses the registration the reason of such decision will be intimated to the applicant.
The Applicant whose application has been rejected can file an appeal before the SAT/ Central Govt. within 30 days from the date
on which a copy of the decision is received.
The decision of the SAT/Govt. shall be final and shall not be questioned before any court.
1.4. Cancellation of Registration
The Authority has the right to cancel the certificate of registration either wholly or in so far as it relates to a particular class of Insurance
business if the any of the conditions specified for registration is not complied with.
[28]
1.5. Renewal of Registration

Every year the registration is to be renewed and the application is to be made to the Authority before 31st Dec. of the preceding years
with the payment of prescribed fees.
2, Regulation For Product Approval
No Insurance Company can sell any insurance product unless & until the product is approved by the Authority.
Period of Approval
Within 15 days of the receipt of the application the Authority may seek additional information with regard to the product, and the insurer
shall not commence selling the product in respect of which additional information has been sought by the Authority, until the Authority
confirms in writing having noted such information. If no such information is sought by the Authority, the insurer can commence selling
the product in the market, as set out in the application after the expiry of the said 15 days period. This procedure is known as “File &
use.”
Chapter 3 Insurance Intermediaries
Distribution Channels
Distribution refers to the arrangement by which the product, after manufacture is moved till it reaches the customers, the objective is to
ensure that the product is available to the customer when he wants to buy it.
Generally for the tangible products the distribution channels is as follows:
Wholesaler/ Stockists: The Wholesaler will buy the goods from the manufacturer in large quantities and hold the stock and distribute
them to retailers as per their requirements.
Retailers: The retailer is one of the last distribution channel, who is selling the product to the customer.
Retail outlet: Sometimes the manufacturer open a retail outlet in each part of country to have a direct access with customer. For e.g.:
BATA showroom for shoes, Titan for wrist watches.
Door to Door Sales: Under this system, the sale is made directly to the customer through the salesman who is visiting at residence of
the customer / prospects.
[29]
For e.g.: Eureka Forbes Products – Water filter, Vacuum Cleaner, Tupperware, Avon Cosmetic.
Multilevel Marketing: This concept of marketing started few years back under which the manufacturer is selling the product to an
individual and forms a chain to provide more benefit to the customers.
For e.g. Amway
Insurance Distribution channels The distribution channel of an Insurance Company, it may be different because the insurance is a
intangible product. The distribution channels are as follows:
The distributions channels are divided into two parts
1. Insurance Agent
Insurance Agents
2. Insurance Intermediaries
Insurance Brokers
Corporate Agent
Insurance Marketing Firm
Web Aggregators
1. Insurance Agent:
Who is an Insurance Agent: A person who can solicit the insurance policy on behalf of the Insurer.
For how many Insurers: An agent can work for one life insurance, one general insurance , one health Insurer and one specialized
insurer
Who can Appoint Agent: insurance company can appoint an agent as per regulations defined by IRDA
[30]
[30]
Who can Issue a License: Authorizes designated persons, being officers of Insurers to issue such license.
Duration of the License: Three years
Fees : Rs 250/-
The license Agent may be to act as an
Agent for the “Life Insurer” or

Agent for the “General Insurer” or
Agent as a “Composite Insurance Agent” means Agent for life insurance as well as general insurance
Procedure to become an Agent:
1. Submit an application to the Insurer in the prescribed form

2. Submit the PAN details along with the prescribed from.
3. Passed the examination conducted by Examining Body as prescribed by the IRDA. The necessary assistance and guidance to
the candidate to equip them with the adequate insurance knowledge.
4. Does not suffer from any disqualifications as under
he is minor
he is of unsound mind
he is found guilty of criminal proceedings
he is found involved in any fraud
he violates the code of conduct
5. has the requisite knowledge to solicit and procure insurance business and capable of providing the necessary service to the
policyholders.
Code of Conduct
(1) Every person holding a license, shall adhere to the code of conduct as specified like identify himself and the insurance company of
whom he is an insurance agent, Disclose his license to the prospect on demand, disseminate the requisite information in respect of
insurance products offered for sale by his insurer, disclose the scales of commission in respect of the insurance product offered for sale,
if asked by the prospect, indicate the premium to be charged by the insurer for the insurance product offered for sale, about proposal
form etc
[31]
(2) No insurance agent shall, like solicit or procure insurance business without holding a valid license; induce the prospect to omit any
material information in the proposal form; induce the prospect to submit wrong information in the proposal form or documents submitted
to the insurer for acceptance of the proposal; behave in a discourteous manner with the prospect; interfere with any proposal introduced
by any other insurance agent; offer different rates, advantages, terms and conditions other than those offered by his insurer; etc
Cancellation and suspension of the License:
The designated person may cancel a license of an insurance agent, if the insurance agent suffers, at any time during the currency of the
license, from any of the disqualification as stated above and recover from him the license and the identity card issued earlier. Even on
non performance of minimum business expectation by the Insurer the agency can be terminated.
Corporate Agent:
Who can be Corporate Agent:
1. A company registered under Companies Act 2013

2. Limited Liability Partnership
3. Co-operative Society
4. Regional Rural Bank
5. NGO or Micro Lending Financial Organization
6. Banking Company
Minimum Capital Requirement: Rs 50 lakhs
Term of License : 3 year
Whose business can be solicited : Three life insurers, Three General Insurers and three Health Insurers
1. Corporate Agent (Life) : can do only life insurance business

2. Corporate Agent (non Life) : can do only non life insurance business
3. Corporate Agent (Health) : can do only health insurance business
4. Corporate Agent (Composite) : can do all type of business as stated in 1to 3.
[32]
Overall In-charge of the Corporate Agent: Principal Officer who should be minimum Graduate and under gone training of 50 hours in
the prescribed institute and have passed prescribed examination.
Specified Persons: Those who have passed 12th class examination can be specified persons who can solicit the business.
Minimum Capital: Rs 50 lakhs
Term of License: Three Years
Renewal Fees: Rs 25000/-
Professional Indemnity Insurance: An insurance policy for the twice the amount remuneration earned should be purchased . The
minimum amount is Rs 50 lakhs and maximum Rs100 crs
Code of Conduct: The code of conduct is to be followed as prescribed in the Regulations
Inspection by IRDA: The IRDA can conduct inspection of the Corporate Agent.
Insurance Brokers
An insurance broker is a new distribution channel introduced in 2002 by IRDA. The insurance broker is professional & expert
organization who deals with all insurance companies and area of operation is on all India bases. He is representing the clients not the
Insurers
The Brokers are categorized as under:
(a) Direct broker; It means the broker can deal in life and general insurance business
(b) Direct Broker (Life): Can deal only with life insurance business
(c) Direct Broker (Non Life) : Can deal only with non life insurance business.
(d) Reinsurance Brokers: Deals only with Reinsurance business
(e) Composite Brokers: It means the broker can deal with reinsurance and life & general insurance business
Requirements of Capital—
Any applicant seeking to become an insurance broker should satisfy the following conditions:
a) it shall have a minimum amount of capital as mentioned below:
[33]
Category Minimum amount (Rupees)

Direct broker Seventy fifty lakhs
Reinsurance broker four hundred lakhs
Composite broker Five hundred lakhs
b) the capital in the case of a company limited by shares and a cooperative society shall be in the form of equity shares ;
c) the capital in the case of other applicants shall be brought in cash;
d) the applicant shall exclusively carry on the business of an insurance broker as licensed under these regulations.
e) No part of the capital of an applicant shall be held by a non-Indian interest beyond 49% at any time.
f) Principal Officer: In any insurance broking firm a person called Principal Officer will be responsible for insurance business
and day to day function of the broking firm. To become the principal officer he should fulfill the following criteria:
The Principal officer should have minimum qualification of graduation or as prescribed by IRDA
the principal officer of the applicant has received at least one hundred hours/fifty hours of theoretical and practical training
from an institution recognized by the Authority from time to time.
has passed an examination, at the end of the period of training conducted by the National Insurance Academy, Pune or any
other examining body recognized by the Authority.
Validity of licence — A licence once issued shall be valid for a period of three years from the date of its issue, unless the same is
suspended or cancelled by IRDA.
Fees:
1. Every insurance broker at the time of application for certificate of registration, pay a non-refundable application fees as set out below:
Category of Insurance broker Amount of application processing fee payable
Direct broker Rs.25,000
Reinsurance broker Rs.50,000
Composite broker Rs.75,000
[34]
2. Every insurance broker shall pay fees as set out below:
Category of
Amount of fee payable
insurance broker
Rs.50,000/- after grant of inprinciple approval in case of a fresh applicant. In the case of Renewal of 18
Direct broker
Registration, the fee shall be Rs 1,00,000/- for a period of 3 years
Rs.1,50,000/- after grant of in-principle approval in case of a fresh applicant. In the case of Renewal of
Reinsurance broker
Rs.2,50,000/- after grant of in-principle approval in case of a fresh applicant. In the case of Renewal of
Composite broker
Professional indemnity insurance — Every insurance broker shall take out and maintain and continue to maintain a professional
indemnity insurance cover throughout the validity of the period of the licence. The amount of indemnity should be two times of the
brokerage earned during last year for direct brokers minimum Rs 100 lakhs and maximum Rs 50 crs Reinsurance broker minimum Rs 4
crs and maximum Rs 75 cr and Composite broker Rs minimum Rs 5crs and maximum Rs 100 crs.
Inspection by IRDA: The IRDA can conduct inspection of the Broker .
Insurance Marketing Firm:
Who can be Corporate Agent:
1. A company registered under Companies Act 2013

2. Limited Liability Partnership
3. Co-operative Society
4. Any other person as may be recognized by the Authority
[35]
Minimum Capital Requirement: Rs 10 lakhs
Term of License : 3 years
Whose business can be solicited : Two life insurers, two General Insurers and two Health Insurers
Other Business can also be conducted:
1. undertaking back office activities

2. Approved person of Insurance Repositories
3. Undertaking survey and loss assessment work
4. any other insurance related activity permitted by the Authority from time to time
5. mutual funds of mutual funds companies Regulated by SEBI
6. pensions products regulated by PFRDA
7. Other financial products distributed by SEBI licensed Investment Advisors
8. Banks/ financial products of banks/NBFC regulated by RBI
9. non-insurance products offered by Department of Post Govt of India
10. any other financial product or activity permitted by the IRDA
Overall In-charge of the Corporate Agent: Principal Officer who should be minimum Graduate and under gone training of 50 hours in
the prescribed institute and have passed prescribed examination.
Insurance Sales Persons (ISP): Those who have passed 12th class examination can be ISP who can solicit the business.
Term of License: Three Years
Area of Operation: Only one specified District

Inspection by IRDA: The IRDA can conduct inspection of the IMF.
[36 ]
Web Aggregator:
Who is web aggregator: It is an intermediary who maintains a website for providing interface to the insurance prospects for the price
comparison and information of the products of different insurers and other related matters
Chapter 4 Point of Sales Persons
Why Point of Sales Persons? IRDA has observed that there are number of persons who are involved in undertaking simple and routine
activities pertaining to solicitation and marketing of insurance policies. For e.g. bulk of products in motor insurance, travel insurance,
personal accident insurance, etc. require very little underwriting.
These happen to be largely pre-underwritten products wherein based on the information provided by the prospect, the insurance policy is
automatically generated by the system. The intervention required for such a product is minimal and the training and examination for such
persons could be of a lesser degree. In order to facilitate the growth of insurance business in the country and to enhance insurance
penetration and insurance density, the Authority created a “Point of Sales Persons”.
Who can be appointed Point of Sales Person?
1. The “Point of Sales Person” shall be atleast 10 th pass.

2. He shall be employ by the insurance company or the insurance intermediary with whom he shall work.
3. Respective Insurance company or insurance intermediary shall provide the training of 15 hours and conduct examination after
the training.
4. The expenses of training fees shall be borne by the respective recruiter.
5. On successful passing the examination, he will be issued a letter by respective recruiter.
Appointment of Point of Sales Person
1. An insurance company or an insurance intermediary can engage a “Point of Sales Person” to represent
2. A “Point of Sales Person” can represent an insurance company or an insurance intermediary.
[37]
How the Point of Sales Persons will solicit the business?
1.“Point of Sales Person” can solicit and market only certain pre-underwritten products approved by the Authority.
2. Every “Point of Sales Person” shall be identified by his Aadhaar Card Number or his PAN Card.
3. The “Point of Sales Person” can sell only the following pre-underwritten product.
Motor Comprehensive Insurance Package Policy for Two-wheeler, private car and commercial vehicles.
Third party liability (Act only) Policy for Twowheeler, private car and commercial vehicles.
Personal Accident Policy
Travel Insurance Policy
Home Insurance Policy
Life Insurance products
Any other Policy specifically approved by the Authority
4. Every policy sold through the “Point of Sales Person” shall be separately identified and pre-fixed by the name “POS – (name of
product)”.
Procedure for Tagging of Proposal Form and Insurance Policy to Point of Sales Person
1. Every proposal form, in paper or in paperless form, insurance policy and other related documents shall carry provision to record
the Aadhaar card number of the PAN card number in order to tag the policy to the “Point of Sales Person” who is selling the said
policy.
2. The insurance company shall be responsible to record the Aadhaar card number or the PAN card number of the “Point of Sales
Person” in the proposal form and insurance policy. The insurance company shall be responsible for the conduct of the “Point of
Sales Person” representing him and any misconduct on part of the Point of Sales Person shall make it liable to a penalty as per
provisions of Section 102 of the Act.
3. For sales effected through the insurance intermediary, the insurance intermediary shall record the Aadhaar card number or the
PAN card number of the “Point of Sales Person” in the proposal form and require insurance company to do the same in the
insurance policy. The insurance intermediary shall be responsible for the conduct of the “Point of Sales Person” engaged by it and
any misconduct on part of the Point of Sales Person shall make it liable to a penalty as per provisions of Section 102 of the Act.
[38]
4. One of the factors that shall be considered while renewing the certificate of registration of the insurance intermediary, shall be
the conduct of the “Point of Sales Person” on the rolls of insurance intermediary.
Compliance
1. The insurance companies and insurance intermediaries shall make suitable changes in their policy administration system to
capture the Aadhaar Card number or the PAN card number details of the “Point of Sales Person”.
2. The “Point of Sales Person” when engaged by the insurer shall place business with that insurer subject to compliance of rules
and procedures of that insurance company.
3. The Authority shall specify the format and the manner of maintaining returns which the insurance company and the insurance
intermediary shall maintain in electronic form which can be accessed by the Authority on a remote location basis. The formats
shall give the number of policies sold and the premium collected by the “Point of Sales
[39]
1. IRDA was formed in _______
(a) 1999
(b) 2001
2. Total members of IRDA are _____
(a) 9
(b) 10
3. The retirement age of member is ___
(a) 62
(b) 65
4. IRDA does not specify requisite qualifications, code of conduct and practical training for
(a) Insurance Brokers

(b) Agents & Surveyors
(c) Third Party Administrator
(d) Insurer
5. ______can supersede the IRDA
(a) Central Govt

(b) Supreme Court
6. What is minimum capital requirement for any life insurance company?
(a) Rs 100cr
(b) Rs 200cr
(c) Rs 1000cr
(d) Rs 150cr
7. Type of Insurers
(a) Life Insurers

(b) General Insurers
(c) Reinsurer
(d) All
8. What is minimum capital requirement for Reinsurer company?
(a) Rs 100cr
(b) Rs 200cr
(c) Rs 1000cr
(d) Rs 150cr
9. By what date renewal application to be filed ?

(a) 31st Dec
(b) 1st Jan
(c) 30th Sept
(d) 31st March
10. Choose the correct Statement
Statement A: File and Use means without the IRDA approval the insurance product cna be sold
Statement B: Use and File means without the IRDA approval the insurance product cna be sold
(a) Both
(b) None
(c) Statement A
(d) Statement B
1 2 3 4 5 6 7 8 9 10
aaadaadbad
[40]
11. Who can sell the insurance product other than Insurer ?
(a) Any person

(b) A person who is licensed by IRDA
(c) A person who is authorized by Insurer.
(d) A person who is authorized by Govt.
12. Choose the correct option
Statement A: The share capital of any Insurance company is Rs 100 crores.
Statement B: The Share capital of Direct Broker is Rs 75 lakhs.
(a) Statement A
(b) Statement B
(c) Both
(d) None
Statement A: To become an Insurance Agent in rural area minimum qualification is 12th passed.
Statement B: To become an Insurance Broker in rural area minimum qualification is 10th passed.
(a) Statement A
(b) Statement B
(c) Both
(d) None
Statement A: Insurer can sell any product.
Statement B: Insurer can sell any product with the approval of IRDA.
(a) Statement A
(b) Statement B
(c) Both
(d) None
Statement A: A Principal Officer is must for all distribution channel of insurance product.
Statement B:A Principal Officer is required only for Insurers.

(a) Statement A
(b) Statement B
(c) Both
(d) None
16. What is the qualification of POS?
(a) 12th pass

(b) 10th Pass
(c) middle pass
(d) Graduate
17. Who will conduct the training for POS?
(a) Insurer
(b) Insurance Intermediary
(c) Any of A or B
(d) POS himself
18. Which insurance policy cannot be sold by POS?
(a) Fire
(b) Motor
(c) PA
(d) Life
Statement A: POS can sell only pre fixed POS products
Statement B: POS should be linked with his Adhar card
(a) Statement A
(b) Statement B
(c) Both
(d) None
Statement A: POS should register under GST
Statement B: POS should be linked with his PAN
(a) Both
(b) None
(c) Statement A
(d) Statement B
11 12 13 14 15 16 17 18 19 20
b a d b d b c a c c
[41]
Module 3 Principles and Practice of Insurance
Introduction to Essential Of Contracts
“Insurance may be defined as a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum
called premium to pay the other party called insured a fixed amount of money one the happening of a certain event.”
“A Contract may be defined as an agreement between two or more parties to do or to abstain from doing an act, with an
intention to create a legally binding relationship.”
Since Insurance is a contract, certain sections of Indian Contract Act are applicable. The Insurance contract involves
Essentials of Commercial Contract
A. Elements of General Contract
1. Offer & Acceptance

2. Consideration
3. Legal capacity to contract or competency
4. Consensus “ad idem”
5. Legality of object
B. Elements of Special Contract relating to Insurance
1. Life Insurance
Utmost Good Faith (Uberrima Fides)
Insurable Interest
Insurable Interest
2. General Insurance
Insurable Interest
Indemnity
Subrogation
Proximate Cause
[42]
The essentials of any Insurance Contract are discussed as under with reference to the life Insurance only.
1. Offer & Acceptance:
We all know that in very contract there are two parties and in insurance contract the two parties are Insurer and a Proposer. In insurance
contract a proposer makes an offer and Insurer accepts it. The Insurer may either reject the offer of the proposer or may make a counter
offer by modifying the terms and conditions or with addition price (premium). The counter offer by Insurer may or may not be accepted.
An advertisement by the Insurance company is known as ‘Invitation to an Offer”.
The offer or proposal and its acceptance may be verbal or in writing but in Insurance contracts these are in writing. In Insurance the
proposer offers to purchase an insurance from the Insurer and this offer is in the form of a proposal form.
2. Consideration:
There is no validity of a contract if there is no consideration, which is the act or promise offered by one party and accepted by the other
as the price of his promise. In Insurance contracts the consideration is the premium that the Proposer pays to the Insurer as the price of
the promise that the Insurer has made that he shall indemnify the insured. Hence premium payment is the consideration on part of the
insured and the promise to Indemnify is the consideration on part of the Insurer.
3. Legal Capacity to Contract or Competency:
For an agreement to be binding on all parties, the parties involved must have the legal capacity to enter into a contract.
With respect to the insurer, if the company is formed as per laws of the country & empowered to solicit insurance then the insurer is
capable of entering into an agreement.
With respect to the insured, the person should be of legal age i.e. 18 years and of sound mind.
If a contract is made with an underage the application may be held unenforceable if the minor decides to repudiate it at a later date. In
Insurance contract the insurer is bound by the contract as long as the underage wishes to continue it. If the minor repudiates his contract,
the law will allow him a refund of all premium paid.
Insanity or mental incompetence precludes the making of a valid Insurance contract.
4. Consensus “ad idem” (Same mind):
The understanding between the insurer & insured person should be of same thinking or mind. The reasons for taking the Insurance policy
should be understandable to both the parties. Both parties to the contract should be of the same mind and there must be consent arising
out of common intention. Both parties should be clear about what the other is saying. The Insurer should know what the insured wants
and the insured should know what the insurer is offering and both should be agreed on this. For example, if an Insured seeking a fire
policy is issued a burglary policy there is no consent arising out of common intention.
[43]
[43]
5. Legality of Object:
To be a valid, a contract must be for a legal purpose & not contrary to public policy. Insurance is legal business therefore it cannot be
illegal on the part of the insurer. An individual can take the life Insurance of his own life or his/her family members. If an individual
takes a policy on the life of an unknown person it will not be a valid contract as it will amount to gambling.
Another example is that the contract will not be legal if it has anything to do with stolen property or if it is in respect of any unlawful
activity. Hence Insurance of stolen goods or the Insurance of smuggling operation shall not stand scrutiny in the court of law and such
contracts will be void.
In addition to the above features which are common to commercial contracts as well as contracts of Insurance, Insurance contracts are
subject to certain special principles evolved under common law in UK and are followed by the Indian courts. These principles are known
as the fundamental principles of the law of Insurance
Principles of Insurance
1. Utmost Good Faith
This principle is applicable only to insurance contract because the insurance product is intangible i.e. cannot be seen or touch or feel
while in the commercial contracts are normally subject to the principle of “Caveat Emptor” i.e. let the buyer beware. In most of these
contracts each party to the contract can examine the item or services which is the subject matter of contract.
Insurance contract is of faith towards each other. An Insurer being a risk bearer is not aware about the proposer or its property. To accept
the risk the Insurer need to know the material facts depending upon the nature of the product.
What is a Material Fact?
Material fact is every circumstance or information, which would influence the judgement of a prudent insurer in assessing the risk.
Or
Those circumstances which influence the insurer decision to accept or refuse the risk or which effect the fixing of the premium or the
terms and conditions of the contract must be disclosed.
Facts, Which Must be Disclosed
I. Facts, which show that a risk represents a greater exposure than would be expected from its nature for e.g. the fact that a part of
the building is being used for storage of inflammable materials.
[44]
ii. External factors that make the risk greater than normal e.g. the building is located next to a warehouse storing explosive
material.
iii. Facts, which would make the amount of loss greater than that normally expected e.g. there is no segregation of hazardous
goods from non-hazardous goods in the storage facility.
iv. History of Insurance (a) Details of previous losses and claims (b) if any other Insurance Company has earlier declined to insure
the property and the special condition imposed by the other insurers; if any.
v. The existence of other insurances
vi. Full facts relating to the description of the subject matter of Insurance
Some examples of Material facts are
(a) In Fire Insurance: The construction of the building, the nature of its use i.e. whether it is of concrete or Kutcha having thatched
roofing and whether it is being used for residential purposes or as a godown, whether fire fighting equipment is available or not.
(b) In Motor Insurance: The type of vehicle, the purpose of its use, its age (Model), Cubic capacity and the fact that the driver has a
consistently bad driving record.
(c) In Personal Accident Insurance: Age, height, weight, occupation, previous medical history if it is likely to increase the choice of an
accident, Bad habits such as drinking etc.
(d) Burglary Insurance: Nature of contents , value of contents , type of security precautions taken.
(e) Life Insurance: Age, Health, Income, family history , profession etc.
As mentioned this is not an exhaustive list but only a few examples.
The details of previous losses are material fact which is relevant to all policies.
Facts, Which need not be Disclosed
a. Facts of Law: Every one is deemed to know the law. Overloading of goods carrying vehicles is legally banned. The transporter can
not take excuse that he was not aware of this provision.
b. Facts which lessen the Risk: The existence of a good fire fighting system in the building.
c. Facts of Common Knowledge: The insurer is expected to know the areas of strife and areas susceptible to riots and of the process
followed in a particular trade or Industry.
[45]
d. Facts which could be reasonably discovered: For e.g. the previous history of claims which the Insurer is supposed to have in his
record.
e. Facts which the insurers representative fails to notice: In burglary and fire Insurance it is often the practice of Insurance companies
to depute surveyors to inspect the premises and in case the surveyor fails to notice hazardous features and provided the details are not
withheld by the Insured or concealed by him them the Insured cannot be penalized.
f. Facts covered by policy condition: Warranties applied to Insurance polices i.e. there is a warranty that a watchman be deployed
during night hours then this circumstance need not be disclosed.
2. Insurable interest
The Insurance Act 1938 doesn’t define the insurable interest but it has been defined as follows by Mac-Gillivray
“Where the assured is so situated that the happening of the event on which the Insurance money is to become payable would as a
proximity cause, involve the assured in the loss or diminution of any right recognised by law or in any legal liability there is an insurable
interest in the happening of that event to the extent of the possible loss or liability.”
One of the essential ingredients of an Insurance contract is that the insured must have an insurable interest in the subject matter of the
contract. Insurance without insurable interest would be a mere wager and as such unenforceable in the eyes of law.
There are four essential components of Insurable Interests
There must be some property, right, interest, life, limb or potential liability capable of being insured.
Any of these above i.e. property, right, interest etc. must be the subject matter of Insurance.
The insured must stand in a formal or legal relationship with the subject matter of the Insurance. Whereby he benefits from its
safety, well-being or freedom from liability and would be adversely affected by its loss, damage existence of liability.
The relationship between the insured and the subject matter must be recognized by law.
When Should Insurable Interest Exist
In Life Insurance Insurable Interest must exist at the time of inception of Insurance and it is not required at the time of claim
In Marine Insurance Insurable Interest must exist at the time of loss / claim and it is not required at the time of inception.
In Property and other Insurance Insurable Interest must exist at the time of inception as well as at the time of loss/ claims.
[46]
3. Principle of Indemnity
Indemnity according to the Cambridge International Dictionary is “Protection against possible damage or loss”. The words protection,
security, compensation etc. are all suited to the subject of Insurance but the dictionary meaning or the alternate words suggested do not
convey the exact meaning of Indemnity as applicable in Insurance Contracts.
In Insurance the word indemnity is defined as “financial compensation sufficient to place the insured in the same financial position
after a loss as he enjoyed immediately before the loss occurred.”
Indemnity thus prevents the insured from recovering more than the amount of his pecuniary loss. It is undesirable that an insured should
make a profit out of an event like a fire or a motor accident because if he was able to make a profit there might well be more fires and
more vehicle accidents.
As in the case of Insurable Interest, the principle of indemnity also relies heavily on the financial evaluation of the loss but in the case of
life and disablement it is not possible to be precise in terms of money
An Insurance may be for less than a complete indemnity but it may not be for more than it.s
Example: A person who insures his car for Rs.4 lacs and it meets with an accident and is a total loss. It is not certain that he will get
Rs.4 lacs. He may have over valued the car or may be the prices of cars have fallen since the policy was taken. The Insurer will only pay
an amount equal to the value of the car at the time of loss. If he finds that a car of the same make and model is available in the market
for Rs.3 lac then he is not liable to pay more than this sum and payment of Rs.3 lacs will indemnify the Insured.
Similarly in the case of partial loss if some part of the car needs to be replaced the Insurer will not pay the full value of the new part. He
shall assess how much the old part had run and after deduction of a proportionate sum he shall pay the balance amount. An insured is not
entitled to new for old as otherwise he would be making a profit from the accident.
However there are two modern types of policy where there is a deviation from the application of this principle.
One is the agreed value policy where the insurer agrees at the outset that they will accept the value of the insured property stated in the
policy (sum insured) as the true value and will indemnify the insured to this extent in case of total loss. Such policies are obtained on
valuable pieces of Art, Curious, Jewellery, Antiques, Vintage cars etc.
The other type of policy where the principle of strict indemnity is not applied is the Reinstatement policy issued in Fire Insurance. Here
the Insured is required to insure the property for its current replacement value and the Insurer agrees that in the event of a total loss he
shall replace the damaged property with a new one or shall pay for the replacement in full.
Other than these there are Life and Personal Accident policies where no financial evaluation can be made. All other Insurance policies
are subjected to the principle of strict Indemnity. In most policy documents the word indemnity may not be used but the courts will
follows this principle in case of any dispute coming before them.
[47]
How is Indemnity Provided?
The Insurers normally provide indemnity in the following manner and the choice is entirely of the insurer
Cash Payment
Repairs
Replacement
Reinstatement
1. Cash Payment
In majority of the cases the claims will be settled by cash payment (through cheques) to the assured. In liability claims the cheques are
made directly in the name of the third party thus avoiding the cumbersome process of the Insurer first paying the Insured and he in turn
paying to the third party.
2. Repair
This is a method of Indemnity used frequently by insurer to settle claims. Motor Insurance is the best example of this where garages are
authorized to carry out the repairs of damaged vehicles. In some countries Insurance companies even own garages and Insurance
companies spend a lot on Research on motor repair to arrive at better methods of repair to bring down the costs.
3. Replacement
This method of Indemnity is normally not preferred by Insurance companies and is mostly used in glass Insurance where the insurers get
the glass replaced by firms with whom they have arrangements and because of the volume of business they get considerable discounts. In
some cases of Jewellery loss, this system is used specially when there is no agreement on the true value of the lost item.
4. Reinstatement
This method of Indemnity applies to Property Insurance where an insurer undertakes to restore the building or the machinery damaged
substantially to the same condition as before the loss. Sometimes the policy specifically gives the right to the insurer to pay money
instead of restoration of building or machinery.
Reinstatement as a method of Indemnity is rarely used because of its inherent difficulties for e.g. if the property after restoration fails to
meet the specifications of the original in any material way or performance level then the Insurer will be liable to pay damages. Secondly,
the expenditure involved in restoration may be much more than the sum Insured as once they have agreed to reinstate they have to do so
irrespective of the cost.
[48]
Limitations on Insurers Liability
1. The maximum amount recoverable under any policy is the sum insured, which is mentioned on the policy. The amount is not
the agreed value of the property (except in Valued policies) nor is it the amount, which will be paid automatically on occurrence of
loss. What will be paid is the actual loss or sum insured whichever is less.
2. Property Insurance is subjected to the Condition of Average. The underlying principle behind this condition is that Insurers are
the trustees of a pool of premiums from which they meet the losses of the few who suffer damage, so it is reasonable to conclude
that every Insured should bring a proper contribution to the pool by way of premium. Therefore if an insured deliberately or
otherwise underinsures his property thus making a lower contribution to the pool, he is not entitled to receive the full benefits.
Corollaries of Indemnity
There are two corollaries to the principle of Indemnity and these are Subrogation and Contribution.
1. Subrogation
It has already been established that the purpose of Indemnity is to ensure that the Insured does not make a profit or gain in any way as a
consequence of an accident. He is placed in the same financial position, which he had occupied immediately before the loss occurred.
As an off shoot of the above it is also fair that the insurer having indemnified the insured for damage caused by another (A Third Party)
should have the right to recover from that party the amount of damages or part of the amount he has paid as indemnity.
This right to recover damages usually lies with the bereaved or injured party but the law recognises that if another has already paid the
bereaved or injured party then the person who has paid the compensation has the right to recover damages.
In case the insured after having received indemnity also recovers losses from another then he shall be in a position of gain which is not
correct and this amount recovered from another shall be held in trust for the insurer who have already given indemnity. Subrogation may
be defined as the transfer of legal rights of the insured to recover, to the Insurer.
2. Contribution
Contribution is the second corollary of Indemnity.
[49]
An individual may have more than one policy on the same property and in case there was a loss and he were to claim from all the
Insurers then he would be obviously making a profit out of the loss which is against the principle of Indemnity. To prevent such a
situation the principle of contribution has been evolved under common law.
Contribution may be defined as the “right of Insurers who have paid a loss to recover a proportionate amount from other Insurers
who are also liable for the same loss”. The common law allows the insured to recover his full loss within the sum insured from any of
the insurers.
Proximate Cause
There are three types of perils related to a claim under an Insurance policy
(1) Insured Perils: These are the perils mentioned in the policy as being insured e.g. Fire, lightening, storm etc. in the case of a
fire policy
(2) Excepted Perils: These are the perils mentioned in the policy as being excepted perils or excluded perils e.g. Riot strike, flood
etc. which may have been excluded and discount in premium availed.
(3) Uninsured Perils: Those not mentioned in the policy at all either in Insured or excepted perils e.g. snow, smoke or water as
perils may not be mentioned in the policy.
Insurers are liable to pay claims arising out of losses caused by Insured Perils and not those losses caused by excepted or Uninsured
perils.
Insurance Documents
Life/General Insurance
The Life Insurance Contract is a long term contract therefore all the terms and conditions should be well defined in the contract to avoid
any legal battle at a later stage. The following documents are involved to enter into a life Insurance contract: -
1. Prospectus: When the parents want to admit their ward to be admitted in school or college then they have to buy the prospectus of the
school or college to know the facilities available there and other special features of the school or college. Similarly in the life Insurance
business the company provides information about itself and the product through the prospectus. Therefore, it is a document, which gives
details regarding set up of the life Insurance company, plans or features of the life Insurance products and other terms and conditions.
Though, prospectus provides a lot of information to client to decide about the product/policy but he would like to take the advice &
guidance of a salesperson.
[50]
2. Proposal Form: After selecting the product to be taken by the prospect the next stage in the contract of Life Insurance begins with the
proposal. The Indian Contract Act says “when one person signified to another his willingness to do or to abstain from doing anything
with a view to obtaining assent or that other such act or abstinence, he is said to have made a proposal”. The information required in the
proposal form will depend upon the nature of the product i.e. Fire, Life, Personal Accident, Motor etc In Life Insurance the proposal is
made by the proposer through a standard printed proposal form of the insurer. The proposal form would contain the information like
Name , Nationality, Occupation, Age, Nominee, Additional information for female proposer, Family History, Details of Personal Health
etc
In Motor insurance: Name , Registration number, capacity of the vehicle, engine and chassis number.
In Home Insurance: Address, type of construction, nature of contents, list of mechanical equipment , list of jewellary.
In Personal Accident: name , address, age, height , any disability etc .
3. Deposit Receipt: Along with the proposal form the premium as calculated above is to be deposited with the Insurance company. Only
after getting the first payment of the premium the proposal will be scrutinized by the Insurance company. As per section 64 VB the
premium is to be paid in advance otherwise the no proposal is accepted by the Insurer.
Along with the proposal form the premium as calculated above is to be deposited with the Insurance company. Only after getting the first
payment of the premium the proposal will be scrutinized by the Insurance company. As per section 64 VB the premium is to be paid in
advance otherwise the no proposal is accepted by the Insurer.
4. Policy Documents
After scrutiny of the proposal form and it is found in order then the policy document is issued.
Under general insurance sometime in addition to the deposit receipt, a cover note is also issued till the policy document is issued. The
cove note issued represent that the insurer has agreed to bear the loss.
This Policy document is a very important document and the POS must contact the insured and urge him to check the columns / data in
the schedule.
This document is to be kept in safe custody, and should be handed over in a neat manner. It should not be left unattended, should not be
misplaced or soiled otherwise there will be a lot of inconvenience at the time of Taking loan against it, passing any endorsement, Giving
it as collateral security and Taking claim. It is like a pronote or Registry.
A policy document is the proof of contract It mentions conditions of contract and also the rights of the policyholder. However, the
policyholder seldom goes through the policy document. The assured should know the rights he enjoys and also the conditions he has to
fulfill, so that the benefits under the contract are maintainable. The agent should explain these to policyholder when he requires any
guidance in dealing with his policy or preferably when the policy is delivered to the policyholder.
[51]
5. Endorsement
After issuing the policy any modification in the policy document can be made by issuing the endorsement not the new policy. Any
endorsement to be made will become part of the policy document. The endorsement will bear the policy number for the cross reference.
6. Renewal Notice
Normally the policies in Non-life Insurance are for a period of 12 months but in case of life Insurance the yearly premiums are paid
based on term of the policy i.e. for number of years. Though there is no binding on an Insurance company to send intimation for renewal
to the policyholder, but if due to some reason the policyholder forgets to deposit premium it is not only loss to the insured but also to the
Insurer who has incurred expenses on maintenance of policy and the relevant documentation. Thus the life Insurance company has
evolved the system of sending renewal notice to the policyholder. This is done in advance so that policyholder deposits the premium,
which is as per agreed terms and conditions. Thus renewal notice is beneficial to company as well as policyholder
Claims
Life Insurance: The policy schedule specified the contingencies on the happening of which the sum assured is payable and it can be
either only on death during the term or only on survival of the term or both either death during or survival of the term. Claims on death
during terms are called “death claims” and those on survival the term as maturity claim. In case of death claim the intimation to the
insurer by any family members. The policy number to be mentioned on the intimation.
General Insurance: Intimation to the Insurer in writing along with policy number and the estimated of the loss (except personal and
Travel insurance).
The Insurer shall appoint a Licensed Surveyor to assess the loss after inspection of th damaged property.
Payment of premium (Section 64VB): Under section 64 (VB) of the Insurance Act the risk undertaken by the Insurer will not be
assumed unless and until the premium is received by Insurer or guaranteed to be paid by the proposer within the prescribed limit.
1. The premium amount should be paid along with the proposal from either by way of cheque or cash. If the cheque is honored, the
risk will start form the date of deposit of the cheque otherwise no commencement of risk.
2. The premium can also be paid by way of guarantee by submitting bank guarantee for the limited period i.e. by the last day of the
succeeding month. Example: The bank guarantee is submitted on 2nd Feb 2017 the premium should be paid on or before 31st
March 2017
3. The premium received by any intermediary should be deposited without deducting any commission or remuneration from the
premium.
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(a) In an insurance contract an insurer makes an offer and the prospect accepts it.
(b) In an insurance contract a prospect makes an offer and an insurer accepts it.
(c) In an insurance contract an offer and acceptance is not a requirement.
(d) In an insurance contract no principles of contact are applicable.
2. The consideration for the insurer under an insurance contract is a______
(a) premium
(b) sum insured
3. The consideration for an insured under an insurance contract is a_________________
(a) compensation
(b) premium
Statement A: The minor can enter in to an insurance contract.
Statement B: The person with unsound mind cannot enter into an insurance contract.
(a) Both statements are correct

(b) Both statements are wrong
(c) Statement A is correct
(d) Statement B is correct
Statement A: Insurance is lawful business.
Statement B: The insurance is not a gambling.
(a) Both statements are correct

(b) Both statements are wrong
(c) Statement A is correct
(d) Statement B is correct
6. When there is a fraudulent non disclosure of material facts the insurance contracts becomes:
(a) voidable
(b) illegal
(c) unenforceable
(d) Void
7. The legal right to insure means
(a) Competence to enter into contract

(b) Insurable interest
(c) Utmost good faith
(d) Consideration

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baadadb
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8. The principle of indemnity is applied in practice through
(a) Franchise deduction

(b) Deduction & depreciation
(c) Extra premium
(d) Excess clause deduction
9. Methods of providing indemnity are
(a) cash payment

(b) repair
(c) Replacement
(d) All
Statement A: The proposer need not to disclose facts which considers as not material
Statement B: Facts which are common knowledge which the insurer is expected to need not be disclosed.
(a) Only A is true

(b) Only B is true
(c) Both are true
(d) Neither of two
(a) the information in the proposal form is used for underwriting

(b) Statement B
(c) Both
(d) None
12. What is proposal form
(a) A request for an insurance cover

(b) An offer to enter into a contract
(c) Both a request and an offer to enter an insurance contract
(d) None of the above
13. Renewal notice is mandatory to be sent.
(a) Till the policy is issued

(b) Till the claim is settled
(c) As evidence of the contract in case the original policy is lost
(d) to know the terms of acceptance
14. Grace period for the annual premium
(a) 30 days
(b) 15 days
(c) 7 days
(d) 45 days
15. if the monthly premium period was due on 24th Feb in a leap year
(a) The grace period will end on 9th March

(b) The grace period will end on 10th march
(c) The grace period will end on 11th March
(d) None

8 9 10 11 12 13 14 15
bdb d c a a b
[54]
Module 4 Insurance Products
As per the syllabus prescribed by IRDA the following products have been explained
1. Vehicle Insurance
2. Health Insurance
3. Personal Accident
4. Travel Insurance
5. Home Insurance
6. Life Insurance
1. Vehicle Insurance
Why Vehicle Insurance ?
In the old days, many of the pedestrians -knocked down by motor vehicles and who were killed or injured, did not get any compensation
because the motorists did not have the resources to pay the compensation and were also not insured.
In order to safeguard the interests of pedestrians, therefore, the Motor Vehicles Act, 1939, introduced compulsory insurance amended in
1988.
Own Damage: The insurance of motor vehicles against damage of the vehicle which is not made compulsory,
Third party Liability insurance arising' out of the use of motor vehicles in public places is made compulsory.
No motor vehicle can ply in a public place without such insurance.
Evidence of vehicle Insurance:
Certificate of Insurance is only an evidence of the existence of a valid insurance as required by the Motor Vehicles Act acceptable to
the police authorities and R.T.O, The points covered under a certificate of insurance differ according to the type of vehicle insured.
[55]
Vehicle Insurance -Classification
Motor vehicles classified -three categories.
i. Private cars
i. Motor cycles and motor scooters
iii. Commercial vehicles, further classified into
Goods carrying vehicles
Tariff For Trailers
Passenger carrying vehicles e.g. Motorized rickshaws, Taxis, Buses
Miscellaneous Vehicles, e.g. Hearses (funeral van), Ambulances, Cinema Film Recording & Publicity vans Mobile
dispensaries etc. etc.
Tariff for Motor trade -Road Transit Risk Only
Tariff for Motor Trade –Road Risk Only
ariff for Motor Trade- Internal Risk Only
Vehicle Insurance-Types of Policies
Car/Van - Private and Commercial

Mc/Scooter-Private and Commercial - Two Wheeler & Three Wheeler
Bus/ Truck- Heavy Vehicle- Private & Commercial
Vehicle Insurance-Claims
1. Accident due to Collision with other vehicle or object or fire or theft resulting damage to the vehicle which may be irreparable or
repairable. Such losses are covered under “Own Damage” if vehicle is insured under comprehensive cover.
2. Third Party -Death- Bodily injury- Property damage
Type of Polices Forms
Form A- To cover Act Liability-This form applies uniformly to all classes of vehicles, whether Private Cars, Commercial Vehicles,
Motor Cycles or Motor Scooters, with suitable amendments in "Limitations as to Use".
Form B- To cover own damage + Act Liability -Policies for Private Cars, Commercial Vehicles, Motor Cycles/Scooters,
[56]
Form B- Coverage's
Section I: Loss or Damage (or “Own Damage")
Fire, explosion, self-ignition or lightning.

Burglary, house breaking or theft.
Riot and strike.
Earthquake (fire and shock damage)
Flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost.
Accidental external means.
Malicious act.
Terrorist activity.
Transit by road, rail, inland waterway, lift, elevator or air.
Landslide /rockslide.
Towing Charges
For motor cycles the limit is Rs.300/- for cars Rs.1500/- and for commercial vehicles Rs.2500/-
Repairs
Ordinarily repairs arising out of damage covered by the policy can be carried out only after they are authorized by the insurers.
However, the insured is allowed to carry out the repairs without authorization from the insurers, provided that: the estimated cost of such
repair does not exceed Rs-500/- (Rs.150/- for motor cycles). Detailed estimate of the cost; and the insured gives the insurers every
assistance to ensure that such repair is necessary and that the charge is reasonable.
Excess
Compulsory Excess
Two wheelers: Rs 100 /-
Private Car Rs 1000/- for cars (including three wheelers upto 1500 cc and Rs 2000/- for exceeding 1500 cc
This applies to all vehicles. The insured has to bear a part of the claim amount in respect of each accident.
[57]
Exclusions; What It does not cover
consequential loss
depreciation
wear and tear; and
mechanical or electrical breakdowns, failures or breakages
Damage to tyres unless the vehicle is damaged at the same time. (Then, 50% of cost of replacement payable). For commercial
vehicles, see Compulsory Excess Clause dealt with later
Loss when the vehicle is driven under the influence of intoxicating liquor or drugs
In the motor cycle and commercial vehicle policy there is an additional exclusion:
Loss of or damage to accessories by burglary, housebreaking or theft unless the vehicle is stolen at the same time.
In commercial vehicle policy, there is a further exclusion: Damage caused by overloading or strain of the vehicle
Section II Liability to Third Parties. It becomes section IV in case of commercial vehicles
The insurers indemnify the insured against all sums which he may become legally liable to any person including occupants carried in the
motor car (provided that they are not carried for hire or reward) by reason of death or bodily injuries caused to such third parties or by
reason of damage to the property of third parties caused by or arising out of the use of the motor car. The insured's liability for damage to
property of third parties is limited to Rs.6000/-; whilst liability for death of or bodily injury to third party is unlimited.
The legal costs and expenses incurred by such third parties are reimbursed with the insurer's written consent.
The insurers are liable for the death of or bodily injury arising out of and in the course of employment, but only to the extent necessary to
meet the requirements of the Motor Vehicles Act.
Section III Commercial vehicle policies only
This section provides cover while the vehicle is towing one disabled mechanically - propelled vehicle. It provides that whilst the insured
vehicle is being used for the purpose of towing any one disabled mechanically - propelled vehicle
the cover provided by the policy remains operative, and Under Section II of the policy, indemnity will also be provided for the liability
in connection with such towed vehicle. This however is subject to the following two provisions:
The towed vehicle should not be towed for hire or reward and No cover is available under the policy for the damage to the towed vehicle
or the property conveyed thereby.
[58]
General Exclusions (applicable to all sections)
These provide that the insurer shall not be liable in respect of:
Any accident outside the geographical area specified in the policy, that is, India. The limit can be extended to cover Bangladesh,
Bhutan, Nepal, Pakistan, Sri Lanka & Maldives on payment of extra premium
Contractual liability.
Any accident when the vehicle is used not in accordance with the Limitations (Use clause.)
Any accident when the vehicle is driven without an effective driving licence (Driver's Clause).
War, etc and nuclear risks.
Conditions
Apart from the usual conditions such as notice of loss, cancellation of policy, arbitration, etc. there are two conditions which are
specific to motor policies.
The insured is required to safeguard the vehicle from loss or damage and maintain it in efficient condition. In the event of an
accident, the insured shall take precautions to prevent further damage. If the vehicle is driven before repairs any further damage is
at insured's risk.
The insurer has the option to repair or replace the vehicle or parts or pay in cash the amount of damage or loss. The insurer's
liability cannot exceed the insured's estimated value of the vehicle (specified in the policy) or the value of the vehicle at the time of
loss whichever is less.
Rating -Private Cars/ Scooters/ Motorcycles
Rates are based upon
the cubic capacity as given by manufacturers,

Insured’s Declared Value (IDV),
the Zone of operation and
Age of the vehicle.
The cubic capacity of the vehicle indicates the power of the engine. Separate rates apply for cars upto 1000 cc, from 1000 cc – 1500 cc
and above 1500 cc and scooters/motorcycles upto 150cc,150-350cc & above 350cc. Similarly there are different rates for vehicles in the
age groups upto 5 yrs.; 5 yrs. to 10 yrs. And above 10 yrs.
[59]
There are two Zones of operation, Zone A and Zone B, as follows:

Zone A : Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, N.Delhi & Pune
Zone B: Rest of India.
Note: The rates for Zone A are higher than those for Zone B.
Commercial Vehicles
The rating depends upon the Zone of operation, passenger carrying capacity/ gross vehicle weight, Insured Declared Value (IDV) and
age of the vehicle. There are three Zones for commercial vehicles.
Zone A Chennai, New Delhi, Kolkatta and Mumbai
Zone B All other state capital
Zone C Rest of India
Personal Accident Cover
There is provision for Compulsory Personal Accident Cover for Owner-Driver of cars and commercial vehicles of Rs.2.0 lacs and Rs.1
lac for owner driver of scooters / motorcycles. It covers Death, PTD and PPD only. Rs 50/- per lakhs (Earlier it was Rs 25/- per lakh)
Extra Benefits All Vehicles
The Third Party premium includes cover for third party property damage in excess of the required coverage of liability of
Rs.6,000/- as per the M.V.Act. In case the insured wants to get only the liability as per act covered (i.e. Rs.6,000/-) then discount
in T.P. premium is allowed.
Wider legal liability to persons e.g. paid drivers etc. employed in operation and / or maintenance of the vehicle i.e. under W.C. Act
and at common law.
Personal Accident covers for unnamed passengers as per the registered carrying capacity of the vehicle upto a max. of Rs.2 lac/
person on payment of extra premium
Extra premium
Extra fittings like radios, tape-recorders, air conditioners etc. (Also applicable to commercial vehicles)-4% & non Electricals-3%
Reliability Trials (Additional premium depend upon approved by TAC/HO)
[60]
Rallies in India (Also applicable to motor cycles): Package policy Rs 60/- for the first day and Rs 30/- for each succeeding day,
Liability Policy only; RS 25 for first day and Rs 15/- for each succeeding day. Rallies extensions may be further extended to
include motor racing, speed tests, hill climbsor motor racing -300% loading on OD and Liability premium on short period scale
premium
30% extra premium for imported vehicle where no Custom Duty is paid
Use of CNG/LPG fuel: 4% of value of kit
Fibre Glass Fuel tank- Rs 50/- & Class D category Vehicles Rs 100/-
Vehicle used for tuition-60% extra on OD
Reliability Test: No defined premium.
Discounts (some examples)
Voluntary excess under Own Damage Section

Membership of recognized Automobile Association 5% max Rs 200/- for Private cars & Rs 50%motor cycles
Deletion of Riot, Strike, etc.. Earthquake, Flood. Special discount for Anti-Theft device approved by AAI (2.5% on O.D. premium
max. of Rs.500).
Special discount of 25% on O.D. premium for vintage cars
50% discount for specially designed vehicle for blind, mentally challenged etc
33.1/3% discount if the vehicle is used in own premises
Concession for Laid up vehicle: not used for more than 2 months-pro rata premium is adjusted at the time of renewal.
Bonus
A discount in the premium is allowed at renewal if there is no claim during the policy year for all vehicles. 1st Year 20%
2nd Year 25%
3rd Year 35%
4th Year 45%
5th Year 50%
[61]
Claims Documents
Apart from claim form and Survey report the other documents required for processing the claim are:
Driving Licence
Registration Certificate Book
Fitness Certificate (Commercial Vehicles)
Permit (Commercial Vehicles)
Police Report (Taxis, commercial Vehicle need F.I.R./ spot survey if loss is heavy or T.P. loss occurs)
Final Bill from repairers
Satisfaction Note from the insured
Receipted bill from the repairer, if paid by insured.
Discharge voucher (full and final payment)
Theft Claims
Intimation to be filed with the Police Station
The police authorities register the complaint allotting it a number of the entry made in the Station Diary. This number which is
usually known as SDE No. or C.R. No. (Crime Register) has to be quoted by the Insured in the claim intimation to the Insurers.
“Non-Traceable “certificate is essential before a total loss following theft is settled by the insurers. The documents to be submitted
by the Insured will be the same as those described above.
If the R.C. Book and Taxation Certificate are also stolen along with the vehicle, it will be necessary for the insured to obtain
duplicate ones from the Registering Authority and thereafter deposit them with the Insurers.
The only additional documents will be letter addressed by the Insured to the R.T.O. informing about the loss of the vehicle due to
theft and filing a Non User Form so that he is not made liable to pay the taxes.
The ignition keys. R.C.Books etc. are preserved by the Insurer in their custody so that these are made readily available if the
vehicle is traced at a later date.
It is always prudent to inform the concerned Registering Authority by a Registered A/D letter that a total loss claim is being
processed for payment in respect of the stolen vehicle and to request them not to transfer the ownership of the vehicle to anyone.
This will prevent the thief from disposing of the stolen vehicle.
[62]
Third Party Claims
Section 165 of the Motor Vehicles Act 1988, empowers the State Governments to set up Motor Accident Claims Tribunals
(MACT) for adjudicating upon third party claims.
When a tribunal has been set up for an area, no civil court has any jurisdiction to entertain any claim falling under the tribunal's
jurisdiction.
The aggrieved party has to move the tribunal within a period of six months from the date of accident.
While making the award, the tribunal has to specify the amount payable by the insurer
Third Party Claims-Procedure
On receipt of notice of claim from the insured, or the third party or from the MACT, the matter is entrusted to an advocate.
Full information relating to the accident is obtained from the insured. The various documents are collected and these include
Driving Licence,
Police report
Details of driver's prosecution, if any
Death certificate, coroner's (PM report) report, if any (fatal claims).
Medical Certificate (bodily injury claims)
Details of age, income and number of dependants etc.
A written statement is then filed on the facts of the case with the MACT by the advocate. Eventually, if the award is made by the
MACT, the amount is paid to the third party against proper receipt.
Third Party Claims -Compromise Settlements
Where there is clear liability under the policy, claims are negotiated with the third party to accept a compromise settlement, which if
accepted by the third party, is registered with the MACT and its consent obtained. The cheque is deposited with MACT for disbursement
to the rightful beneficiaries.
Lok Adalats
Pending cases with the MACT where the liability under the policy is not in doubt are placed before the Lok Adalat or Lok Nyayalaya,
for a voluntary and amicable settlement between the parties. A copy of decision in the prescribed memo and the cheque is deposited with
MACT. Lok Adalat sessions are organized regularly by the insurance companies in liaison with the Legal Aid Board of each State and
MACT to effect amicable settlement of third party claims.
No Fault Liability
These claims are settled by depositing the appropriate amount with the MACT after obtaining death certificate, medical certificate and
police report.
[63]
Health Insurance
Why do you need health insurance?
As medical care advances and treatments increase, health care costs also increase. The purpose of health insurance is to help you pay for
care. It protects you and your family financially in the event of an unexpected serious illness or injury that could be very expensive. In
addition, you are more likely to get routine and preventive care if you have health insurance.
You need health insurance because you cannot predict what your medical bills will be. In some years, your costs may be low. In other
years, you may have very high medical expenses. If you have health insurance, you will have peace of mind in knowing that you are
protected from most of these costs. You should not wait until you or a family member becomes seriously ill to try to purchase health
insurance.
What it covers?
Hospitalization and Domiciliary expenses for illness/disease/ Accident sustained under the following heads of Expenses.
Room Rent, Boarding Expenses as provided by the Hospital/ Nursing Home.
Nursing Expenses
Surgeon, Anesthetist Medical Practitioner, Consultants, specialist fees.
Anesthesia, Blood Oxygen, Operation Theatre charge, Surgical Appliances, Medicines & Drug charges
Pharmacy
What is Hospital/Nursing home?
Registered with local Authority and under Clinical Establishment ( Registration and Regulations) Act 2010 or
Has qualified nursing staff under its employment round the clock
Has at least 10 in-patient beds in town having a population of less than 10,00,000 and at least 15 in-patient beds in all other places
Has qualified medical practitioners in charge, round the clock
Has a fully equipped operation theatre of its own where surgical procedures are carried out
Maintains daily records of patient and makes these accessible to the insurance company ‘s authorized personnel
Who is Medical Practitioner?
Who holds degree/diploma of a recognized institute and is registered with Medical Council of respective state of India
[64]
What is Domiciliary hospitalization Benefit?
What is Domiciliary hospitalization Benefit?
Medical treatment exceeding 3 days which require hospital treatment but due to
1) The condition of the patient is such that he/she cannot be removed to the hospital/nursing home
or
Patient cannot be removed to hospital due to lack of accommodation
There are certain expenses are not payable
1. During the first two years of the operation of insurance cover, the expenses on treatment of certain diseases such as cataract,
Benign, Prostates, Hypertrophy, Hernia, congenital Internal diseases, Fistula in anus, piles, Sinusitis and related disorders are not
payable
2. Injury or Disease directly or indirectly caused by or arising from or attributable to War, Invasion, Act of Foreign Enemy.
Warlike operations (whether war be declared or not).
3. cosmetic or aesthetic treatment of any description, plastic surgery other, than as may be necessitated due to an accident or as a
part of any illness.
4. Cost of spectacles and contact lenses, hearing aids
5. Dental treatment or surgery of any kind unless requiring hospitalization.
6. congenital external disease or defects or anomalies, sterility, venereal disease, intentional self-injury and use of intoxicating
drugs/ alcohol.
7. AIDS/HIV
8. Expenses on vitamins and tonics unless forming part of treatment for injury or disease as certified by the attending Physician.
9. Injury or Disease directly or indirectly caused by or contributed to by nuclear weapons/ materials.
10. Treatment arising from or traceable to pregnancy, childbirth including ceasarian section.
11. Charges incurred at Hospital or Nursing Home primarily for diagnostic, X-Ray or laboratory examinations not consistent with
or incidental to the diagnosis
12. Naturopathy treatment.
Health Insurance Premium Rates depends upon
1. Age of the person; The new born baby to till the age of 65 years the person can insure himself under health insurance. After the age
65 years the policy can be renewed but first time policy will not be permissible.
2. Sum Insured: The sum insured varied from Rs 25000/- to Rs 100 lakhs varying from insurer to insurer. In cas of higher sum insured
the treatment cannot be taken abroad also subject to that no treatment is available fro such dieses.
3. Location of the residence; Metro cities or many cities defined by the respective insurer may attract higher premium as compared to
other cities as the treatment in other cities are cheaper. It does not mean that a health insurance policyholder living in tier 3 cities and
cannot take treatment in metro cities. He can but the claim amount will be reduced by certain percentage say 10% or 20%.
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Type of Health Insurance Policies:
Individual: The sum insurance of an individual will be defined. Example : Mr A can opt the sum insured Rs 5 lakhs and Mrs A can opt
the sum insured Rs 3 lakhs and for the children the sum insured can be opted for less amount say Rs 1 lakh or Rs 2 lakhs. The premium
will be applicable based on the
Floater: This policy is issued to all family members under single sum insured.
Example: the family of Mr A aged 35 years is consist wife age 32 years and two children age of 7 and 5 years. All the family members
can be covered under single sum insured say Rs 5 lakhs. If any member is hospitalized the expenses will be reimbursed upto the sum
insured or actual expenses which ever is less. The premium is charged based on the highest age of the family members generally father,
head of family has the highest age but in certain case the wife has the higher age than the husband and in that the premium will be
applicable as per wife age.
Claim Settlement Procedure:
If any Claim arises in health insurance policy, the same can be settled in any of the following ways:
1. Reimbursement of expenses
2. Cashless facility for planned Hospitalization
3. Cashless Facility for emergency hospitalization
1. Reimbursement of expenses: if a policyholder falls sick and hospitalized in non empanelled hospital then he should follow the
following procedure:
Intimation to the insurer/ Third Party Administrator (TPA) along with the name of the person who has fallen sick
Policy number
Name of the hospital
Name of the Doctor
The above information should be sent with in 7 days of the hospitalization. With in 30 days Final claim form should be furnished along
with the following documents:
Hospital receipts/ original bills

Cash memos
Various reports and tests
Hospital admission and discharge slip
Case History
Any other documents desired by TPA or Hospital
Note: Kindly ensure that you have been admitted to a hospital/nursing home as defined in the policy.
[66]
Type of Health Insurance Policies:
Individual: The sum insurance of an individual will be defined. Example : Mr A can opt the sum insured Rs 5 lakhs and Mrs A can opt
the sum insured Rs 3 lakhs and for the children the sum insured can be opted for less amount say Rs 1 lakh or Rs 2 lakhs. The premium
will be applicable based on the
Floater: This policy is issued to all family members under single sum insured.
Example: the family of Mr A aged 35 years is consist wife age 32 years and two children age of 7 and 5 years. All the family members
can be covered under single sum insured say Rs 5 lakhs. If any member is hospitalized the expenses will be reimbursed upto the sum
insured or actual expenses which ever is less. The premium is charged based on the highest age of the family members generally father,
head of family has the highest age but in certain case the wife has the higher age than the husband and in that the premium will be
applicable as per wife age.
Claim Settlement Procedure:
If any Claim arises in health insurance policy, the same can be settled in any of the following ways:
1. Reimbursement of expenses
2. Cashless facility for planned Hospitalization
1. Reimbursement of expenses: if a policyholder falls sick and hospitalized in non empanelled hospital then he should follow the
following procedure:
Intimation to the insurer/ Third Party Administrator (TPA) along with the name of the person who has fallen sick
Policy number
Name of the hospital
Name of the Doctor
The above information should be sent with in 7 days of the hospitalization. With in 30 days Final claim form should be furnished along
with the following documents:
Hospital receipts/ original bills

Cash memos
Various reports and tests
Hospital admission and discharge slip
Case History
Any other documents desired by TPA or Hospital
Note: Kindly ensure that you have been admitted to a hospital/nursing home as defined in the policy.
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2. Cashless facility for planned Hospitalization:
The expected expenses to be incurred should be sent to TPA through the agreed list of network hospital
Policy no. & card number should be shown to the Hospital
On confirmation from the TPA the treatment can be taken in that hospital.
If expenses increases during the treatment then the hospital will sent revise estimate to the TPA for their approval.
For any post hospitalization treatment the original bills/cash memo can be sent to the TPA after completing the treatment for the
reimbursement.
A card issued by the insurer should be shown to the hospital

The expected expenses may sent to the TPA for their approval.
For any post hospitalization treatment the original bills/cash memo can be sent to the TPA after completing the treatment for the
reimbursement.
Important: Kindly ensure that the Identity card is easily available with the policy holder.
Additional Benefits
1. Family Discount: In case of individual policies the discount of 10% in the total premium is allowed to a family comprising the
insured and any one or more of the following i) Spouse
ii) Dependent Children (i.e. legitimate or legally adopted)
iii) Dependent parents
2. Cumulative Bonus: The sum insured is increased by certain percentage say 5% for each claim free year of insurance subject to a
maximum accumulation of 10 years. In the event of a claim, the increased percentage will be reduced certain percentage say the double
of the bonus rate say by 10% of the Sum Insured at the next renewal but the basic sum insured will remain the same. Some companies do
not allow this cumulative bonus and instead allow a discount in the premium on next renewal if no claim is reported during the currency
of the previous policy.
3. Cost of Health Checkup:The insured shall be entitled to reimbursement of medical check up generally once in every four
underwriting years subject to no claim preferred during this period. 15 The cost shall not exceed 1% of the average sum insured during
the block of four years.
Personal Accident
What is Personal Accident ?
Death or Bodily Injury arising solely and directly out of Accident by external violent & visible means.
Examples: Road/train/sea/Air Accident, slip anywhere and get injury, drowning in water , Snake/mosquito bite, Heat stroke/cold wave
[68]
Types of Personal Accident Policy
Individual
Group Personal Accident policy
Janta Personal Accident Policy
Pradhan Mantri Jeevan Bima Yojna
Age group covered under Personal Accident policy: 5-70 years
Coverage’s
Death
Permanent Total Disability (PTD)
Permanent Partial Disability (PPD)
Temporary Total Disability (TTD)
Weekly Benefit 1% of sum insured maximum Rs 5000/- per week maximum for 100 weeks otherwise it will exceed the sum
insured
Medical Benefit( on additional Premium)
24 Hours/Off duty50%/On duty75% premium
Worldwide Cover
Additional Benefits
Education fund per child

Cumulative Bonus max upto 50%
Repartition of Body from the place to residence
Family Discount
Limit of Sum Insured
Maximum 72 to 120 times of the monthly income for death cover

Maximum 24 times of the Monthly income for Temporary Total Disablement
Family : Spouse 50% or Rs 1.00 lakh-if not earning
Child- 5 to 25 years-Rs 25% or Rs 50000/- Death/PTD/PPD
Miscellaneous provisions
1. Once claim is paid up to sum insured under this policy it becomes in operative.
2. Weekly benefit is paid once amount is arrived and agreed.
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4. Travel Insurance
Who needs? Those who are going abroad either on Business or pleasure trip.
What it covers?
1. Medical expenses: Any medical expenses incurred whilst abroad for any sudden disease, illness, injury or death with cashless facility.
It also reimburse emergency expenses towards medical evacuation to India. The cost of transporting the mortal remains of the deceased
back home or the cost of burial abroad is also payable.
2. Dental care Expenses: It covers any acute anaesthetic treatment of teeth due to injury
3. Personal Accident: It covers unfortunately sustain accidental bodily injury during the trip.
4. Accidental death & Dismemberment – Common Carrier: The compensation is paid for the permanent disability or loss life arising
out of an accident while reding as a passenger in a common carrier.
5. Daily allowance: If an insured is hospitalized for more than 2 days the daily allowance is also paid at a prescribed rate depending
upon the sum insured.
6. Loss of Passport: Any expense incurred to get the duplicate passport is also reimbursed.
7. Total Loss of checked baggage: The total loss of the checked in baggage caused by a common carrier.
8. Delay of checked baggage: If the checked in baggage is delayed for more than 12 hours, the reasonable expenses incurred for the
purchase of toiletries , clothing and medication
9. Trip Delay: If the trip is cancelled or interrupted due to any medical emergency , personal employment problems or natural disaster
due to which any non refundable prepaid payments or additional expenses are reimbursed
10. Missed connection: If flight is missed due to its delay in arrival by more than 3 hours the compensation for additional expenses
incurred
11. Personal Liability: vAny amount paid to third party resulting from death, injury or damage to health or property
12. Hijack distress allowance: In case of hijack of the common carrier in which an insured is travelling in for more than 12 hours an
allowance is paid
What it does not cover/ Exclusion
A. Medical expenses towards treatment of any pre-existing illness , pregnancy or complication related to same suicide, self
inflicted injury or illness , mental disorder, anxiety, stress or depression
B. HIV/AIDS
C. If travelling against the advice of a physician
D. If travelling for the purpose of obtaining treatment
E. War or nuclear perils
F. Theft or loss of passport when left unattended or not informed to Police Authorities
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Highlight
Premium payable in Rupees and Claims settled abroad in foreign Currency.
Sum Insured
It varies from US $ 50000 to US $ 500000
Conditions
1. Age Limit: 6 months and above upto 70 years and more than 70 years medical check up is required.
2. Policy is to be taken prior to departure from India.
3. Intimation of the claim be given to the “Claim settlement Agency” in that country. The address of that agency is given the
policy document.
4. The maximum period of 180 days for which the policy can be issued. After that it can be extended for another 180 days but
request may eb sent before expiry of the running policy.
5. Every claim is subject to excess of US$ 100
5. Home Insurance
What is Home Insurance? Any dwelling unit is consist of two parts building and contents and both are subject to risk like building and
contents may get damage due to fire, earthquake , flood etc. The contents are at risk for the burglary and some electrical gadgets may get
damage due fluctuation of power etc. All those risks are covered under the home insurance. This is a package policy specially designed
to meet the insurance requirements of a householder by combining under a single policy, a number of our standard policies usually taken
by householders. Discount in premium is offered depending upon the number of sections of the policy, opted for, by the proposer. The
home insurance policy is issued covering the following perils
Section I - Fire & Allied Perils
a. Coverage for building

b. Covers contents of the dwelling belonging to the proposer and his/her family members permanently residing with him/her.
Allied Perils:
1. Fire, Lightening, Explosion of gas in domestic appliance

2. Bursting and overflowing of water tanks, apparatus or pipes.
3. Damage caused by Aircraft
4. Riot, Strike, Malicious or Terrorist Act
5. Earthquake, Fire and/or Shock, subsidence and Landslide (including Rockslide) damage
6. Flood, Inundation, Storm, Tempest, Typhoon, Hurricane, Tomado or Cyclone.
7. Impact damage
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Section II - Burglary & House Breaking including larceny and theft.
Covers contents of the dwelling against loss due to burglary, house breaking, larceny or theft.
Section III - All Risks (Jewellery & Valuables)
Covers loss or damage to your jewellery and valuables by accident or misfortune whilst kept, worn or carried anywhere in India subject to
the value declared in the schedule.
Section IV - Plate Glass
Loss or damage to fixed plate glass in the insured premises by accidental breakage subject to limit of sum insured
Section V - Breakdown of Domestic appliances
Covers domestic appliances against unforeseen and sudden physical damage due to mechanical or electrical breakdown.
Section VI - T.V. Set including VCP/VCR (ALL RISKS)
Covers loss or damage to T.V.Set including VCP/VCR by fire and allied perils, burglary, house breaking or theft, breakage due to
accidental external means, mechanical or electrical breakdown. Any legal liability arising out of bodily injury or accidental death of any
person other than insured's family members or employee as also damage to property not belonging to or in the custody of insured ,
caused by use of the T.V. Set is also covered upto a limit of Rs.25,000/-.
Section VII - Pedal Cycles (All Risks)
Covers loss or damage to pedal cycles by :
1. Fire & allied perils

2. Burglary, housebreaking, theft
3. Accidental external means
4. Third party personal injury or Third party property damage for Rs.10,000/-
[72]
Section VIII - Baggage Insurance
Covers loss or damage to insured's accompanied baggage by accident or misfortune whilst the insured is traveling on tour or holiday
anywhere in India.
Section IX - Personal Accident
Covers Death or bodily injury by accidental, violent, external and visible means to the insured person named in the schedule and subject
to limits specified therein.
Section X - Public Liability
Covers Insured's legal liability for bodily injury or loss of or damage to property of third party limited to amount specified in the schedule
and workmen's compensation liability to domestic servants engaged in insured's premises.
How to select the sum insured?
For the insurance of household items, it would be necessary to group the items in a broad category like furniture, clothing , linen, utensils
, crockery etc. and give a value equivalent to the market value i.e. the value for which this used item could be bought or sold in the
market.
Sections I A & B, II, III, IV, VI ,VII & VIII should be insured on market value basis as described above.
It is a condition of Section V i.e. breakdown of domestic appliances , that the sum insured should represent the current replacement value
of a similar item. For e.g. to insure 165 ltr. Godrej fridge which is 3 years old, the sum insured should be equivalent to the cost price of a
new 165 ltr. Godrej fridge.v However, the claim amount payable would be the amount required to bring the damaged item to the same
condition as it was prior to the damage subject to the adequacy of the sum insured.
The sum insured under section IX i.e. Personal Accident should not exceed 72 months salary from gainful employment.
How to claim?
In case of any incident leading to a valid claim under the policy, following steps should be taken:
1. Take necessary steps to minimize the loss/damage.
2. In case of fire, inform fire brigade immediately.
3. In case of theft, larceny or burglary inform the police immediately along with a list of items stolen and their approximate value.
4. Inform insurance company by phone or fax and in writing.
5. Extend full co-operation to the surveyor appointed by the insurance Co. and provide necessary documents to the substantiate the
loss. A claim form issued by the company is also to be submitted.
6. In case any rights of recovery exist against any other party responsible for the loss, your rights of recovery have to be subrogated
to the insurance company on payment of claim.
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6. Life Insurance Product:
1. Life Insurance Products have been classified in various ways by different authors. Life Insurance Products can be basically classified
into two types of plans:- Traditional Plans and Market Linked Plans. The Traditional plans can be further classified into two basic plans
viz Term Insurance, and Permanent Insurance. Permanent Insurance can be further divided into three major heads Whole Life Insurance
plans, Endowment Insurance and annuities.
1.1. The chart given hereunder describes the structure of life insurance products.
The Life Insurance plans are generally not standalone products. They are generally offered as the combination of various plans to suit the
needs of the customers. The companies include features of various types of plan to make it more customer friendly so that the purpose of
taking a particular policy is fulfilled. We shall now discuss the types of plan in detail.
2. Traditional Plans
Till few years ago the traditional plans had dominated the insurance market. In India before the liberalization of Insurance sector mainly
the traditional plans were in vogue. After the arrival of private players into the life Insurance market the concept of Market Linked Plans
were introduced and since then this plan has been very successful and has almost dominated the life insurance products market.
Theoretically there are two types of insurance term and pure endowment. Term insurance is a pure risk cover whereas pure endowment is
a pure savings plan. Term insurance is a saleable product on its own where as pure endowment plan is not marketable as there are many
other avenues for saving available in the market. What is sold in the market is a combination of term and pure endowment where the
benefits are payable both either on death during the term or on survival of the term and these are known as endowment plans.
The traditional plans can be broadly classified into Term Insurance Plans and Permanent Insurance Plans.
2.1 Term Insurance Plans
Term insurance is the simplest type of life insurance and requires the smallest initial cash outlay. It is often used to provide protection for
a specific period of time, such as 10 years.
Term Insurance is a form of pure insurance. It is the cheapest insurance and nothing is payable to the life assured who survives the
duration of policy. This insurance is appropriate when the policyholder’s need for coverage is temporary.
Compared with other life insurance policies this is not very complicated for the provider to offer. This is the most widely used life
insurance policy.
[74]
2.2 The salient features of Term Life Insurance are given below:
A death benefit is paid to the beneficiary if the insured dies while the policy is in force.
There are no benefits paid at the expiration of the policy or if the insured dies after the policy expires.
Term insurance is generally purchased by those with a temporary need for life insurance, or by those with limited budgets.
Term insurance may be appropriate for specific needs, including the needs of some business owners.
2.3 Example of Term Life Insurance
Mr X takes a term life insurance for Rs.1 lakh for 10 years. The annual premium is Rs 250 per year. During the above period of 10 years
if Mr X dies his heirs will get Rs. 1 lakh as claim. No extra amount will be paid as this policy does not provide for any savings element.
1.3 Permanent Insurance
Permanent life insurance is designed to provide life insurance protection for lifetime. A permanent life insurance policy generally
accumulates a cash value—money that can be withdrawn or borrowed, in many cases with favorable tax treatment.
There are various permanent life insurance products available. The main differences between these products are:
The flexibility of premium payments
How the cash value is invested
The death benefit guarantees
1. Permanent Insurance can be further divided into sub plans. The Whole life insurance plans, Endowment Insurance plans, Money Back
Insurance plans are some of the examples of Permanent Insurance Plans.
[75]
2. Whole Life Insurance Plans
Whole life policies are normally those where the claim is paid on death or at age 100 by grace. It can be a with profit policy or a without
profit policy. The premium paying period can be for the entire period or limited to lesser number of years. It is called a limited whole life
plan. In fact the premium paying period can be anything from 5 years to 50 years or even longer. For the same sum assured and at the
same age, the longer the duration of premium paying period, the smaller is the quantum of premium. The final claim can be paid in
single installment or as a pension payable in several installments.
Since in the whole life policies, the claim is payable on death only, the insurance companies can invest this money in long-term projects
and thus earn higher dividend. Therefore, the bonus rate in whole life policies is more compared to endowment policies.
Another variant of the whole life policy is a convertible whole life policy. A young man, who has a need for high insurance but can not
pay high premium, can take this policy. This policy can be converted into an endowment policy after a specified period when the
installment premium increases. Thus the insured gets time to decide the duration of the policy and can plan better.
3. Endowment Insurance Plans
Endowment plans are those where the sum assured is paid either on maturity or death if earlier. It takes care of both the risks of dying
too early and living too long. Endowment insurance policies are different when compared with other insurance policies. This policy does
not primarily operate to provide life insurance benefits. On the contrary the main objective of an endowment policy lies in offering
monetary benefits during the life term of the individual. Life insurance protection comes only after that.
There are several options for paying the face value of the insurance policy. They can be paid on the death of the insured like any other
insurance policy. Other choices include paying them on the attainment of a certain age or after the successful payment of policy
premiums.
This type of insurance is recommended if you want to save some money for meeting a Particular purpose like funding your child’s study
in a university. The life insurance cover of endowment policies entitles your dependents to obtain the policy amount in case of your
death.
In market, there are various life products available under different name and style but all these products are fall under Endowment Plans.
The most commonly name of the different products of different insurers in the market are us as under:
1. Money Back plan

2. A Marriage Endowment Plan
3. Children Plans
4. Insurance Plan with profit
The basic objective of any life insurance plan to pay the sum insured either on death or at the time of maturity of the policy.
[76]
1. The validity of a Motor Cover Note for a maximum period of is ____.
(a) 60 days
(b) 30 days
(c) 15 days
(d) 14 days
2. Which of the following Statement is true
Statement A: Voluntary ‘excess’ under own damage section is applicable to all vehicles.
Statement B: Compulsory ‘excess’ is applicable only to commercial vehicles.
(a) Both
(b) None
(c) Only A
(d) Only B
3. Which of the following premium rating factors does not apply to motor cycles and scooters (own damage cover)?
(a) Geographical area of operation

(b) cubic capacity
(c) Insured's estimated value
(d) Purchase price
4. Private Car policy does not cover the following use:
(a) Used for social purpose

(b) Reliability test
(c) Used for domestic pleasure purpose
(d) Carrying samples belonging to insured
5. Own damage is covered under which Section of the Package Policy?
(a) Sec. II
(b) Sec.III
(c) Sec.II
(d) None
Statement A: Cumulative Bonus is not available
Statement B: Health checkup expenses are not payable.
(a) Both
(b) None
(c) Statement A
(d) Statement B
7. Which of the following statements is true in connection with individual Mediclaim Policy?
Statement A: Mediclaim Policy covers treatment arising from pregnancy and childbirth.
Statement B: Mediclaim Policy does not cover dental treatment or surgery unless requiring hospitalization.
(a) Both
(b) None
(c) only A
(d) only B
8. The health insurance premium does not depend upon
(a) Age
(b) Sum Insured
(c) City
(d) illness
9. Choose the Type of claim settlement
(a) Reimbursement of expenses

(b) Cashless facility for planned Hospitalization
(c) Cashless Facility for emergency hospitalization
(d) All
Statement A: Expenses of OPD is covered under health Insurance.
Statement B: Family discount is applicable
(a) Both
(b) None
(c) Statement A
(d) Statement B
1 2 3 4 5 6 7 8 9 10
aaadaadbad
[77]
11. Special feature of normal PA policy
(a) Cover is for office hours & on a worldwide basis

(b) Cover is for 24 hours & within India only
(c) Cover is for office hours & within India only
(d) Cover is for 24 hours & on a worldwide basis
12. Which of the following contingencies is‘not’ covered under personal accident policy?
(a) Permanent total disablement

(b) Temporary total disablement
(c) Permanent partial disablement
(d) Temporary partial disablement
13. Under group personal accident policies, ‘on duty’ cover is available at ____% of the normal premium.
(a) 60
(b) 75
(c) 25
(d) 50
14. Under Personal Accident Policy, weekly benefits are paid subject to a maximum period of
(a) 100
(b) 52
(c) 104
(d) 75
15. Which of the following Statements is true in relation to Standard Personal Accident Policy?
Statement A: The cover is for 24 hours.
Statement B: The cover is on a world-wide basis.
(a) Statement A
(b) Statement B
(c) Both
(d) None
16. Travel Insurance covers
(a) Medical expenses

(b) Hijack Distress allowance
(c) Both
(d) None
17. Travel insurance issued for maximum period of
(a) 180 days

(b) 90 days
(c) 45 days
(d) 30 days
18. What is not covered under travel insurance?
(a) Third party Liability

(b) Personal Accident
(c) Preexisting Dieses
(d) Loss of checked in baggage
19. Maximum Sum insured under Travel Insurance
(a) US$ 50000

(b) US$ 100000
(c) US $ 250000
(d) US $ 500000
Statement A: Travel insurance will cover preexisting dieses.
Statement B: Maximum sum insured is US$ 1000000
(a) Both
(b) None
(c) Statement A
(d) Statement B
11 12 13 14 15 16 17 18 19 20
b a d b d b c a c c
[78]
21. How many section under Home Insurance?
(a) 10
(b) 8
(c) 6
(d) 4
22. Which section is compulsory?
(a) I
(b) II
(c) All
(d) None
Statement A: Public Liability is an exclusion under home insurance.
Statement B: Public liability is an optional coverage.
(a) Both
(b) None
(c) Statement A
(d) Statement B
Statement A: Jewelery is all risk coverage’s.
Statement B: Plate glass is related looking mirror
(a) Both
(b) None
(c) Statement A
(d) Statement B

Statement A: Building can be covered burglary.
Statement B: Building is covered under flood peril
(a) Both
(b) None
(c) Statement A
(d) Statement B
Statement A: Term plans cover death only
Statement B: Under Term Plans the sum insured is also paid on maturity.
(a) Both
(b) None
(c) Statement A
(d) Statement B
Statement A:Under Whole life plan cover death only
Statement B: Under Term Plan the sum insured is paid on death only.
(a) Both
(b) None
(c) Statement A
(d) Statement B
28. Various types of life insurance products
(a) Term Plan

(b) Whole Life Plans
(c) Endowment Plans
(d) All
Statement A:Under pure endowment the um insured paid on death only.
Statement B: Under endowment Plan the sum insured is paid on death and maturity.
(a) Both
(b) None
(c) Statement A
(d) Statement B
Statement A:Under whole life plan the sum insured is paid at the age 100 years.
Statement B:Term plans cannot be issued under market linked plans
(a) Both
(b) None
(c) Statement A
(d) Statement B
21 22 23 24 25 26 27 28 29 30
a a d c d c a d d a
[79]
Module 5 Grievance Redressal Mechanism

Introduction:
Whenever any industry grows the disputes do arise and the same is applicable to insurance sector too. After privatization of the insurance
sector it is growing at pace arte not less tha 22% over the previous year.
As we all know that the insurance contract is long term contract varying from 1 year to 40 years. The disputes do arise when the Insurer
repudiates the claims. To redress the grievance of the policyholders, IRDA has prescribed various mechanisms, as under, to redress the
grievances.
1. Grievance Redressal Officer

2. Integrated Grievance Management System (IGMS)
3. Ombudsman Scheme
4. Consumer Protection Act 1986
1. Submission of Grievance to Grievance Officer at Head Office: of the to Every Insurer has the Grievance Officer to whom the
Policyholders can submit their grievances and the Insurers have to redress the grievances within 30 days of the submission of the
grievances. The particulars of Grievance Officer are mentioned at the end of the policy document.
2. Integrated Grievance Management System (IGMS): The complaint can be filed online to IRDA vide its website
www.igms.irda.gov.in . The policyholders can file a complaint against Insurer with all details like policy number and concerned branch
of the Insurer from where the policy is issued.
Before submitting the complaint the Policyholder will have to be registered on the website based on PAN and Date of Birth.
On filing the complaint on this website , the complaint simultaneously sent to concerned Branch, its controlling office and Head Office
and IRDA.
The complaint is to be resolved within 24 hours otherwise the matter can be escalated on the same website.
It is very effective system to resolve the grievances not only the claims but also related to non issue of the policy and other related issues
of the Policy
[80]
3. Ombudsman Scheme
Central Government framed rules known as Redressal of Public Grievances Rule 1998' in exercise of the powers vested in it under
section 114(1) of Insurance Act, 1938
These rules arc in respect of the Ombudsman Scheme to resolve all complaints relating to claims against insurers.
Complaints are to be resolved in cost effective, efficient and impartial manner.
The Scheme has been notified in the Gazette of India on 11.11.98.
The Ombudsman may receive and consider complaints of individuals relating to:
Any partial or total repudiation of claim by an insurer;

Any dispute in regard to premium paid or payable in terms of the policy;
Any dispute in regard to the legal construction of the policies in so far as such disputes relate to the claims;
Delay in settlement of claims;
Non-issue of an insurance document to customers after receipt of premium;
The Ombudsman shall act as counselor and mediator in matters which are within his terms of reference and, if requested to do so
in writing by mutual agreement by the insured person and insurance company;
The Ombudsman's decision whether the complaint is fit and proper for being considered by it or not shall be final.
When can a complaint be made to the Ombudsman?
If the insurer has rejected a written representation of the complainant; or

The complainant had not received any reply within one month after the insurer received his representation; or
The complainant is not satisfied with the reply given to him by the insurer.
The complaint is made not later than 1 year after the insurer had rejected the representation or sent his final reply on the
representation of the Complainant; and
The complaint is not on the same subject matter, for which any proceedings “before any court, or Consumer Forum, or arbitrator”
is pending or were so earlier
[81]
Recommendations:
When a complaint is settled through mediation of the Ombudsman, he makes a 'recommendation' which he considers fair in the
circumstances of the case.
Copies of the 'recommendation' shall be sent to the complainant and the insurance company.
Such 'recommendation' shall be made not later than one month from the date of the receipt of the complaint.
If a complainant accepts the recommendations of the Ombudsman, he will communicate his acceptance within 15 days of receipt
of the recommendation.
Acceptance letter to the Ombudsman should clearly state that the settlement reached is acceptable to him in totality in full and final
settlement of his claim.
Thereafter, the Ombudsman will send a copy of the recommendation along with complainant's acceptance letter to the insurance
company.
The insurer shall comply with the terms and conditions of the recommendation immediately but not later than 15 days of the
receipt of such recommendations.
Finally, the insurer shall inform the Ombudsman about its compliance.
Awards: Where complaint is not settled through mediation of the Ombudsman
he shall pass an Award which he considers fair in the facts of the case. and award shall be in writing.
It shall state the amount awarded to the complainant.
Ombudsman shall not award any compensation in excess of the loss suffered by the complainant or 20 lakh, whichever is less.
Award shall be passed within a period of three months from the date of receipt of the complaint.
Copies of the award shall be sent to the insurer and the complainant.
Copies of the award shall be sent to the insurer and the complainant.
Complainant shall furnish to the insurer within one month, a letter of acceptance that award is in full and final settlement of his
claim.
Insurer shall comply with the award within 15 days from the receipt of the acceptance letter and intimate compliance to the
Ombudsman.
Consequences of non-acceptance of award: If the complainant does not intimate acceptance within one month from the date of receipt
of the award, the insurance company may not implement the award.
Ex-gratia payment: If the Ombudsman deems fit, he may award an Ex-gratia payment. The decision of the ombudsman is binding on
the insurers, but the consumer if he feels aggrieved by the decision can approach the civil courts for relief.
[82]
4. Consumer Protection Act, 1986
Objective: Man is a social & rational animal. He has throughout his evolution tried to improve upon everything he has laid his hands
upon, anything which he has thought & about everything which he has invented or discovered. This special faculty which has been
blessed on man & which inspires a person to channelize all his energies to reach a destination of perfection in life is the power to think.
One cannot survive alone. Interaction is must. There is interaction between two individuals, between families, between societies, between
nations and so on & so forth. Education, trade and commerce, all are focuses of human interaction. But the indispensable interaction
between the entities, if one may think of minutely keeping in view the commercialization of every sphere of life is the interaction
between the seller & the buyer. The giver & the recipient, the skilled ones & the beneficiaries – the trader & the consumer. In fact, every
body is a consumer because one may sell something but at the same time has to buy also. As everyone is a consumer therefore, the
legislative has enacted the Consumer Protection Act 1986 which was made more powerful by the Consumer Protection (Amendment)
Act 1993 to arm each & every consumer &/ or consumer associations with rights to seek speedy & cheap remedies in such manner which
is proving to be very popular & effective as well, leaving behind a trait of rulings & findings where under so many of us have benefited.
The statute has been enacted to provide for better protection of the interests of consumers & for better protection of the interests of
consumers & for that purpose to make provisions for the establishment of consumer councils & other authorities for the settlement of
consumer’s disputes & for matters connected therewith.
General
1. The Act applies to all the goods and services.

2. It covers private, public and cooperative sectors
Rights of the consumers
The Act seeks to promote and protect the rights of the consumers such as: -
1) the right to be protected against marketing of goods which are hazardous to life and property;
2) the right to be informed about the quality, quantity, potency, purity, standard and price of goods to protect the consumer against
unfair trade practices;
3) the right to be heard and assured that consumer's interests will receive due consideration at appropriate forums;
4) the right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers;
5) the right to consumer education.
[83]
Who is a consumer for the purpose of services?

a) One who hires any services for a consideration, which has been paid or promised or partly paid or partly promised or under any
system of deferred payments;
b) It includes any beneficiary of such service other than the one who actually hires the service for consideration and such services
are availed with the approval of such person.
What constitutes a defect or deficiency?
A defect or deficiency is a
fault.
imperfection,
shortcoming or
inadequacy in the
quality
nature or
manner of performance which is required to be
maintained by or under any law or
in pursuance of a contract or
undertaking in relation to that service
The main objective of the Act is:
to provide simple, speedy and inexpensive redressal to the consumer's grievances.

To provide this, a three-tier quasi-judicial machinery at the National, State and District level has been envisaged under the Act,
namely
National Consumer Disputes Redressal Commission (National Commission)
State Consumer Disputes Redressal Commission (State Commission)
District Consumer Disputes Redressal Forum (District Forum)
[84]
Who can file a complaint?
1. Consumer:
2. Any voluntary organisation representing consumers registered under Companies Act/Societies Act;
3. Central Government:
4. State Government or Union Territory
A group of consumers having common dispute
Where to file a complaint?
1. If the cost of goods or services and compensation asked for does not exceed Rs. 20 lakhs then the complaint can be filed in the
District Forum which has been notified by the government for the District where the cause of action has arisen or where party
resides;
2. If the cost of goods or services and compensation asked for is more than Rs. 20 lakhs but less than 100 lakhs, the complaint can
be filed before State Commission;
3. If the cost of goods or services and compensation asked for exceeds Rs. 100 lakhs, the complaint can be filed before the
National Commission.
Appeals:
If a person is not satisfied with the decision of the district forum, he can file an appeal with the state commission and in case of not being
satisfied with the decision of state commission, appeal can be filed before the national commission. Appeals against the decision of the
national commission can be filed in the supreme court
Relief available to consumers:
Depending on the nature of relief sought for by the consumer and facts, the redressal forum may give order for one or more of the
following relief:-
1. Removal of defects from the goods.

2. Replacement of goods.
3. Refund of consideration paid.
4. Award of compensation for the loss or injury suffered.
Limitations: Complaint is to be filed within 2 years from the date on which cause of action has arisen. Time-barred complaints shall not
be entertained by Forums.
[85]
(Protection of Policyholders’ Interests) Regulations,
These Regulations are in addition to any other regulations made by the Authority, which may, inter alia, provide for protection of the
interest of policyholders. These Regulations apply to all insurers, insurance agents, insurance intermediaries and policyholders.
Point of Sale
1. a prospectus of any insurance product shall clearly state the scope of benefits, the extent of insurance cover and in an explicit
manner explain the warranties, exceptions and conditions of the insurance cover and, in case of life insurance, whether the product
is participating (with-profits) or non-participating (withoutprofits). The allowable rider or riders on the product shall be clearly
spelt out with regard to their scope of benefits, and in no case, the premium relatable to all the riders put together shall exceed 30%
of the premium of the main product.
2. An insurer or its agent or other intermediary shall provide all material information in respect of a proposed cover to the prospect
to enable the prospect to decide on the best cover that would be in his or her interest.
3. Where the prospect depends upon the advice of the insurer or his agent or an insurance intermediary, such a person must advise
the prospect dispassionately.
4. Where, for any reason, the proposal and other connected papers are not filled by the prospect, a certificate may be incorporated
at the end of proposal form from the prospect that the contents of the form and documents have been fully explained to him and
that he has fully understood the significance of the proposed contract.
Proposal for insurance
(1) Except in cases of a marine insurance cover, where current market practices do not insist on a written proposal form, in all
cases, a proposal for grant of a cover, either for life business or for general business, must be evidenced by a written document. It
is the duty of an insurer to furnish to the insured free of charge, within 30 days of the acceptance of a proposal, a copy of the
proposal form.
(2) Forms and documents used in the grant of cover may, depending upon the circumstances of each case, be made available in
languages recognised under the Constitution of India.
(3) In filling the form of proposal, the prospect is to be guided by the provisions of Section 45 of the Act. Any proposal form
seeking information for grant of life cover may prominently state therein the requirements of Section 45 of the Act.
[86]
(4) Where a proposal form is not used, the insurer shall record the information obtained orally or in writing, and confirm it within a
period of 15 days thereof with the proposer and incorporate the information in its cover note or policy. The onus of proof shall rest
with the insurer in respect of any information not so recorded, where the insurer claims that the proposer suppressed any material
information or provided misleading or false information on any matter material to the grant of a cover.
(5) Wherever the benefit of nomination is available to the proposer, in terms of the Act or the conditions of policy, the insurer shall
draw the attention of the proposer to it and encourage the prospect to avail the facility.
(6) Proposals shall be processed by the insurer with speed and efficiency and all decisions thereof shall be communicated by it in
writing within a reasonable period not exceeding 15 days from receipt of proposals by the insurer.
Grievance redressal procedure
Every insurer shall have in place proper procedures and effective mechanism to address complaints and grievances of policyholders
efficiently and with speed and the same along-with the information in respect of Insurance Ombudsman shall be communicated to the
policyholder along-with the policy document and as maybe found necessary.
6. Matters to be stated in life insurance policy
(1) A life insurance policy shall clearly state:
(a)the name of the plan governing the policy, its terms and conditions;
(b)whether it is participating in profits or not;
(c)the basis of participation in profits such as cash bonus, deferred bonus, simple or compound reversionary bonus;
(d)the benefits payable and the contingencies upon which these are payable and the other terms and conditions of the insurance
contract;
(e)the details of the riders attaching to the main policy;
(f)the date of commencement of risk and the date of maturity or date(s) on which the benefits are payable;
(g)the premiums payable, periodicity of payment, grace period allowed for payment of the premium, the date the last instalment of
premium, the implication of discontinuing the payment of an instalment(s) of premium and also the provisions of a guaranteed
surrender value.
[87]
(h) the age at entry and whether the same has been admitted;
(i) the policy requirements for (a) conversion of the policy into paid up policy, (b) surrender (c) non-forfeiture and (d) revival of
lapsed policies;
(j) contingencies excluded from the scope of the cover, both in respect of the main policy and the riders;
(k) the provisions for nomination, assignment, and loans on security of the policy and a statement that the rate of interest payable
on such loan amount shall be as prescribed by the insurer at the time of taking the loan;
(l) any special clauses or conditions, such as, first pregnancy clause, suicide clause etc.; and
(m) the address of the insurer to which all communications in respect of the policy shall be sent.
(n) the documents that are normally required to be submitted by a claimant in support of a claim under the policy
Claims procedure in respect of a life insurance policy
(1) A life insurance policy shall state the primary documents which are normally required to be submitted by a claimant in support
of a claim.
(2) A life insurance company, upon receiving a claim, shall process the claim without delay. Any queries or requirement of
additional documents, to the extent possible, shall be raised all at once and not in a piecemeal manner, within a period of 15 days of
the receipt of the claim.
(3) A claim under a life policy shall be paid or be disputed giving all the relevant reasons, within 30 days from the date of receipt
of all relevant papers and clarifications required. However, where the circumstances of a claim warrant an investigation in the
opinion of the insurance company, it shall initiate and complete such investigation at the earliest. Where in the opinion of the
insurance company the circumstances of a claim warrant an investigation, it shall initiate and complete such investigation at the
earliest, in any case not later than 6 months from the time of lodging the claim.
(4) Subject to the provisions of section 47 of the Act, where a claim is ready for payment but the payment cannot be made due to
any reasons of a proper identification of the payee, the life insurer shall hold the amount for the benefit of the payee and such an
amount shall earn interest at the rate applicable to a savings bank account with a scheduled bank (effective from 30 days following
the submission of all papers and information).
(5) Where there is a delay on the part of the insurer in processing a claim for a reason other than the one covered by sub-regulation
(4), the life insurance company shall pay interest on the claim amount at a rate which is 2% above the bank rate prevalent at the
beginning of the financial year in which the claim is reviewed by it.
[88]
6. Matters to be stated in general insurance policy
(1) A general insurance policy shall clearly state:
(a) the name(s) and address(es) of the insured and of any bank(s) or any other person having financial interest in the subject matter
of insurance;
(b) full description of the property or interest insured;
(c) the location or locations of the property or interest insured under the policy and, where appropriate, with respective insured
values;
(d) period of Insurance;
(e) sums insured;
(f) perils covered and not covered;
(h) any franchise or deductible applicable;
(i) premium payable and where the premium is provisional subject to adjustment, the basis of adjustment of premium be stated;
(j) policy terms, conditions and warranties;
(k) action to be taken by the insured upon occurrence of a contingency likely to give rise to a claim under the policy;
(l) the obligations of the insured in relation to the subject matter of insurance upon occurrence of an event giving rise to a claim
and the rights of the insurer in the circumstances;
(m) any special conditions attaching to the policy;
(n) provision for cancellation of the policy on grounds of mis-representation, fraud, non-disclosure of material facts or non-
cooperation of the insured;
(o) the address of the insurer to which all communications in respect of the insurance contract should be sent;
(p) the details of the riders attaching to the main policy;
(q) proforma of any communication the insurer may seek from the policyholders to service the policy.
(2) Every insurer shall inform and keep informed periodically the insured on the requirements to be fulfilled by the insured regarding
lodging of a claim arising in terms of the policy and the procedures to be followed by him to enable the insurer to settle a claim early.
[89]
Claim procedure in respect of a general insurance policy
(1) An insured or the claimant shall give notice to the insurer of any loss arising under contract of insurance at the earliest or within such
extended time as may be allowed by the insurer. On receipt of such a communication, a general insurer shall respond immediately and
give clear indication to the insured on the procedures that he should follow. In cases where a surveyor has to be appointed for assessing a
loss/ claim, it shall be so done within 72 hours of the receipt of intimation from the insured.
(2) Where the insured is unable to furnish all the particulars required by the surveyor or where the surveyor does not receive the full
cooperation of the insured, the insurer or the surveyor as the case may be, shall inform in writing the insured about the delay that may
result in the assessment of the claim. The surveyor shall be subjected to the code of conduct laid down by the Authority while assessing
the loss, and shall communicate his findings to the insurer within 30 days of his appointment with a copy of the report being furnished to
the insured, if he so desires. Where, in special circumstances of the case, either due to its special and complicated nature, the surveyor
shall under intimation to the insured, seek an extension from the insurer for submission of his report. In no case shall a surveyor take
more than six months from the date of his appointment to furnish his report.
(3) If an insurer, on the receipt of a survey report, finds that it is incomplete in any respect, he shall require the surveyor under intimation
to the insured, to furnish an additional report on certain specific issues as may be required by the insurer. Such a request may be made by
the insurer within 15 days of the receipt of the original survey report.
(4) The surveyor on receipt of this communication shall furnish an additional report within three weeks of the date of receipt of
communication from the insurer.
(5) On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 30 days offer a
settlement of the claim to the insured. If the insurer, for any reasons to be recorded in writing and communicated to the insured, decides
to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the survey report or the additional survey
report, as the case may be.
(6) Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made
within 7 days from the date of acceptance of the offer by the insured. In the cases of delay in the payment, the insurer shall be liable to
pay interest at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by
it.
[90]
Policyholders’ Servicing
(1) An insurer carrying on life or general business, as the case may be, shall at all times, respond within 10 days of the receipt of any
communication from its policyholders in all matters, such as:
(a) recording change of address;

(b) noting a new nomination or change of nomination under a policy;
(c) noting an assignment on the policy;
(d) providing information on the current status of a policy indicating matters, such as, accrued bonus, surrender value and
entitlement to a loan;
(e) processing papers and disbursal of a loan on security of policy;
(f) issuance of duplicate policy;
(g) issuance of an endorsement under the policy; noting a change of interest or sum assured or perils insured, financial interest of a
bank and other interests; and
(h) guidance on the procedure for registering a claim and early settlement thereof.
General
(1) The requirements of disclosure of “material information” regarding a proposal or policy apply, under these regulations, both to
the insurer and the insured.
(2) The policyholder shall assist the insurer, if the latter so requires, in the prosecution of a proceeding or in the matter of recovery
of claims which the insurer has against third parties.
(3) The policyholder shall furnish all information that is sought from him by the insurer and also any other information which the
insurer considers as having a bearing on the risk to enable the latter to assess properly the risk sought to be covered by a policy.
(4) Any breaches of the obligations cast on an insurer or insurance agent or insurance intermediary in terms of these regulations
may enable the Authority to initiate action against each or all of them, jointly or severally, under the Act and/or the Insurance
Regulatory and Development Authority Act, 1999.
[91]
Know Your Customer (KYC) Norms and Anti Money Laundering (AML)
What is KYC?: KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making
reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of customer’s business,
reasonableness of operations in the account in relation to the customer’s business, etc which in turn helps the banks to manage their risks
prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for
money laundering.
Legal Requirement: Yes. Reserve Bank of India has issued guidelines to banks under Section 35A of the Banking Regulation Act, 1949
and Rule 7 of Prevention of MoneyLaundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and
Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients
of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005.
Procedure for Customer Identification: Customer identification means identifying the customer and verifying his/her identity by using
reliable, independent source documents, data or information. Bank has laid down Customer Identification Procedure to be carried out at
different stages i.e. while establishing a banking relationship; carrying out a financial transaction or when the bank has a doubt about the
authenticity/veracity or the adequacy of the previously obtained customer identification data.
4. Once KYC requirements are complied with while opening the account, whether the bank can again ask for KYC compliance
from the customer?
Yes. To ensure that the latest details about the customer are available, banks have been advised to periodically update the customer
identification data based upon the risk category of the customers.
Banks create a customer profile based on details about the customer like social/financial status, nature of business activity, information
about his clients’ business and their location, the purpose and reason for opening the account, the expected origin of the funds to be used
within the relationship and details of occupation/employment, sources of wealth or income, expected monthly remittance, expected
monthly withdrawals etc. When the transactions in the account are observed not consistent with the profile, bank may ask for any
additional details / documents as required. This is just to confirm that the account is not being used for any Money
Laundering/Terrorist/Criminal activities.
[92]
Confidential document: Yes. The information collected from the customer for the purpose of opening of account is treated as
confidential and details thereof are not divulged for cross selling or any other similar purposes.
What is Money Laundering and Financial Terrorism?: Money laundering involves disguising financial assets so that they can be
used without detection of the illegal activity that produced them. Through money laundering, the launderer transforms the monetary
proceeds derived from criminal activity into funds with an apparently legal source.
Financial Terrorism means financial support to, in any form of terrorism or to those who encourage, plan or engage in terrorism.
Money launderers send illicit funds through legal channels in order to conceal their criminal origin while those who finance terrorism
transfer funds that may be legal or illicit in original in such a way as to conceal their source and ultimate use, which is to support
Financial Terrorism.
Rules and regulations on KYC/AML/CTF: The extant regulations of RBI and the rules notified under Prevention of Money
Laundering Act, 2002 deal with what is called as an initiative of Anti Money Laundering (AML) and Countering the Terrorist Financing
(CTF). These rules and regulations try to prevent the process of money laundering and financing of terrorism related activities. The
regulations require the banks to know their customers (popularly known as the Know Your Customer or KYC regulations) and to
monitor their transactions. Further, specified information under the PMLA about the cash and suspicious transactions need to be
submitted to the Financial Intelligence Unit, India (FIU-IND).
Compliance with AML regulations assists the banks in keeping a close watch on the transactions to identify suspicious transactions, if
any, and thereby provide information to the law enforcement authorities (through reports to FIU-IND) to deal with such transactions as
per the applicable laws and regulations
Though the above norms are define by RBI for banking industry and the same is applicable to insurance industry as per circular
issued by the IRDA. Features to be verified and documents required to be obtained from customers?
The features to be verified and documents that may be obtained vary depending upon the type of customers. The same are furnished
below:
[93]
Type of Account ‘Officially Valid Documents’ for Identity Proof & Proof of Address
holder
Accounts of 1. Passport
Individuals 2. Driving license with photo
3.Permanent Account Number (PAN) card (will be accepted for Identity proof only)
4. Voter’s Identity Card issued by Election Commission of India,
5. Job card issued by NREGA duly signed by an officer of the State Government.
6. The letter issued by the Unique Identification Authority of India containing details of name, address and Aadhaar
number.
(Copy of latest two passport size photographs and copy of any one of the above documents to be obtained)
‘Simplified Where ‘simplified measures’ are applied for verifying the identity of customers the following documents shall
measures’ for be deemed to be ‘Officially Valid Documents’:
‘Low Risk’ 1. Identity card with applicant's Photograph issued by Central/ State Government Departments, Statutory/ Regulatory
Customers: Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;
2. letter issued by a gazetted officer, with a duly attested photograph of the person;
Where ‘simplified measures’ are applied for verifying for the limited purpose of proof of address the following
additional documents are deemed to be ‘Officially Valid documents’:
1. Utility bill which is not more than two months old of any service provider (electricity, telephone, postpaid mobile
phone, piped gas, water bill);
2. Property or Municipal Tax receipt;
3. Bank account or Post Office savings bank account statement;
4. Pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or
Public Sector Undertakings, if they contain the address;
5. Letter of allotment of accommodation from employer issued by State or Central Government departments,
statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and
listed companies. Similarly, leave and license agreements with such employers allotting official accommodation;
6. Documents issued by Government departments of foreign jurisdictions and letter issued by Foreign Embassy or
Mission in India.
Note: In case of Permanent Address Proof, a Declaration for local address should be given.
[94]
For Joint 1. Independent identity and address proof (any one ID document from the above mentioned list) of each joint account
Account holder is required to be obtained.
Holders
who are not
closely
related to
each other
In case of 1. An Identity Card issued by college / institution.
Foreign 2. An admission letter for the course mentioning duration of course for which he / she is admitted by the Institute /
Students College.
3. Copy of Passport and copy of Visa.
Accounts of (All following documents to be obtained)
Companies 1. Certificate of Incorporation
2. Memorandum & Articles of Association.
3. Resolution of the Board of Directors and Power of Attorney granted to its managers, officers or employees to transact on
its behalf
An officially valid document in respect of managers, officers or employees holding an attorney to transact on its behalf
Accounts of (Any two of the following documents to be obtained)
Sole 1. Proof of the name, address and activity of the concern, like registration certificate (in case of registered concern),
Proprietary 2. certificate of / license issued by the municipal authorities under Shop & Establishment Act,
firms. 3. sales and income tax returns,
4. CST / VAT certificate,
5. Certificate / registration document issued by Sales Tax / Service Tax / Professional Tax authorities.
6. License issued by the Registering authority like certificate of Practice issued by Indian Institute of Chartered
Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical
Council, Food and Drug Control Authorities, etc. Registration / licensing document issued in the name of proprietary
concern by the Central Government or State Government Authority / Department, IEC (Importer Exporter Code) issued to
the proprietary concern by the office of DGFT as an Identity document.
7. The complete Income Tax return (not just the acknowledgement) in the name of Sole Proprietor where the Firm’s
income is reflected, duly Authenticated/ Acknowledged by the Income Tax Authorities.
8. Utility bills such as electricity, water, and landline telephone bills in the name of the proprietary concern as required
documents for opening of bank accounts of proprietary concerns. OR In case where the branches are satisfied that it is not
possible to furnish two such documents, they would have the discretion to accept only one of those documents as activity
proof. In such cases, the branches would have to undertake contact point verification, collect information to establish the
existence of such firm, confirm, clarify and satisfy that the business activity has been verified from the address of the
proprietary concern. Any Officially valid document (as given above for Accounts of individuals) identifying proprietor
with his/her photograph.
[95]
Accounts of Partnership (All following documents to be obtained)

firms. (Registered) 1. Registration certificate,
2. Partnership deed and.
An Officially valid document in respect of the person holding an Attorney to transact on its behalf.
Accounts of Trusts & (All following documents to be obtained)
Foundations. 1. Registration Certificate
2. Trust Deed; and
Any Officially valid document (as given above for Accounts of individuals) for verifying identity and
address Proof of Trustees, settlers, beneficiaries and persons holding Power of Attorney, Founders/
Managers Directors/Signatories
Accounts of Unincorporated All following documents to be obtained) 1. Resolution of the Managing body of such association or
Associations or body of body of individuals;
individuals/Soci ety / Clubs. 2. Power of Attorney granted to him to transact on its behalf;
*For unregistered entities 3. An Officially valid document in respect of the person holding an Attorney to transact on its behalf;
(whether partnership firm, and
trusts, foundations etc) 4. Any one of the below mentioned list of documents to collectively establish the legal existence of such
an associations or body of individuals. a. Partnership Deed/ Trust Deed
b. Certificate of / license issued by the municipal authorities under Shop & Establishment Act,
c. Sales Tax Returns,
d. CST / VAT certificates
e. Certificate / registration document issued by Sales Tax / Service Tax / Professional Tax authorities.
f. License issued by the Registering authority like certificate of Practice issued by Indian Institute of
Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries
of India, Indian Medical Council, Food and Drug Control Authorities, etc.
g. The complete Income Tax return (not just the acknowledgement) in the name of Sole Proprietor
where the Firm’s income is reflected, duly Authenticated/ Acknowledged by the Income Tax
Authorities.
h. Utility bills such as electricity, water, and landline telephone bills in the name of the proprietary
concerns.
Accounts of Hindu (All following documents to be obtained)
Undivided Family 1. Declaration from the Karta.
2. Any Officially valid document (as given above for Accounts of individuals) to verify the identity and
address of Karta.
3. HUF Letter signed by all the adult co-partners
Non- Resident Individuals (All following documents to be obtained)
(NRI) 1. Passport
2. Residence Visa
NOTE:
Copies of these documents to be verified by the bank official with the original or duly attested by
Banker / Notary Public/ Indian Embassy to the satisfaction of the bank
[96]
Do’s & Dont’s of POS
Do's
1. Show your identity to the customer

2. Disclose the name of your organization to whom you are representing.
3. Familiarize with all those insurance products which has pre-fixed with POS
4. Disclose the commission/ remuneration to be received on the product the customer intends to buy.
5. Indicate the premium to be charged by the Insurer for the Insurance product offered for sale
6. Where the POS represents more than one insurer offering same line of products, he should dispassionately advice the
policyholder on the products of all Insurers whom he is representing and product best suited to the specific needs of the product.
7. Obtain the requisite documents at the time of filing the proposal form with the Insurer and other documents subsequently asked
for by the Insurer completion of the proposal
8. Advise every prospects to effect nomination under the policy
9. Inform promptly the prospect about the acceptance or rejection of the proposal by the Insurer
10. Render necessary assistance and advice to policyholder introduced through him/her on all policy servicing matters including
assignment of policy, change of address or exercise of options under the policy or any other policy service where ever necessary
11. Render necessary assistance to the policyholders or claimants or beneficiaries in complying with the requirements for
settlement of claims by the Insurer.
[97]
Don’ts
Do's
1. solicit or procure insurance business without being appointed by any Insurer/Insurance Intermediaries
2. induce the prospect to omit any material information in the proposal form
3. induce the prospect to submit wrong information in the proposal form or documents submitted to the Insurer for acceptance of
the proposal
4. resort to multilevel marketing fro soliciting and procuring insurance policies
5. behave in discourteous manner with prospects
6. interfere with any proposal introduced by any other POS
7. offer different rates, advantages, terms and conditions other than those offered by the Insurer
8. force a policyholder to terminate the existing policy and to effect a new policy from him within three years from the date of such
termination of the earlier policy
9. sell any insurance product which is not prefixed POS
[98]
1. Interest payable on delay settlement of the claim.
(a) 9%
(b) 12%
(c) 6%
(d) 2% above the bank rate
2. Which is easiest way to resolve the grievance
(a) Ombudsman
(b) IGMS
(c) Consumer Court
(d) All
3. Financial limit of Ombudsman to resolve the dispute
(a) 20 lakhs
(b) 10 lakhs
(c) 15 lakhs
(d) unlimited
4. The decision of the ombudsman is binding upon
(a) Insurer
(b) Insured
(c) Both
(d) None
Statement A: Ombudsman can entertain the complaint of the commercial organization.
Statement B: Ombudsman can entertain the complaint of an individual
(a) Both
(b) Statement A
(c) Statement B
(d) None
12345
ddadc
[99]
6. Who issued the direction to follow the KYC norms?
(a) RBI
(b) SEBI
(c) IRDA
(d) All
7. Choose the correct statement
Statement A: KYC norms depend upon the type of customers.
Statement B: KYC norms common for all customers
(a) Statement A
(b) Statement B
(c) Both
(d) None
8. Which is not a valid identity proof of an Individual ?
(a) Adhar Card

(b) Driving License
(c) PAN
(d) Visiting card of an individual
9. KYC documents for NRI (Non Resident Indian)
(a) Copy of Passport with notarized

(b) Copy of Resident visa with notarized
(c) Both
(d) None
10. Which is not valid documents of Trust for KYC?
(a) Trust Deed

(b) Registration certificate
(c) PAN
(d) Memorandum of Association
6 7 8 9 10
daddd
@*
[100]
*@
Statement A: POS can sell any insurance product.
Statement B: POS can sell the product which is prefixed POS
(a) Statement A
(b) Statement B
(c) Both
(c) None
12.Which is not the duty of POS
(a) Advise the customer to mention name of the Nomination

(b) Claim service
(c) Show Identify proof
(d) Offer different to the customer
11 12
b d
[100]

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Module -1 Introduction of Insurance

How Insurance Works

This data as per statistic is certain.

Total Population of a city 1,00,000

Role of Insurance in Economic Dev-Elopment

Long Term Funds for Infrastructure

Transfer of Technical Expertise

Superior Quality at Lower Prices

Human Resource Development

Insurance Companies Act as Guardians in number of Ways: -

Source of Income of any person

Illness (malnutrition, environment, chronic) – uncertain

The only method is Life and General Insurance because

(a) To provide Security and Safety

(c) To Eliminate Dependency

(d) To Encourage Savings

(e) To fulfill the needs of a person

Risk, Perils & Hazard

The possibility of house or property getting damaged by an earthquake or lightening.

2. Man Made Perils:

(i) Physical (ii) Moral (iii) Morale

Who faces Risk ?

(i) Personal Risks

2. Loss Prevention and Reduction:

Type of Risk Suitable Method

Quiz Questions Module - 1

1. Whether Death is certain life?

2. Is the essence of the Insurance scheme is a Social science or Accumulation of funds.

4. Insurance provides benefits to

5. Insurance premium consists of

(a) Claim amount

6. What is the basic needs of a person?

7. What is uncertainty in life?

Quiz Answers Module - 1

8. What is certainty in life?

(a) Old age

10. Is insurance useful for old age?

11. Risk is _______ of occurrence of loss.

12. Earthquake is ______ perils.

13. Inflation is _______ perils.

14. There are ______types of hazards

15. Pure Risks are ____.

Quiz Answers Module - 1

Module-2 Indian Insurance Market

Provident Insurance Societies Act V of 1912 and

The Office of Controller was established to implement this act.

Insurance Regulatory Develpment Authority Act (IRDA) 1999

The Central Government can remove any member of the Authority if he is

Bar on future employment

Superintendence & Direction

Duties, Powers & Functions of Authority

Powers & Functions to

Accounts and audit

1. Bajaj Allianz Life Insurance Co Ltd

2. Reliace Life Insurance Co Ltd

3. Aviva Life Insurance Co Ltd

4. Birla sunlife Insurance Co Ltd

5. HDFC Life Insurance Co Ltd

6. Life Insurance Co Ltd.

7. ICICI Pru Life Insurance Co Ltd