Module 1

Introduction to
General Insurance
1.1 Introduction
• Every asset is to subject to risk. It may be destroyed or
may become non-functional anytime.
• Insurance is defined as a contract whereby, in return of
payment of premium by the insured, the insurers pay
the financial losses suffered by the insured as a result
of the occurrence of unforeseen events.
• Thus, insurance protects a person from losses suffered
and indemnifies the loss.
• Thus it can be rightly said that General insurance is for
the person and not the property as any asset or
property is inherently exposed to any loss.
• Insurance is based on the concept of risk pooling or risk
sharing of losses.
• Basically under this concept, all individuals suffering a
similar risk, place an agreed sum into a pool and the
monies collected are used to indemnify any contributing
individual against any loss arising out of the risk.
• Therefore we can say Insurance is a mechanism where
the losses of an individual are transferred over a group
of individuals who are exposed to the same risk.
• In other words Insurance is a method in which a large
number of people exposed to a similar risk make
contributions to the common fund out of which the
losses suffered by the unfortunate few due to accidental
events, are made good.
1.2 Concept of Insurance
For example in a village there are 400 houses each valued
at Rs.20000. Each year on the average 4 houses get burnt
resulting into total loss of Rs.80,000. If all the 400 owners
come together and contribute Rs.200 each the common
fund would be Rs.80000/-. This fund is enough to pay
Rs.20,000 to each of the 4 owners whose houses got
burnt. Thus the risk of 4 owners is spread over 400
house-owners of the village.
The universe includes
a. Human beings (generally covered under Life
Insurance companies). However, Personal Accident
insurance, travel insurance, health insurance etc.
related to human being are dealt with by General
insurance companies – human being is also treated
as an asset)
b. Other non-human living beings like elephants, horses,
cattle, pigs, dogs, fish, honey bee etc. (covered by
General insurance companies) These are treated as
property or assets of human beings because they
provide monetary benefit to human being.

c. Non-life assets like industries, dwelling houses

(buildings), machinery, aero planes, ships, motor
vehicles, electrical fixtures, factories, shops etc.
(covered by general insurance companies).

• If a human being dies, there is a financial loss to

family. If the non-human living beings die there is a
financial loss to the owner.
• If the non-life assets are destroyed there is a financial
loss to the owner.
• So customers pay certain nominal premium and get
secured from untimely death or destruction of
property to cover financial loss.
• In other words, customers transfer the risk of the
loss of the asset to the insurers by paying the
required premium.
• Insurance does not protect the asset against death
or damage to property but pays the actual financial
loss to the family or owner of the property.
• The person who pays the premium is called insured
and the company which pools the premium fund
and pays in case of loss is called the Insurance
Company.
• Thus, one can conclude that “General Insurance is
for the person and not the property”.
• In other words it means, that property is inherently
exposed to loss, while financial loss compensation
can be made good for an individual through the
medium of insurance.
1.3 Purpose and need
of Insurance
• Every asset is exposed to RISK. Risk means
possibility of loss or damage – may/may not
happen.
• Assets may be damaged by external causes
i.e. by fire, flood, breakdown, earthquake etc.
called perils. Insurance reduces consequences
of adverse situations.
• Insurance is a means of protection from
financial loss but it would not protect the asset.
• It is a form of risk management primarily used
to cover against the risk of a contingent,
uncertain loss.
• As earlier said, assets normally have expected
life time.
•If the asset is destroyed before the expected life
time by any unexpected accidents, there is a
financial loss.
•To guard against such unexpected losses there is
a need for insurance.
•Therefore, assets are insured because they are
likely to be destroyed or made non functional
before the expected life time.
•By insuring the assets the insured can feel safe
that his capital on asset is secured and he is free
from any anxieties.
•Besides, the insured can replace the damaged
asset with the payment of loss received from
insurers – so that the insured can run his business
uninterrupted.
1.4 Concepts of Risk, Peril & Hazard
A. PERIL:
Accidents, diseases, Fire, floods, breakdown, lightning,
earthquake etc. are called accidental events. These are
otherwise called PERILS.

Qualifications of peril:
i. A peril cannot be avoided through insurance.
ii. However the peril can sometimes be avoided through
better safety and control management.
iii. A peril may not always cause loss or damage. E.G. A
mild earthquake may not cause loss. The damage that
the perils cause to the asset is called the RISK.
B. RISK: means

ii. Possibility of loss or damage. It may happen or not happen.

iii. Exposure to danger.
1.4 Concepts of Risk, Peril & Hazard
Qualifications of Risk

a. It should be a pure risk but not speculative:

• Pure risks are not within the control of human being –
example: Floods, Earthquake etc. therefore insurable.
• Speculative risk means participating in bets, horse racing,
and lottery tickets etc.
• If you do not participate, you can avoid a loss in such
speculative activities.
• Therefore avoidance of losses
in speculative risks is within your control.
Therefore, not insurable.

a. It should be uncertain:
• The Loss or damage may or may not happen. Insurance is
done against the possibility that the damage may happen.
• Possibility implies uncertainty. If risk is certain it cannot be
insured.
 • Ex: If you keep firewood in fire it is certain they would burn.
• But firewood placed nearby fire may burn – may not burn
(uncertainty).
• Human being is also called as an asset. Death is certain
but time of death is uncertain. Therefore, there is a need for
insurance.

c. There should be financial loss:

If the owner of the asset destroyed does not feel any financial
loss, it need not be insured. If your motor cycle is stolen and
if you do not feel financial loss, there is no necessity of
insurance.

d. Other points are:

∙ Risk if certain is not insurable.
∙ Rain is not in the control of human being. Hence cricket
match can be insured.
∙ Insurance does not protect the asset
∙ Insurance does not prevent loss
∙ Risk / Perils cannot be avoided.
 ∙ Insurance compensate monetary losses but only to
some extent, i.e. Sum Assured but not fully.
∙ Only economic losses measured in terms of money can
be insured.
∙ Non-economic losses like – love and affection of
parents, sentimental losses cannot be covered.

Risk is also used to refer to the peril i.e. loss producing

event. In a fire policy risk of fire is covered. Similarly the
subject matter of insurance is also often called Risk. If a
motor cycle is covered under the policy, the risk covered
under the motor policy is Motor Cycle. Therefore, Risk
means:
Possibility of loss or damage / loss producing event /
property covered by insurance.

b. Physical hazards
If the physical condition of the asset is subnormal or
substandard, the risk is more. If a 20 year old building is offered
for fire insurance, there is an increase in the chance of loss
from any peril. Therefore insurers charge extra Premium
physical hazards.
Occupational hazards
Persons working in fumes, excessive temperatures, flight duties,
chemical factories, high voltage electricity, working at
heights/high Speed machines etc. are supposed to be extra
hazardous.
Persons working in mines are offered for Workmen’s Company
Policy, insurers have to charge extra premium as the occupation
risk is more.

Moral Hazard
It refers to the increase in probability of loss due to dishonesty
characters. It is an attempt to defraud the insurance company.
It is not possible to quantify moral hazard.
People like to get undue advantage of the Insurance.
Ex: Proposer is old – no earlier insurance – He asks for large sum
under personal accident though the income is not matching.
The proposer has to undergo major heart operation. But he
declares in the proposal that he is quite healthy without any
ailments.
1.5 Conclusion

• One needs to insure the assets to protect

himself from unexpected financial loss that
may arise due to perils.

• Insurance is a business of sharing. People of

same risk contribute premium to premium
fund.

• If anyone among them suffers a loss he will

paid the loss from the premium fund.
• If a person can bear small losses he need not
insure (self-insurance).

• If the losses are heavy he may not be able to

bear, therefore he transfers the risk on
insurers.

• Risk is an exposure to danger. Risk occurs

due to operation of a peril.
1.5 Conclusion
• A peril need not always cause a risk.

• A fire in a shop can cause a loss but not in an iron

shop.

• Physical/moral/morale hazards may be considered

at extra premium basing on degree of hazard or
frequency of losses or rejected by insurers.

•Occupational hazard generally considered at extra

premium.

•To conclude general insurance policies provide

protection against various risk and thus helps us to
secure things we value such as vehicles, home,
health, businesses and many more.

•Having adequate insurance helps us stay prepared

for unexpected risks.
 Module 2:
Indian Insurance Market - General
Introduction
• Insurance in India is sold, not bought.
• Insurance is a complex product representing a promise to
compensate the insured or third party according to
specified terms and conditions in the event of the
occurrence of a covered contingency.
• In most insurance transactions there is usually an
intermediary who has a distinct role to play in the entire
life cycle of a product, from the point of sale through
policy servicing, up to claim servicing.
• Insurance is a contract in which an insurer indemnifies
another against losses from specific contingencies or
perils.
• It helps to protect the insured person or their family
against financial loss.
• There are many types of insurance policies. Life, health,
homeowners, and auto are the most common forms of
insurance.
• There are a number of other participants namely the Brokers, Third Party Administrators,
Surveyors and Loss Adjusters etc.
• These participants in the insurance industry have distinct role and functions to perform in the
smooth conduct of insurance operations.
• The various participants operating in the insurance markets are shown in the Figure below:
The constituents include:

a. Regulator (IRDAI)
b. Insurance Companies
c. Reinsurance Companies
d. Intermediaries or Distributors
 Agents
 Brokers
 Surveyors
 Third Party Administrators

e. Common Service Centers

f. Web-Aggregators
g. POS Person
h. Insurance Marketing Firm
i. Insurance Self- Network Platform
Insurance Companies
Insurance organizations are divided into 3 main categories offering
different types of products. They are
• Life insurance
• Non- life insurance
• Reinsurance

Life insurance

• Life insurance companies cover the risk of human beings.

• Different products are offered covering the risk of death and risk
associated with old age people etc.
• Under traditional Plans, Term assurance (death risk only),
Endowment Policy (covering death and maturity), Pension
policies for old age people etc. are sold.
• There are 24 life insurance companies operating in India
including LIC of India, which is the only Government Company.
Some of the Private Companies are Joint venture with a foreign
company also.
Non-Life Insurance Companies

• Non-life insurance is otherwise called General

Insurance. These insurers deal with risks other
than those of human lives.
• However, general insures also offer health
insurance, personal accident insurance and
workmen’s compensation insurance (covering
workers) covering human lives in India.
• Assets like house, car, factory etc. are exposed
to fire, earthquake, riot, theft, floods, cyclones
etc.
• General insurance compensate the owner if the
assets are damaged by such risks. Including 5
public sector general insurance companies, there
are total 30 general insurance companies, the
Export Credit Guarantee Corporation (ECGC)
provides export credit insurance support to
Indian exporters and is controlled by the Ministry
of Commerce.
Reinsurance Companies

• We have learnt transfer of risk is insurance.

When lakhs of people transfer their risks on
insurers, insurers also face the problem of
accumulation of risks.
• Suppose 1000 people insured with one insurer
against the total sum of Rs.2 Crores. The relative
premium is Rs.50Lakhs on the assumption that
100 people may die.
• If suddenly an earthquake occurs and 200
people die the premium is not adequate to pay
the claims.
• Therefore, any amount of liability beyond their
capacity is insured with another insurance
company. This is called Reinsurance.
• They cede certain % of risk with Reinsurance
Company. General Insurance Corporation of
India is the re-insurer in India.
Agents
• An agent is a person who is licensed by the Authority
IRDAI in India to solicit and procure insurance business
including business relating to continuance, renewal or
revival of policies of insurance
• An agent is an individual who is an intermediary
representing an insurance company.
• An individual agent is one, who has undergone requisite
training, passed an examination and been duly licensed by
IRDAI to sell insurance policies to the public and provide
after-sales service including assisting at the time of a claim.
• His licence may be for life insurance, general insurance or
both. Many IRDAI licensed insurance agents also represent
other financial sector entities like mutual funds or the
National Small Savings Organisation.
Role of Agents under IRDAI regulation
The Agent as per the provision so the IRDAI, is obligated
as follows:

• Full information must be provided to the proponent at

the point of sale to enable him to decide on the best
cover or plan to minimize instances of cooling off by the
proponents.

• An agent should be well versed in all the plans, the

selling points and also be equipped to assess he needs
of the clients.

• Adherence to the prescribed Code of Conduct for

agents is of crucial importance. Agents must, therefore,
familiarize themselves with provisions of the Code of
Conduct.
• Agents must provide the office with the accurate
information about the prospect for a fair assessment of
the risk involved. The agents’ confidential report must,
therefore, be completed very carefully.
• Agents must also possess adequate knowledge of
policy servicing and claim settlement procedures so
that the policyholders can be guided correctly.
• Submission of proposal forms and proposal deposit to
the branch office immediately to avoid delays and to
enable the office to take timely decisions.
• A leaflet or brochure containing relevant features of the
plan that is being sold should be available with the
agents.
Agency Regulations
The provisions of IRDAI for Appointment of Insurance
Agents Regulations, 2016, for exercise of the powers
conferred by section 114A of the Insurance Act, 1938 (4
of 1938), read with sections 14 and 26 of the Insurance
Regulatory and Development Authority Act, 1999 (41 of
1999) and sections 42 of Insurance Act, 1938 are as
follows:

1. These Regulations shall be called Insurance

Regulatory and Development Authority of India
(Appointment of Insurance Agents) Regulations,
2016.
2. These Regulations shall come into force with
effect from 1st April,
Key Definitions
• “Insurance Agent” means an individual appointed by an insurer
for the purpose of soliciting or procuring insurance business
including business relating to the continuance, renewal or revival
of policies of insurance.
• “Composite Insurance Agent” means an individual who is
appointed as an insurance agent by two or more insurers subject
to the condition that he/she shall not act as insurance agent for
more than one life insurer, one general insurer, one health insurer
and one each of the mono-line insurers. A Composite Insurance
Agent means an insurance agent who holds a license to act as an
insurance agent for a life insurer and a general insurer.
Traditionally, agents have represented the insurance company
and brokers have represented the client. Agents and brokers are
known as producers. Agents may be captive agents selling
policies written by a single insurer, the agent’s employer, or an
independent agent selling policies from a number of different
insurers.
• “Centralised list of Agents” means a list of agents
maintained by the Authority, which contains all details of
agents appointed by all insurers.
• “Centralised list of black listed agents” means list of
agents maintained by the Authority whose appointment is
cancelled/suspended by a designated official of insurer on
grounds of violation of code of conduct and / or fraud.
• “Designated Official” means an officer authorised by the
Insurer to make Appointment of an individual as an Insurance
Agent.
• “Mono-Line Insurer” for the purpose of these Regulations
means insurer as defined under section 2(9) of Insurance Act,
1938 and carrying on one particular specialized line of
business such as agriculture insurance, export credit
guarantee business.
• “Corporate Agent” - A corporate agent is an intermediary
other than an individual, may be a firm, company or a
registered society, representing an insurance company. A
Designated Person means an officer normally in charge of
marketing operations, as specified by an insurer, and
authorized by the Authority to issue or renew licenses under
the applicable regulations.
Appointment of the Insurance agent by the Insurer
• An applicant seeking appointment as an insurance agent of an
Insurer shall submit an application in Form I-A to the Designated
Official of the Insurer.
• The Designated Official of the insurer, on receipt of the
application, shall satisfy himself that the applicant:-
• Has furnished the Agency Application in Form I-A complete in
all respects;
• Has submitted the PAN details along with the Agency
Application Form;
• Has passed the insurance examination as specified under
Regulations 6;
• Does not suffer from any of the disqualifications mentioned in
Regulation 7;
• Has the requisite knowledge to solicit and procure insurance
business; and capable of providing the necessary service to
the policy holders;
• The Designated Official shall exercise due diligence in
verifying the agency application and ascertaining that the
applicant does not hold agency appointment for more than
one life insurer, one general insurer, one health insurer
and one each of the mono-line insurers and is not in the
centralised list of blacklisted agents.
• The Designated Official shall also verify
a) The centralised list of agents maintained by the
Authority with the PAN Number of the applicant to
ascertain the information as in sub Regulation (3) above.
b) The centralised list of black listed agents maintained by
the Authority to ascertain that the applicant is not black
listed.
• The Designated Official on satisfying himself that the
applicant has complied with all the conditions mentioned in
Regulation 4(2) to 4(4) above, and also does not suffer
from any of the disqualifications mentioned in sub-section
(3) of Section 42 of the Act, may process the agency
application and grant appointment to the applicant as an
insurance agent by issuing an appointment letter within 15
days of receipt of all documents from the applicant.
• The Designated Official shall allot an agency code
number to the appointed agent and the agency code
number shall be prefixed by the abbreviation of the
insurer’s name.
• The Designated Official may refuse or reject, for
reasons being recorded, an application if he/she feels
that the grant of appointment may be against public
interest.
• The agency appointment letter issued as mentioned
in sub-Regulation(5) above shall lay down the terms
of appointment covering all conditions governing
appointment and functioning of the applicant as
insurance agent and the code of conduct as outlined
in Regulation 8.
• The letter of appointment shall be dispatched not later
than 7 days after the appointment of the agent as
mentioned in sub-Regulation (5) above.
• The applicant so appointed as an insurance agent
shall be provided an identity card, by the insurer
which shall identify the agent with the insurer whom
he/she is representing as an agent.
• An applicant must be at least 18 years and above of age on the
date of the application. The applicant shall furnish proof of age.
• An applicant shall furnish the proof of pass in the pre-recruitment
exam conducted by an examination body duly recognised by the
Insurance Regulatory and Development Authority of India.
• The Designated Official may refuse to grant Agency
Appointment to any applicant if the applicant does not fulfil any
of the conditions mentioned in these Regulations and
communicate the refusal for appointment as agent to the
applicant in writing, within 21 days of receipt of the application.
• An applicant who is aggrieved by the decision of the Designated
Official refusing to grant the agency appointment may submit a
review application to the appellate officer designated by the
insurer for review of the decision.
• The insurer shall designate an Appellate Officer to consider the
review application of the applicant. The Appellate Officer shall
consider the application and communicate the final decision in
writing within 15 days of receipt of the review application.
Suspension of appointment of an agent
The appointment of an agent may be cancelled or
suspended after due notice and after giving him/her a
reasonable opportunity of being heard if he/she:-

a) violates the provisions of the Insurance Act,1938 (4 of

1938), Insurance Regulatory and Development
Authority Act, 1999 (41 of 1999) or rules or regulations,
made there under as amended from time to time

b) attracts any of the disqualifications mentioned in

Regulation7.

c) fails to comply with the code of conduct stipulated in

Regulation 8 and directions issued by the Authority from
time to time.

d) violates terms of appointment.

e) fails to furnish any information relating to his/her activities
as an agent as required by the Insurer or the Authority;
f) fails to comply with the directions issued by the Authority;
g) furnishes wrong or false information; or conceals or fails to
disclose material facts in the application submitted for
appointment of Insurance Agent or during the period of its
validity.
h) does not submit periodical returns as required by the
Insurer/Authority;
i) does not co-operate with any inspection or enquiry
conducted by the Authority;
j) fails to resolve the complaints of the policyholders or fails to
give a satisfactory reply to the Authority in this behalf;
k) either directly or indirectly involves in embezzlement of
premiums / cash collected from policy holders/ prospects on
behalf of insurer. However, this proviso does not permit an
agent to collect cash/premium without specific authorisation by
the insurer.
Corporate agent
• A corporate agent is an intermediary other than an
individual, may be a firm, company or a registered
society, representing an insurance company.
• A Designated Person means an officer normally in
charge of marketing operations, as specified by an
insurer, and authorized by the Authority to issue or
renew licenses under the applicable regulations.

Insurance Broker
• An Insurance Broker means a person licensed by IRDAI who arranges insurance contracts with
insurance companies on behalf of his clients.
• An Insurance Broker may represent more than one insurance company and may deal with more than
one life or general insurer or both.
• An insurance broker sells, solicits or negotiates insurance for compensation. It is the broker’s
responsibility to seek out appropriate insurance coverages for the client and obtain the best overall
price, terms and conditions. Brokers are most often associated with large or complex commercial lines
risks.
Often people get confused between an agent and a broker. They are different and have distinct roles to
play. Their functions and responsibilities are explained in the table below.

Difference between Agent and Broker

Actuaries
• Actuaries are supposed to be the brains of insurance companies.
• Actuaries calculate the price of issuing a policy based on the
probability and severity of the happening of the risk.
• Basing on statistical data and past loss experience, he calculates
the premium. He sits at Head Office.
• This premium is taken as base premium by the underwriter.
• Every year he assesses the financial position of insurance
company to ensure whether the company has sufficient reserves
to pay for further liabilities.

Third Party Administrators (TPAs)

• IRDA has issued licences to certain individual bodies as TPAs to service health insurance.
• They are authorized to settle claims (hospital bills) on behalf of insurance companies.
• The role played by a TPA is explained in the above figure.

• They act as a link between the policyholder, Regulator, Insurance Company and the hospita
Loss Adjusters / Surveyors
• They assess and certify the loss in general insurance CLAIMS.
• A Surveyor and Loss Assessor is relevant for general insurance
business, where assessment of the loss of the subject matter
insured is very important for deciding the claim amount.
• As general insurance contracts are indemnity contracts in nature,
the amount paid by the insurance company cannot exceed the
amount of actual loss incurred.
• The job of the Surveyor or a Loss Assessor is therefore to arrive at
the exact amount of loss incurred and his role is critical to a
general insurer.
• Surveyors are engaged to conduct surveys in which they examine
cargo, transport units, transport facilities and the circumstances of
a claim and send the insurers a survey report.
• Often it will be necessary to engage surveyors in the overseas
countries where the cargo is located.
• A Surveyor has to be person or a firm or a company licensed
under Regulation 3 or Regulation 4, as the case may be.
 A Surveyor and Loss Assessors shall be appointed either by insurers or
insured to assess loss under a policy of insurance in respect of
1. Motor insurance – above Rupees fifty thousand
2. Other than motor insurance – above Rupees one lakh
3. Such appointment of a surveyor for assessment of loss shall be
made within 72 hours from the time the occurrence of loss was
known to the insurer or insured, as the case may be.
4. Notice of such appointment shall be sent in writing to the insurer or
insured as the case may be and shall form part of the claims
settlement process.
5. A Surveyor and Loss Assessor shall assess losses of only those
departments specified in his/her or its license.

It shall be the duty of every Licensed Surveyor and Loss Assessor to

investigate, manage, quantify, validate and deal with losses (whether
insured or not) arising from any contingency, and report thereon to the
insurer or insured, as the case may be., All Licensed Surveyors and
Loss Assessors shall carry out the said work with competence,
objectivity and professional integrity and strictly adhere to the code of
conduct as stipulated in these Regulations.
The following, shall, inter alia, be the duties and responsibilities of a
Surveyor and Loss Assessor:-
• declaring whether he has any interest in the subject-matter in
question or whether it pertains to any of his relatives, business
partners or through material shareholding;
• Bringing to the notice of the Authority, any change in the information
or particulars furnished at the time of issuance of license, within a
period not exceeding fifteen days from the date of occurrence of such
change, that has a bearing on the license granted by the Authority
• maintaining confidentiality and neutrality without jeopardising the
liability of the insurer and claim of the insured;
• conducting inspection and re-inspection of the property in question
suffering a loss; e. examining, inquiring, investigating, verifying and
checking upon the causes and the circumstances of the loss in
question including extent of loss, nature of ownership and insurable
interest;
• conducting spot and final surveys, as and when necessary and
comment upon franchise, excess/under insurance and any other
related matter;
• estimating, measuring and determining the quantum and description
of the subject under loss;
• advising the insurer and the insured about loss minimisation, loss
control, security and safety measures, wherever appropriate, to avoid
further losses;
• commenting on the admissibility of the loss as also observance of
warranty conditions under the policy contract;
• surveying and assessing the loss on behalf of insurer or insured;
• assessing liability under the contract of insurance;
• pointing out discrepancy, if any, in the policy wordings;
• satisfying queries of the insured/insurer and of persons connected
thereto in respect of the claim/loss;
• recommending applicability of depreciation, percentage and quantum
of depreciation;
• giving reasons for repudiation of claim, in case the claim is not
covered by policy terms and conditions;
• taking expert opinion, wherever required;
• commenting on salvage and its disposal wherever necessary.
• A surveyor or loss assessor whether appointed by insurer or insured, shall
submit his report to the insurer as expeditiously as possible, but not later than
30 days of his appointment, with a copy of the report to the insured giving his
comments on the insured’s consent or otherwise on the assessment of loss.
• 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, in any case not exceeding six months from the insurer for
submission of his report.
• In cases where the Survey report is pending due to non-completion of
documents, the surveyor may issue the final survey report independently
based on the available documents on record, giving minimum three
reminders in writing to the insured.
• 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 such incomplete issues.
• Such a request may be made by the insurer within 15 days of the receipt of
the original survey report. Provided that the facility of calling for an additional
report by the insurer shall not be resorted to more than once in the case of a
claim.
• 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.
Common Service Centres
• A CSC is a low-cost setup and distribution center for government institutions to
deliver e-governance services to the rural population.
• An army of digitally trained individuals are leading a silent entrepreneurship
revolution in the heart of Indian villages.
• Through common service centers (CSC) or Jan Seva Kendras, many young people
(some even teenagers) have enrolled to become Rural Authorised Persons (RAP) to
solicit business.
• These individuals need to undergo training and examination as specified by the
Insurance Regulatory and Development Authority of India (IRDAI), in the subject of
insurance products and other necessary topics.
• “CSC" means the "Common Service Centre" established under National e-
Governance Plan by M/s CSC e-Governance Services India Limited. “CSC-SPV"
means M/s CSC e-Governance Services India Limited, the Special Purpose Vehicle
(SPV) incorporated to facilitate delivery of government, private and social sector
services to citizens of India through the Common Services Centres (CSCs) network,
and approved by the Authority under these Regulations, who for remuneration
arranges insurance contracts (under specific products approved by the Authority) with
insurers on behalf of its clients and offers other insurance related services through
CSC Network.
 • “CSC Product” means the product marketed through the CSC Model and prefixed
with the word “CSC” to clearly distinguish the product as ‘Exclusive CSC Product’. I.
• Registration :
1. The Applicant CSC-SPV, desiring to obtain a Registration to act as an insurance
intermediary shall follow the following procedure:-
• Submit an application to the Authority in the Form A as specified in these
Regulations.
• Remit non-refundable application fees of five thousand rupees plus applicable tax
along with the application for grant of registration
• Submit all the necessary documents as mentioned in the application Form- A along
with declaration from Principal Officer satisfying the fit & proper criteria specified in
Schedule-I (Part- I).
2. An application, that is not complete in all respects and/or not conforming to the
instructions specified in application form and/or not complying with the
requirements and/or directions of the Authority, may be rejected. Provided that,
before rejecting any such application, the CSC-SPV shall be given a reasonable
opportunity to complete the application in all respects and rectify the errors, if any.
3. Grant of Registration to the CSC-SPV - The Authority on being satisfied that the
applicant fulfils all the conditions specified for the grant of registration, shall grant a
registration in Form-B and send intimation thereof to the CSC-SPV.
 4. The registration shall be issued subject to the CSC-SPV adhering to the
conditions and code of conduct as specified in Schedule IV
5. Period of Validity of Registration of the CSC-SPV - The registration issued under
these Regulations shall be valid for a period of three years from the date of its
issue, unless it is suspended or cancelled by the Authority.
6. CSC-SPV shall not be allowed to function as such after the expiry of registration
unless it is renewed by the Authority.
7. In case the registration of the CSC-SPV is cancelled or suspended or not
renewed the policyholders shall be serviced by the insurers.
8. Persons engaged for solicitation - For the purpose of solicitation of insurance
business, Rural Authorized Person (RAP) is authorized.
9. CSC-SPV shall be responsible for all acts of commission and omission of the
RAPs deployed on their behalf.
10. Rural Authorized Person (RAP) shall possess minimum qualification as specified
in Schedule-I, Part-III.
11. The Training, examination and certification of RAP shall be as specified in
Schedule-I, Part-IV.
12. Code of Conduct for Rural Authorised Person is stipulated in Schedule-IV.
Web Aggregators
• As per the definition of the Insurance Regulatory and Development
Authority of India (IRDAI), Insurance Web Aggregators compile and
provide information about insurance policies of various companies
on a website.
• In other words, they collect data from various sources and
databases, such as insurance company websites, and compile this
data to make it presentable to any potential insurance policy buyers.

Training Institutes
• These institutes supply trained manpower to the meet the growing
need of skilled labour in insurance industry. Insurance Institute of
India (III), Insurance Institute of Risk Management (IIRM) and
National Insurance Academy (NIA) are the premier training
institutes in the field of insurance.
Non Government Organisations – Protecting the
customer’s rights
• They provide awareness of insurance products and protecting the
interests of customers.
• They associate with Self-help Groups in rural areas for development
of micro-insurance.

Point of Sales Persons (POS)

• Insurance Sales Person (ISP) is an individual employed by Insurance
Marketing Firm to solicit or procure insurance products and who holds a
valid certificate issued by the Authority for the purposes of the same.
• In the year 2015, Insurance and Regulatory Authority of India (IRDA) in an
effort to increase insurance penetration in the country, felt the need for
more distributors to travel the last mile (remote areas).
• To achieve this goal, IRDA has designed is a simple certification process
for these distributors and IRDA allowed for a new type of distributor, called
the point of sale (POS) person In 2015.
 • The Authority 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.
• Products like motor insurance, travel insurance, personal accident
insurance, etc. require very little underwriting.
• These policies are treated to be largely pre-underwritten products. In other
words, it means that the policies are based on the information provided by
the prospect, the insurance policy is automatically generated by the
system.
• The job requires minimum effort. The training needs are also very simple.
The detailed description of the role and function of POS is detailed in
Chapter – V later.

Insurance Marketing Firms

• Insurance Marketing Firm is a new distribution channel to solicit or procure insurance products,
to distribute other financial products by employing individuals licensed to market, distribute and
service such other financial products.
• “Insurance Marketing Firm” is an entity registered by the Authority to solicit or procure insurance
products as specified in regulation.
• “Insurance Marketing Firm” is an entity registered by the Authority to solicit
or procure insurance products as specified in regulation. 3(a) of these
regulations,
• to undertake insurance service activities as specified in regulation 3(b) of
these regulations and
• to distribute other financial products as specified in regulation 3(c) of these
regulations by employing individuals licensed to market, distribute and
service such other financial products.
• "Insurance Sales Person" (ISP) is an individual employed by Insurance
Marketing Firm to solicit or procure insurance products and who holds a
valid certificate issued by the Authority for the purposes of the same.
• “Insurance Servicing Activity” means the activities specified in regulation
3(b) of these regulations.
• "Principal Officer” of Insurance Marketing Firm means a director or a
partner or any officer or employee so designated by it, and approved by
the Authority, to exclusively supervise the activities of Insurance Marketing
Firm and who possesses the requisite qualifications and practical training
and who has passed examination as required under these Regulations.

Insurance Self Network Platform

• lnsurance Self-Network Platform means an electronic platform set-up by
any applicant with the permission of the Authority.
• For the purposes of these guidelines, an insurance agent is not permitted
to set up a separate insurance self-network platform and instead can use
respective insurer's self-network platform, if available.
• However, the insurer shall be responsible for compliance of these
guidelines on behalf of the insurance agents.
Referral Providers
• A Referral Entity provides data of its clients to an insurer who wishes to
sell policies to them.
• It does not actually sell the policies. It may also introduce its clients to the
insurer; provide space in its office for the use of the employees of the
insurer and for display of publicity material to help the insurer sell policies.

Motor Insurance Network Providers

• The MISP may offer the policyholder insurance claim cashless service,
repairs and any other offer or service so long as it is not an inducement or
rebating or unfair business practice or which in any way restricts the
choice of the policyholder to choose the insurer or insurance intermediary.
n offering cashless service, the MISP shall not discriminate between the
policyholders who have bought motor insurance policies through it or
otherwise so long as the insurer is having such an arrangement with it.
Every MISP shall:-
• offer a choice of motor insurance policies of different insurer(s) to the
prospect
• inform the prospect of the premium rates of different insurers;
• issue the motor insurance policy on obtaining the express consent of the
prospect;
• make available to the policyholder a copy of the insurance policy in
electronic form;
• have a separate dedicated Bank Account linked to the MISP PAN number
in which all payments are received from insurer(s) or insurance
intermediary;
• ensure issuance of receipt of the insurer on receiving insurance premium;
• share the data submitted by the prospecU policyholder policyholders
containing his contact number, mobile number and other details relevant
for insurance with the insurers;
• transfer data of the policyholders and registration & other particulars of the
automobile to the insurers at the end of the day;
• undertake reconciliation on a weekly basis on the motor insurance policies
distribution &premium collected between the MISP, the sponsoring entity &
the insurer;
• prominently display copy of the code of conduct on its premises;
• furnish any information as required by the Authority relating to insurance
business;
• submit periodical returns as required by the Authority;
• cooperate in any inquiry conducted by the Authority;
• comply with any other requirement which the Authority may specify.

Every MISP shall not:

• receive any payment directly or indirectly for outsourcing activity behalf of
either the insurer or the insurance intermediary;
• force the prospecU policyholder to necessarily buy motor insurance policy
through a particular insurance intermediary or insurer;
• deny the prospect his rights and options to seek motor insurance policy or
renewal of motor insurance policy from any insurer or insurance
intermediary;
• directly or indirectly control or interfere in determination of premium of
policies;
• direct or indirect imposition of risk selection by insurers or curtailment of
choice of the prospect/ policyholder;
• interfere in product design;
• interfere in the appointment of surveyors and loss assessors assessment
activities;
• directly or indirectly influence the claims for inflating its revenue;
• solicit motor insurance business from those persons who did not buy the
automobile from it;
• issue a motor insurance policy or a motor insurance cover note that
carries name or logo or any other symbol, except that of the insurer;
• conduct its business in a manner prejudicial to the interests of the
policyholders;
• indulge in manipulating the insurance business;
• indulge in unfair trade practices;
• default in complying with, or acts in contravention of, any requirement of
the Act, IRDA Act, 1999 or of any rule or any regulation or order made or
any direction issued thereunder;
• default in complying with any direction issued or order made, by the
Authority;
Conclusion
• Thus, insurance is a complex process involving the participation and
cooperation of all the various stakeholders for mutual benefit and good.
• However, it must be remembered that insurance is a social contract based
on faith and trust. Hence all the participants should have good faith and
trust and work harmoniously for the common good.
PRINCIPAL
OF
INSURANCE
INTRODUCTION
▪In this chapter, we shall learn
about the basic principles that
govern the working of insurance.
The chapter is divided into two
sections
▪The first section deals with the
elements of insurance and the
second section deals with the
special features of an insurance
contract.
LEARNING
OUTCOMES
▪ Elements of insurance
▪ Insurance contract - Legal
aspects
▪ Insurance contract - Special
features
ELEMENTS OF
INSURANCE
▪We have seen that the process of
insurance has four elements

▪ Asset
▪ Risk
▪ Risk pooling
▪ Insurance contract

▪Let us now look at the various elements of

the insurance process in some detail.
ASSET
▪An asset may be defined as anything that confers some benefit and has an economic
value to its owner‟.
▪An asset must have the following features:

a) Economic value
▪An asset must have economic value. Value can arise in two ways.

▪ Income generation: Asset may be productive and generate income.

▪ Serving needs: An asset could also add value by satisfying one or a group of needs.
ASSET
b) Scarcity and ownership
▪ What about air and sunlight? Are they not
assets.
▪ The answer is No.

▪ Indeed, few things are as valuable as air and

sunlight. We cannot live without them. Yet they are
not considered as assets in the economic sense of
the term.
ASSET
There are two reasons for this:

▪ Their supply is abundant and not scarce.

▪ They are not owned by any one individual

but are freely available to all. This implies
that an asset must satisfy two more conditions
to qualify as such - its scarcity and its
ownership or possession by someone.
INSURANCE OF
ASSETS
c) Insurance of assets
In insurance we are interested in economic losses that
arise from unexpected and fortuitous events, not
losses arising as a result of natural wear and tear.
Insurance provides protection only against financial
losses arising from unexpected events and not natural
wear and tear, of assets due to usage over time.

▪We must note that insurance cannot protect an asset

from loss or damage.
▪An earthquake will destroy a house whether it is
insured or not. The insurer can only pay a sum of
money, which would reduce the economic impact of
the loss. Losses can arise in the event of breach of an
agreement.
 ▪What about our lives? There is indeed nothing as
valuable to us as our own lives and those of our
loved ones.

▪Our lives can be seriously affected when

subjected to an accident or an illness. This can
LIFE impact in two ways:

▪Firstly there are costs of treatment of a particular

INSURANCE disease.

▪Secondly there may be loss of economic

earnings, both due to death or disability. These
kinds of losses are covered by insurances of the
person or personal lines of insurance.
RISK
▪The second element in the process of
insurance is the concept of risk. We shall define
risk as the chance of a loss. Risk thus refers to
the likely loss or damage that can arise on
account of happening of an event. We do not
usually expect our house to burn down or our
car to have an accident.
 Yet it can happen. Examples of risks are the
possibility of economic loss arising from the
burning of a house or a burglary or an
accident which results in the loss of a limb.

This has two implications:

RISK I. Firstly, it means that that the loss may or

may not happen. The chance or
likelihood of loss can be expressed
mathematically.

Risk always implies a probability. Its

value always lies between 0 and 1,
where 0 represents certainty that a loss
will not happen while 1 represents
certainty that it will happen.
 II. Secondly, the event, whose
occurrence actually leads to the loss,
RISK is known as a peril. It is the cause of
the loss.
BASIS OF RISK CLASSIFICATION
 a) Extent of damage likely to be suffered

This is given by the degree of loss and its impact

on an individual or business. On this basis one
may identify three types of risk events or
BASIS OF situations:

i. Critical or Catastrophic
RISK Where losses are of such a magnitude; that may
CLASSIFIC result in total loss or bankruptcy.

Example
ATION An earthquake that completely destroys a village
A major fire that completely destroys a multi
crore installation A situation like the terrorist
attack of 9/11 on World Trade Centre which
caused injuries to many people
 ii. Major

In which the possible losses may result

in serious financial losses, compelling
BASIS OF the firm to borrow in order to continue
operations.

RISK Example:
A fire in the plant of a large
CLASSIFIC multinational company at Gurgaon
destroys inventory worth Rs 1 crore.
ATION The loss is heavy but not so high as to
lead to bankruptcy. A major kidney
transplant operation whose cost is
prohibitive.
 iii. Marginal/Insignificant
BASIS OF Where the possible losses are insignificant
RISK and can be easily met from an individual or a
firm’s existing assets or current income
without imposing any undue financial strain.
CLASSIFIC
Example:
ATION A minor car accident results in the side
being slightly grazed due to which some of
the paint is damaged and a fender is slightly
bent. An individual suffering from common
cold and cough
 b) Nature of risk environment
Another basis for classifying risks is by
the nature of the environment.

BASIS OF i. Static risks

RISK Static risks refer to events taking place

within a stable environment. They have
a regular pattern of occurrence over
CLASSIFIC time and can be reasonably predicted.
They are thus easier to insure.
ATION Typically such risks are caused by
natural events. Examples are fire,
earthquake, death, accident and
sickness.
 ii. Dynamic risks

Typically refer to perils that affect the

BASIS OF social environment and result from

economic and social factors. They are
called dynamic because they don‟t
RISK necessarily have a regular pattern of
occurrence and cannot be predicted
like static risks. Again these risks often
CLASSIFIC have vast national and social
consequences and may affect a large
section of people.
ATION Examples are unemployment, inflation,
war and political upheavals. Insurance
companies in general do not insure
dynamic risks.
 iii. Marginal/Insignificant

Where the possible losses are

BASIS OF insignificant and can be easily met from
an individual or a firm’s existing assets or
current income without imposing any
RISK undue financial strain.

Example
CLASSIFIC A minor car accident results in the side
being slightly grazed due to which some
ATION of the paint is damaged and a fender is
slightly bent. An individual suffering from
common cold and cough
 b) Nature of risk environment

BASIS OF Another basis for classifying risks is by the

nature of the environment.

i. Static risks
RISK Static risks refer to events taking place
within a stable environment. They have a
CLASSIFIC regular pattern of occurrence over time and
can be reasonably predicted. They are thus
easier to insure. Typically such risks are

ATION caused by natural events. Examples are fire,

earthquake, death, accident and sickness.
 ii. Dynamic risks

Typically refer to perils that affect the

BASIS OF social environment and result from

economic and social factors. They are
called dynamic because they don’t

RISK necessarily have a regular pattern of

occurrence and cannot be predicted like
static risks. Again these risks often have

CLASSIFIC vast national and social consequences and

may affect a large section of people.

Examples are unemployment, inflation,

ATION war and political upheavals. Insurance
companies in general do not insure
dynamic risks.
 c) Who is affected?

A third way of classifying risks may be provided by

considering who is affected by a particular peril or

BASIS OF loss event.

i. Fundamental risks: affect large populations.

Their impact is widespread and tends to be

RISK catastrophic. Examples of fundamental or

systemic risks are wars, droughts, floods and
earthquakes and terrorist attacks.

CLASSIFIC ii. Particular risks: affect only specific individuals

and not an entire community or group. In this
case the loss is borne only by particular
individuals and not the entire community or
ATION group. Examples of particular risks are burning
of a house or an automobile accident or
hospitalisation following an accident.
Commercial insurance is available to cover both
fundamental and particular risk.
BASIS OF d) Result / Consequence / Outcome

i. Speculative risk describes a situation

RISK in which the consequence can be

either a profit or a loss. Typical
examples of taking such risk are

CLASSIFIC gambling on horses or stock market

speculation. One assumes such risk
deliberately in the hope of a gain.

ATION
 ii. Pure risk on the other hand involves situations in
which the outcomes can result only in loss or no loss,
but never in gain.
For example, a flood or a fire either occurs or does

BASIS OF not occur. If it happens there is a loss. If it does not

happen there is neither loss nor gain. Similarly, a
person may or may not fall seriously ill.

RISK Insurance only applies in case of pure risks, where it

protects against loss that may arise. Speculative
risks cannot be insured.

CLASSIFIC Examples of pure risk:

ATION Chemical – Fire, Explosion

Natural – Earthquake, Flood, Cyclone
Social – Riots, Fraud, Thefts
Technical – Machinery Breakdown
Personal – Death, Disability, Sickness
HAZARD
▪ We have seen above that mere exposure to a peril
need not cause a loss. Again, a loss need not be
severe. The condition or conditions which increase the
probability of a loss or its severity, and thus impact(s)
the risk is known as hazard

▪ When insurers make an assessment of the risk, it is

generally with reference to the hazards to which the
asset is subject. Let us now give some examples of the
link between assets, peril and hazards
 Asset Peril Hazard

Life Cancer Excessive Smoking

Let us now give some Factor Fire Explosive material left

examples of the link unattended
between assets, peril
and hazards
Car Car Accident Careless driving by
driver

Cargo Storm Water Seeping in Cargo

TYPE OF HAZARDS
a) Physical hazard is a physical condition that increases the chance of
loss.

b) Moral hazard refers to dishonesty or character defects in an

individual that influence the frequency or severity of the loss. A dishonest
individual may attempt to commit fraud and make money by misusing the
facility of insurance.
TYPE OF HAZARDS
c) Legal hazard is more prevalent in cases involving a liability to pay for damages.
It arises when certain features of the legal system or regulatory environment can
increase the incidence or severity of losses.

A major concern in insurance is the relationship between risks and associated

hazards. Assets are classified into various risk categories on this basis and the price
charged for insurance coverage [known as the premiums] would increase if the
susceptibility to loss, arising as a result of the presence of associated hazards, is
high.
MATHEMATICAL PRINCIPLE OF
INSURANCE (RISK POOLING)
The third element in insurance is a mathematical principle that makes insurance
possible. It is known as the principle of risk pooling.

Suppose there are 1,00,000 houses exposed to the risk of fire that can cause an
average loss of Rs. 50,000. If the chance of a house catching fire is 2 in 1,000 [or
0.002] it would mean that the total amount of loss suffered would be Rs. 1,00,00,000
[=50000 x 0.002 x 1,00,000].

If an insurer were to get the owners of each of the hundred thousand houses to
contribute Rs. 100 and if these contributions were to be pooled into a single fund, it
would be enough to pay for the loss of the unfortunate few who suffered from the
fire. The required amount of individual contribution is evident from the calculation
below 1,00,000 x 100 = Rs. 1,00,00,000
EXAMPLE
Mr. Shyam, who has a factory, with plant, machinery and inventory worth Rs
70 lakhs, wants to insure them with an insurer. The chance that there would
be loss or damage to the factory and its contents from fire or other insured
perils is 7 out of 1000 [0.007].

Both Mr. Shyam and the insurer are aware about this.

How are their positions different and why does Shyam want to insure?
EXAMPLE
Mr. Shyam‘s position
The probability of loss (0.007) is of little use to Mr. Shyam since it only suggests that on
average about 7 out of 1000 factories like his, would be impacted by the loss.

He does not know whether his factory would be one among the unfortunate seven? In fact
nobody can predict if the particular factory would suffer a loss. Shyam may be said to be in
a state of uncertainty. Not only does he not know the future, he cannot even predict what it
will be. It is obviously a cause for anxiety. Insurer‘s position Let us now look at the insurer’s
position.

When Shyam’s risk of loss is combined and pooled with that of thousands of others, who
are exposed to similar situation, it now becomes finite and predictable. The insurer need
not worry about Shyam’s factory as much as the latter does. It is enough that only seven out
of thousand factories be subjected to the loss. So long as the actual losses are same or
nearly same as the expected, the insurer can meet them by drawing money from the pool
of funds.
RISK POOLING AND LAW OF
LARGE NUMBERS
The probability of damage [derived as 7 out of 1000 or 0.007 in the example above] forms
the basis on which the premium is determined. The insurer would face no risk of loss if the
actual experience was as expected. In such a situation the premiums of the numerous
insured would be sufficient to completely compensate for the losses of those who have
been affected by the peril. The insurer would however face a risk if the actual experience
was more adverse than expected and the premiums collected were not sufficient to pay
the claims.

How can the insurer be sure about its predictions?

This becomes possible because of a principle known as the “Law of large numbers”. It
states that the larger the size of the pool of risks, the actual average of losses would be
closer to the estimated or expected average loss.
CONDITIONS FOR
INSURING A RISK
When does it make sense to insure a risk from the insurer’s point of view?

Six broad requirements for a risk to be considered insurable are given in the box
below.

▪A sufficiently large number of homogenous [similar] exposure units to make the

losses reasonably predictable. This follows from the law of large numbers. Without
this it would be difficult to make predictions.

▪Loss produced by the risk must be definite and measurable. It is difficult to decide
the compensation if one cannot say for sure that a loss has occurred and how much it
is.
CONDITIONS FOR
INSURING A RISK
▪Loss must be fortuitous or accidental. It must be the result of an event that may or may not
happen. The event must be beyond the control of insured. No insurer would cover a loss
that is intentionally caused by the insured.

▪Sharing of losses of the few by many can work only if a small percentage of the insured
group suffers loss at any given period of time.

▪Economic feasibility: The cost of insurance must not be high in relation to the possible
loss; otherwise the insurance would be economically unviable.

▪ Public policy: Finally the contract should not be contrary to public policy and morality
THE
▪The fourth element of insurance is that it
INSURAN involves a contractual agreement in which
the insurer agrees to provide financial
protection against specified risks for a
CE price or consideration known as the
premium. The contractual agreement
takes the form of an insurance policy.
CONTRA
CT
 a) The process of insurance has four
elements (asset, risk, risk pooling and an
insurance contract)

b) An asset may be anything that confers

some benefit and is of economic value to its

SUMMAR owner

c) A chance of loss represents risk

Y d) Condition or conditions that increase the

probability or severity of the loss are
referred to as hazards

e) The mathematical principle, that makes

insurance possible is known as principle of
risk pooling
 f) The elements of a valid contract include offer and
acceptance, consideration, legality, capacity of the parties
and the agreement between parties

g) Indemnity ensures that the insured is compensated to

the extent of his loss on the occurrence of the contingent
event

SUMMAR h) Subrogation means the transfer of all rights and

remedies, with respect to the subject matter of insurance,
from the insured to the insurer

Y i) The principle of contribution implies that if the same

property is insured with more than one insurance
company, the compensation paid by all the insurers
together cannot exceed the actual loss suffered

j) All insurance contracts are based on the principle of

Uberrima Fides
 Question 1
Moral hazard means:
QUESTIO Ans:

NS AND i. Dishonesty or character defects in an

individual
Honesty and values in an individual
ANSWERS ii.
iii.
iv.
Risk of religious beliefs
Hazard of the property to be insured
 Question 1
Moral hazard means:
QUESTIO Ans:

NS AND i. Dishonesty or character defects in

an individual
Honesty and values in an individual
ANSWERS ii.
iii.
iv.
Risk of religious beliefs
Hazard of the property to be insured
 Question 2
QUESTIO Risk indicates:

Ans:
NS AND i. Fear of unknown
ii. Chance of loss
iii. Disturbances at public place

ANSWERS iv. Hazard

 Question 2
QUESTIO Risk indicates:

Ans:
NS AND i. Fear of unknown
ii. Chance of loss
iii. Disturbances at public place
ANSWERS iv. Hazard
 Question 3

QUESTIO ______________ means spreading one’s

investment in different kinds of assets.
Ans:
NS AND i.
ii.
Pooling
Diversification

ANSWERS iii.
iv.
Gambling
Dynamic Risk
 Question 3

QUESTIO ______________ means spreading one’s

investment in different kinds of assets.
Ans:
NS AND i.
ii.
Pooling
Diversification

ANSWERS iii.
iv.
Gambling
Dynamic Risk
 Question 4
_____________ is not an example of an
QUESTIO asset.

Ans:
NS AND i.
ii.
iii.
House
Sunlight
Plant and machinery
ANSWERS iv. Motor car
 Question 4
_____________ is not an example of an
QUESTIO asset.

Ans:
NS AND i.
ii.
iii.
House
Sunlight
Plant and machinery
ANSWERS iv. Motor car
 Question 5
______________ is not an example of
QUESTIO risk.

Ans:
NS AND i. Damage to car due to accident
ii. Damage of cargo due to rain water
ANSWERS iii. Damage to car tyre due to wear and
tear
iv. Damage to property due to fire
 Question 5
______________ is not an example of
QUESTIO risk.

Ans:
NS AND i. Damage to car due to accident
ii. Damage of cargo due to rain water
ANSWERS iii. Damage to car tyre due to wear
and tear
iv. Damage to property due to fire
 Question 6
QUESTIO Earthquake is an example of:

Ans:
NS AND i.
ii.
Catastrophic risk
Dynamic risk
Marginal risk
ANSWERS iii.
iv. Speculative risk
 Question 6
QUESTIO Earthquake is an example of:

Ans:
NS AND i.
ii.
Catastrophic risk
Dynamic risk
Marginal risk
ANSWERS iii.
iv. Speculative risk
 Question 7
Select the most appropriate logical

QUESTIO equivalence for the statement.

Statement: Insurance cannot protect an
asset from loss or damage.

NS AND Ans:

ANSWERS i.
ii.
iii.
True
False
Partially true
iv. Not necessarily true
 Question 7
Select the most appropriate logical

QUESTIO equivalence for the statement.

Statement: Insurance cannot protect an
asset from loss or damage.

NS AND Ans:

ANSWERS i.
ii.
iii.
True
False
Partially true
iv. Not necessarily true
 Question 8
__________________ means transfer
of all rights and remedies, with
respect to the subject matter of
QUESTIO insurance, from insured to insurer.

Ans:
NS AND i.
ii.
Contribution
Subrogation
iii. Legal hazard
ANSWERS iv. Risk pooling
 Question 8
__________________ means transfer
of all rights and remedies, with
respect to the subject matter of
QUESTIO insurance, from insured to insurer.

Ans:
NS AND i.
ii.
Contribution
Subrogation
iii. Legal hazard
ANSWERS iv. Risk pooling
 Question 9
An example of a fact which need not be
QUESTIO disclosed unless asked for is
______________ by the insurer.

NS AND Ans:
i. Age of the insured

ANSWERS ii.
iii.
Presence of fire extinguisher
Heart ailment
iv. Other insurance details
 Question 9
An example of a fact which need not be
QUESTIO disclosed unless asked for is
______________ by the insurer.

NS AND Ans:
i. Age of the insured

ANSWERS ii.
iii.
Presence of fire extinguisher
Heart ailment
iv. Other insurance details
 Question 10
________________ is a wrong statement
QUESTIO made during negotiation of a contract.

Ans:
NS AND i.
ii.
Misrepresentation
Contribution
ANSWERS iii.
iv.
Offer
Representation
 Question 10
________________ is a wrong statement
QUESTIO made during negotiation of a contract.

Ans:
NS AND i.
ii.
Misrepresentation
Contribution
ANSWERS iii.
iv.
Offer
Representation
THANK
YOU
Grievance Redressal
Mechanism
Introduction
• Insurance industry is essentially a service industry
where, in the present context, customer
expectations are constantly rising and
dissatisfaction with the standard of services
rendered is ever present.

• Despite there being continuous product

innovation and significant improvement in the
level of customer service aided by use of modern
technology, the industry suffers badly in terms of
customer dissatisfaction and poor image.
Introduction
• Alive to this situation the Government and the regulator have taken a number of
initiatives. IRDAI‟s regulations stipulate the turnaround times (TAT) for various
services that an insurance company has to render the consumer.

• These are part of the IRDAI (Protection of Policyholders‟ Interests Regulations),

2017. Insurance companies are also required to have an effective grievance
redressal mechanism and IRDAI has created the guidelines for that too.
Integrated Grievance management
system
• Integrated Grievance Management System (IGMS) IRDAI has launched an Integrated
Grievance Management System (IGMS) which acts as a central repository of insurance
grievance data and as a tool for monitoring grievance redress in the industry. For any
grievance the complainant is required to first approach the respective insurer.

• If no response provided or resolution of grievance is not to the satisfaction of the

complainant, the complainant can approach the Regulator under the IGMS.
Policyholders can register on this system with their policy details and lodge their
complaints.

• Complaints are then forwarded to the respective insurance companies. Grievance

redressal mechanism IGMS tracks complaints and the time taken for their redressal.
2. The consumer protect act 1986
•This Act was passed “to provide for better protection
of the interest of consumers and to make provision for
the establishment of consumer councils and other
authorities for the settlement of consumer disputes”.

•The Act has been amended by the Consumer

Protection (Amendment) Act, 2002.
3. Definitions provided in the act
Some definitions provided in the Act are as follows:

1. “Service” means service of any description which is made available to potential

users and includes the provision of facilities in connection with banking, financing,
insurance, transport, processing, supply of electrical or other energy, board or
lodging or both, housing construction, entertainment, amusement or the purveying
of news or other information. But it does not include the rendering of any service
free of charge or under a contract of personal service.
Definitions continue…

2.Insurance is included as a service “Consumer” means any person who buys any goods
for a consideration and includes any user of such goods. But it does not include a
person who obtains such goods for resale or for any commercial purpose or Hires or
avails of any services for a consideration and includes beneficiary of such services.

3.“Defect” means any fault, imperfection, shortcoming inadequacy in the quality,

nature and manner of performance which is required to be maintained by or under any
law or has been undertaken to be performed by a person in pursuance of a contract or
otherwise in relation to any service.
Definitions continue…
4. “Complaint” means any allegation in writing made by a complainant that: an unfair
trade practice or restrictive trade practice has been adopted the goods bought by him
suffer from one or more defects the services hired or availed of by him suffer from
deficiency in any respect price charged is in excess of that fixed by law or displayed on
package goods which will be hazardous to life and safety when used are being offered
for sale to the public in contravention of the provisions of any law requiring trader to
display information in regard to the contents, manner and effect of use of such goods.

5. “Consumer dispute” means a dispute where the person against whom a complaint
has been made, denies and disputes the allegations contained in the complaint.
Consumer disputes redressal agencies
“Consumer disputes redressal agencies” are established in each district and state and at
national level.

i. District Forum The forum has jurisdiction to entertain complaints, where value of the
goods or services and the compensation claimed is up to Rs.20 lakhs. The District Forum
is empowered to send its order/decree for execution to appropriate civil court.

ii. State Commission This redressal authority has original, appellate and supervisory
jurisdiction. It entertains appeals from the District Forum. It also has original jurisdiction
to entertain complaints where the value of goods/service and compensation, if any
claimed exceeds Rs. 20 lakhs but does not exceed Rs. 100 lakhs.
iii. National Commission The final authority established under the Act is the National
Commission. It has original, appellate as well as supervisory jurisdiction.

● It can hear the appeals from the order passed by the State Commission and in its
original jurisdiction it will entertain disputes, where goods/services and the
compensation claimed exceeds Rs.100 lakhs. It has supervisory jurisdiction over
State Commission.

● All the three agencies have powers of a civil court.

Procedure for filing a complaint
• The procedure for filing a complaint is very simple in all above three redressal
agencies. There is no fee for filing a complaint or filing an appeal whether before
the State Commission or National Commission.
• The complaint can be filed by the complainant himself or by his authorised agent.
It can be filed personally or can even be sent by post.
• It may be noted that no advocate is necessary for the purpose of filing a complaint
 Consumer forum orders
If the forum is satisfied that the goods complained against suffer from any of the
defects specified in the complaint or that any of the allegations contained in the
complaint about the services are proved, the forum can issue an order directing the
opposite party to do one or more of the following namely,

i. To return to the complainant the price, (or premium in case of insurance), the
charges paid by the complainant
ii. To award such amount as compensation to the consumers for any loss or injury
suffered by the consumer due to negligence of the opposite party
iii. To remove the defects or deficiencies in the services in question
iv. To discontinue the unfair trade practice or the restrictive trade practice or not to
repeat them
v. To provide for adequate costs to parties
 The majority of consumer disputes with the three
forums fall in the following main categories as far
as insurance business are concerned
Nature of i. Delay in settlement of claims
ii. Non-settlement of claims
complaints iii. Repudiation of claims
iv. Quantum of loss
v. Policy terms, conditions etc.
The issuance of Ombudsman
The Central Government under the powers of the Insurance Regulatory & Development
Authority Act, 1999 made Insurance Ombudsman Rules 2017 by a notification published in the
official gazette on 25th April 2017.

These rules apply to all of insurers and their agents and intermediaries In respect of all
complaints of all personal lines of insurance, group insurance policies, policies issued to sole
proprietorship and micro enterprises. Personal lines that is, insurances taken in an individual
capacity.
The issuance of Ombudsman
The objective of these rules is to resolve all complaints of
all personal lines of insurance, group insurance policies,
policies issued to sole proprietorship and micro
enterprises on the part of insurance companies and their
agents and intermediaries in a cost effective, and
impartial manner.

The Ombudsman, by mutual agreement of the insured

and the insurer can act as a mediator and counsellor
within the terms of reference.
The decision of the Ombudsman, whether to accept or
reject the complaint, is final.
Complaint to Ombudsman
Any complaint made to the Ombudsman should be in writing, signed by the insured or his legal heirs,
nominee or assignee, addressed to an Ombudsman within whose jurisdiction, the insurer has a branch/
office, the facts giving rise to the complaint, supported by documents, the nature and extent of the loss
caused to the complainant and the relief sought. Complaints can be made to the Ombudsman if:

i. The complainant had made a previous written representation to the insurance company and the
insurance company had: Rejected the complaint or The complainant had not received any reply within one
month after receipt of the complaint by the insurer

ii. The complainant is not satisfied with the reply given by the insurer

iii. The complaint is made within one year from the date of rejection by the insurance company

iv. The complaint is not pending in any court or consumer forum or in arbitration
Recommendations
by the
Ombudsman
There are certain duties/protocols that the
Ombudsman is expected to follow:

i. Recommendations should be made within one

month of the receipt of such a complaint

ii. The copies should be sent to both the

complainant and the insurance company

iii. Recommendations have to be accepted in writing

by the complainant within 15 days of receipt of such
recommendation

iv. A copy of acceptance letter by the insured should

be sent to the insurer and his written confirmation
sought within 15 days of his receiving such
acceptance letter
Award
If the dispute is not settled by intermediation, the Ombudsman will pass an award to the insured which he
thinks is fair, and is not more than what is necessary to cover the loss of the insured.

The awards by Ombudsman are governed by the following rules:

i. The award should not be in excess of loss suffered as a direct consequence OR more than Rs.30 lakh
(including relevant expenses)
ii. The award should be made within a period of 3 months from the date of receipt of all requirements
from the complainant and a copy of the award to be sent to the complainant and insurer.
The complainant shall be entitled to such interest at a rate per annum as specified in the regulations
framed by the IRDAI Act 1999 from the date the claim ought to have been settled until date of payment of
awarded amount.
iii. The insurer shall comply with the award within 30 days of the receipt of the award and intimate
compliance of the same to the Ombudsman
iv. The award of the Ombudsman shall be binding on the insurer.
Awards by Ombudsdman
The awards by Ombudsman are governed by the following rules:

i. The award should not be in excess of loss suffered as a direct consequence OR more
than Rs. 30 lakh (including relevant expenses)

ii. The award should be made within a period of 3 months from the date of receipt of all
requirements from the complainant and a copy of the award to be sent to the
complainant and insurer. The complainant shall be entitled to such interest at a rate per
annum as specified in the regulations framed by the IRDAI Act 1999 from the date the
claim ought to have been settled until date of payment of awarded amount.
Summary
• IRDAI has launched an Integrated Grievance Management System (IGMS) which acts as a central
repository of insurance grievance data and as a tool for monitoring grievance redress in the industry.

• Consumer disputes redressal agencies are established in each district and state and at national level.

• As far as insurance business is concerned, the majority of consumer disputes fall in categories such
as delay in settlement of claims, non-settlement of claims, repudiation of claims, quantum of loss
and policy terms, conditions etc.

• The Ombudsman, by mutual agreement of the insured and the insurer can act as a mediator and
counsellor within the terms of reference.

• If the dispute is not settled by intermediation, the Ombudsman will pass award to the insured which
he thinks is fair, and is not more than what is necessary to cover the loss of the insured.
Questions and Answers
Question 1
Expand the term IGMS.

I. Insurance General Management System

II. Indian General Management System
III. Integrated Grievance Management System
IV. Intelligent Grievance Management System
Questions and Answers
Question 1
Expand the term IGMS.

I. Insurance General Management System

II. Indian General Management System
III. Integrated Grievance Management System
IV. Intelligent Grievance Management System
Question 2
Which of the below consumer grievance redressal
agencies would handle consumer disputes amounting
between Rs. 20 lakhs and Rs. 100 lakhs?

I. District Forum
II. State Commission
III. National Commission
IV. Zilla Parishad
Question 2
Which of the below consumer grievance redressal
agencies would handle consumer disputes amounting
between Rs. 20 lakhs and Rs. 100 lakhs?

I. District Forum
II. State Commission
III. National Commission
IV. Zilla Parishad
Question 3
Which among the following cannot form the basis for
a valid consumer complaint?

I. Shopkeeper charging a price above the MRP for a

product
II. Shopkeeper not advising the customer on the best
product in a category
III. Allergy warning not provided on a drug bottle
IV. Faulty products
Question 3
Which among the following cannot form the basis for
a valid consumer complaint?

I. Shopkeeper charging a price above the MRP for a

product
II. Shopkeeper not advising the customer on the best
product in a category
III. Allergy warning not provided on a drug bottle
IV. Faulty products
Question 4
Which of the below will be the most appropriate
option for a customer to lodge an insurance policy
related complaint?

I. Police
II. Supreme Court
III. Insurance Ombudsman
IV. District Court
Question 4
Which of the below will be the most appropriate
option for a customer to lodge an insurance policy
related complaint?

I. Police
II. Supreme Court
III. Insurance Ombudsman
IV. District Court
Question 5
Which of the below statement is correct with regards
to the territorial jurisdiction of the Insurance
Ombudsman?

I. Insurance Ombudsman has National jurisdiction

II. Insurance Ombudsman has State jurisdiction
III. Insurance Ombudsman has District jurisdiction
IV. Insurance Ombudsman operates only within the
specified territorial limits
Question 5
Which of the below statement is correct with regards
to the territorial jurisdiction of the Insurance
Ombudsman?

I. Insurance Ombudsman has National jurisdiction

II. Insurance Ombudsman has State jurisdiction
III. Insurance Ombudsman has District jurisdiction
IV. Insurance Ombudsman operates only within the
specified territorial limits
Question 6
How is the complaint to be launched with an insurance
ombudsman?

I. The complaint is to be made in writing

II. The complaint is to be made orally over the phone
III. The complaint is to be made orally in a face to face
manner
IV. The complaint is to be made through newspaper
advertisement
Question 6
How is the complaint to be launched with an insurance
ombudsman?

I. The complaint is to be made in writing

II. The complaint is to be made orally over the phone
III. The complaint is to be made orally in a face to face
manner
IV. The complaint is to be made through newspaper
advertisement
Question 7
What is the time limit for approaching an Insurance
Ombudsman?

I. Within two years of rejection of the complaint by the

insurer
II. Within three years of rejection of the complaint by
the insurer
III. Within one year of rejection of the complaint by the
insurer
IV. Within one month of rejection of the complaint by
the insurer
Question 7
What is the time limit for approaching an Insurance
Ombudsman?

I. Within two years of rejection of the complaint by the

insurer
II. Within three years of rejection of the complaint by
the insurer
III. Within one year of rejection of the complaint by
the insurer
IV. Within one month of rejection of the complaint by
the insurer
Question 8
Which among the following is not a prerequisite for
launching a complaint with the Ombudsman?

I. The complaint must be by an individual on a

“Personal Lines‟ insurance
II. The complaint must be lodged within 1 year of the
insurer rejecting the complaint
III. Complainant has to approach a consumer forum
prior to the Ombudsman
IV. The total relief sought must be within an amount of
Rs.20 lakhs.
Question 8
Which among the following is not a prerequisite for
launching a complaint with the Ombudsman?

I. The complaint must be by an individual on a

“Personal Lines‟ insurance
II. The complaint must be lodged within 1 year of the
insurer rejecting the complaint
III. Complainant has to approach a consumer forum
prior to the Ombudsman
IV. The total relief sought must be within an amount of
Rs.20 lakhs.
Question 9
Are there any fee/charges that need to be paid for
lodging the complaint with the Ombudsman?

I. A fee of Rs 100 needs to be paid

II. No fee or charges need to be paid
III. 20% of the relief sought must be paid as fee
IV. 10% of the relief sought must be paid as fee
Question 9
Are there any fee/charges that need to be paid for
lodging the complaint with the Ombudsman?

I. A fee of Rs 100 needs to be paid

II. No fee or charges need to be paid
III. 20% of the relief sought must be paid as fee
IV. 10% of the relief sought must be paid as fee
Question 10
Can a complaint be launched against a private
insurer?

I. Complaints can be launched against public insurers

only
II. Yes, complaint can be launched against private
insurers
III. Complaint can be launched against private insurers
only in the Life Sector
IV. Complaint can be launched against private insurers
only in the Non-Life Sector
Question 10
Can a complaint be launched against a private
insurer?

I. Complaints can be launched against public insurers

only
II. Yes, complaint can be launched against private
insurers
III. Complaint can be launched against private insurers
only in the Life Sector
IV. Complaint can be launched against private insurers
only in the Non-Life Sector
THANK
YOU
LEGAL PRINCIPLES OF
AN INSURANCE
CONTRACT
INTRODUCTION

In this chapter, we discuss the elements that govern the

working of an insurance contract. The chapter also deals
with the special features of an insurance contract.
ELEMENTS OF VALID CONTRACT
INSURANCE CONTRACTS LEGAL ASPECTS
a) The insurance contract Insurance involves a contractual agreement in which the insurer
agrees to provide financial protection against certain specified risks for a price or consideration
known as the premium. The contractual agreement takes the form of an insurance policy.

b) Legal aspects of an insurance contract We will now look at some features of an insurance
contract and then consider the legal principles that govern insurance contracts in general.
 i. Offer and acceptance

• When one person signifies to another his

willingness to do or to abstain from doing anything
ELEMENTS with a view to obtaining the assent of the other to
such act, he is said to make an offer or proposal.
OF VALID • Usually, the offer is made by the proposer, and
CONTRACT acceptance made by the insurer. When a person to
whom the offer is made signifies his assent thereto,
this is deemed to be an acceptance. Hence, when a
proposal is accepted, it becomes a promise.
• The acceptance needs to be communicated to
the proposer which results in the formation of a
contract.
• When a proposer accepts the terms of the
insurance plan and signifies his assent by paying
the deposit amount, which, on acceptance of the
proposal, gets converted to the first premium, the
proposal becomes a policy.
• If any condition is put, it becomes a counter
offer. The policy bond becomes the evidence of
the contract.
ii. Consideration

- This means that the contract must contain some mutual benefit for the parties. The
premium is the consideration from the insured, and the promise to indemnify, is the
consideration from the insurers.

iii. Agreement between the parties

- Both the parties should agree to the same thing in the same sense. In other words, there
should be “consensus ad-idem” between both parties. Both the insurance company and
the policyholder must agree on the same thing in the same sense.
iv. Free consent

● There should be free consent while entering into a contract. Consent is said to be
free when it is not caused by Coercion Undue influence Fraud Misrepresentation
Mistake When consent to an agreement is caused by coercion, fraud or
misrepresentation, the agreement is voidable.

v. Capacity of the parties

● Both the parties to the contract must be legally competent to enter into the contract.
The policyholder must have attained the age of majority at the time of signing the
proposal and should be of sound mind and not disqualified under law. For example,
minors cannot enter into insurance contracts.
 vi. Legality

● The object of the contract must be legal, for example, no insurance can be had for
illegal acts. Every agreement of which the object or consideration is unlawful is void.
The object of an insurance contract is a lawful object.
 i. Coercion - Involves pressure applied through criminal
means

ii. Undue influence - When a person who is able to

dominate the will of another, uses her position to obtain an
undue advantage over the other

iii. Fraud - When a person induces another to act on a false

IMPORTANT belief that is caused by a representation he or she does not
believe to be true. It can arise either from deliberate
TERMS concealment of facts or through misrepresenting them

iv. Mistake - Error in one‟s knowledge or belief or

interpretation of a thing or event. This can lead to an error in
understanding and agreement about the subject matter of
contract
INSURANCE CONTRACTS - SPECIAL FEATURES

Uberrima Fides or Utmost Good Faith

- This is one of the fundamental principles of an insurance contract. Also called uberrima fides, it
means that every party to the contract must disclose all material facts relating to the subject matter
of insurance.

- A distinction may be made between Good Faith and Utmost Good Faith. All commercial contracts
in general require that good faith shall be observed in their transaction and there shall be no fraud
or deceit when giving information. Apart from this legal duty to observe good faith, the seller is not
bound to disclose any information about the subject matter of the contract to the buyer. The rule
observed here is that of - Caveat Emptorǁ which means Buyer Beware.
- The parties to the contract are expected to examine the subject matter of the
contract and so long as one party does not mislead the other and the answers
are given truthfully, there is no question of the other party avoiding the contract

- Insurance contracts stand on a different footing. Firstly, the subject matter of the
contract is intangible and cannot be easily known through direct observation or
experience by the insurer. Again there are many facts, which by their very nature,
may be known only to the proposer.The insurer has to often rely entirely on the
latter for information.

- Hence the proposer has a legal duty to disclose all material information about
the subject matter of insurance to the insurers who do not have this information.
EXAMPLE

David made a proposal for an insurance policy. At the time of applying for the policy,
David was suffering from and under treatment for Diabetes. But David did not disclose
this fact to the insurance company. David was in his thirties, so the insurance company
issued the policy without asking David to undergo a medical test. Few years down the
line, David‟s health deteriorated and he had to be hospitalised. David could not recover
and died in the next few days. A claim was raised on the insurance company.
EXAMPLE CONTINUE …

To the surprise of David‟s nominee, the insurance company rejected the claim. In its investigation,
the insurance company found out that David was already suffering from diabetes at the time of
applying for the policy and this fact was deliberately hidden by David. Hence the insurance
contract was declared null and void and the claim was rejected.

Material information is that information which enables the insurers to decide: Whether they will
accept the risk? If so, at what rate of premium and subject to what terms and conditions? This
legal duty of utmost good faith arises under common law. The duty applies not only to material
facts which the proposer knows, but also extends to material facts which he ought to know.
MATERIAL FACTS

Material fact has been defined as a fact that would affect the judgment of an insurance
underwriter in deciding whether to accept the risk and if so, the rate of premium and the
terms and conditions.

Whether an undisclosed fact was material or not would depend on the circumstances of the
individual case and could be decided ultimately only in a court of law. The insured has to
disclose facts that affect the risk.
Let us take a look at some of the types of material facts in insurance that one needs
to disclose:

I. Facts indicating that the particular risk represents a greater exposure than normal.
II. Hazardous nature of cargo being carried at sea, past history of illness
III. Existence of past policies taken from all insurers and their present status
IV. All questions in the proposal form or application for insurance are considered to be
material, as these relate to various aspects of the subject matter of insurance and its
exposure to risk. They need to be answered truthfully and be full in all respects. The
following are some scenarios wherein material facts need not be disclosed.
The following are some scenarios wherein material facts need not be disclosed
It is also held that unless there is a specific enquiry by underwriters, the proposer has no
obligation to disclose the following facts:

i. Measures implemented to reduce the risk.

Example: The presence of a fire extinguisher

ii. Facts which the insured does not know or is unaware of

Example: An individual, who suffers from high blood pressure but was unaware about the
same at the time of taking the policy, cannot be charged with non-disclosure of this fact.
iii. Which could be discovered, by reasonable diligence? It is not necessary to disclose
every minute material fact. The underwriters must be conscious enough to ask for the
same if they require further information.

iv. Matters of law Everybody is supposed to know the law of the land. Example: Municipal
laws about storing of explosives

v. About which insurer appears to be indifferent (or has waived the need for further
information) The insurer cannot
Material Facts that need not be disclosed

It is also held that unless there is a specific enquiry by underwriters, the proposer has no obligation
to disclose the following facts:

i. Measures implemented to reduce the risk.

Example: The presence of a fire extinguisher

ii. Facts which the insured does not know or is unaware of Example: An individual, who suffers from
high blood pressure but was unaware about the same at the time of taking the policy, cannot be
charged with non-disclosure of this fact.
iii. Which could be discovered, by reasonable diligence? It is not necessary to disclose every minute
material fact. The underwriters must be conscious enough to ask for the same if they require further
information.

iv. Matters of law Everybody is supposed to know the law of the land. Example: Municipal laws about
storing of explosives

v. About which insurer appears to be indifferent (or has waived the need for further information)
The insurer cannot later disclaim responsibility on grounds that the answers were incomplete
BREACH OF UTMOST GOOD OF FAITH

Breach of Utmost Good Faith We shall now consider situations which would involve a Breach of
Utmost Good Faith. Such breach can arise either through Non-Disclosure or Misrepresentation.

Non-Disclosure: may arise when the insured is silent in general about material facts because
the insurer has not raised any specific enquiry. It may also arise through evasive answers to
queries raised by the insurer. Often disclosure may be inadvertent (meaning it may be made
without one‟s knowledge or intention) or because the proposer thought that a fact was not
material. In such a case it is innocent. When a fact is intentionally suppressed it is treated as
concealment. In the latter case there is intent to deceive.
Misrepresentation: Any statement made during negotiation of a contract of insurance
is called representation. A representation may be a definite statement of fact or a
statement of belief, intention or expectation. With regard to a fact it is expected that the
statement must be substantially correct. When it comes to Representations that concern
matters of belief or expectation, it is held that these must be made in good faith.

Misrepresentation is of two kinds:

i. Innocent Misrepresentation relates to inaccurate statements, which are made

without any fraudulent intention.
ii. Fraudulent Misrepresentation on the other hand refers to false statements that are
made with deliberate intent to deceive the insurer or are made recklessly without due
regard for truth.

An insurance contract generally becomes void when there is a clear case of

concealment with intent to deceive, or when there is fraudulent misrepresentation.
 •A policy of insurance may be called in question at any
time within three years from the date of issuance of the
policy or the date of commencement of risk or the date
of revival, of the policy or the date of the rider to the
policy, whichever is later, on the ground of fraud:
FRAUD
•The insurer shall have to communicate in writing to the
insured or the legal representatives or nominees or
assignees of the insured the grounds and materials on
which such decision is based.
The term “Fraud” has been defined and specified as follows:

The expression "fraud" means any of the following acts committed by the insured or by his
agent, with the intent to deceive the insurer or to induce the insurer to issue a insurance
policy:

(a)the suggestion, as a fact of that which is not true and which the insured does not believe
to be true;

(b) the active concealment of a fact by the insured having knowledge or belief of the fact

(c) any other act fitted to deceive; and

(d) any such act or omission as the law specially declares to be fraudulent.
- Mere silence as to facts likely to affect the assessment of the risk by the insurer is not
fraud, unless the circumstances of the case are such that regard being had to them, it is
the duty of the insured or his agent, keeping silence to speak, or unless his silence is, in
itself, equivalent to speak.

- No insurer shall repudiate a insurance policy on the ground of fraud if the insured can
prove that the mis-statement of or suppression of a material fact was true to the best of
his knowledge and belief or that there was no deliberate intention to suppress the fact or
that such mis-statement of or suppression of a material fact are within the knowledge of
the insurer:

- It is also provided that in case of fraud, the onus of disproving lies upon the
beneficiaries, in case the policyholder is not alive. A person who solicits and negotiates a
contract of insurance shall be deemed for the purpose of the formation of the contract, to
be the agent of the insurer
INSURABLE INTEREST
The existence of insurable interest‟ is an essential ingredient of every insurance
contract and is considered as the legal prerequisite for insurance. Let us see how
insurance differs from a gambling or wager agreement.

i. Gambling and insurance

Consider a game of cards, where one either loses or wins. The loss or gain
happens only because the person enters the bet. The person who plays the
game has no further interest or relationship with the game other than that he
might win the game.
Betting or, wagering is not legally enforceable in a court of law and thus any contract in pursuance of
it will be held to be illegal. In case someone pledges his house if he happens to lose a game of cards,
the other party cannot approach the court to ensure its fulfillment. Now consider a house and the
event of it burning down.

The individual who insures his house has a legal relationship with the subject matter of insurance –
the house. He owns it and is likely to suffer financially, if it is destroyed or damaged. This relationship
of ownership exists independent of whether the fire happens or does not happen, and it is the
relationship that leads to the loss.

The event (fire or theft) will lead to a loss regardless of whether one takes insurance or not. Unlike a
card game, where one could win or lose, a fire can have only one consequence – loss to the owner of
the house. The owner takes insurance to ensure that the loss suffered is compensated for in some
way. The interest that the insured has in his house or his money is termed as insurable interest. The
presence of insurable interest makes an insurance contract valid and enforceable under the law.
PROXIMATE CLAUSE
The last of the legal principles is the principle of proximate cause.

Proximate cause is a key principle of insurance and is concerned with how the loss or
damage actually occurred and whether it is indeed as a result of an insured peril. If the loss
has been caused by the insured peril, the insurer is liable. If the immediate cause is an
insured peril, the insurer is bound to make good the loss, otherwise not.

Under this rule, the insurer looks for the predominant cause which sets into motion the chain
of events producing the loss. This may not necessarily be the last event that immediately
preceded the loss i.e. it is not necessarily an event which is closest to, or immediately
responsible for causing the loss. Other causes may be classified as remote causes, which are
separate from proximate causes. Remote causes may be present but are not effectual in
causing an event.
INDEMNITY

- The principle of indemnity is applicable to Non-life insurance policies. It means

that the policyholder, who suffers a loss, is compensated so as to put him or her
in the same financial position as he or she was before the occurrence of the loss
event. The insurance contract (evidenced through insurance policy) guarantees
that the insured would be indemnified or compensated up to the amount of loss
and no more.

- The philosophy is that one should not make a profit through insuring one‟s assets
and recovering more than the loss. The insurer would assess the economic value
of the loss suffered and compensate accordingly.
- In most types of non-life insurance policies,
which deal with insurance of property and
liability, the insured is compensated to the
extent of actual amount of loss i.e. the
amount of money needed to replace lost or
damaged property at current market prices
less depreciation.
- Indemnity might take one or more of the
following modes of settlement: Cash
payment Repair of a damaged item
Replacement of the lost or damaged item
Restoration, (Reinstatement) for example,
rebuilding a house destroyed by fire.
EXAMPLE

- Ram has insured his house, worth Rs.10 lakhs, for the full amount. He suffers loss on
account of fire estimated at Rs. 70000. The insurance company would pay him an amount of
Rs. 70000. The insured can claim no further amount.

- Consider a situation now where the property has not been insured for its full value. One
would then be entitled to indemnity for loss only in the same proportion as one‟s insurance.
Suppose the house, worth Rs. 10 lakhs has only been insured for a sum of Rs. 5 lakhs. If the
loss on account of fire is Rs. 60000, one cannot claim this entire amount. It is deemed that
the house owner has insured only to the tune of half its value and he is thus entitled to claim
just 50% [Rs. 30000] of the amount of loss. This is also known as underinsurance. The
measurement of indemnity to be paid would depend on the type of insurance one takes.
SUBROGATION
Subrogation follows from the principle of indemnity. Subrogation means the transfer of
all rights and remedies, with respect to the subject matter of insurance, from the insured
to the insurer. It means that if the insured has suffered from loss of property caused due
to negligence of a third party and has been paid indemnity by the insurer for that loss,
the right to collect damages from the negligent party would lie with the insurer. Note that
the amount of damage that can be collected is only to the extent of amount paid by the
insurance company.

Subrogation: It is the process an insurance company uses to recover claim amounts

paid to a policy holder from a negligent third party. Subrogation can also be defined as
surrender of rights by the insured to an insurance company that has paid a claim
against the third party.
EXAMPLE

Mr. Kishore’s household goods were being carried in Sylvain Transport service. They got damaged
due to driver’s negligence, to the extent of Rs. 45,000 and the insurer paid an amount of Rs 30,000
to Mr. Kishore. The insurer stands subrogated to the extent of only Rs. 30,000 and can collect that
amount from Sylvain Transports. Suppose, the claim amount is for Rs. 45,000/, insured is
indemnified by the insurer for Rs. 40,000, and the insurer is able to recover under subrogation Rs
45,000/ from Sylvain Transports, then the balance amount of Rs. 5,000 will have to be given to the
insured.

This prevents the insured from collecting twice for the loss - once from the insurance company and
then again from the third party. Subrogation arises only in case of contracts of indemnity.
SUMMARY
Insurance involves a contractual agreement in which the insurer agrees to provide financial
protection against specified risks for a price or consideration known as the premium. A contract
is an agreement between parties, enforceable at law.
The elements of a valid contract include:

i. Offer and acceptance

ii. Consideration,
iii. Consensus ad-idem,
iv. Free consent v. Capacity of the parties and
vi. Legality of the object The special features of insurance contracts include:
● Uberrima fides,
● Insurable interest,
● Proximate cause
QUESTIONS AND ANSWERS
Question 1
Which element of a valid contract deals with premium?

Ans:
I. Offer and acceptance
II. Consideration
III. Free consent
IV. Capacity of parties to contract
QUESTIONS AND ANSWERS
Question 1
Which element of a valid contract deals with premium?

Ans:
I. Offer and acceptance
II. Consideration
III. Free consent
IV. Capacity of parties to contract
Question 2
_____________ relates to inaccurate statements, which are made without any fraudulent
intention.

Ans:
I. Innocent Misrepresentation
II. Contribution
III. Offer
IV. Representation
Question 2
_____________ relates to inaccurate statements, which are made without any fraudulent
intention.

Ans:
I. Innocent Misrepresentation
II. Contribution
III. Offer
IV. Representation
Question 3
________________ involves pressure applied through criminal means.

Ans:
I. Fraud
II. Undue influence
III. Coercion
IV. Mistake
Question 3
________________ involves pressure applied through criminal means.

Ans:
I. Fraud
II. Undue influence
III. Coercion
IV. Mistake
Question 4
Which among the following is true regarding life insurance contracts?

Ans:
I. They are verbal contracts not legally enforceable
II. They are verbal which are legally enforceable
III.They are contracts between two parties (insurer and insured) as per requirements of
Indian Contract Act, 1872
IV. They are similar to wager contracts
Question 4
Which among the following is true regarding life insurance contracts?

Ans:
I. They are verbal contracts not legally enforceable
II. They are verbal which are legally enforceable
III.They are contracts between two parties (insurer and insured) as per
requirements of Indian Contract Act, 1872
IV. They are similar to wager contracts
Question 5
Which of the below is not a valid consideration for a contract?

Ans:
I. Money
II. Property
III. Bribe
IV. Jewellery
Question 5
Which of the below is not a valid consideration for a contract?

Ans:
I. Money
II. Property
III. Bribe
IV. Jewellery
Question 6
Which of the below party is not eligible to enter into a life insurance contract?

Ans:
I. Business owner
II. Minor
III. House wife
IV. Government employee
Question 6
Which of the below party is not eligible to enter into a life insurance contract?

Ans:
I. Business owner
II. Minor
III. House wife
IV. Government employee
Question 7
Which of the below action showcases the principle of “Uberrima Fides”?

Ans:
I. Lying about known medical conditions on an insurance proposal form
II. Not revealing known material facts on an insurance proposal form
III. Disclosing known material facts on an insurance proposal form
IV. Paying premium on time
Question 7
Which of the below action showcases the principle of “Uberrima Fides”?

Ans:
I. Lying about known medical conditions on an insurance proposal form
II. Not revealing known material facts on an insurance proposal form
III. Disclosing known material facts on an insurance proposal form
IV. Paying premium on time
Question 8
Which of the below is not correct with regards to insurable interest?

Ans:
I. Father taking out insurance policy on his son
II. Spouses taking out insurance on one another I
III. Friends taking out insurance on one another
IV. Employer taking out insurance on employees
Question 8
Which of the below is not correct with regards to insurable interest?

Ans:
I. Father taking out insurance policy on his son
II. Spouses taking out insurance on one another I
II. Friends taking out insurance on one another
IV. Employer taking out insurance on employees
Question 10
Find out the proximate cause for death in the following scenario? Ajay falls off a horse and
breaks his back. He lies there in a pool of water and contracts pneumonia. He is admitted to
the hospital and dies because of pneumonia.

Ans:
I. Pneumonia
II. Broken back
III. Falling off a horse
IV. Surgery
Question 10
Find out the proximate cause for death in the following scenario? Ajay falls off a horse and
breaks his back. He lies there in a pool of water and contracts pneumonia. He is admitted to
the hospital and dies because of pneumonia.

Ans:
I. Pneumonia
II. Broken back
III. Falling off a horse
IV. Surgery
THANK YOU
 Module 4:
Point of Sale: General Insurance
products including Health
Insurance
Introduction
• General insurance penetration and density in India is
dismally low. Hence. The IRDAI is putting all efforts to
increase the sale of general insurance policies especially
in the rural areas by introducing innovative distribution
channels such as Point of Sales Person (POS) for life
and general insurance business.

POS - General Insurance including

Stand-Alone Health lnsurance IRDAI
Guidelines
• As per IRDAI’s Guidelines on Point of Sales Person -
Non-Life & Health Insurers, issued on 26th October,
2015, the Authority observed that there are number of
persons who are involved in undertaking simple and
routine activities pertaining to solicitation and marketing
of insurance policies.
Scope and applicability of POS Guidelines
As per the guidelines issued by IRDAI, there shall be
two types of persons who shall solicit and market
insurance policies namely:

a. Insurance agent or specified persons of corporate

agent or broker trained persons for soliciting and
marketing insurance policies or Insurance Sales
Persons of Insurance Marketing Firm or rural
authorised persons of CSC-SPV or authorised
person of web aggregators who can solicit and
market all types of insurance policies.

b. Point of Sales Person” who can solicit and market

only certain pre-underwritten products approved by
the Authority.
 Eligibility of POS persons
i. Every “Point of Sales Person” shall be identified by
his Aadhaar Card Number or his PAN Card.
ii. The persons soliciting and marketing such
pre-underwritten products approved by the Authority
shall be called as “Point of Sales Person”.
iii. The “Point of Sales Person” shall be at least 10th
pass.
iv. Conduct an in-house training of fifteen (15) hours for
the candidate
v. Conduct an examination after successful completion
of the training
vi. Issue certificate to the candidate who pass the
examination
vii. Engage the successful candidate in the examination
as POSP by entering into an agreement with POSP
for the sale of General insurance and issuing an
Appointment letter with appropriate terms and
condition within 15 days form passing the
examination
viii. Allot a POS code to the POSP and place the same
in the Appointment Letters issued to POSP
 Products solicited and marketed by Point of sales person
The “Point of Sales Person” can sell only the following
pre-underwritten product.
i. Motor Comprehensive Insurance Package Policy for
Two-wheeler, private car and commercial vehicles.
ii. Third party liability (Act only) Policy for
Two-wheeler, private car and commercial vehicles.
iii. Personal Accident Policy
iv. Travel Insurance Policy
v. Home Insurance Policy
vi. Any other Policy specifically approved by the
Authority

Every policy sold through the “Point of Sales Person”

shall be separately identified and pre-fixed by the name
“POS – (name of product)”. The insurance company
shall file the product with the Authority under the file use
guidelines for information.
 Tagging of Proposal form and Insurance policy to Point of
Sales person
i. 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.
ii. 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.
iii. 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.
iv. 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.
v. 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
• 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”.
• 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.
• 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
Person” on a monthly basis

Latest IRDAI Guidelines for POSP, 2018

• IRDAI has revised the guidelines for POS recently as
per its circular Ref. No: IRDAI /INT/CIR/PSP/159
/09/2018, dated 25th September, 2018, with regards
to POS the following rules have been enforced.
1. Removal of the prefix ‘POS’ from POS product name
• Firstly, on receiving representation from insurance companies requesting to do away with the prefix
“POS” in the product name as per the provisions contained in No. IRDA /Int /GSL /ORD /183
/10/2015 dt. 26.10.2015 for General & Health insurance and point No.2 (ii) of IRDA Circular
No.IRDA/LIFE/GSL/GSL/222/11/2016 dt.07.11.2016 for life insurance – which stated that every
policy sold through the “Point of Sales Persons”, shall be separately identified and pre-fixed by the
name “POS- (name of the Product)”.
• The above requirement was to identify the person involved in the sales process. Secondly, the
IRDAI (Protection of Policyholder’s Interest) Regulations, 2017, under the matters to be stated in
life, general and health insurance policy, makes it mandatory to give the details of the person
involved in the sales process.
• By virtue of this requirement, the need to have the prefix “POS” becomes redundant as the
insurance policy itself will carry the details of the person selling such a policy. In the light of the
above, the Authority, hereby, discontinues requirements of using the word “POS” prefixed before
the POS product name for Life, General and Health products.
2. Allowing all Micro Insurance products in life, general and health
insurance be distributed through the POS
• The IRDAI, observed that advantages such as higher insurance penetration, lower prices,
increased choice to customers, etc. which would otherwise accrue to the policyholder by 39
making micro-insurance products available through POS channel is being lost.
• Therefore, the Authority after reviewing the position, hereby allows all Micro Insurance
products of Life, General and Health insurance to be distributed through the POS also.

3. Manner of dealing with cases of Health/PA policies where Sum

Insured crosses the limit specified under the POS guidelines

• The Authority after reviewing the position, hereby allows all Micro Insurance products of
Life, General and Health insurance to be distributed through the POS also
4. Revised Guidelines for POS- General
Insurance, 2017
• Attention is drawn to IRDA circular no IRDA/ Life/ ORD/ GLD/ 223/
2017 dated 7thFebruary, 2017 on the modification to Guidelines on
Point of Salesperson – Life Insurance wherein based on the feedback
of insurers and taking into account the practical ease for insurer/
intermediaries, the condition of training from and passing of NIELIT
examination is being dispensed with. Similar requests have been
received from the non-life insurers.
• Given that the products allowed under the Non-Life and Health
Insurance are largely preunderwritten based on the information
provided by the prospect and the insurance policy is automatically
generated by the system it would be in order to bring parity with the
approach followed in case of life insurance.
In light of the above, the following modifications are undertaken to
Guidelines on Point of Sales Person – Non-Life and Health dated 26th
October, 2015:

The General insurer including stand-alone health insurer or insurance

intermediary proposing to engage the POS person shall:

i. Ensure that the applicant is not engaged with any other insurer or
insurance intermediary by cross-checking with the database housed in
Insurance Information Bureau (IIB), Hyderabad.
ii. Conduct an in-house training of fifteen (15) hours for the candidate
iii. Conduct an examination after successful completion of the training
iv. Issue a certificate to the candidate who has passed the examination
in the format attached to the circular.
v. Engage the successful candidate as POS person by entering into a
written agreement, specifying the terms and conditions.
vi. Upload the details in the IIB date-base at the end of the day. 40
vii. Maintain a proper record of training and examination for at least five
(5) years from the end of financial year in which these are conducted
which shall be made available to the inspecting official of the Authority
during on-site inspection.
5. IRDAI Guidelines Point of Salespersons (PoSP) – Distribution of
Add-ons – maintenance of records – submission of Returns,
IRDAI/INT/CIR/PSP/130/06/2017
1. Permission for Add-On Covers The Authority has received
requests from some of the insurers to allow Add-ons to be
sold through Point of Sale (POS). Upon examination of the
same it has been decided to allow Add-ons to be marketed
through PoS, subject to the overall sum insured limit of the
base product.
2. Maintenance of Records In accordance with point No.VII (3)
of Guidelines on Point of Sales Person (POS) No.
IRDA/Int/GDL/ORD/183/10/2015 dated 26th October 2015,
the insurance companies and insurance intermediaries are
advised to keep with them the record of the particulars of
the PoS and the business procured by them, as per format
given at Annexure I.
3. Submission of Returns In accordance with point No. VII (3)
of Guidelines on Point of Sales Person (POS) No.
IRDA/Int/GDL/ORD/183/10/2015 dated 26th October 2015,
insurance companies and insurance intermediaries are
advised to file with the Authority the following:
 Details of PoS as per format given at Annexure II.
 Details of products sold by PoS, as per format given at Annexure III.
 POS – Categories and Salient features of POS Products

• “General insurance is for the person and property”. In other words, it

means, that any general insurance policy provides indemnity to the
owner for any loss or damage to the property.
• Another point to note is that any asset is inherently exposed to loss.
This loss may be caused due to natural calamities, or any man
made perils. This is the reason why general insurance policies are
called as indemnity policies.
• General Insurance variety of products are available – broadly
grouped as under:
• Fire insurance
• Marine Insurance
• Motor Insurance
• Personal Accident Insurance
• Health Insurance
• Liability Insurance
• Miscellaneous Insurance
• Rural Insurance
• Health insurance sold by Standalone Health Insurance
companies which deals exclusively health insurance –both
domestic and overseas medical insurance.

As discussed earlier, the IRDA has preferred certain types of

insurance products which can be marked by POS persons.
The reason being bulk of products in motor insurance, travel
insurance, personal accident insurance, etc. require very little
underwriting.
These happen to be largely preunderwritten products wherein
based on the information provided by the prospect, the
insurance policy is automatically generated by the system.
These include:
• Motor Comprehensive Insurance Package Policy for
Two-wheeler, private car and commercial vehicles.
• Third party liability (Act only) Policy for Two-wheeler,
private car and commercial vehicles.
• Personal Accident Policy
• Travel Insurance Policy
• Home Insurance Policy
• Health Insurance
• Agriculture pump sets
• Pradhanmantri Suraksha Bima Yojana – subject to the
terms conditions and benefits decided by Government.

Crop insurance comprising: - Pradhan Mantri Fasal Bima

Yojana (PMFBY), - Weather Based Crop lnsurance
Scheme (WBCIS) and - Coconut Palm lnsurance Scheme
(CPIS)
Motor Package Policy
• A Motor insurance policy provides cover to a motorized
vehicle against any loss or damage to the vehicle.
• In India, Motor insurance is mandated as it is a
requirement under the Motor Vehicles Act, 1988.
• Motor insurance gives protection to the vehicle owner
against i. damages to his/her vehicle and ii. pays for
any Third Party Liability determined as per law against
the owner of the vehicle.
• Third Party Insurance is a statutory requirement. The
owner of the vehicle is legally liable for any injury or
damage to third party life or property caused by or
arising out of the use of the vehicle in a public place.
• Driving a motor vehicle without insurance in a public
place is a punishable offence in terms of the Motor
Vehicles Act, 1988.
Types of Motor Insurance

Broadly there are two types of insurances policies

that offer motor insurance cover:
• Liability Only Policy (Statutory requirement)
• Package Policy (Liability Only Policy + Damage to
owner’s Vehicle usually called O.D Cover

It is important to note that if only a Liability Only Policy is

taken, damage to the vehicle will not be covered. Hence,
it would be prudent to take a Package Policy which
would give a wider cover, including cover for the vehicle.
Coverage under Motor Insurance
The damages to the vehicle due to the following perils are
usually covered under OD section of the Motor Insurance
policy:
a. Fire, Explosion, Self- Ignition, Lightning
b. Burglary/Housebreaking / Theft
c. Riot & Strike
d. Earthquake
e. Flood, Storm, Cyclone, Hurricane, tempest,
inundation, hailstorm, frost
f. Accidental external means
g. Malicious Act
h. Terrorism acts
i. While in Transit by Rail/ Road, Inland waterways, Lift,
Elevator or Air
j. Land slide /Rock slide
Exclusions
The following contingencies are usually excluded under
the Motor Insurance Policy:
• Not having a valid Driving License
• Under Influence of intoxicating liquor/ drugs
• Accident taking place beyond Geographical limit
• While Vehicle is used for unlawful purposes
• Electrical/Mechanical Breakdowns.

Basis of Sum Insured

1. For Own Damage: The Sum Insured under a Motor
Insurance policy reflects the value of the motor vehicle
determined based on the concept known as Insured's
Declared Value. Insured's Declared Value is the value
arrived at based on the Manufacturer's present value
and depreciation based on the Age of the Vehicle.
2. For Third Party: Coverage is as per requirements of the
Motor Vehicles Act, 1988. Compulsory Personal accident
cover for owner-driver is also included. Policy can also be
extended to cover various other risks like Personal
Accident to occupants of vehicle, Workmen's
Compensation to Driver, etc over and above the cover
available to him under statute.

Classification of motor vehicles

Motor vehicles are classified into three broad categories:
a. Private Cars: used for social domestic and pleasure
purposes
b. Motor Cycles and motor scooters used for social domestic
and pleasure purposes
c. Commercial vehicles - All Goods carrying vehicles,
Passenger carrying vehicles: (Motorized
rickshaws/Taxis/Buses)
Premium Rating
Premium rating or pricing is a very scientific exercise based
on the probability of occurrence f loss. Generally, the
Premium rating depends on the following factors:
Private cars:
1. Insured Declared Value (IDV) I.E. SUM INSURED
2. Cubic Capacity of the vehicle (cc)
3. Geographical Zones (Hyderabad comes under Zone B –
rest under Zone C)
4. Age of the Vehicle: different rates are charged depending
on age is up to 5 years, 5 to 10 years and above 10
years. Generally package policy is not offered if the
vehicle is more than 10 ears.
5. Personal accident cover up to Rs.2 lakhs is available for
owner cum driver
Motor cycles / scooters:
1. Rating factors same as applicable to Private Cars.
2. Different rates are applied depending on cubic capacity
of the vehicle i.e. up to 150 46 cc.; 150 cc to 350 cc and
above 350 cc.
3. Personal accident cover upto Rs.1 Lakh is available for
owner cum driver.

Commercial vehicles
Four Wheeled vehicles (Passengers for Hire) i.e. Taxis.
Rating factors are:
1. Age: < 5 years, 5 to 7 years, > 7 years.
2. C.C. < 1000, 1000 to 1500. > 1500
3. Zone: A & B.
Busses:
Rating factors are:
1. Age as per taxis
2. Licenced Carrying capacity: < 18; 18 to 36; > 38
passengers

Zones
A: Chennai, Delhi/New Delhi, Kolkata, Mumbai.
B: All other State Capitals
C. Rest of India

Note: The higher the passenger carrying capacity, the

higher the premium Premium rates are less to Zone C,
and increased for Zone B & A. IDV is not the rating
factor for Private Cars (PCs),Taxis.and Buses.
Goods Carrying Vehicles (Public Carrier):

Rating factors are as per buses. Gross Vehicle Weight is

another factor for rating. < 12000 Kg GVW - Above 12000
KG – Additional premium for each 100 Kg.

NOTE:
1. In Commercial Vehicles : Rates Are Applied On
Insured’s Declared Value (IDV) of the Vehicle.
2. In Passenger Carrying Vehicles, Rates are high for
higher carrying capacity. The Rates are increased for
Zone C and increased for Zone B and C.
3. For Goods Vehicles Rates Are Higher For Age And
Zone B And C.
4. Personal Accident Cover For driver cum owner is
Rs.2,00,000/-.
Third party liability (act policy) for two wheelers, private
cars and commercial vehicles:
Liability only Policy:
This policy is designed to meet the minimum requirements of
Policy as envisaged in the MV Act. Section 146 of M.V. Act, 1988
says “no person shall use a motor vehicle in a public place
unless there is in force a policy of insurance” Therefore motor
third party insurance is compulsory as per the MV Act. The policy
indemnifies the insured against his legal liability in case of an
accident arising out of the use of the vehicle anywhere in India in
respect of:
a. Death or injury to any person as per the limit laid down in the
MV Act.
b. Damage to third party property (not belonging to or under
trust / custody /control of insured) as per the limit specified in
the schedule.
c. Costs and expenses incurred by the insured with written
consent of Insurance Co.
 d. Liability arising from Workmen’s Compensation Act 1923 in
respect of death of or bodily injury to:
• Paid driver of the vehicle
• Conductor or ticket examiner of public service vehicles
(Buses)
• Workers carried by the insured owner for loading and
unloading goods in a goods carrying vehicle.

Personal Accident cover for Owner-Driver:

The company undertakes to pay specified compensation In case:
i. Of death or bodily injury to Owner cum Driver while driving the
vehicle in direct connection with the vehicle insured
ii. Or whilst mounting into or dismounting from or traveling in the
insured vehicle as a co-driver,
iii. Caused by violent accidental external and visible means:
Subject to: 1. owner-driver is the registered owner of the
vehicle. 2. He is the insured named in the policy. 3. Holds an
effective driving license
• Generally, in all cases of third-party death/body injury or passenger of a public service vehicle, or
workmen in goods vehicle or third-party property damage, -caused by negligent driving of insured
vehicle, application for compensation is filed before Motor Accident Claims Tribunal(MACT)
established in each district of the country.
• IN CASE OF DEATH, MACT make a “No fault Liability” award without proof of negligence of driver.
• And after enquiry, make a final award having satisfied that there is negligence of the insured vehicle
driver.
• As per the recent amendment in M.V.Act in 2016, the Government has fixed the liability of insurer as
under:
• Death of a person – Rs.10 Lakhs maximum
• Bodily injury - Rs. 5 laksh maximum

Hit and Run cases

Vehicles cause accidents, runs away, but identity cannot be ascertained. Compensation known as
Solatium is payable out of a Solatium Fund established by Central Government (from 1.10.1982).
• Death Rs.2,00,000
• Grievous bodily Injury Rs. 50,000
The claim is to be lodged though Dist. Collector to the insurance company authorized to handle hit and
run claims.
Questions and Answers
Based on training
Ques: __________can solicit and market only certain pre-underwritten products approved by the Authority.

Ans:
a. Point of Sales Person
b. Insurance Marketing Firm
c. Sales Person
d. Agent

Ques: The “Point of Sales Person” shall be at least __________.

Ans:
a. 12th Pass
b. 10th Pass
c. Graduate
d. Post Graduate

Ques: Conduct an in-house training of __________ hours for the candidate.

Ans:
a. 30
b. 48
c. 15
d. 24
Ques: __________can solicit and market only certain pre-underwritten products approved by the Authority.

Ans:
a. Point of Sales Person
b. Insurance Marketing Firm
c. Sales Person
d. Agent

Ques: The “Point of Sales Person” shall be at least __________.

Ans:
a. 12th Pass
b. 10th Pass
c. Graduate
d. Post Graduate

Ques: Conduct an in-house training of __________ hours for the candidate.

Ans:
a. 30
b. 48
c. 15
d. 24
Ques: __________can solicit and market only certain pre-underwritten products approved by the Authority.

Ans:
a. Point of Sales Person
b. Insurance Marketing Firm
c. Sales Person
d. Agent

Ques: The “Point of Sales Person” shall be at least __________.

Ans:
a. 12th Pass
b. 10th Pass
c. Graduate
d. Post Graduate

Ques: Conduct an in-house training of __________ hours for the candidate.

Ans:
a. 30
b. 48
c. 15
d. 24
Ques: __________can solicit and market only certain pre-underwritten products approved by the Authority.

Ans:
a. Point of Sales Person
b. Insurance Marketing Firm
c. Sales Person
d. Agent

Ques: The “Point of Sales Person” shall be at least __________.

Ans:
a. 12th Pass
b. 10th Pass
c. Graduate
d. Post Graduate

Ques: Conduct an in-house training of __________ hours for the candidate.

Ans:
a. 30
b. 48
c. 15
d. 24
Ques: __________can solicit and market only certain pre-underwritten products approved by the Authority.

Ans:
a. Point of Sales Person
b. Insurance Marketing Firm
c. Sales Person
d. Agent

Ques: The “Point of Sales Person” shall be at least __________.

Ans:
a. 12th Pass
b. 10th Pass
c. Graduate
d. Post Graduate

Ques: Conduct an in-house training of __________ hours for the candidate.

Ans:
a. 30
b. 48
c. 15
d. 24
Ques: __________can solicit and market only certain pre-underwritten products approved by the Authority.

Ans:
a. Point of Sales Person
b. Insurance Marketing Firm
c. Sales Person
d. Agent

Ques: The “Point of Sales Person” shall be at least __________.

Ans:
a. 12th Pass
b. 10th Pass
c. Graduate
d. Post Graduate

Ques: Conduct an in-house training of __________ hours for the candidate.

Ans:
a. 30
b. 48
c. 15
d. 24
Ques: The “Point of Sales Person” can sell only the following pre-underwritten product. Select the product which POSP cannot sell.

Ans:
a. Motor Insurance
b. Personal Accident Insurance
c. Travel Insurance
d. Engineering Insurance

Ques: The insurance company shall be responsible to record the __________ or the PAN card number of the “Point of Sales Person” in the
proposal form and insurance policy.

Ans:
a. Aadhar Card
b. Passport
c. Ration Card
d. Driving License

Ques: Any misconduct on part of the Point of Sales Person shall make it liable to a penalty as per provisions of __________ of the Act.

Ans:
a. Section 27
b. Section 102
c. Section 29
d. Section 105
Ques: The “Point of Sales Person” can sell only the following pre-underwritten product. Select the product which POSP cannot sell.

Ans:
a. Motor Insurance
b. Personal Accident Insurance
c. Travel Insurance
d. Engineering Insurance

Ques: The insurance company shall be responsible to record the __________ or the PAN card number of the “Point of Sales Person” in the
proposal form and insurance policy.

Ans:
a. Aadhar Card
b. Passport
c. Ration Card
d. Driving License

Ques: Any misconduct on part of the Point of Sales Person shall make it liable to a penalty as per provisions of __________ of the Act.

Ans:
a. Section 27
b. Section 102
c. Section 29
d. Section 105
Ques: The “Point of Sales Person” can sell only the following pre-underwritten product. Select the product which POSP cannot sell.

Ans:
a. Motor Insurance
b. Personal Accident Insurance
c. Travel Insurance
d. Engineering Insurance

Ques: The insurance company shall be responsible to record the __________ or the PAN card number of the “Point of Sales Person” in the
proposal form and insurance policy.

Ans:
a. Aadhar Card
b. Passport
c. Ration Card
d. Driving License

Ques: Any misconduct on part of the Point of Sales Person shall make it liable to a penalty as per provisions of __________ of the Act.

Ans:
a. Section 27
b. Section 102
c. Section 29
d. Section 105
Ques: The “Point of Sales Person” can sell only the following pre-underwritten product. Select the product which POSP cannot sell.

Ans:
a. Motor Insurance
b. Personal Accident Insurance
c. Travel Insurance
d. Engineering Insurance

Ques: The insurance company shall be responsible to record the __________ or the PAN card number of the “Point of Sales Person” in the
proposal form and insurance policy.

Ans:
a. Aadhar Card
b. Passport
c. Ration Card
d. Driving License

Ques: Any misconduct on part of the Point of Sales Person shall make it liable to a penalty as per provisions of __________ of the Act.

Ans:
a. Section 27
b. Section 102
c. Section 29
d. Section 105
Ques: The “Point of Sales Person” can sell only the following pre-underwritten product. Select the product which POSP cannot sell.

Ans:
a. Motor Insurance
b. Personal Accident Insurance
c. Travel Insurance
d. Engineering Insurance

Ques: The insurance company shall be responsible to record the __________ or the PAN card number of the “Point of Sales Person” in the
proposal form and insurance policy.

Ans:
a. Aadhar Card
b. Passport
c. Ration Card
d. Driving License

Ques: Any misconduct on part of the Point of Sales Person shall make it liable to a penalty as per provisions of __________ of the Act.

Ans:
a. Section 27
b. Section 102
c. Section 29
d. Section 105
Ques: The “Point of Sales Person” can sell only the following pre-underwritten product. Select the product which POSP cannot sell.

Ans:
a. Motor Insurance
b. Personal Accident Insurance
c. Travel Insurance
d. Engineering Insurance

Ques: The insurance company shall be responsible to record the __________ or the PAN card number of the “Point of Sales Person” in the
proposal form and insurance policy.

Ans:
a. Aadhar Card
b. Passport
c. Ration Card
d. Driving License

Ques: Any misconduct on part of the Point of Sales Person shall make it liable to a penalty as per provisions of __________ of the Act.

Ans:
a. Section 27
b. Section 102
c. Section 29
d. Section 105
Ques: All ____________ products of Life, General and Health insurance to be distributed through the POS also.

Ans:
a. Micro Insurance
b. Social Insurance
c. Micro and Social Insurance
d. Cattle Insurance

Ques: All General Insurers are required to maintain a proper record of training and examination for at least ____________ years from
the end of financial year in which these are conducted which shall be made available to the inspecting official of the Authority during
on-site inspection.

Ans:
a. 3
b. 7
c. 10
d. 5

Ques: Which among the following is not a General Insurance Product?

Ans:
a. Life Insurance
b. Motor Insurance
c. Health Insurance
d. Travel Insurance
Ques: All ____________ products of Life, General and Health insurance to be distributed through the POS also.

Ans:
a. Micro Insurance
b. Social Insurance
c. Micro and Social Insurance
d. Cattle Insurance

Ques: All General Insurers are required to maintain a proper record of training and examination for at least ____________ years from
the end of financial year in which these are conducted which shall be made available to the inspecting official of the Authority during
on-site inspection.

Ans:
a. 3
b. 7
c. 10
d. 5

Ques: Which among the following is not a General Insurance Product?

Ans:
a. Life Insurance
b. Motor Insurance
c. Health Insurance
d. Travel Insurance
Ques: All ____________ products of Life, General and Health insurance to be distributed through the POS also.

Ans:
a. Micro Insurance
b. Social Insurance
c. Micro and Social Insurance
d. Cattle Insurance

Ques: All General Insurers are required to maintain a proper record of training and examination for at least ____________ years from
the end of financial year in which these are conducted which shall be made available to the inspecting official of the Authority during
on-site inspection.

Ans:
a. 3
b. 7
c. 10
d. 5

Ques: Which among the following is not a General Insurance Product?

Ans:
a. Life Insurance
b. Motor Insurance
c. Health Insurance
d. Travel Insurance
Ques: All ____________ products of Life, General and Health insurance to be distributed through the POS also.

Ans:
a. Micro Insurance
b. Social Insurance
c. Micro and Social Insurance
d. Cattle Insurance

Ques: All General Insurers are required to maintain a proper record of training and examination for at least ____________ years from
the end of financial year in which these are conducted which shall be made available to the inspecting official of the Authority during
on-site inspection.

Ans:
a. 3
b. 7
c. 10
d. 5

Ques: Which among the following is not a General Insurance Product?

Ans:
a. Life Insurance
b. Motor Insurance
c. Health Insurance
d. Travel Insurance
Ques: All ____________ products of Life, General and Health insurance to be distributed through the POS also.

Ans:
a. Micro Insurance
b. Social Insurance
c. Micro and Social Insurance
d. Cattle Insurance

Ques: All General Insurers are required to maintain a proper record of training and examination for at least ____________ years from
the end of financial year in which these are conducted which shall be made available to the inspecting official of the Authority during
on-site inspection.

Ans:
a. 3
b. 7
c. 10
d. 5

Ques: Which among the following is not a General Insurance Product?

Ans:
a. Life Insurance
b. Motor Insurance
c. Health Insurance
d. Travel Insurance
Ques: All ____________ products of Life, General and Health insurance to be distributed through the POS also.

Ans:
a. Micro Insurance
b. Social Insurance
c. Micro and Social Insurance
d. Cattle Insurance

Ques: All General Insurers are required to maintain a proper record of training and examination for at least ____________ years from
the end of financial year in which these are conducted which shall be made available to the inspecting official of the Authority during
on-site inspection.

Ans:
a. 3
b. 7
c. 10
d. 5

Ques: Which among the following is not a General Insurance Product?

Ans:
a. Life Insurance
b. Motor Insurance
c. Health Insurance
d. Travel Insurance
Ques: Motor insurance is mandated as it is a requirement under the Motor Vehicles Act,____________.

Ans:
a. 1988
b. 1972
c. 1945
d. 1992

Ques: Broadly there are two types of insurances policies that offer motor insurance cover:

Ans:
a. Package Policy and Personal Accident
b. Personal Accident and Liability only
c. Standalone OD and Liability only
d. Package Policy and Liability Only

Ques: The damages to the vehicle due to the which perils is usually not covered under OD section of the Motor Insurance policy:
Ans:
a. War
b. Earthquake
c. Terrorism
d. Riot and Strike
Ques: Motor insurance is mandated as it is a requirement under the Motor Vehicles Act,____________.

Ans:
a. 1988
b. 1972
c. 1945
d. 1992

Ques: Broadly there are two types of insurances policies that offer motor insurance cover:

Ans:
a. Package Policy and Personal Accident
b. Personal Accident and Liability only
c. Standalone OD and Liability only
d. Package Policy and Liability Only

Ques: The damages to the vehicle due to the which perils is usually not covered under OD section of the Motor Insurance policy:
Ans:
a. War
b. Earthquake
c. Terrorism
d. Riot and Strike
Ques: Motor insurance is mandated as it is a requirement under the Motor Vehicles Act,____________.

Ans:
a. 1988
b. 1972
c. 1945
d. 1992

Ques: Broadly there are two types of insurances policies that offer motor insurance cover:

Ans:
a. Package Policy and Personal Accident
b. Personal Accident and Liability only
c. Standalone OD and Liability only
d. Package Policy and Liability Only

Ques: The damages to the vehicle due to the which perils is usually not covered under OD section of the Motor Insurance policy:
Ans:
a. War
b. Earthquake
c. Terrorism
d. Riot and Strike
Ques: Motor insurance is mandated as it is a requirement under the Motor Vehicles Act,____________.

Ans:
a. 1988
b. 1972
c. 1945
d. 1992

Ques: Broadly there are two types of insurances policies that offer motor insurance cover:

Ans:
a. Package Policy and Personal Accident
b. Personal Accident and Liability only
c. Standalone OD and Liability only
d. Package Policy and Liability Only

Ques: The damages to the vehicle due to the which perils is usually not covered under OD section of the Motor Insurance policy:
Ans:
a. War
b. Earthquake
c. Terrorism
d. Riot and Strike
Ques: Motor insurance is mandated as it is a requirement under the Motor Vehicles Act,____________.

Ans:
a. 1988
b. 1972
c. 1945
d. 1992

Ques: Broadly there are two types of insurances policies that offer motor insurance cover:

Ans:
a. Package Policy and Personal Accident
b. Personal Accident and Liability only
c. Standalone OD and Liability only
d. Package Policy and Liability Only

Ques: The damages to the vehicle due to the which perils is usually not covered under OD section of the Motor Insurance policy:
Ans:
a. War
b. Earthquake
c. Terrorism
d. Riot and Strike
Ques: Motor insurance is mandated as it is a requirement under the Motor Vehicles Act,____________.

Ans:
a. 1988
b. 1972
c. 1945
d. 1992

Ques: Broadly there are two types of insurances policies that offer motor insurance cover:

Ans:
a. Package Policy and Personal Accident
b. Personal Accident and Liability only
c. Standalone OD and Liability only
d. Package Policy and Liability Only

Ques: The damages to the vehicle due to the which perils is usually not covered under OD section of the Motor Insurance policy:
Ans:
a. War
b. Earthquake
c. Terrorism
d. Riot and Strike
Point of Sale: General
Insurance products- II
Personal Accident Insurance
• Personal accident cover provides the insured financial
assistance in case if the insured suffers an accident
which leads to a serious injury or death.
• As the name suggests, Personal Accident provides
protection against the risk of death and disablement that
can be caused by accidents and it is applicable
anywhere in the world.
• An accident can include events such as the following:
• Injury caused because of any kind of fall or collision
• Any kind of train/ road or plane accident.
• Any kind of injury due to gas cylinder burst.
• Injuries because of burning, drowning, poisoning etc
 Personal Accident insurance or PA insurance is an annual
policy which provides compensation in the event of
injuries, disability or death caused solely by violent,
accidental, external and visible events. It is different from
life insurance and 48 medical & health insurance. If the
insured dies or receives bodily injury due to an accident
caused by external violent and visible means the company
will pay:

i. Death - 100% of capital sum insured.

ii. Loss of both eyes/both limbs/one limb \ and one eye -
100% CSI\
iii. Loss of one eye or one limb @ 50% CSI
iv. Permanent Total Disablement (PTD) 100% CSI
v. Permanent partial disablement- % shown in the policy.
vi. Temporary Total Disablement@ 1% of CSI restricted to
Rs.3000 per week Maximum for 100 weeks.
vii. Temporary Partial Disablement is not covered under
the P.A. Policy.
viii. Loss of hearing in both ears is not PTD.
Types of Disablement
An accident can result in three events. viz. temporary
disability, permanent disability, and death
i. Temporary disability: In case of a temporary total
disability, a weekly compensation is paid by the
Insurance Company for the entire period of the
disability. Nevertheless, generally, the payment is
made only for a maximum period of 52 weeks. This
payment can prove invaluable to your family members
in case you are the only earning member of the family.
Please note that you don’t receive any compensation
for a temporary partial disability.
ii. Permanent disability: You are eligible for the entire
insured sum in the event of a permanent total
disability. In case of a permanent partial disability, a
certain pre-decided percentage of the sum is provided
by the Insurance Company. It is suggested to read the
policy carefully before you buy it, as the percentage
varies from company to company.
 iii. Accidental death: In the unfortunate event of death, the
entire sum insured in paid to the nominees of the insured
person. However, keep in mind that in order to be eligible for
this feature, death should happen within a specific period
from the accident. This period is generally between 90 to
180 days. NOTE: Transportation of dead body, education
fund for 2 dependent children can are also automatically
covered as additional benefits at no extra payment.

Exclusions
No compensation is payable in respect of
death/injury/disablement caused due to:
i. Intentional self-injury, suicide or attempted suicide
ii. Under the influence of intoxicating liquor or drugs
iii. Engaged in aviation or ballooning, mounting into or
dismounting from or traveling in any balloon or aircraft
other than a passenger anywhere in the world.
iv. Directly or indirectly caused by venereal disease or insanity
v. Committing breach of law with criminal intent vi. Service in
armed forces. Caused by prolonged child birth, pregnancy or
consequence.

Home Insurance
• Home insurance, also commonly called homeowner's
insurance, is a type of property insurance that covers a
private residence.
• It is an insurance policy that combines various personal
insurance protections, which can include losses occurring to
one's home, its contents, loss of use (additional living
expenses), or loss of other personal possessions of the
homeowner, as well as liability insurance for accidents that
may happen at the home or at the hands of the homeowner
49 within the policy territory.
• Additionally, homeowner's insurance provides financial
protection against disasters. A standard home insurance
policy insures the home itself along with the things kept
inside. The perils and losses covered is explained in the
table given below:
 Cattle Insurance
Cattle Insurance Policy is provided for protection of Indian rural
people from financial loss due to death of their cattle, which is one the
most valued possessions of the rural community. The Policy covers
the persons having cows, bullocks or buffaloes of either sex certified
as being in sound and perfect health and free from injury or disease
by a veterinary doctor / surgeon and who are Members (in groups) of
Micro Finance Institutions, Non-Government Organizations,
Government Sponsored Organizations and such affinity groups /
institutions in rural and social sector. The word cattle refer to
indigenous/exotic/cross bread of the following animals:
• Milch cows 2 to 10 years
• Milch buffalos 3 to 12 years/
• Stud bulls (Cow & buffaloes) 3 to 8 years
• Bullocks (Castrated bulls and castrated male buffaloes) 3 to 12
years.
 Coverage
Cattle Insurance Policy indemnifies for death due to:

• Accident (by fire/lightning/STFI/earthquake/famine)

• Diseases contracted during the currency of the policy

• Surgical operations

• Riot and Strike

Exclusions
The policy does not cover the following:

1. Neglect, overloading, ill treatment or use of animal for a purpose not stated in the
policy

2. Accident/disease occurring prior to commencement of risk

3. Theft and clandestine sale of insured animal.

4. 4. Transport by air and sea. Further, the Insurance Company is not liable, if the animal
dies due a disease occurred within 15 days from the commencement of risk and If the
tag is not surrendered to insurers in case of claim. (If the tag is lost, insured shall
arrange for retagging)
 Health Insurance
• Health insurance is an insurance that covers the whole or a part of the risk of a
person incurring medical expenses, spreading the risk over a large number of
persons.

• The term ‘Health Insurance’ relates to a type of insurance that essentially covers
medical expenses.

• A health insurance policy like other policies is a contract between an insurer and
an individual / group in which the insurer agrees to provide specified health
insurance cover at a particular “premium” subject to terms and conditions
specified in the policy.

Coverage
A Health Insurance Policy would normally cover expenses reasonably and
necessarily incurred under the following heads in respect of each insured person
subject to overall ceiling of sum insured (for all claims during one policy period).

a. Room, Boarding expenses

b. Nursing expenses

c. Fees of the surgeon, anesthetist, physician, consultants, specialists

d. Anesthesia, blood, oxygen, operation theatre charges, surgical
appliances, medicines, drugs, diagnostic materials, X-ray,
Dialysis, chemotherapy, Radio therapy, cost of pace maker,
Artificial limbs, cost or organs and similar expenses.
e. Hospitalization
f. Domiciliary hospitalization
g. For illness/disease suffered or accidental injury sustained during
the policy period.

The maximum liability in respect of all claims is the Sum Insured

during the policy period. Expenses on hospitalization for a minimum
period of 24 hours are admissible. This time limit is not applied to
specific treatment i.e. Dialysis, Chemotherapy, Radiotherapy, Eye
surgery, Dental surgery, Lithotripsy (Kidney stone 51 removal),
D&C, Tonsillectomy taken in hospital/nursing home and the insured
is discharged on the same day. Relevant medical expenses
incurred during the period up to 30 days prior to and for a period of
60 days after hospitalization are treated as part of the claim.
 Hospital/Nursing Home means:
A registered establishment with local authorities,
a. With provision of number of in-patient beds
b. Operation Theatre
c. Qualified doctors and nursing staff round the clock

Exclusions (for both Hospitalization

and Nursing homes)
The following are exclusions under a health insurance policy:
i. Pre-existing diseases/injuries when the cover incepts for
the first time
ii. Waiting period: 30 days from the commencement of the
policy
iii. Waiting period is not applicable if there is a continuous
insurance preceding 12 months without any break with
any Indian Insurer
iii. Waiting period is not applicable if there is a continuous
insurance preceding 12 months without any break with any Indian
Insurer
iv. Separate premium rates are available for age groups up to 35
years/ 46-55 years / 56- 65 years / 66-70 years /76-80 years. Sum
insured varies from company to company.

• In the proposal form besides general questions, proposer have

to give details of past diseases and illness and details of
treatment; average monthly income and income tax PAN NO.
• INSURERS offer floater health policies besides individual
policies. Under floater policy one sum insured is chosen by the
proposer for him, spouse, dependent children etc. In case of
hospitalization any one person can utilize the full sun insured.
Revised Guidelines for sale of Indemnity based
Health Insurance Policies through POS Persons,
2017
Inclusion of Indemnity based Health Insurance
Product through PoS – General Insurers and
Standalone Health Insurers.
• Guidelines No.IRDA/Int/GDL/ORD/183/10/2015
dated 26.10.2015 pertaining to Point of Sales
Person (POS) and the subsequent Circulars
giving the details of types of products that can be
solicited by the POS.
• The Authority has received requests from many
insurers to allow indemnity based health
insurance products to be sold through Point of
Sale (POS).
On examination of the request made, the Authority
under the powers vested with it under clause V(1)(f),
of the said guidelines, has decided to allow individual
indemnity based health insurance products to be
solicited through PoS channel with the following
conditions:-
1. The indemnity based health insurance products
may be offered to only individual policyholders
excluding groups and government scheme.
2. Rs.5 lacs per life/individual will be the maximum
sum insured
3. Number of such products that can be filed as POS
product is capped at 3 (three) per insurance
company
4. Since Health indemnity products follow a different
process than health benefit products, which were
hitherto included in the POS channel, the POS
may be educated about the process involved in
preferring claims, particularly the cashless claims
who in turn shall educate the holder of indemnity
based health insurance product.
Agricultural Pumpsets
This insurance is granted to centrifugal electrical/diesel
pump sets up to 25 HP of approved makes, used for
agricultural purposes only.
Coverage
The policy covers unforeseen and sudden physical
damage to pump sets including starters by
1. Fire, lightning
2. Riot, strike, malicious damage
3. Mechanical and electrical breakdowns
4. Burglary (provided the pump set is kept in a locked
enclosure)
5. Terrorism
6. Flood risks can be granted on a selective basis on
additional premium. Discounts are
7. available on group/long term policies
Exclusions
1. Normal wear and tear, gradual deterioration
due to atmospheric conditions or otherwise.
2. Wilful act or gross negligence of insured or his
representative.
3. Faults existing at the time of commencement
and known to the insured or his
4. representative.
5. Loss or damage for which the manufacturer or
supplier of property is responsible either
6. by law or under contract.
7. Cost of dismantling, transporting to workshop
and back as also cost of re-erection.
8. However, transport and re-erection charges to
be paid in full in case of total loss.
Sum Insured
100% of Market Value at the time of proposal.
Premium
Standard cover (Excluding Flood risk) 1% of S.I.
Flood cover (optional) 0.5% of S.I. Note :
Premium will be loaded by 50% for pumpsets
which are more than 10 years old. 7.
Discounts
No Claim Discount (only to individual) : this shall
be allowed at the following rates at the time of
renewal :
(i) If no claim arises for 1 years 10%
(ii) If no claim arises for 2 consecutive years 15%
(iii) If no claim arises for 3 consecutive years 20%
Long Term Discount :
• 2 years Policy 15%
• 3 years and upto 5 years 25%
• 6 years upto 9 years Policy 30%

d) Extra Premium for flood risk : 0.5 to 1.0% (gross) p.a. of the sum insured. Flood cover should
not be allowed freely & if necessary, it must be accepted by R.O. only.
Excess
It will be 1% of Sum Insured subject to a minimum of Rs.100/- on each and every claim.

Rewinding Charges
• Rewinding charges are payable after deducting salvage value of the burnt copper plus
deductible excess.
• Rewinding charges payable under the policy should not exceed 15% of the Sum Insured. 10.
CREDIT TO DEVELOPMENT OFFICER/AGENT

Claim Procedure
• On the happening of loss or damage, the insured shall forthwith give notice to Insurance
Co. (also to police in case of theft).
• Thereafter on receiving claim form, repair bills, the claims will be processed.
• Survey may not be conducted in all cases. The insurer’s liability shall be limited to the
charges mentioned above after taking into account the salvage value and the excess
• applicable.
• Companies should not normally insist on surveys for pumps with less than 15 HPs.
• Capacity unless they have reasons to do otherwise. The matter of holding survey is left to
the discretion of the Company.
Pradhanmantri Suraksha Bima Yojana
This policy is designed and floated by the Government. The
Pradhan Mantri Suraksha Bima Yojana is an insurance cover
aimed at securing any Indian citizen against accidents.
Features
• This insurance protects citizens against death or disability
caused due to any accident.
• The Premium to be paid under this scheme is an annual
amount of Rs.12/- per person.
• The eligible subscribers for this scheme should possess a
savings bank account with their Aadhaar number linked to it
and should be within the age group of 18 to 70 years.
• Holders of multiple saving bank accounts in one or many
banks can opt to join the scheme through only one savings
bank account.
• The premium for this insurance cover gets deducted from
the savings bank account of the insurance holder by means
of ‘auto debit’ in one installment.
 Weather Based Crop insurance Scheme (WBCIS)

• In 2015-16, the Weather-based Crop Insurance

Scheme (WBCIS) is being implemented as
component of National Crop Insurance
Programme (NCIP).
Features
• This scheme provides insurance coverage and
financial support to the farmers in the event of
failure of crops due to Adverse Weather
Incidence and subsequent crop loss.
• This simply implies that if a farmer did not insure
his crop under MNAIS (Modified National
Agricultural Insurance Scheme) but somehow his
crops were damaged due to adverse weather
conditions; he is still able to claim insurance if he
goes with this component
 • The Adverse Weather Incidences leading to
crop loss and subsequent indemnity under
WBCIS are as follows:
1. Rainfall – Deficit Rainfall, Unseasonal Rainfall,
Excess rainfall, Rainy days, Dry-spell
2. Dry days
3. Relative Humidity
4. Temperature – High temperature (heat), Low
temperature (frost)
5. Wind Speed
6. A combination of the above
7. Hailstorms and cloudburst

Crops Covered
The scheme covers major food crops such as
cereals, millets & pulses, Oilseeds and commercial
/ horticultural crops. Crops are selected and notified
by State Governments.
Coconut Palm insurance Scheme (CPIS)
During the last summer, thousands of coconut palms perished due to natural disasters or
extreme heat. Some of them wilted away under uncontrollable pest attacks.
• This summer a new CPIS will safeguard the farmers against losses they may have to suffer
from natural calamities like drought, floods, cyclones, cloudbursts, and storm and elephant
raids.
• It also guards against pests and wilt (become limp through heat or lack of water) attacks.
• Farmers who own at least 5 healthy coconut palms between the ages of seven and sixty can
avail the scheme.
• The insurance will be applicable upon two different segments – the palms less than 15 years
in age and those between 16 and 60.
• The palms less than 15 years can be insured with Rs. 9 per palm payable as Rs. 2.25 from
• the farmer, Rs. 2.25 from the government and the rest from the Coconut Development Board.
Coconut Palm insurance Scheme (CPIS)
• The palms between 16 and 60 years can be insured by paying a premium. of Rs.14/-per palm.
• The Coconut Dev. Board will pay Rs.7/- and the rest will be shared 50-50 by the state
government and the farmer.
• The premium can be paid directly to the insurance company or through the Krishi Bhavan.
• Upon loss due to any of the reasons covered by the scheme, the farmer must approach the
Agriculture Insurance Company within 2 weeks.
• The insurance amount – Rs.900/-- for a palm less than 15 year old and Rs.1750/- for those
older will be paid to the farmer within a month of filing such application.

Conclusion
Thus, as seen above the IRDAI has permitted the POS to solicit not only simple life insurance
policies but also general insurance policies to thereby increase insurance penetration in the rural
areas.
Questions and
Answers
Based on training
Ques1: Personal accident cover provides the insured financial assistance in case if the insured suffers an accident which leads
to __________.

Ans:
a. Injury
b. Fever
c. Minor Injury
d. Few Injuries

Ques2: If the insured dies because of Personal Accident, the claimant will get-

Ans:
a. 50% of Sum Insured
b. 100% of Sum Insured
c. 90% of Sum Insured
d. No claim

Ques3: If insured dies because of suicide, will he get a claim under Personal Accident Insurance?

Ans:
a. Yes
b. Maybe Yes
c. No
d. Maybe No
Ques4: In Home Insurance, a policy can be purchased for _______.

Ans:
a. Own shop
b. Neighbour's Residence
c. Neighbour’s Shop
d. Own Residence

Ques5: Cattle Insurance Policy is provided for protection of Indian rural people from financial loss due to_______ of their cattle.

Ans:
a. Death
b. Injury
c. Personal Accident
d. Suicide

Ques6: Neglect, overloading, ill treatment are _______ in the cattle insurance policy.

Ans:
a. Included
b. Excluded
c. Specifically Included
d. Specifically Excluded
Ques7: ‘Health Insurance’ relates to a type of insurance that essentially covers ____________ expenses.

Ans:
a. Travel
b. Funeral
c. Medical
d. Cosmetic surgery

Ques8: Expenses on hospitalization for a minimum period of ____________ are admissible in Health insurance.

Ans:
a. 12 hours
b. 48 hours
c. 72 hours
d. 24 hours

Ques9: Agricultural Pumpsets insurance is granted to centrifugal electrical/diesel pump sets up to ____________ of approved
makes, used for agricultural purposes only.

Ans:
a. 25 HP
b. 15 HP
c. 30 HP
d. 40 HP
ANSWERS:
1. Injury
2. 100% of Sum Insured
3. No
4. Own residence
5. Death
6. Excluded
7. Medical
8. 24 Hours
9. 25 HP
Principles and practices of
Insurance- I
Introduction
• Insurance is both an art and science.
• Like any other perfect science, insurance too is
based in fundamental principles that are universally
applicable.
• These principles act as guiding principles for the
formation and validity of a contract.
• Further insurance is an intangible product.
• Hence the insurance bond acts as an evidence of
this process.
• There are many other documents that are important
in the process of issuance of an insurance policy
from the inception of an application.
 Insurance Contract
• Insurance is a legal contract.
• In other words it means that insurance contract can be
enforced in the court of law.
• This also implies that like all other contracts, all the
essentials of a contract must be present in an insurance
contract.

These include:
1. Offer
2. Acceptance
3. Consideration
Offer
Insurance companies solicit insurance i.e. they offer
insurance by approaching people. When the party is
interested in taking insurance he is given a proposal for
completion and submission. This proposal is called
offer in insurance terminology. The application for
insurance constitutes the offer. It should be noted that
the person offering the asset for insurance must have
legal relationship with it. The object of the contract must
be legal and not against public policy. Ex. Stolen goods
cannot be insured.
Acceptance
Mere obtaining a proposal cannot be construed that
insurance company has accepted the proposal for
issue of a policy. As it is simply an offer. Insurers can
consider the proposal at normal rates, or on loading the
premium or reject the proposal depending upon the
degree of risk involved. Once the proposal is accepted
by the insurer it is treated as a agreement and the
company forwards the application for issuance of the
policy.
Consideration
In insurance, premium is called consideration. In a
contract of insurance, insured pays the premium and
insurer pay the loss if used by the insured perils. Premium
can be collected in cash, by cheque/DD or through
debit/credit cards or by bank guarantee. Issue of a policy
is not possible unless full premium is received.

Principles of Insurance
Insurance principles are governing rules based on which
the contract of insurance is built. These principles are
universal in nature. These are applicable to life insurance
and as well as general insurance contracts. However, for
life insurance, only the first two principles are applicable
while for general insurance all six principles are
applicable.
 Principle Of Utmost Good Faith: ( UGF)
• Both Insured and Insurer have to observe UGF.
• Proposer has to declare all material facts in the
proposal and insurer has to declare all benefits,
exclusions etc. in the prospect/policy.
• UGF requires the proposer to disclose all material
facts which he knows and ought to know (in the
proposal form).
• Obligation to disclose all material information about
the subject matter of contract lies upon the proposer.
• Agent/ Insurance company have to follow UGF in
giving correct information about the risks covered,
terms and conditions etc. in the policy/and
promotional literature.
• Material information helps to decide acceptance / rate
of premium / terms and conditions (by insurers).
• It would not help in fixing the sum insured.
• Rejection / charged extra premium / refused to renew
also are material facts.
• Material facts are to be disclosed at the time of issue
of policy and at the time of renewal also.

EXAMPLES
• Fire Insurance: Construction of building / occupancy /
nature of goods.
• Marine Insurance: Method of packing – nature of
goods.
• Motor Insurance: c.c./carrying capacity / Year of
manufacture/ purpose/ geographical area.
• Personal Insurance: Occupation /
age/height/weight/physical disabilities.
Effect when duty of disclosure is broken
• Policy becomes cancelled from inception if the proposer
has obtained it illegally. Thus policy is Void.
• If material information is not disclosed, insurers can avoid
the claim payment (voidable), yet the Policy is not
cancelled.

Contractual duty
• Proposer must give correct and accurate information of
the subject matter.
• Duty of disclosure of material information applies to
Insured / agent / insurers. Fraudulent breach of UGF
makes the contract of insurance VOID.
• UGF applies in all insurances where proposal from with a
declaration clause is used.
Principle of Insurable Interest
The essentials of Insurable interest are:
1. there must be a property capable of being insured
2. such property must be the subject matter of
insurance
3. The insured must bear legal relationship to the
subject matter whereby he stands to benefit by
the safety of the property and stands to lose by its
loss or damage.
4. Therefore the legal right to insure is called
Insurable interest.
Insurable interest arises in the following cases:
a) Owner of property have insurable interest in the property.
b) Bank/Financier has insurable interest to the extent of
loan granted by him.
c) Insured himself has insurable interest in his own life
d) Insurers also have insurable interest in the property
insured by them – they may not afford to pay catastrophic
losses - therefore re-insure the property.

EXAMPLES
Time when insurable interest should present:
1. In Fire, Accident, Motor, and Miscellaneous and Marine
hull:
• At the time of proposing the risk for insurance &
• At the time of loss or damage.
2. In Marine Cargo insurance
• Insurable interest is required only at the time of loss
• Not at the time of taking the policy.
If the insured has no insurable interest – contact
becomes void
Principle of Indemnity:
• The general meaning of Indemnity is “to make good the
loss or damage”. To place in the same financial position as
he occupied immediately before the loss. To prevent the
insured from making any profit out of
• the loss. Insured cannot recover more than the actual loss.
Principle of indemnity arises under the common law.
Examples:
Buildings and Machinery: cost of replacement less
depreciation
Motor Insurance:
• In case of total or constructive total loss, insured declared
value is paid.
• In Partial losses: cost of repair/replacement less
depreciation. T.P. claims by order of the court.
Principle of Indemnity:
• Indemnity is not applicable in personal accident insurance
policy, as it is not possible to replace human life or limb.
Therefore Losses are paid as per the terms and conditions of
the policy.

LIMITATIOINS:

• S.I. is the maximum limit of liability

• Property insurances are subject to condition of average.
• Policy “Excess” / “Franchise” will be deducted from the
claim amount
• Salvage value will be deduced from the claim amount.
Principle of Subrogation:
• Subrogation means transfer of rights and remedies of the
insured to the insurer, who has indemnified the insured in
respect of the loss due to negligence of a third party.
EXAMPLE
• Mr. Raju sent goods by Railway goods carrier duly insuring the
goods. Due to negligence of the railways, the goods were
damaged. Under insurance policy insurance company pays the
loss to Mr. Raju and takes a subrogation letter from him
authorizing insurers to recover the loss from railways as the
loss occurred due to their negligence. Subrogation helps
Insurer to recover the loss from the negligent third party to
minimize the losses. It stops the insured to receive indemnity
from insurers and again from the third party – i.e. double
payment for single loss. Fire/Miscellaneous policies contain
express subrogation condition in the policy. Subrogation under
common law is implied in contracts of indemnity and arises only
after payment of loss.
Principle of Contribution:
If the property is insured with more than one company,
insured may make profit in case of a claim. Therefore, each
insurer contributes to the actual loss. The principle applied is
Sum insured by the insurer/total sum insured with all insurers
x actual loss.
EXAMPLE
Mr. Raju insured his motor cycle with three insurance
companies at Rs.60,000 each. It involved in an accident and
the loss is Rs.30000/-. If the insurers do not know the multiple
insurance of the same motor cycle, Mr. Raju receives
Rs.60000 thus making a profit of Rs.30000/- (actual loss is
Rs.30000/).
If it is known to the three insurance companies then each
company would pay Rs.10000/- and Mr.Raju receives only
Rs.30000 which is actual loss. i.e.Rs.30000/Rs.90000 x
Rs.30000 = Rs.10000/-. Subrogation and Contribution clause
does not arise in personal accident insurance policies, since
these are not contracts of strict indemnity. In case of several
insurances, Insurer pays only proportion of loss i.e.
contribution.
Principle of Proximate Cause:
Insurance pays the claim only if the loss occurs due to insured perils.
There is no liability for a loss caused by an uninsured peril or an
excluded peril. For example, If stocks are damaged due to fire, claim
is payable as fire is covered under file policy. But if stocks are stolen
under policy, the claim is not payable as theft is not covered under
the policy.
The clause says:
• Two or more causes, operating simultaneously or
• One after the other or
• Insured peril and excluded peril operate together.

In such cases it becomes necessary to choose the most dominant

and effective cause which has brought about the loss and whether
such cause is insured or not. This is called the ‘proximate cause’.
Proximate cause defined as the active efficient cause that sets in
motion a train of events which bring about a result, without the
intervention of any force started and working from a new and
independent source.
Examples:
An insured suffered injuries due to accident, and contacted
an infectious disease while undergoing treatment and died.
Court held the death is due to disease and is not payable
under personal accident policy since it is a remote cause.
A wall of the building affected by fire and during demolition
fell on an adjoining building and damaged it. The owner of
that building claimed the loss under fire policy. The court
held fire was the proximate cause and claim is payable.
In the practical side, there are a number od documents that
are necessary in the business processing of an insurance
contract. These include the following
Insurance Documentation
Proposal Form
The proposal form is the basis of insurance. Hence, proposal must
be filled very carefully. All material information must be truly
revealed in the application. Hence the applicant must see that he
fills the application himself.
1. Proposal form is an offer for obtaining insurance cover.
2. Proposal form provides material information, a declaration that
the answers given are true and
3. agreement of the insured that the proposal form shall be the
basis of contract of insurance.
4. The questions vary according to the particular class of insurance
concerned.
5. Proposal forms are required in Fire/motor/Accident insurances.
6. In Marine Cargo Insurance written proposal form is not
mandatory.
Proposal form contains information regarding:
1. Name of the Proposer/address/Occupation/sum insured.
2. Previous and present Insurances/ / past losses are common
in all proposal forms.
3. Other questions relate to signature, date and time of
proposal, Agent’s recommendations etc. 5. Declaration duly
signed.
Sales Material
Every agent has to carry with his set of proposal forms,
prospectuses, his licence to act as an agent and claim statistics
of his company showing excellent service rendered by his
company etc. This material adds to the confidence of the public
because insurance is an intangible product.
Premium Receipt
According to Section 64 VB of Insurance Act, 1938, no
insurer shall assume risk unless full premium is received
in advance or guaranteed to pay. Where the premium is
tendered by postal money order or cheque sent by post,
the risk may be assumed on the date on which the
money order is booked or the cheque is posted, as the
case may be.
Where an insurance agent collects a premium on a
policy of insurance on behalf of an insurer, he shall
deposit with, or dispatch by post to the insurer, the
premium so collected in full without deduction of his
commission within twenty-four hours of the collection
excluding bank and postal holiday. Once premium is
received in full, insurance company issues computer
generated premium receipt giving details of receipt
number, payee’s name and address, amount paid, type
of policy details, policy No. etc.. Once premium receipt is
issued, it is deemed the risk commences under the
policy.
Policy Forms
Insurance policy is the evidence of insurance contract. It is to be stamped according to Indian
Stamp Act, 1899.
A scheduled policy may be divided into certain distinct sections as under:
 Heading: Insurer’s name, address and address of their Registered Office are mentioned.
 Preamble or Recital Clause: Parties to the contract are mentioned.
 Operative or Insuring clause: The perils covered, when the insurers become liable to make
payment, the excluded perils, mode of settlement, Sum insured, limits of liability are specifically
mentioned.
 Schedule: It contains Policy No / Name of insured/address/business, agency code, sum insured,
property covered, period of Insurance, date of issue etc.
 Conditions: All policies contain express conditions to regulate the contract. These conditions can
be of various types such as:
- Conditions Precedent: Proposer has to disclosure of all material facts before the contract is
concluded.
- Conditions subsequent: Insured has to notify any alternations in the risk during currency of the
policy.
- Conditions precedent to liability: Notification of claim within a time limit prescribed in the policy.
Matters to be stated in General Insurance
Policy
A general insurance policy shall clearly state:
1. the name(s) and address(s) of the insured and of
any bank(s) or any other person having financial
interest in the subject matter of insurance, UIN of
the product, name, code number, contact details of
the person involved in sales process;
2. full description of the property or interest insured;
3. the location or locations of the property or interest
insured under the policy and, where appropriate,
with respective insured values;
4. period of Insurance;
5. sums insured;
6. perils covered and not covered;
7. any franchise or deductible applicable;
8. premium payable and where the premium is provisional
subject to adjustment, the basis of adjustment of premium be
stated;
9. policy terms, conditions and warranties, Exclusions, if any.
10. action to be taken by the insured upon occurrence of a
contingency likely to give rise to a claim under the policy;
11. 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;
12. any special conditions attaching to the policy;
13. the grounds for cancellation of the policy which in the
case of a retail policy, for the insurer, can be only on the
grounds of mis – representation, non-disclosure of material
facts, fraud or non co- operation of the insured
 Explanation: Products approved as retail policies under File
and Use guidelines notified by the Authority from time to
time fall within the purview of retail policy referred above.
Provided that in the case of Commercial policies alone,
other circumstances under which the policy may be
cancelled be given, along with the manner of calculation of
refund and notice period for cancellation.

14. the address of the insurer to which all communications in

respect of the insurance contract should be sent;
15. the details of the endorsements, add-on covers attaching
to the main policy;
16. that, on renewal, the benefits provided under the policy
and/or terms and conditions of the policy
17. including premium rate may be subject to change; and
18. details of insurer’s internal grievance redressal
mechanism along with address and contact
19. details of Insurance Ombudsman within whose territorial
jurisdiction the branch or office of the insurer or the
residential address or place of residence of the
policyholder is located.
Matters to be stated in a Health Insurance Policy:
A health insurance policy shall clearly state:
1. The name of the policyholder and the names of each
beneficiary covered, UIN of the product, name, code number,
contact details of the person involved in sales process;
2. Date of birth of the insured and corresponding age in
completed years;
3. The address of the insured;
4. The period of insurance and the date from which the
policyholder has been continuously obtaining health insurance
cover in India from any of the insurers without break;
5. The sums Insured;
6. The sub-limits, Proportionate Deductions and the existence of
Package rates if any, with cross reference to the concerned
policy section;
7. Co-pay limits if any;
8. The pre-existing disease (PED) waiting period, if applicable;
9. Specific waiting periods as applicable;
10. Deductible as applicable – general and specific, if any;
11. Cumulative Bonus, if any;
12. Periodicity of payment of premium instalment;
13. Policy period;
14. Policy terms, conditions, exclusions, warranties;
15. Action to be taken on the occurrence of a claim for cashless and
reimbursement options separately;
16. Details of TPA, if any engaged, their address, toll free number,
website details;
17. Details of Grievance Redressal mechanism of insurer;
18. Free look period facility and portability conditions;
19. Policy migration facility and conditions where applicable;
10. that, on renewal, the policy could be subject to certain changes in
terms and conditions including change in premium rate;
11. Provision for cancellation of the policy; and
12. Address and other contact details of Ombudsman within whose
territorial jurisdiction the branch or office of the insurer or the residential
address or place of residence of the policyholder is located.
General Principles Governing Issuance Of
General And Health Insurance Policies:
1. In stipulating the exclusions of the policy, insurers shall endeavour to classify the exclusions,
wherever possible as under:
• Standard exclusions applicable in all policies;
• Exclusions specific to the policy which cannot be waived;
• Exclusions specific to the policy, which can be waived on payment of additional premium.
2. The insurers may also endeavour to broadly categorize policy conditions into following, so as to
give clarity and understanding of the conditions to the policyholder:
• Conditions precedent to the contract;
• Conditions applicable during the contract;
• Conditions when a claim arises;
• Conditions for renewal of the contract.
3. Every insurer shall keep the insured informed on the requirements to be fulfilled regarding lodging
of a claim arising in terms of the policy and the procedures to be followed by him so as to settle claim
early.
Questions and answers
Based on training
Ques: When the party is interested in taking insurance he is given a ______ for completion and submission

Ans:
a. Proposal form
b. Policy
c. Claim form
d. Endorsement form

Ques: Proposer has to declare all ______ in the proposal and the insurer has to declare all benefits, exclusions etc. in the prospect/policy.

Ans:
a. Complete information
b. Material Facts
c. Important Facts
d. Basic Details

Ques: Obligation to disclose all material information about the subject matter of contract lies upon the ___________

Ans:
a. Insured
b. Insurer
c. Proposer
d. Agent
Ques: When the party is interested in taking insurance he is given a ______ for completion and submission

Ans:
a. Proposal form
b. Policy
c. Claim form
d. Endorsement form

Ques: Proposer has to declare all ______ in the proposal and the insurer has to declare all benefits, exclusions etc. in the prospect/policy.

Ans:
a. Complete information
b. Material Facts
c. Important Facts
d. Basic Details

Ques: Obligation to disclose all material information about the subject matter of contract lies upon the ___________

Ans:
a. Insured
b. Insurer
c. Proposer
d. Agent
Ques: When the party is interested in taking insurance he is given a ______ for completion and submission

Ans:
a. Proposal form
b. Policy
c. Claim form
d. Endorsement form

Ques: Proposer has to declare all ______ in the proposal and the insurer has to declare all benefits, exclusions etc. in the prospect/policy.

Ans:
a. Complete information
b. Material Facts
c. Important Facts
d. Basic Details

Ques: Obligation to disclose all material information about the subject matter of contract lies upon the ___________

Ans:
a. Insured
b. Insurer
c. Proposer
d. Agent
Ques: When the party is interested in taking insurance he is given a ______ for completion and submission

Ans:
a. Proposal form
b. Policy
c. Claim form
d. Endorsement form

Ques: Proposer has to declare all ______ in the proposal and the insurer has to declare all benefits, exclusions etc. in the prospect/policy.

Ans:
a. Complete information
b. Material Facts
c. Important Facts
d. Basic Details

Ques: Obligation to disclose all material information about the subject matter of contract lies upon the ___________

Ans:
a. Insured
b. Insurer
c. Proposer
d. Agent
Ques: When the party is interested in taking insurance he is given a ______ for completion and submission

Ans:
a. Proposal form
b. Policy
c. Claim form
d. Endorsement form

Ques: Proposer has to declare all ______ in the proposal and the insurer has to declare all benefits, exclusions etc. in the prospect/policy.

Ans:
a. Complete information
b. Material Facts
c. Important Facts
d. Basic Details

Ques: Obligation to disclose all material information about the subject matter of contract lies upon the ___________

Ans:
a. Insured
b. Insurer
c. Proposer
d. Agent
Ques: When the party is interested in taking insurance he is given a ______ for completion and submission

Ans:
a. Proposal form
b. Policy
c. Claim form
d. Endorsement form

Ques: Proposer has to declare all ______ in the proposal and the insurer has to declare all benefits, exclusions etc. in the prospect/policy.

Ans:
a. Complete information
b. Material Facts
c. Important Facts
d. Basic Details

Ques: Obligation to disclose all material information about the subject matter of contract lies upon the ___________

Ans:
a. Insured
b. Insurer
c. Proposer
d. Agent
Ques: Material information helps to decide proposal acceptance /_____________ / terms and conditions (by insurers)

Ans:
a. Claims acceptance
b. Endorsement acceptance
c. Renewals
d. Rate of premium

Ques: Policy becomes cancelled from inception if the proposer has obtained it _________

Ans:
a. Illegally
b. legitimately
c. Forcefully
d. Legally

Ques: Duty of disclosure of material information applies to __________

Ans:
a. Insured/ Insurer/ Nominee
b. Insured / agent / insurers
c. Assignee/Insurer/Agent
d. Nominee/Agent/Insured
Ques: Material information helps to decide proposal acceptance /_____________ / terms and conditions (by insurers)

Ans:
a. Claims acceptance
b. Endorsement acceptance
c. Renewals
d. Rate of premium

Ques: Policy becomes cancelled from inception if the proposer has obtained it _________

Ans:
a. Illegally
b. legitimately
c. Forcefully
d. Legally

Ques: Duty of disclosure of material information applies to __________

Ans:
a. Insured/ Insurer/ Nominee
b. Insured / agent / insurers
c. Assignee/Insurer/Agent
d. Nominee/Agent/Insured
Ques: Material information helps to decide proposal acceptance /_____________ / terms and conditions (by insurers)

Ans:
a. Claims acceptance
b. Endorsement acceptance
c. Renewals
d. Rate of premium

Ques: Policy becomes cancelled from inception if the proposer has obtained it _________

Ans:
a. Illegally
b. legitimately
c. Forcefully
d. Legally

Ques: Duty of disclosure of material information applies to __________

Ans:
a. Insured/ Insurer/ Nominee
b. Insured / agent / insurers
c. Assignee/Insurer/Agent
d. Nominee/Agent/Insured
Ques: Material information helps to decide proposal acceptance /_____________ / terms and conditions (by insurers)

Ans:
a. Claims acceptance
b. Endorsement acceptance
c. Renewals
d. Rate of premium

Ques: Policy becomes cancelled from inception if the proposer has obtained it _________

Ans:
a. Illegally
b. legitimately
c. Forcefully
d. Legally

Ques: Duty of disclosure of material information applies to __________

Ans:
a. Insured/ Insurer/ Nominee
b. Insured / agent / insurers
c. Assignee/Insurer/Agent
d. Nominee/Agent/Insured
Ques: Material information helps to decide proposal acceptance /_____________ / terms and conditions (by insurers)

Ans:
a. Claims acceptance
b. Endorsement acceptance
c. Renewals
d. Rate of premium

Ques: Policy becomes cancelled from inception if the proposer has obtained it _________

Ans:
a. Illegally
b. legitimately
c. Forcefully
d. Legally

Ques: Duty of disclosure of material information applies to __________

Ans:
a. Insured/ Insurer/ Nominee
b. Insured / agent / insurers
c. Assignee/Insurer/Agent
d. Nominee/Agent/Insured
Ques: Material information helps to decide proposal acceptance /_____________ / terms and conditions (by insurers)

Ans:
a. Claims acceptance
b. Endorsement acceptance
c. Renewals
d. Rate of premium

Ques: Policy becomes cancelled from inception if the proposer has obtained it _________

Ans:
a. Illegally
b. legitimately
c. Forcefully
d. Legally

Ques: Duty of disclosure of material information applies to __________

Ans:
a. Insured/ Insurer/ Nominee
b. Insured / agent / insurers
c. Assignee/Insurer/Agent
d. Nominee/Agent/Insured
Ques: The insured must bear legal relationship to the subject matter whereby he stands to benefit by the safety of the property and
stands to lose by its loss or damage. Therefore the legal right to insure is called ___________.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution

Ques: Indemnity is not applicable in ______________ policy, as it is not possible to replace human life or limb.

Ans:
a. Car Insurance
b. Health Insurance
c. Travel Insurance
d. Personal accident insurance

Ques: ____________ means transfer of rights and remedies of the insured to the insurer.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution
Ques: The insured must bear legal relationship to the subject matter whereby he stands to benefit by the safety of the property and
stands to lose by its loss or damage. Therefore the legal right to insure is called ___________.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution

Ques: Indemnity is not applicable in ______________ policy, as it is not possible to replace human life or limb.

Ans:
a. Car Insurance
b. Health Insurance
c. Travel Insurance
d. Personal accident insurance

Ques: ____________ means transfer of rights and remedies of the insured to the insurer.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution
Ques: The insured must bear legal relationship to the subject matter whereby he stands to benefit by the safety of the property and
stands to lose by its loss or damage. Therefore the legal right to insure is called ___________.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution

Ques: Indemnity is not applicable in ______________ policy, as it is not possible to replace human life or limb.

Ans:
a. Car Insurance
b. Health Insurance
c. Travel Insurance
d. Personal accident insurance

Ques: ____________ means transfer of rights and remedies of the insured to the insurer.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution
Ques: The insured must bear legal relationship to the subject matter whereby he stands to benefit by the safety of the property and
stands to lose by its loss or damage. Therefore the legal right to insure is called ___________.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution

Ques: Indemnity is not applicable in ______________ policy, as it is not possible to replace human life or limb.

Ans:
a. Car Insurance
b. Health Insurance
c. Travel Insurance
d. Personal accident insurance

Ques: ____________ means transfer of rights and remedies of the insured to the insurer.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution
Ques: The insured must bear legal relationship to the subject matter whereby he stands to benefit by the safety of the property and
stands to lose by its loss or damage. Therefore the legal right to insure is called ___________.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution

Ques: Indemnity is not applicable in ______________ policy, as it is not possible to replace human life or limb.

Ans:
a. Car Insurance
b. Health Insurance
c. Travel Insurance
d. Personal accident insurance

Ques: ____________ means transfer of rights and remedies of the insured to the insurer.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution
Ques: The insured must bear legal relationship to the subject matter whereby he stands to benefit by the safety of the property and
stands to lose by its loss or damage. Therefore the legal right to insure is called ___________.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution

Ques: Indemnity is not applicable in ______________ policy, as it is not possible to replace human life or limb.

Ans:
a. Car Insurance
b. Health Insurance
c. Travel Insurance
d. Personal accident insurance

Ques: ____________ means transfer of rights and remedies of the insured to the insurer.

Ans:
a. Insurable interest
b. Indemnity
c. Subrogation
d. Contribution
Ques: A wall of the building affected by fire and during demolition fell on an adjoining building and damaged it. The owner of that
building claimed the loss under _________.

Ans:
a. Fire Policy
b. Health Policy
c. Burglary Policy
d. Marine Policy

Ques: __________ shall be the basis of contract of insurance.

Ans:
a. Claim Form
b. Proposal form
c. Endorsement copy
d. Policy copy

Ques: According to _____________ of Insurance Act, 1938, no insurer shall assume risk unless full premium is received in advance or
guaranteed to pay.

Ans:
a. Section 45
b. Section 27 C
c. Section 64 VB
d. Section 41
Ques: A wall of the building affected by fire and during demolition fell on an adjoining building and damaged it. The owner of that
building claimed the loss under _________.

Ans:
a. Fire Policy
b. Health Policy
c. Burglary Policy
d. Marine Policy

Ques: __________ shall be the basis of contract of insurance.

Ans:
a. Claim Form
b. Proposal form
c. Endorsement copy
d. Policy copy

Ques: According to _____________ of Insurance Act, 1938, no insurer shall assume risk unless full premium is received in advance or
guaranteed to pay.

Ans:
a. Section 45
b. Section 27 C
c. Section 64 VB
d. Section 41
Ques: A wall of the building affected by fire and during demolition fell on an adjoining building and damaged it. The owner of that
building claimed the loss under _________.

Ans:
a. Fire Policy
b. Health Policy
c. Burglary Policy
d. Marine Policy

Ques: __________ shall be the basis of contract of insurance.

Ans:
a. Claim Form
b. Proposal form
c. Endorsement copy
d. Policy copy

Ques: According to _____________ of Insurance Act, 1938, no insurer shall assume risk unless full premium is received in advance or
guaranteed to pay.

Ans:
a. Section 45
b. Section 27 C
c. Section 64 VB
d. Section 41
Ques: A wall of the building affected by fire and during demolition fell on an adjoining building and damaged it. The owner of that
building claimed the loss under _________.

Ans:
a. Fire Policy
b. Health Policy
c. Burglary Policy
d. Marine Policy

Ques: __________ shall be the basis of contract of insurance.

Ans:
a. Claim Form
b. Proposal form
c. Endorsement copy
d. Policy copy

Ques: According to _____________ of Insurance Act, 1938, no insurer shall assume risk unless full premium is received in advance or
guaranteed to pay.

Ans:
a. Section 45
b. Section 27 C
c. Section 64 VB
d. Section 41
Ques: A wall of the building affected by fire and during demolition fell on an adjoining building and damaged it. The owner of that
building claimed the loss under _________.

Ans:
a. Fire Policy
b. Health Policy
c. Burglary Policy
d. Marine Policy

Ques: __________ shall be the basis of contract of insurance.

Ans:
a. Claim Form
b. Proposal form
c. Endorsement copy
d. Policy copy

Ques: According to _____________ of Insurance Act, 1938, no insurer shall assume risk unless full premium is received in advance or
guaranteed to pay.

Ans:
a. Section 45
b. Section 27 C
c. Section 64 VB
d. Section 41
Ques: A wall of the building affected by fire and during demolition fell on an adjoining building and damaged it. The owner of that
building claimed the loss under _________.

Ans:
a. Fire Policy
b. Health Policy
c. Burglary Policy
d. Marine Policy

Ques: __________ shall be the basis of contract of insurance.

Ans:
a. Claim Form
b. Proposal form
c. Endorsement copy
d. Policy copy

Ques: According to _____________ of Insurance Act, 1938, no insurer shall assume risk unless full premium is received in advance or
guaranteed to pay.

Ans:
a. Section 45
b. Section 27 C
c. Section 64 VB
d. Section 41
Principles and practices of
General Insurance- II
Warranties
Insurers like to ensure that the risk remains the same
throughout the currency of the policy and therefore
apply warranties. If a warranty is broken the contract
becomes voidable. (Whether contribute to the loss or
not). Examples
- Fire Insurance: Warranted that no hazardous goods
will be stored in the building insured during the currency
of the policy.
- Marine Insurance: Warranted that goods are packed
in double gunny bags.
- Burglary Insurance: Warranted that the premises are
guarded by a watchman at all times.
Endorsements
• An insurance endorsement is an
amendment or addition to an existing
insurance contract which changes the
terms or scope of the original policy.
• Endorsements may also be referred to
as riders.
• An insurance endorsement may be used
to add, delete, exclude or otherwise alter
coverage.
• Endorsements are passed to effect
alterations in the policy (e.g. change in
address).
• Endorsements can be passed at the
time of issue of policy or after issue of
policy.
Certificate of Insurance
• Certificate is the evidence of the insurance contract.
• This is the legal contract.
• In motor insurance in addition to the policy a certificate of insurance is required to be issued in
accordance to Form No.51 in terms of Rule 141 of Central Motor Vehicle Rules 1989.
• In Marine, Certificates of insurance are issued to provide evidence of cover on shipments insured
under Cargo open cover or floating policies.

Section 41 of Insurance Act

• This section speaks about Prohibition of rebates.— No person shall allow or offer any rebate of
whole or part of the commission payable in procuring insurance or in the renewal of insurance or
offer rebate of the premium shown on the policy.
• Violation of the above provision attracts with a punishment of Rs.500/-.
Revised Guidelines on Section 41
As per the revised guidelines, under Section 41 of the Insurance Act, 1938, as amended from time to
time:
1. No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person
to take out or renew or continue an insurance in respect of any kind of risk relating to lives or
property in India, any rebate of the whole or part of the commission payable or any rebate of the
premium shown on the Policy, nor shall any person taking out or renewing or continuing a Policy
accept any rebate, except such rebate as may be allowed in accordance with the published
prospectus or tables of the insurer:
2. Provided that acceptance by an insurance agent of commission in connection with a Policy of life
insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of
premium within the meaning of this sub-section if at the time of such acceptance the insurance
agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent
employed by the insurer.
3. Any person making default in complying with the provisions of this section shall be liable for a
penalty which may extend to ten lakh rupees.
Insurance Claims Management
• Insurance contract is a promise to indemnify the insured on the occurrence of the contingent event.
• Hence, claims processing is a very important function of the insurance company.
• However, the claims processing have various step to be followed such as
⮚ ▪Intimation of claim
⮚ ▪Appointment of Surveyor
⮚ ▪Survey Report
⮚ ▪Assessment of Loss
⮚ ▪Settlement of loss
⮚ ▪Discharge voucher
⮚ ▪ Payment of claim
• The Policy conditions provide that loss be intimated immediately.
• Immediate notice allow the insurers to enquire into loss at early stage.
• For example, under Burglary etc. policies, notice is to be given to Police. Under Rail Transit
Cargo policies, notice is given to Railways also.
• On receipt of claim intimation, insurer's check:

- That the policy in force as on the date of loss or damage

- Whether the loss or damage is caused by an insured peril
- Subject matter affected is one and the same
- There is no undue delay in intimation

• On satisfying with the above facts, a claim form is issued to the insured.
• Issue of claim form does not mean admission of liability.
• Therefore insurers serve the claim form ‘without prejudice’.
• All correspondence with the insured is also marked in the same way.
Claim Procedure In Respect of a General
Insurance Policy
The claim process in case of a general insurance is as follows:
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.
2.On receipt of such a communication, a general insurer shall respond immediately and give clear
information 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 do so immediately, in any case within 72 hours of the
receipt of intimation from the insured.
3. Insurer shall communicate the details of the appointment of surveyor, including the role, duties and
responsibilities of the surveyor to the insured by letter, email or any other electronic form
immediately after the appointment of the surveyor.
4. The insurer / surveyor shall within 7 days of the claim intimation, inform the insured / claimant of the
essential documents and other requirements that the claimant should submit in support of the claim.
Where documents are available in public domain or with a public authority, the surveyor/insurer
shall obtain them.
5. The surveyor shall start the survey immediately unless there is a contingency that delays immediate
survey, in any case within 48 hours of his appointment.
6. Interim report of the physical details of the loss shall be recorded and uploaded/forwarded to the
insurer within the shortest time but not later than 15 days from the date of first visit of the surveyor. A
copy of the interim report shall be furnished by the insurer to the insured/claimant, if he so desires.
7. 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 to the insured under information to the insurer about the consequent
delay that may result in the assessment of the claim.
8. It shall be the duty equally of the insurer and the surveyor to follow up with the insured for pending
information/documents guiding the insured with regard to submissions to be made. The insurer and/or
surveyor shall not call for any information/document that is not relevant for the claim.
9. The surveyor shall, subject to sub-regulation 4 above, submit his final report to the insurer within 30
days of his appointment. A copy of the surveyor’s report shall be furnished by the insurer to the
insured/claimant, if he so desires. Notwithstanding anything mentioned herein, in case of claims made
in respect of commercial and large risks the surveyor shall submit the final report to the insurer within
90 days of his appointment.
10. However, such claims shall be settled by the insurer within 30 days of receipt of final survey report
and/or the last relevant and necessary document as the case may be.
11. Where special circumstances exist in respect of a claim either due to its special / complicated
nature, or due to difficulties associated with replacement/reinstatement, the surveyor shall, seek an
extension from insurer for submission of his report. In such an event, the insurer shall give the status
to the insured/claimant fortnightly wherever warranted. The insurer may make provisional/ on account
payment based on the admitted claim liability.
12. 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/claimant; 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 final survey report.
13. Provided that the facility of calling for an additional report by the insurer shall not be resorted to
more than once in the case of a claim.
14. The surveyor, on receipt of this communication, shall furnish an additional report within three
weeks from the date of receipt of communication from the insurer.
15. On receipt of the final survey report or the additional survey report, as the case may be, and on
receipt of all required information/documents that are relevant and necessary for the claim, an insurer
shall, with in a period of 30 days offer a settlement of the claim to the insured/claimant. If the insurer,
for any reasons to be recorded in writing and communicated to the insured/claimant, decides to reject
a claim under the policy, it shall do so within a period of 30 days from the receipt of the final survey
report and/or additional information/documents or the additional survey report, as the case may be.
16. In case, the amount admitted is less than the amount claimed, then the insurer shall inform the
insured/claimant in writing about the basis of settlement in particular, where the claim is rejected, the
insurer shall give the reasons for the same in writing drawing reference to the specific terms and
conditions of the policy document.
17. In the event the claim is not settled within 30 days as stipulated above, the insurer shall be liable
to pay interest at a rate, which is 2% above the bank rate from the date of receipt of last relevant and
necessary document from the insured/claimant by insurer till the date of actual payment.
Claim Procedure In Respect of a Health
Insurance Policy
1. Every insurer shall adhere to the procedure laid down
under Insurance Regulatory and Development Authority
of India (Health Insurance) Regulations, 2016 for
settlement of health insurance claims.
- An Insurer shall settle the claim within 30 days from
the date of receipt of last necessary document in
accordance with the provisions of Regulation 27 of
IRDAI (Health Insurance) Regulations, 2016.
- In the case of delay in the payment of a claim, the
insurer shall be liable to pay interest from the date of
receipt of last necessary document to the date of
payment of claim at a rate 2% above the bank rate.
2. However, where the circumstances of a claim warrant
an investigation in the opinion of the insurer, it shall
initiate and complete such investigation at the earliest,
in any case not later than 30 days from the date of
receipt of last necessary document. In such cases,
Insurer shall settle the claim within 45 days from the
date of receipt of last necessary document.
3. In case of delay beyond stipulated 45 days the
Insurer shall be liable to pay interest at a rate 2%
above the bank rate from the date of receipt of last
necessary document to the date of payment of claim.
4. Return of premium on cancellation during Free Look
Period shall be processed in accordance with the
provisions of Regulation 14 of IRDAI (Health
Insurance) Regulations, 2016. Any refund shall be
processed with speed and shall be refunded within 15
days from the date of receipt of request for free look
cancellation.
Explanation: Health Insurance claims for the purpose
of this Regulation shall be claims arising under all
insurance policies issued by Life, General and Health
Insurers in respect of Health Insurance Business as
defined in Section 2 (6C) of the Act.
Investigation and Assessment
On receipt of completed claim form a Surveyor
(Licensed by IRDA) is appointed to investigate and
assess the loss. If the loss is small, loss is
assessed by an Officer of the insurers. In large
losses, independent licensed surveyor is
appointed. In addition to claim form, independent
survey reports etc. certain other documents are
required as mentioned below:

- Personal Accident Claim: Doctor’s report

specifying cause of accident, nature of illness,
duration of disablement is required.
- Workmen’s Compensation Claims: Medical
evidence is required.
- Livestock and Cattle Insurance claims:
Veterinary Doctor’s report is essential.
- Third party Claims: Medical record and opinion is
needed.
In Third Party Property Damage claims: Survey
Report is required.

- Fire claims - Fire Brigade report/Police report

- Cyclone claims – report of Meteorological
Department
- Burglary claims – FIR/final report
- Fatal Accidents – Post mortem report / police
report.
- Motor Claims –Driver License, Registration
Book, Permit, Police report etc.
- Cargo Claims – documents vary according to
type of loss
Settlement
• Once the claim is found admissible, insurers
obtain Discharge voucher duly signed by the
insured.
• The voucher states “received Rupees .........in
full and final discharge of the claim amount“.
• If the claim is found to be in order, payment is
made to the claimant.
• If property in a fire policy is mortgaged to
Bank, paid to Bank.
• If motor vehicle is financed, claim is paid to
Financiers.
• A Marine Cargo claim is paid to claimant who
produces the policy duly endorsed in his
favor.
Conclusion

• Thus, insurance is a legal contract based on trust

and faith.
• However, insurance must be documented with
proper documents as this is an intangible product.
• Further, this process of insurance is also complex
and all documents and attachments must be in
place, especially at the time of payment of a claim.
Questions and Answers
Based on training
Ques: If a warranty is broken the contract becomes _________.

Ans:
a. Voidable
b. Void
c. Cancelled
d. Rejected

Ques: An insurance__________ is an amendment or addition to an Existing insurance contract which changes the terms or scope of
the original policy.

Ans:
a. Cancellation
b. Endorsement
c. Changes
d. Renewal

Ques: In motor insurance in addition to the policy a __________ is required to be issued in accordance to Form No.51 in terms of
Rule 141 of Central Motor Vehicle Rules 1989.

Ans:
a. Proposal form
b. Claim form
c. Certificate of Insurance
d. Endorsement copy
Ques: If a warranty is broken the contract becomes _________.

Ans:
a. Voidable
b. Void
c. Cancelled
d. Rejected

Ques: An insurance__________ is an amendment or addition to an Existing insurance contract which changes the terms or scope of
the original policy.

Ans:
a. Cancellation
b. Endorsement
c. Changes
d. Renewal

Ques: In motor insurance in addition to the policy a __________ is required to be issued in accordance to Form No.51 in terms of
Rule 141 of Central Motor Vehicle Rules 1989.

Ans:
a. Proposal form
b. Claim form
c. Certificate of Insurance
d. Endorsement copy
Ques: If a warranty is broken the contract becomes _________.

Ans:
a. Voidable
b. Void
c. Cancelled
d. Rejected

Ques: An insurance__________ is an amendment or addition to an Existing insurance contract which changes the terms or scope of
the original policy.

Ans:
a. Cancellation
b. Endorsement
c. Changes
d. Renewal

Ques: In motor insurance in addition to the policy a __________ is required to be issued in accordance to Form No.51 in terms of
Rule 141 of Central Motor Vehicle Rules 1989.

Ans:
a. Proposal form
b. Claim form
c. Certificate of Insurance
d. Endorsement copy
Ques: If a warranty is broken the contract becomes _________.

Ans:
a. Voidable
b. Void
c. Cancelled
d. Rejected

Ques: An insurance__________ is an amendment or addition to an Existing insurance contract which changes the terms or scope of
the original policy.

Ans:
a. Cancellation
b. Endorsement
c. Changes
d. Renewal

Ques: In motor insurance in addition to the policy a __________ is required to be issued in accordance to Form No.51 in terms of
Rule 141 of Central Motor Vehicle Rules 1989.

Ans:
a. Proposal form
b. Claim form
c. Certificate of Insurance
d. Endorsement copy
Ques: If a warranty is broken the contract becomes _________.

Ans:
a. Voidable
b. Void
c. Cancelled
d. Rejected

Ques: An insurance__________ is an amendment or addition to an Existing insurance contract which changes the terms or scope of
the original policy.

Ans:
a. Cancellation
b. Endorsement
c. Changes
d. Renewal

Ques: In motor insurance in addition to the policy a __________ is required to be issued in accordance to Form No.51 in terms of
Rule 141 of Central Motor Vehicle Rules 1989.

Ans:
a. Proposal form
b. Claim form
c. Certificate of Insurance
d. Endorsement copy
Ques: If a warranty is broken the contract becomes _________.

Ans:
a. Voidable
b. Void
c. Cancelled
d. Rejected

Ques: An insurance__________ is an amendment or addition to an Existing insurance contract which changes the terms or scope of
the original policy.

Ans:
a. Cancellation
b. Endorsement
c. Changes
d. Renewal

Ques: In motor insurance in addition to the policy a __________ is required to be issued in accordance to Form No.51 in terms of
Rule 141 of Central Motor Vehicle Rules 1989.

Ans:
a. Proposal form
b. Claim form
c. Certificate of Insurance
d. Endorsement copy
Ques: An insured or the claimant shall give notice to the _________ of any loss arising under contract of insurance at the earliest or within
such extended time as may be allowed by the insurer.

Ans:
a. Broker
b. Agent
c. Corporate Agent
d. Insurer

Ques: The surveyor shall start the survey immediately unless there is a contingency that delays immediate survey, in any case within
_______ of his appointment.

Ans:
a. 48 hours
b. 24 hours
c. 72 hours
d. 1 month

Ques: Every insurer shall adhere to the procedure laid down under Insurance Regulatory and Development Authority of India (__________)
Regulations, 2016 for settlement of health insurance claims.

Ans:
a. Motor Insurance
b. Health Insurance
c. Life Insurance
d. General Insurance
Ques: An insured or the claimant shall give notice to the _________ of any loss arising under contract of insurance at the earliest or within
such extended time as may be allowed by the insurer.

Ans:
a. Broker
b. Agent
c. Corporate Agent
d. Insurer

Ques: The surveyor shall start the survey immediately unless there is a contingency that delays immediate survey, in any case within
_______ of his appointment.

Ans:
a. 48 hours
b. 24 hours
c. 72 hours
d. 1 month

Ques: Every insurer shall adhere to the procedure laid down under Insurance Regulatory and Development Authority of India (__________)
Regulations, 2016 for settlement of health insurance claims.

Ans:
a. Motor Insurance
b. Health Insurance
c. Life Insurance
d. General Insurance
Ques: An insured or the claimant shall give notice to the _________ of any loss arising under contract of insurance at the earliest or within
such extended time as may be allowed by the insurer.

Ans:
a. Broker
b. Agent
c. Corporate Agent
d. Insurer

Ques: The surveyor shall start the survey immediately unless there is a contingency that delays immediate survey, in any case within
_______ of his appointment.

Ans:
a. 48 hours
b. 24 hours
c. 72 hours
d. 1 month

Ques: Every insurer shall adhere to the procedure laid down under Insurance Regulatory and Development Authority of India (__________)
Regulations, 2016 for settlement of health insurance claims.

Ans:
a. Motor Insurance
b. Health Insurance
c. Life Insurance
d. General Insurance
Ques: An insured or the claimant shall give notice to the _________ of any loss arising under contract of insurance at the earliest or within
such extended time as may be allowed by the insurer.

Ans:
a. Broker
b. Agent
c. Corporate Agent
d. Insurer

Ques: The surveyor shall start the survey immediately unless there is a contingency that delays immediate survey, in any case within
_______ of his appointment.

Ans:
a. 48 hours
b. 24 hours
c. 72 hours
d. 1 month

Ques: Every insurer shall adhere to the procedure laid down under Insurance Regulatory and Development Authority of India (__________)
Regulations, 2016 for settlement of health insurance claims.

Ans:
a. Motor Insurance
b. Health Insurance
c. Life Insurance
d. General Insurance
Ques: An insured or the claimant shall give notice to the _________ of any loss arising under contract of insurance at the earliest or within
such extended time as may be allowed by the insurer.

Ans:
a. Broker
b. Agent
c. Corporate Agent
d. Insurer

Ques: The surveyor shall start the survey immediately unless there is a contingency that delays immediate survey, in any case within
_______ of his appointment.

Ans:
a. 48 hours
b. 24 hours
c. 72 hours
d. 1 month

Ques: Every insurer shall adhere to the procedure laid down under Insurance Regulatory and Development Authority of India (__________)
Regulations, 2016 for settlement of health insurance claims.

Ans:
a. Motor Insurance
b. Health Insurance
c. Life Insurance
d. General Insurance
Ques: An insured or the claimant shall give notice to the _________ of any loss arising under contract of insurance at the earliest or within
such extended time as may be allowed by the insurer.

Ans:
a. Broker
b. Agent
c. Corporate Agent
d. Insurer

Ques: The surveyor shall start the survey immediately unless there is a contingency that delays immediate survey, in any case within
_______ of his appointment.

Ans:
a. 48 hours
b. 24 hours
c. 72 hours
d. 1 month

Ques: Every insurer shall adhere to the procedure laid down under Insurance Regulatory and Development Authority of India (__________)
Regulations, 2016 for settlement of health insurance claims.

Ans:
a. Motor Insurance
b. Health Insurance
c. Life Insurance
d. General Insurance
Ques: On receipt of completed claim form a ___________ (Licensed by IRDA) is appointed to investigate and assess the loss.

Ans:
a. Agent
b. Broker
c. Surveyor
d. TPA

Ques: Once the claim is found admissible, insurers obtain ____________ duly signed by the insured.

Ans:
a. Claim form
b. Bill
c. Payment Receipt
d. Discharge voucher

Ques: If property in a fire policy is hypothecated to financial institution, then claim is paid to ______.

Ans:
a. Bank
b. Insured
c. Nominee
d. Assignee
Ques: On receipt of completed claim form a ___________ (Licensed by IRDA) is appointed to investigate and assess the loss.

Ans:
a. Agent
b. Broker
c. Surveyor
d. TPA

Ques: Once the claim is found admissible, insurers obtain ____________ duly signed by the insured.

Ans:
a. Claim form
b. Bill
c. Payment Receipt
d. Discharge voucher

Ques: If property in a fire policy is hypothecated to financial institution, then claim is paid to ______.

Ans:
a. Bank
b. Insured
c. Nominee
d. Assignee
Ques: On receipt of completed claim form a ___________ (Licensed by IRDA) is appointed to investigate and assess the loss.

Ans:
a. Agent
b. Broker
c. Surveyor
d. TPA

Ques: Once the claim is found admissible, insurers obtain ____________ duly signed by the insured.

Ans:
a. Claim form
b. Bill
c. Payment Receipt
d. Discharge voucher

Ques: If property in a fire policy is hypothecated to financial institution, then claim is paid to ______.

Ans:
a. Bank
b. Insured
c. Nominee
d. Assignee
Ques: On receipt of completed claim form a ___________ (Licensed by IRDA) is appointed to investigate and assess the loss.

Ans:
a. Agent
b. Broker
c. Surveyor
d. TPA

Ques: Once the claim is found admissible, insurers obtain ____________ duly signed by the insured.

Ans:
a. Claim form
b. Bill
c. Payment Receipt
d. Discharge voucher

Ques: If property in a fire policy is hypothecated to financial institution, then claim is paid to ______.

Ans:
a. Bank
b. Insured
c. Nominee
d. Assignee
Ques: On receipt of completed claim form a ___________ (Licensed by IRDA) is appointed to investigate and assess the loss.

Ans:
a. Agent
b. Broker
c. Surveyor
d. TPA

Ques: Once the claim is found admissible, insurers obtain ____________ duly signed by the insured.

Ans:
a. Claim form
b. Bill
c. Payment Receipt
d. Discharge voucher

Ques: If property in a fire policy is hypothecated to financial institution, then claim is paid to ______.

Ans:
a. Bank
b. Insured
c. Nominee
d. Assignee
Ques: On receipt of completed claim form a ___________ (Licensed by IRDA) is appointed to investigate and assess the loss.

Ans:
a. Agent
b. Broker
c. Surveyor
d. TPA

Ques: Once the claim is found admissible, insurers obtain ____________ duly signed by the insured.

Ans:
a. Claim form
b. Bill
c. Payment Receipt
d. Discharge voucher

Ques: If property in a fire policy is hypothecated to financial institution, then claim is paid to ______.

Ans:
a. Bank
b. Insured
c. Nominee
d. Assignee
DOCUMENTATION
INTRODUCTION

•In the insurance industry, we deal with a

large number of forms, documents etc. This
chapter takes us through the various
documents and their importance in an
insurance contract.

•It also gives an insight to the exact nature

of each form, how to fill it and the reasons
for calling specific information.
 Proposal forms

Acceptance of the proposal (underwriting)

Premium receipt

LEARNING Cover Notes / Certificate of Insurance / Policy Document

OUTCOMES Warranties

Endorsements

Interpretation of policies

Renewal notice
PROPOSAL FORMS

•The insurance documentation is provided for

the purpose of bringing understanding and
clarity between insured and insurer.

•There are certain documents that are

conventionally used in the insurance business.
The insurance agent, being the person closest
to the customer, has to face the customer and
clarify all doubts about the documents involved
and help her in filling them up.
 PROPOSAL FORMS

• The insurance company comes to know

the customer and her insurance needs
only from the documents that are
submitted by customer. They help the
insurer to understand the risk better.
• Agents should understand the purpose of
each document involved and the
importance and relevance of information
contained in the documents used in
insurance.
 PROPOSAL FORMS

The first stage of documentation is essentially the proposal

forms through which the insured informs:
• who she is,
• what kind of insurance she needs
• details of what she wants to insure, and for what
period of time

•Details would mean the monetary value of and all material

facts connected with the subject matter of insurance.
RISK ASSESSMENT BY INSURER
Proposal form is to be filled in by the proposer for
insurance, for furnishing all material information
required by the insurer in respect of a risk, in order
to enable the insurer to decide:
• whether to accept or decline and
• in the event of acceptance of the risk, to
determine the rates,
• terms and conditions of a cover to be granted
RISK ASSESSMENT BY INSURER
•Proposal form contains information which are useful for
the insurance company to accept the risk offered for
insurance. The principle of utmost good faith and the duty
of disclosure of material information begin with the
proposal form for insurance.

•The duty of disclosure of material information arises

prior to the inception of the policy, and continues even
after the conclusion of the contract.
EXAMPLE
• If the insured was required to maintain an alarm or
had stated that he has an automatic alarm system in
his gold jewelry showroom, then not only is he
required to disclose it, he has to ensure the same
remains in a working condition throughout the
policy period
• The existence of the alarm is a material fact for the
insurer who will be accepting the proposal based
on these facts and pricing the risk accordingly
EXAMPLE
• Proposal forms are printed by insurers usually with
the insurance company’s name, logo, address and
the class/type of insurance/product that it is used
for.
• It is customary for insurance companies to add a
printed note in the proposal form, though there is
no standard format or practice in this regard.
EXAMPLE
Some examples of such notes are:
•Non-disclosure of facts material to the assessment of
the risk, providing misleading information, fraud or
non-co-operation by the insured will nullify the cover
under the policy issued

•The company will not be on risk until the proposal has

been accepted by the Company and full premium paid.
MATERIAL FACTS
These are important, essential and relevant information for
underwriting of the risk to be covered by the insurer. In
other words, these are facts connected with the subject
matter of insurance which may influence an insurer’s
decision in the following:

• Accepting or not accepting a risk for insurance,

• Fixing the amount of premium to be charged, and
• including special provisions in the contract about the
conditions under which the risk would be covered
and how a loss would be payable
MATERIAL FACTS
Declaration in the proposal form: Insurance
companies usually add a declaration at the end of
the proposal form to be signed by the insurer. This
ensures that the insured has filled up the form
accurately and understood the facts given therein,
so that at the time of a claim there is no scope for
disagreements, on account of misrepresentation of
facts. This serves the main principle of utmost good
faith on the part of the insured.
EXAMPLE
Examples of such declarations are:

•I/We hereby declare and warrant that the above

statements are true and complete in all respects and
that there is no other information which is relevant to
the application for insurance that has not been
disclosed to you.

•I/We agree that this proposal and the declarations

shall be the basis of the contract between me/us and
(insurer’s name).
NATURE OF QUESTIONS
IN PROPOSAL FORM

The number and nature of questions in a

proposal form vary according to the class of
insurance concerned.

i. Fire insurance proposal forms are

usually used for relatively simple/standard
risks like houses, shops etc. For large
industrial risks, inspection of the risk is
arranged by insurer before acceptance of
the risk. Special questionnaire are
sometimes used in addition to the proposal
form to gather specific information.
NATURE OF QUESTIONS
IN PROPOSAL FORM

Fire insurance proposal form seeks, among

other things, the description of the property
which would include the following
information:
• Construction of external walls and
roof, number of story Occupation of
each portion of the building
• Presence of hazardous goods
• Process of manufacture
• The sums proposed for insurance
• The period of insurance, etc.
NATURE OF QUESTIONS IN
PROPOSAL FORM
ii. For motor insurance, questions are asked about the
vehicle, its operations, make and carrying capacity, how it is
managed by the owner and related insurance history.
iii. In personal lines like health, personal accident and
travel insurance, proposal forms are designed to get
information about the proposer’s health, way of life and
habits, pre-existing health conditions, medical history,
hereditary traits, past insurance experience etc.
iv. In other miscellaneous insurances, proposal forms
are compulsory and they incorporate a declaration which
extends the common law duty of good faith.
ELEMENTS OF PROPOSAL

i. Proposer‘s name in full

The proposer should be able to identify herself

unambiguously. It is important for the insurer to know with
whom the contract has been entered, so that the benefits
under the policy would be received only by the insured.
Establishing identity is important even in cases where
someone else may have acquired an interest in the risk
insured (like a mortgagee, bank or legal heirs in case of
death) and has to make a claim.
ELEMENTS OF PROPOSAL
ii. Proposer‘s address and contact details

The reasons stated above are applicable for collecting

the proposer’s address and contact details as well.

iii. Proposer‘s profession, occupation or business

In some cases like health and personal accident
insurance, the proposer’s profession, occupation or
business are of importance as they could have a material
bearing on the risk.
 ELEMENTS OF PROPOSAL
iv. Details and identity of the subject matter of insurance

The proposer is required to clearly state the subject matter that is

proposed for insurance.

Example
The proposer is required to state if it is:
A private car [with its identification like engine number, chassis number,
registration number] or
A residential house [with its full address and identification numbers] or
An overseas travel [by whom, when, to which country, for what
purpose]
A person’s health [with person’s name, address and identification] etc.
depending on the case
 EXAMPLE
v. Sum insured indicates limit of liability of the insurer
under the policy and has to be indicated in all proposal
forms.

A delivery man of a fast-food restaurant, who has to

frequently travel on motor bikes at a high speed to
deliver food to his customers, may be more exposed to
accidents than the accountant of the same restaurant.
EXAMPLE
•The proposer is required to inform the details about his
previous insurances to the insurer. This is to understand his
insurance history. In some markets there are systems by
which insurers confidentially share data about the insured.

•The proposer is also required to state whether any insurer

had declined his proposal, imposed special conditions,
required an increased premium at renewal or refused to
renew or cancelled the policy.
EXAMPLE
•Details of current insurance with any other insurer including the
names of the insurers are also required to be disclosed. Especially in
property insurance, there is a chance that insured may take policies
from different insurers and when a loss happens, claim from more
than one insurer.
•This information is required to ensure that the principle of
contribution is applied so that the insured is indemnified and does
not gain/profit due to multiple insurance policies for the same risk.
•Further, in personal accident insurance an insurer would like to
restrict the amount of coverage (sum insured) depending on the
sum insured under other PA policies taken by the same insured.
vii. Loss experience

The proposer is asked to declare full details of all losses suffered by

him/her, whether or not they were insured. This will give the insurer
information about the subject matter of insurance and how the
insured has managed the risk in the past. Underwriters can
understand the risk better from such answers and decide on
conducting risk inspections or collecting further details.

viii. Declaration by insured

As the purpose of the proposal form is to provide all material

information to the insurers, the form includes a declaration by the
insured that the answers are true and accurate and he agrees that
the form shall be the basis of the insurance contract. Any wrong
answer will give the right to insurers to avoid the contract. Other
sections common to all proposal forms relate to signature, date and
in some cases agent‘s recommendation.
ix. 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.
 • The intermediary has a responsibility towards
both parties i.e. insured and insurer
• An agent or a broker, who acts as the
intermediary between the insurance company
ROLE OF and the insured has the responsibility to
INTERMEDIARY ensure all material information about the risk
is provided by the insured to insurer.
• IRDA regulation provides that intermediary
has responsibility towards prospect.
 •IRDA regulation states that “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”
DUTY OF AN •“Where the prospect depends upon the advice of the
insurer or his agent or an insurance intermediary, such a
INTERMEDIARY person must advise the prospect dispassionately”
TOWARDS •“Where, for any reason, the proposal and other
connected papers are not filled by the prospect, a
PROSPECT 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.”
 We have seen that a completed proposal form
broadly gives the following information:

• Details of the insured

ACCEPTANCE OF • Details of the subject matter
PROPOSAL • Type of cover required
(UNDERWRITING) • Details of the physical features both
positive and negative - including type and
quality of construction, age, presence of
firefighting equipment, the type of security
etc.
 •The insurer may also arrange for pre-inspection
survey of the risk before acceptance, depending on
the nature and value of the risk. Based on the
information available in the proposal and in the risk
inspection report, additional questionnaire and other
documents, the insurer takes the decision.
PREVIOUS HISTORY
•The insurer then decides about the rate to be
OF INSURANCE applied to the risk factor and calculates the premium
AND LOSS based on various parameters, which is then conveyed
to the insured.

•Proposals are processed by the insurer with speed

and efficiency and all decisions thereof are
communicated by it in writing within a reasonable
period.
 DEFINITION -
UNDERWRITING
• Underwriting: As per guidelines, the
company has to process the proposal within
15 days‟ time. The agent is expected to keep
track of these timelines, follow up internally
and communicate with the prospect/insured
as and when required by way of customer
service.
• This entire process of scrutinizing the
proposal and deciding about acceptance is
known as underwriting
PREMIUM RECEIPT

•Premium is the consideration or

amount paid by the insured to the
insurer for insuring the subject matter of
insurance, under a contract of insurance.

•Payment of Premium in Advance

(Section-64 VB of Insurance Act,1938) As
per Insurance Act, premium is to be paid
in advance, before the inception date of
the insurance contract.
PREMIUM RECEIPT

• This is an important provision, which

ensures that only when the premium
is received by the insurance company,
a valid insurance contract can be
completed and the risk can be
assumed by the insurance company.
• This section is a special feature of
non-life insurance industry in India.
 • Section 64 VB of the Insurance Act-1938 provides
that no insurer shall assume any risk unless and
until the premium is received in advance or is
guaranteed to be paid or a deposit is made in
advance in the prescribed manner
IMPORTANT
• Where an insurance agent collects a premium on a
POINTS policy of insurance on behalf of an insurer, he shall
deposit with or dispatch by post to the insurer the
premium so collected in full without deduction of
his commission within twenty-four hours of the
collection excluding bank and postal holidays.
 • It is also provided that the risk may be assumed only from
the date on which the premium has been paid in cash or
by cheque.
• Where the premium is tendered by postal or money
order or cheque sent by post, the risk may be assumed
on the date on which the money order is booked or the
IMPORTANT cheque is posted as the case may be.
• Any refund of premium which may become due to an
POINTS insured on account of the cancellation of policy or
alteration in its terms and conditions or otherwise, shall
be paid by the insurer directly to the insured by a crossed
or order cheque or by postal/money order and a proper
receipt shall be obtained by the insurer from the insured,
and such refund shall in no case be credited to the
account of the agent.
 The premium to be paid by any person proposing to take an
insurance policy or by the policyholder to an insurer may be made in
any one or more of the following methods:
a) Cash
b) Any recognised banking negotiable instrument such as cheques,
demand drafts, pay order, banker’s cheques drawn on any scheduled
bank in India;
METHODS c) Postal money order;

OF PAYMENT d) Credit or debit cards;

e) Bank guarantee or cash deposit;
OF PREMIUM f) Internet;
g) E-transfer
h) Direct credits via standing instruction of proposer or the
policyholder or the life insured through bank transfers;
i) Any other method or payment as may be approved by the
Authority from time to time;
 •After underwriting is completed it may take some time
before the policy is issued.
CERTIFICATE
•Pending the preparation of the policy or when the
OF negotiations for insurance are in progress and it is
INSURANCE necessary to provide cover on a provisional basis or
when the premises are being inspected for determining
/POLICY the actual rate applicable, a cover note is issued to
DOCUMENT confirm protection under the policy. It gives description
of cover. Sometimes, insurers issue a letter confirming the
provisional insurance cover instead of a cover note.
CERTIFICATE OF INSURANCE / POLICY DOCUMENT

Although the cover note is not stamped, the wording of

the cover note makes it clear that it is subject to the
usual terms and conditions of the insurers' policy for the
class of insurance concerned. If the risk is governed by
any warranties, then the cover note would state that the
insurance is subject to such warranties. The cover note is
also made subject to special clauses, if applicable e.g.
Agreed Bank Clause, Declaration Clause etc.
 A cover note would incorporate the following:

a) Name and address of insured

b) Sum insured
c) Period of insurance
d) Risk covered
COVER e) Rate and premium: if rate is not known, the provisional premium
NOTES f) Description of the risk covered: for example a fire cover note
would indicate identification particulars of the building, its
construction and occupancy.
g) Serial number of the cover note
h) Date of issue
i) Validity of cover note is usually for a period of a fortnight and
rarely up to 60 days
 •These are normally issued when details required for the
issue of policy such as name of the steamer, number of
packages, or exact value etc. are not known. Even in
respect of exports, a cover note may be issued e.g. a
certain quantity of cargo meant for shipment is sent by
the exporter to the docks.
MARINE
COVER • It may happen that, owing to difficulty of securing
adequate shipping space, shipment of the cargo by the
NOTES intended vessel does not take place. The quantity
therefore, that may be sent by a particular vessel cannot
be known. In the circumstances, a cover note may be
required which is to be followed subsequently by the
issue of regular policy when full details are available and
made known to the insurance company.
 As requested you are hereby held covered subject to
usual conditions of the company's policy to the extent of
Rs. ___________

a) Clauses: Institute Cargo Clauses A, B or C

including War SRCC risks as per Institute Clauses, but
MARINE subject to 7 days’ notice of cancellation.
COVER b) Conditions: Details of shipment to be supplied on
receipt of shipping documents for issue of policy. In the
NOTES event of loss or damage prior to declaration and / or
shipment on board the steamer, it is hereby agreed
that the basis of valuation shall be prime cost of the
goods plus charges actually incurred and for which the
assured is liable.
 MOTOR COVER NOTES
These are to be issued in the form prescribed by the respective companies the operative
clause of a motor cover note may read as follows:
“The insured described in the form, referred to below, having proposed for insurance in
respect of the Motor Vehicle(s) described therein and having paid the sum of Rs....as
premium the risk is hereby held covered under the terms of the company’s usual form
of......Policy applicable thereto (subject to any Special Conditions mentioned below) unless
the cover be terminated by the Company by notice in writing in which case the insurance
will thereupon cease and a proportionate part of the premium otherwise payable for such
insurance will be charged for the time the company had been on risk.”
c) Effective date and time of commencement of insurance for the purpose of the Act.
Time...... Date......
d) Date of expiry of insurance
e) Persons or classes of persons entitled to drive
f) Limitations as to use
g) Additional risks, if any
MOTOR COVER NOTES
The Motor Cover Note incorporates a certificate to the effect that it is issued in accordance with
the provisions of Chapters X and XI of the Motor Vehicles Act, 1988.

The Motor Cover Note generally contains the following particulars:

• Marine Cover Note Number

• Date of issue
• Name of the insured
• Valid up to

With regard to inland transit normally all relevant data required for issue of policy are available and
therefore a cover note is rarely required. There may however, be some occasions when cover notes
are issued and substituted later on by policies containing full description of the cargo, transit etc.
● Registration mark and number, or description of the vehicles insured/cubic capacity/carrying
capacity/make/year of manufacture, engine number, chassis number
● Name and address of the insured
CERTIFICATE OF INSURANCE – MOTOR
INSURANCE

This certificate provides

For instance in motor
evidence of insurance to the
A certificate of insurance insurance, in addition to the
Police and Registration
provides existence of policy, a certificate of
Authorities. A specimen
insurance in cases where insurance is issued as
certificate for private cars is
proof may be required. required by the Motor
reproduced below, showing
Vehicles Act.
salient features.
 A general insurance policy usually contains:

• The name(s) and address(es) of the insured and any other

person having insurable interest in the subject matter;
• Full description of the property or interest insured;
POLICY • The location/s of the property or interest insured under
the policy and
DOCUMENT where appropriate, with respective insured values;
• Period of insurance;
• Sums insured;
• Perils covered and exclusions;
• Any excess/deductible applicable;
• Premium payable and where the premium is provisional
subject to adjustment, the basis of adjustment of premium;
 • Policy terms, conditions and warranties;
• Action to be taken by the insured upon occurrence of a
contingency
likely to give rise to a claim under the policy;
• 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;
• Any special conditions;
POLICY • Provision for cancellation of the policy on grounds of
misrepresentation,
DOCUMENT fraud, non-disclosure of material facts or non-cooperation of the
insured;
• The address of the insurer to which all communications in
respect of the
policy should be sent;
• The details of the riders if any;
• Details of grievance redressal mechanism and address of
ombudsman
 •Warranties are used in an insurance contract to limit the liability of the
insurer under a contract. Insurers incorporate appropriate warranties to
reduce the hazard. With a warranty, one party to the insurance contract, the
insured, undertakes certain obligations that need to be complied within a
certain period of time and the liability of the insurer depends on the insured’s
compliance with these obligations. Warranties play an essential role in
managing and improving the risk.

•A warranty is a condition expressly stated in the policy which has to be

literally complied with for validity of the contract. Warranty is not a separate
WARRANTIES document. It is part of both cover notes and policy document. It is a condition
precedent to the contract. It must be observed and complied with strictly and
literally, irrespective of the fact whether it is material to the risk or not. If a
warranty is breached, the policy becomes voidable at the option of the
insurers even when it is clearly established that the breach has not caused or
contributed to a particular loss. However, in practice, if the breach of warranty
is of a purely technical nature and does not, in any way, contribute to or
aggravate the loss, (losses can be treated as non-standard claims and settled)
insurers at their discretion may process the claims according to norms and
guidelines as per company policy.
 1. Fire Insurances warranties are as given below
•Warranted, that no hazards goods shall be stored in the insured premises during
the currency of policy.
•Silent Risk: Warranted that no manufacturing activity is carried out in the
insured premises for consecutive period of 30 days or more.
•Cigarette Filter Manufacturing: Warranted that no solvents having flash point
below 300C are used/stored in the premises

2. In Marine Insurance, a warranty is defined as follows: “a promissory warranty,

WARRANTIES there is to say, a warranty by which the assured undertake that some particular
thing shall or shall not be done, or that some condition will be fulfilled, or
whereby he affirms or negatives the existence of a particular state of facts”.
•In Marine Cargo Insurance, a warranty is inserted to the effect that goods (e.g.
tea) are packed in tin-lined cases. In Marine Hull insurance by inserting a warranty
that the insured vessel will not navigate in a certain area, gives an idea to the
insurer about the extent of risk he has agreed to provide cover for. If the
warranty is breached, the risk agreed to initially is altered and the insurer is
allowed to discharge himself from further liability from the date of breach
 •It is the practice of insurers to issue policies in a standard form; covering certain
perils and excluding certain others.
•If certain terms and conditions of the policy need to be modified at the time of
issuance, it is done by setting out the amendments/changes through a document
called endorsement.
•It is attached to the policy and forms part of it. The policy and the endorsement
together constitute the evidence of the contract. Endorsements may also be
issued during the currency of the policy to record changes/ amendments.

Endorsements normally required under a policy related to:

ENDORSEMENTS
a) Variations/changes in sum insured

• Change of insurable interest by way of sale, mortgage, etc.

• Extension of insurance to cover additional perils / extension of policy
period
• Change in risk, e.g. change of construction, or occupancy of the building in
fire insurance
• Transfer of property to another location
• Cancellation of insurance
INTERPRETATION OF POLICIES
Interpretation of policies

• Contracts of insurance are expressed in writing and the insurance

policy wordings are drafted by insurers. These policies have to be
interpreted according to certain well-defined rules of construction or
interpretation which have been established by various courts.

• The most important rule of construction is that the intention of the

parties must prevail and this intention is to be looked for in the policy
itself. If the policy is issued in an ambiguous manner, it will be
interpreted by the courts in favour of the insured and against the
insurer on the general principle that the policy was drafted by the
latter.
INTERPRETATION OF POLICIES
Policy wordings are understood and interpreted as per the following rules:

a) An express condition overrides an implied condition except where there is

inconsistency in doing so.
b) In the event of a contradiction in terms between the standard printed policy
form and the typed or handwritten parts, the typed or handwritten part is
deemed to express the intention of the parties in the particular contract, and
their meaning will overrule those of the original printed words.
c) If an endorsement contradicts other parts of the contract the meaning of the
endorsement will prevail as it is the later document.
d) Clauses in italics over-ride the ordinary printed wording where they are
inconsistent.
INTERPRETATION OF POLICIES
e) Clauses printed or typed in the margin of the policy are to be
given more importance than the wording within the body of the
policy.
f) Clauses attached or pasted to the policy override both marginal
clauses and the clauses in the body of the policy.
g) Printed wording is over-ridden by typewritten wording or
wording impressed by an inked rubber stamp.
h) Handwriting takes precedence over typed or impressed wording.
i) Finally, the ordinary rules of grammar and punctuation are applied
if there is any ambiguity or lack of clarity.
IMPORTANT POINTS
Construction of policies

•An insurance policy is evidence of a commercial contract and the

general rules of construction and interpretation adopted by courts
apply to insurance contracts as in the case of other contracts.
•The principal rule of construction is that the intention of the parties
of the contract must prevail, that intention must be gathered from the
policy document itself and the proposal form, clauses, endorsements,
warranties etc. attached to it and forming a part of the contract.
IMPORTANT POINTS
Meaning of wordings
•The words used are to be construed in their ordinary and popular sense. The meaning to
be used for words is the meaning that the ordinary man in the street would construe.
Thus, fireǁ means flame or actual burning.

•On the other hand, words which have a common business or trade meaning will be
construed with that meaning unless the context of the sentence indicates otherwise.
Where words are defined by statute, the meaning of that definition will be used, such as
“theft” as in the Indian Penal Code.

•Many words used in insurance policies have been the subject of previous legal decisions
and those decisions of a higher court will be binding on a lower court decision. Technical
terms must always be given their technical meaning, unless there is an indication to the
contrary.
SUMMARY
a) The first stage of documentation is essentially the proposal
forms through which the insured informs about herself
b) The duty of disclosure of material information arises prior to
the inception of the policy, and continues even after the
conclusion of the contract
c) Insurance companies usually add a declaration at the end of
the Proposal form to be signed by the insurer
• Previous and present insurance
• Loss experience
• Declaration by the insured
SUMMARY
d) Elements of a proposal form include:

• Proposer’s name in full

• Proposer’s address and contact details
• Proposer’s profession, occupation or business
• Details and identity of the subject matter of
insurance
• Sum insured
SUMMARY
e) An agent, who acts as the intermediary, has the
responsibility to ensure all material information about the risk
is provided by the insured to insurer.

f) The process of scrutinizing the proposal and deciding about

acceptance is known as underwriting.

g) Premium is the consideration or amount paid by the

insured to the insurer for insuring the subject matter of
insurance, under a contract of insurance.
SUMMARY
h) Payment of premium can be made by cash, any recognised
banking negotiable instrument, postal money order, credit or debit
card, internet, e- transfer, direct credit or any other method
approved by authority from time to time.
i) A cover note is issued when preparation of policy is pending or
when negotiations for insurance are in progress and it is necessary
to provide insurance cover on provisional basis.
j) Cover notes are used predominantly in marine and motor classes
of business.
k) A certificate of insurance provides existence of insurance in cases
where proof may be required
SUMMARY
l) The policy is a formal document which provides an evidence of
the contract of insurance.
m) A warranty is a condition expressly stated in the policy which
has to be literally complied with for validity of the contract.

n) If certain terms and conditions of the policy need to be modified

at the time of issuance, it is done by setting out the amendments /
changes through a document called endorsement.

o) The most important rule of construction is that the intention of

the parties must prevail and this intention is to be looked for in the
policy itself.
QUESTIONS AND ANSWERS

Question 1
__________ is the maximum limit of liability of insurer under the policy

● Sum insured
● Premium
● Surrender value
● Amount of loss
QUESTIONS AND ANSWERS

Question 1
__________ is the maximum limit of liability of insurer under the policy

● Sum insured
● Premium
● Surrender value
● Amount of loss
QUESTIONS AND ANSWERS

Question 2
_______________ is the consideration or price paid by insured under a contract

● Claim amount
● Surrender value
● Maturity amount
● Premium
QUESTIONS AND ANSWERS

Question 2
_______________ is the consideration or price paid by insured under a contract

● Claim amount
● Surrender value
● Maturity amount
● Premium
QUESTIONS AND ANSWERS
Question 3

A document which provides an evidence of contract of insurance is called________

● Policy
● Cover note
● Endorsement
● Certificate of insurance
QUESTIONS AND ANSWERS
Question 3

A document which provides an evidence of contract of insurance is called________

● Policy
● Cover note
● Endorsement
● Certificate of insurance
QUESTIONS AND ANSWERS

Question 4

The duty of disclosure arises

● Prior to inception of the policy

● After inception of the policy
● Prior to inception and continues during the policy
● There is no such duty
QUESTIONS AND ANSWERS
Question 4

The duty of disclosure arises

● Prior to inception of the policy

● After inception of the policy
● Prior to inception and continues during the policy
● There is no such duty
QUESTIONS AND ANSWERS
Question 5

Material fact

● Is the value of all material covered in a policy

● Not important for assessing the risk
● Is important as it influences the decision of the underwriter
● Is not important as it has no bearing on the decision of the underwriter
QUESTIONS AND ANSWERS
Question 5

Material fact

● Is the value of all material covered in a policy

● Not important for assessing the risk
● Is important as it influences the decision of the underwriter
● Is not important as it has no bearing on the decision of the underwriter
QUESTIONS AND ANSWERS

Question 6

Fire proposal seeks to know

● Process of manufacture
● Details of material stored
● Construction of building
● All the above
QUESTIONS AND ANSWERS
Question 6

Fire proposal seeks to know

● Process of manufacture
● Details of material stored
● Construction of building
● All the above
QUESTIONS AND ANSWERS

Question 7

Premium cannot be received

● In cash
● By cheque
● By promissory note
● By credit card
QUESTIONS AND ANSWERS

Question 7

Premium cannot be received

● In cash
● By cheque
● By promissory note
● By credit card
QUESTIONS AND ANSWERS

Question 8

The certificate of Motor Insurance

● Is not mandatory
● Has to be kept with self always
● Has to be kept in the car always
● Has to be kept in the bank locker
QUESTIONS AND ANSWERS

Question 8

The certificate of Motor Insurance

● Is not mandatory
● Has to be kept with self always
● Has to be kept in the car always
● Has to be kept in the bank locker
QUESTIONS AND ANSWERS

Question 9

A warranty

● Is a condition expressly stated in the policy

● Has to be complied with
● Both a and b
● None of the above
QUESTIONS AND ANSWERS

Question 9

A warranty

● Is a condition expressly stated in the policy

● Has to be complied with
● Both a and b
● None of the above
QUESTIONS AND ANSWERS

Question 10

Renewal Notice for Motor insurance is issued by _____________

● The Insured before expiry of the policy

● The Insurer before expiry of the policy
● The Insured after expiry of the policy
● The Insurer after expiry of the policy
QUESTIONS AND ANSWERS

Question 10

Renewal Notice for Motor insurance is issued by ____________

● The Insured before expiry of the policy

● The Insurer before expiry of the policy
● The Insured after expiry of the policy
● The Insurer after expiry of the policy
THANK YOU
Miscellaneous I- Life Insurance
Introduction
• Since Insurance is the subject matter of solicitation”.
• In simple words it means, that insurance is advisory
in nature.
• Nobody should be forced to buy insurance policies.
• This is a social contract based in mutual truest and
faith.
• This phrase, which is found in all insurance
advertisements in India, was mandated by IRDA,
and it means basically that: “insurance is the product
that is being sold by this advertisement, and not
anything else.”
• The intention is to prevent advertisements from
being misleading, and trying to trick consumers into
buying insurance while advertising something else.
• This module covers all the other miscellaneous
issues that a POSP should know for better policy
servicing and marketing. “
5.2 Anti – Money Laundering (AML) & Know Your Customer
(KYC) norms
Money laundering means turning dirty money into clean
money. Criminals conceal the origin or ownership by
concealing wherefrom the money has com. They move the
money to a place where the money attract less attention.
It is of three types:
• a) Launderer purchases treasures, monetary documents with
the illegal money. Or deposit the money in various financial
institutions every day.
• b) Launderer places dirty money in a foreign country
bank-later he ensures the money in transferred
• in his bank account in another country. He takes a loan on
the deposit and make dirty money into
• white money
c) Launderer utilizes the laundered money for the purpose it
was actually laundered after the dirty
• money reenters the legitimate economy.
In insurance, single premium products, Unit linked products,
features like top-ups, partial withdrawals, and free look
period are the sources of money laundering. Premium
around Rs. 1 Lakh need due diligence. Suspicious activities
in insurance also include:
1) Reluctance to provide identification/ or providing fictitious
information
2) Frequent requests for change of address etc.
3) Unreasonable requests for free-look cancellations
4) Assignment to unrelated parties without valid
consideration
5) Unusual termination of policies and refunds
6) Overpayment of premium and seek refund after a while.
• Because money laundering is the weapon of
terrorists every care is taken by all the financial
institutions.
• IRDA issued strict guidelines to see the
insurance products are not used unlawfully to
finance terrorist activities.
• Accordingly, governments and international
authorities implement a range of AML insurance
regulations and issue life insurance sanctions
lists.
• With compliance penalties including fines and
prison terms,, life insurance firms should ensure
they understand their obligations and how to
implement them as part of their AML insurance
policy.
Ex: A person takes a personal accident policy for
Rs.10 crore say paying Rs.1 lakh as premium by
cash (dirty money). After few days he cancels the
policy take a refund so that the dirty money can be
converted into clean money.
Know your customer (KYC) NORMS

Criminals attempt to use financial services with

dubious identity and vanish once their purpose
is served. AML requires true identity of
customers – like clear identification of the
customer, address, photograph, financial status,
purpose of taking an insurance policy. Under
KYC, the risk profile of the customer is studied
as shown below:
a) Salaried employees, BPL persons,
Government employees etc. pose low risk
b) Non-residents, high net worth people, trusts,
charities, NGOs and organizations receiving
donations, politically exposed persons fall under
high risk category
Know your customer (KYC) NORMS- II

20,000/-

Rs.20,0000
Do's and Don'ts for POS Persons
DO’S:
1) Carry stock of proposal forms, prospectuses, rating schedules with you.
2) Keep Adhar and Pan Nos. with you.
3) Be honest in your job / express sincere interest in the client.
4) Respect other’s time – be timely in contacting the customer
5) Be professional – i.e. explain risk factors, benefits etc. clearly to the client
6) Plan your schedule of clients to be met every day.
7) Have firsthand knowledge of the products you sell, terms, conditions and exclusions.
8) Whether the client takes policy or not, try to leave good and favorable impression in the mind the
client so that he may contact you in future.
9) Be a good listener. Be able to deal with rejection.
Do's and Don'ts for POS Persons
DON’TS:
1) Do not be late in contacting the clients
2) Do not be outrageous or speak loudly
3) Do not dump your ideas on the client
4) Do not be ambiguous in answering the client. If you do not know the answer, tell him he will come
back with correct answer, but do not give wrong answers.
5) Do not get dejected when the client rejects the insurance.
6) Do not be overactive and give different unpleasant gestures.
7) Do not be shabby in your dress.
Grievance Redressal Mechanism
• Insurance is a social contract based on trust and
faith.
• This means that the people who buy insurance
completely have faith in the person who is selling
insurance.
• The insurance company should deal with all
complaint within 15 days.
• If that does not happen or if policyholder is
unhappy with the solution he can: Approach the
Grievance Redressal Cell of the Consumer
Affairs Department of IRDA
• In case the policyholder has any complaints,
IRDAI has instituted a mechanism called as
IGMS for redressal of such consumer complaints
at the earliest as explain below:
Integrated Grievance Management System (IGMS)
• It is a central repository of insurance grievance data
launched by Insurance Regulatory and
• Development Authority as a tool for monitoring grievance
redress in the insurance industry.
• It is a centralized and online access to register complaints.
Policyholders can register their claims on this system with
their policy details.
• IRDA has access to the data. IRDA forwards the complaints
to respective insurance companies. IRDA maintains a track
on the complaints and the time taken by the insurers in
redressing the complaints.
• Complaints can be registered at
http://www.policyholder.gov.in/Integrated Grievance
Management.aspx.
Grievance Redressal Procedure

1. A complainant who wishes to make a complaint against

insurer, intermediary, insurance intermediary, distribution
channel or other regulated entities involved in insurance
sales and services shall approach the respective
grievance redressal officer of insurer. In case either
grievance redressal officer of insurer does not respond or
the resolution provided by him is not to the satisfaction of
the complainant he may register a complaint in grievance
redressal management system of the Authority. The
Authority facilitates re-examination of the complaint so as
to provide final resolution by insurer.
2. Every insurer shall have in place an effective grievance
redressal procedure to address complaints of
policyholders efficiently and with speed and communicate
the action taken by the insurer on the complaint to the
complainant along with the information in respect of
Insurance Ombudsman as may be necessary.
3. Grievance Redressal Officer
⮚ Every insurer shall have a designated Grievance
Redressal Officer (GRO) of a senior level at the
corporate office. The GRO at the corporate office will
be the contact person for the Authority.
⮚ Every other office of the insurer shall also have a
designated Grievance Officer who shall be head of that
office. The details of the GRO/designated Grievance
Officer along with the contact details in full shall be
published in the website of the insurer and the name
and contact details of designated Grievance Officer of
respective office and the other Grievance Officers in
hierarchy up to GRO at corporate office shall also be
displayed in the notice board of respective offices.
⮚ Every office of the insurer shall also display in
prominent place, the name, address and other contact
details of the insurance ombudsman within whose
jurisdiction the office falls.
4. Grievance Redressal System/Procedure:
⮚ Every insurer shall have a system including IT systems
and a procedure for receiving, registering and disposing
of grievances in each of its offices. Every insurer shall
publicize its grievance redressal procedure and ensure
that it is specifically made available on its website.
⮚ All insurers shall necessarily form part of the Integrated
Grievance Management System (IGMS) put in place by
the Authority to facilitate the registering/ tracking of
complaint on-line by the policyholders. The Insurer’s
system, shall involve, mirroring of the Grievance
database, of Insurers with IGMS and shall also facilitate
analysis of complaints, mitigation, improvement of
processes and system, through constant review.
⮚ Insurers shall also have in place system to receive and
deal with all kinds of calls including voice/e-mail,
relating to grievances, from prospects and
policyholders. The system shall enable and facilitate the
required interfacing with the Authority’s system of
handling calls/e-mails
5. Closure of complaint/grievance:
⮚ A complaint shall be considered as disposed of and
closed when a. The insurer has acceded to the
request of the complainant fully (or) b. Where the
complainant has indicated in writing, acceptance of
the response of the insurer. (or) c. Where the
complainant has not responded to the insurer within 8
weeks of the insurer’s written response.
⮚ Where the grievance is not resolved in favour of the
policyholder or partially resolved in favour of the
policyholder, the insurer shall inform the complainant
of the option to take up the matter before insurance
ombudsman giving details of the name and address of
the Ombudsman of competent jurisdiction.
The Consumer Protection Act, 1986:
• This Act was passed “to provide for better
protection of the interest of consumers and to make
provision for the establishment of consumer
councils and other authorities for the settlement of
consumer’s disputes.
• Insurance is considered as a service organization
and hence comes under he purview of Consumer
protection act.
• “Consumer” means any person who buys goods
and services for his benefit.
• One who buys goods for resale is not a consumer.
• 'Defect' means any fault in quality and service of
the goods a bought.
A complaint can be filed before a consumer forum if:
⮚ The goods purchased are defective
⮚ Deficiency in service is there
⮚ The price charged is in excess of that fixed by
law or displayed on package.

'Consumer dispute' means a dispute where the

person against whom a complaint has been made,
denies and disputes the allegations contained in the
complaint
 The Consumer Protection Bill, 2018
• The Consumer Protection Bill, 2018 which seeks to replace the
long existing Consumer
• Protection Act of 1986 was passed by the Lok Sabha on December
20, 2018 and now it awaits Rajya Sabha's approval.
• The Bill replaces the Consumer Protection Act, 1986.
• The Bill enforces consumer rights, and provides a mechanism for
redressal of complaints regarding defect in goods and deficiency in
services.
• As per the new bill, the Consumer Disputes Redressal
Commissions will be set up at the District, State and National levels
for adjudicating consumer complaints. Appeals from the District and
State Commissions will be heard at the next level and from the
National Commission by the Supreme Court. The Bill also proposes
to sets up a Central Consumer Protection Authority to promote,
protect and enforce consumer rights as a class. It can issue safety
notices for goods and services, order refunds, recall goods and rule
against misleading advertisements.
The Bill establishes Consumer Protection Councils at the
district, state and national levels to render advise on
consumer protection. The Bill sets up Consumer Disputes
Redressal Commissions (consumer courts) to hear
complaints on matters like:
1. defect in goods or deficiency in services;
2. unfair or restrictive trade practices;
3. excessive pricing;
4. knowingly selling goods or providing services that do not
meet safety norms; and
5. product liability.

Such complaints can be filed electronically and from where

the complainant resides or works.
 Consumer Disputes Redressal Agencies
Consumer disputes redressal agencies are established
in each district and state and at national level.
1. District Forum:
The forum has jurisdiction to entertain complaints,
where value of the goods or services and the
compensation claimed is up to Rs.20 lakhs. The
District Forum is empowered to send its order/ decree
for execution to appropriate Civil Court.
2. State Commission:
This redressal authority has original, appellate and
supervisory jurisdiction. It entertains appeals from the
District Forum. It also has original jurisdiction to
entertain complaints where the value of goods/service
and compensation, if any claimed exceeds Rs.20
lakhs but does not exceed Rs. 100 lakhs. Other
powers and authority are similar to those of the
District Forum.
3. National Commission:

The final authority established under the Act is the

National Commission. It has original; appellate as well
as supervisory jurisdiction. It can hear the appeals
from the order passed by the State Commission and in
its original jurisdiction it will entertain disputes, where
goods/services and the compensation claimed
exceeds Rs.100 lakhs. It has supervisory jurisdiction
over State Commission.

A complaint can be filed before the forums under

insurance contracts:
⮚ Delay in settlement of claims
⮚ Non-settlement of claims
⮚ Repudiation of claims
⮚ On quantum of loss
⮚ Policy terms and conditions etc.
If the forum is satisfied that there is a defect in the service
rendered by insurers, it can issue an order directing the
insurers to do one or more of the following:

1. To return the premium paid by the policyholder (insured

requested for cancellation of policy but premium not
refunded).
2. To make good the loss to the policyholder (Pay the
claim)
3. To remove the defects or deficiencies in the service in
question (if the policy is
4. not issued, it should be issued immediately).
5. To discontinue unfair trade practices. (Over charging the
premium or rejecting
6. the claim on fictitious grounds etc.)
7. To provide for adequate costs to parties.
 Insurance Ombudsman
• The Central Government under the powers of the Insurance Act,
1938 made Redressal of Public Grievances Rules, 1998.
• These rules apply to life and non-life insurance, for all personal
lines of insurances, that is, insurances taken in an individual
capacity.
• Insurance Ombudsman is appointed by the Insurance Council
wherein s senior heads of insurance companies are members.
• Therefore, insurance ombudsman is appointed by insurers
themselves.
• The Ombudsman, by mutual agreement of the insured and the
insurer can act as a mediator and resolve complains in a cost
effective, efficient and impartial manner.
• The decision of the Ombudsman, whether to accept or reject the
complaint, is final.
The process of grievance redressal is explained below:
a. Complaint to the Ombudsman
• A complaint to the Ombudsman should be made in
writing, signed by the insured or his legal heirs, addressed
to an Ombudsman within whose jurisdiction, the insurer
has a branch / office, supported
• by documents, if any, along with an estimate of the nature
and extent of loss suffered by to the complainant and the
relief sought.
b. Complaints can be made to the Ombudsman if:
 The complainant had made a previous written
representation to the insurance company and the insurance
company had rejected the complaint or
 The complainant had not received any reply within one
month after receipt of the complaint by the insurer
 The complainant is not satisfied with the reply given by
the insurer.
 The complaint is made within one year from the date of
rejection by the insurance company.
 The complaint is not pending in any Court or Consumer
Forum or in arbitration.
c. Recommendations by the Ombudsman
• Recommendations should be made within one
month of the receipt of such a complaint.
• The copies should be sent to both the complainant
and the insurance company.
• Recommendations have to be accepted in writing
by the complainant within 15 days of receipt of such
recommendation.
• A copy of acceptance letter by the insured should
be sent to the insurer and his written confirmation
sought within 15 days of his receiving such
acceptance letter.
• If the dispute is not settled by intermediation, the
Ombudsman will pass award to the insured which
he thinks is fair and is not more than what is
necessary to cover the loss of the insured.
d. Awards of Ombudsman:
• Ombudsman has authority where the amount in dispute is upto
Rs.20 Lakhs only.
• He has to pass award within 3 months.
• The insured should acknowledge the receipt of the award in full
as a final settlement within one month of the receipt of such
award.
• The insurer shall comply with the award and send a written
intimation to the Ombudsman within 15 days of the receipt of
such acceptance letter.
• If the insured does not intimate in writing the acceptance of
such award, the insurer may not implement the award.
Complaints of the following nature can be filed before the
Ombudsman:
⮚ Total or partial repudiation
⮚ Premium payable or paid
⮚ Legal construction of the policy
⮚ Delay in settlement
⮚ Non-issue of documents.

If the Ombudsman makes an award against the insurance

company and the insurance company is not satisfied by the
award, it cannot reject the award and make an appeal unless
substantial law is involved in the award or it is defective.
However, if the insured is not satisfied with the order of the
Ombudsman he can reject the award and make an appeal or
proceed in a court of law.