BASIC

OF
INSURANCE
Objective
 Get an overview of Policy Bazaar
 Explain the need for insurance and how insurance works
 Describe the basic concepts of insurance
 Outline the history and recent developments in the Indian insurance
industry.
 Describe the regulatory framework for insurance
 Explain the importance of an insurance contract
 Enumerate and explain the principles governing insurance
 Analyze the key documents used in insurance and their importance
 Outline the different types of insurance products available in the market
 Understand the major conditions related to insurance
 Describe the Grievance Redress-al procedure in Insurance
What is Insurance ?

 A risk management and risk sharing tool

 A legal contract between the Insured and Insurer-known as ‘Policy’

 Used to transfer risk to a third party (insurance company or insurer)

 Generalized promise by the insured to pay the premium and by the insurer

to pay for the accepted risk to the insured/family who has faced the event

 Insurance Company gives Assurance: Compensation of Financial Losses in

case of uncertainty
Types Of Insurance
INSURANCE

LIFE
LIFE NON LIFE / GENERAL

TERM MOTOR
INVESTMENT HEALTH
MARINE
FIRE
TRAVEL
PROPERTY
What is Premium?
Premium is the price of Insurance Cover chosen by the insured
Premium Calculation
FACTORS AFFECTING THE PREMIUM

 Mortality rates: Probability that a person will die before his next
birthday.
 Expenses: Cost incurred by the insurer in going about their
Calculate risk Calculate Level
business. premium Premium
 Income from investment of premium: Returns on the premiums
invested by the insurers
 Benefits promised: The pricing will depend upon the benefits
promised by the company Arrive at Gross
Calculate net
premium by
 Inflation Rate: High inflation can result in experiencing higher Premium to be
deducting
operating costs, leading to more expensive premiums for the charges and add
interest on
the expenses
consumer investments
 Re-Insurer Guidelines: An increase in reinsurance Premium
results in to Increase in Insurer Premium
How Insurance Works ?

 Insurance companies apply the ‘law of large numbers’ to determine the

expected cost of total annual claims.
 Premium rates are decided according to expected number of claims during
that year.
 Not everyone will experience the happening of an insured event at the
same time, but those who do are compensated from this risk pool
 Risk transfer through risk pooling is Insurance
Law Of Large Numbers

Large Group of People Insurers further invest the Money pool used to settle
Paying Premium for similar money to multiply it and claims of people facing
risks to the insurer create a large pool of unpleasant events
money
History Of Insurance ?

1870 1938 1956 1972 1993 2000

Foreign investment in the

Indian insurance industry
First Policy Issued LIC of India formed after was recommended by the
in India the nationalization of 245 committee set up under
private life insurers the chairmanship of R N
Malhotra the former RBI
Governor

4 public sector General

Insurance Companies
The Insurance Act was formed after the Insurance sector opened
enforced (Amended) nationalization of 107 up in India for private
General Insurance players
Companies.
Concept Of Insurance

Theory Of Probability

Large Numbers Sharing

Advance Pooling of
Mutual Help
Contribution Risk
What is Risk ?

 Possibility of damage or loss

 Possibility of an unfavorable event occurring

 Doubt concerning the outcome of a situation

 Something or someone considered to be a potential hazard

Common Risk Faced

Premature Accidental
Death Damage

Risk to Illness Risk to

Life Fire
Asset

Living too Natural

Disability Theft
Long Calamity
Components Of Risks

HAZARD PERIL UNCERTAINITY

Smoking Lung Cancer Death

Drunk Car Accident Hospitalised

Managing Risk

1 Risk Avoidance

2 Risk Retention
RISK
MANAGEMENT
3 Loss Prevention

4 Risk Transfer
IRDAI

 It is a body tasked with regulating and promoting

insurance in the country.
 IRDA was constituted by the Insurance Regulatory
and Development Authority Act -IRDA Act, 1999
and it came in operations in 2000s and has its
headquarters in Hyderabad, Telangana.
Function And Duties Of IRDAI

 Issuing the registration certificates to insurance companies and regulating them.

 Protect the interests of the policyholders.
 Provide licenses to insurance intermediaries like agents and brokers after stating the required
qualifications and setting guidelines for their code of conduct
 Promote and regulate professional organizations related to insurance to enhance the development of the
sector.
 Regulate and supervise the premium rates and terms of the insurance policies
 Specify the conditions and manners by which the insurance companies have to present their financial
reports
 Regulate the investment of the policyholders’ funds by the insurance companies.
 Ensure the maintenance of the solvency margin, i.e., an insurance company’s ability to pay out claims.
 Guidelines Of IRDAI To Start A Company
A company should be 100 years old in the Insurance
Industry

FDI was allowed

A) 74% of the equity would be Indian Company
B) 26% max for the foreign Company

200 crore of Capital is required

A) 100 crore in cash to be deposited at IRDA
B) 100 crore of Infrastructure

10% of the total premium collected to be deposited

**In the Year 2000, as per FDI 26% stake for
foreign investors. In 2015 this was increased with IRDA every year after the company is operational
to 49%.further in 2021 this limit has been
raised to 74% with a series of safeguards.
Policy Issuance Process
Customer receives
Customer visit the Customer select the Customer pays the
the
Website / Store Required Product Premium
Acknowledgement

Customer undergo Customer share all

QC, BEFORE CASE IS Customer fill out
PUSHED TO INSURER
with Medical the Required KYC /
the Proposal Form
Process Income Documents

Case forwarded to OUTCOMES OF UNDERWRITER

Insurer for
Underwriting
POLICY COUNTER ADDITIONAL
POLICY ISSUED POSTPONED
REJECTED OFFER REQUIREMENT

THE CASE IS ASSIGNED BACK TO PRE

THE CASE IS MOVED TO SERVICE RM BUCKET
ISSUANCE ASSOCIATES
Underwriting
Underwriting is the process of assessing the risk of Customers. It is of three types:

1. Medical
2. Non-Medical (Lifestyle)
3. Financial

UNDERWRITING
OUTCOMES

COUNTER OFFER / ADDITIONAL

POLICY ISSUED POLICY REJECTED POSTPONED
LOADING REQUIREMENT

Cover Starts Request for

Customer Accepts
Bond / FPR Mailed Premium Returned Premium Returned Additional Docs /
/ Rejects
to Customer Medical
Free Look / Cooling Off Period

 It is a duration given to the customer after receiving the policy bond, to

understand the terms and conditions of the policy and decide whether he
wants the policy.

15 Days: Offline
30 Days: Online

 In case the customer cancels the policy in the free look period, the
premium paid by the customer will be returned after the following
deductions:

 Medical expenses (if any)

 Stamp Duty
 Service Tax / GST
 Administration Costs (Printing Paper, Courier etc.)
 Pro-rata risk premium (premium for the cover
already used from issuance date till cancellation)
Grace Period

 A Grace Period is an amount of time your insurance company allows you to

pay after your monthly premium is due (while keeping your coverage
active)

15 Days - Monthly Frequency

30 Days - Yearly / Half Yearly / Quarterly Frequency
Revival / Re-Instatement Period

 It is the duration allowed to the customer to activate his lapsed policy after the grace period. After the
premium due date, the policy owner can make the late payment and reinstate the lapsed policy without
applying for a new policy again.
 The customer has to follow the following procedure to revive the policy
 A written application for revival with the reason for delay of premium
 Pay all pending premiums with interest
 Pay revival fees (if any), late fees/penalty
 All medical expenses
(after 6 months of the reinstatement period commences)
 Fresh Underwriting
Premium Payment Failure

Failure to make timely premium payment

DUE DATE SURRENDER PAIDUP
Grace Period 1. Withdrawal Of Premium 1. Reduced SA
15days - Monthly 2. Termination Of Policy 2. Policy Continues
30days - Q/H/Y 3. Revive  3. Revive 

Lapse

Revival / Reinstatement Period

(Up to 5years from Due Date)
What is Money Laundering

Conversion of Black Money into White Money is known as Money Laundering

Anti Money laundering

Enacted in 2003 and commenced on July 1, 2005

Guidelines to put a check on the practice of money laundering.

As per AML guidelines for the insurance industry, the insurers must follow a strict KYC
(Know your customer process) by mandating the below documents from the customer
to establish the identity of the customer and their source of income for the
premium being paid
 An age-proof;
 An identity proof;
 An address proof and Income proof documents (if required)
IRDAI’s Distance Marketing Guidelines

 Inform clients that the call is being recorded

 Clear the post-training assessment conducted by the respective telemarketers

 Follow standardized scripts for sales

 Highlight the purpose of the call

 Disclose his/her name before solicitation

 Obtain all relevant information of customer/insured

 Suggest plans strictly based on customers’ needs.

 Share his/her name and employee code on the recorded line before sharing the sale

 No inconvenience or harm to be caused to the clients during or after solicitation

Major Principles Of Insurance

1. Utmost Good Faith

2. Insurable Interest

3. Indemnity
Major Principles Of Insurance

1. Utmost Good Faith

The principle of Utmost Good Faith (Uberrimae Fidei ) states that the Insurer and the Insured must
disclose all material facts before the policy’s inception.

Breach of Utmost Good Faith

Non-Disclosure: Hiding any relevant information on purpose to deceive the company

Miss-Representation: Disclose incorrect details for the information sought by the insurer.

**Uberrimae fidei is a Latin phrase meaning "utmost good faith"

Major Principles Of Insurance

2. Insurable Interest

An Insurable Interest is an object/person which, if damaged or destroyed, would result in financial

hardship for the policyholder.

Legal right of a person to insure a subject matter whose well being benefits him but its damage affects him
adversely for the policyholder.

I can buy an Insurance policy for:

Self Parents Spouse Children Assets Debtors Partners Employer - Employee

**Siblings, Relatives, Friends etc. are not Insurable Interest

Major Principles Of Insurance

3. Indemnity

 Indemnity means FINANCIALCOMPENSATIONFORTHE LOSSES.

 Means in the event of a loss the insurance company indemnifies (compensates)the
Insured for the loss they incur, under the terms and conditions of the policy
 Insured is compensated only to the extent to which they have suffered a loss
 Thus the insured cannot profit from insurance
 Hence, the benefit will be available only for the covered losses basis the actual
Bills submitted by the policyholder.

Applicable only to General Insurance

Contract Of Insurance

 An insurance contract is a legal agreement

 Between the insurance company and the insured person

 Wherein the insured agrees to pay a premium to the insurer and the insurer agrees to pay a sum of

money, on the happening of a specified event, to the insured person.

Features of Valid Insurance Contract

Offer and
Consideration Eligibility
Acceptance
• There must be an offer • Consideration for • Minors, people with
which must be insurance contract is the unsound mind or
acceptable to both the premium paid by the persons disqualified by
parties unconditionally proposer to the insurer law cannot enter into
insurance contracts
Policy Servicing Timeline (TAT)

5 - 7 Working Days Turn Around Time to get the Final Decision from Insurer, once all the
required Documents are submitted & Medical is completed

1-2 Working Days

Turn Around Time to get the Soft Copy of the Policy, if Issued

5-7 Working Days

Turn Around Time to get the Refund of Policy if Not Issued / Cancelled

7-10 Working Days Turn Around Time to get the Claim settled if all the required Documents
are submitted
Terminologies

1. Proposer • One who proposes for insurance and pays the premium

2. Insured • One whose risk is being covered

3. Insurer • The insurance provider (Insurance Company)

4. Nominee • Person appointed by the insured to receive the policy money

• Person appointed by the insured to receive the policy money for his own
5. Beneficiary benefit

6. Actuary • Designs the plan and decides the premium

Terminologies

7. Policy Term • Duration of the policy cover

• Regular: Premium paid throughout the Policy Term , Limited:

8. Premium Paying Term Premium paid within a small duration, Singular: One time payment

9. Premium Payment • How often the premium has to be paid in an year-Monthly, Quarterly,
Frequency Half yearly, Annually

• Amount of risk cover for the covered losses to be paid by insurer on

10. Sum Insured happening of a specific event(General Insurance)

• Amount of risk cover to be paid by insurer on happening of a specific

11. Sum Assured event (Life Insurance)

12. Claim Settlement • Ratio of the claims settled by the insurer per 100 claims received by
Ratio them. Serves as a benchmark of the claim service of the insurer
Basic Elements of Life Insurance Policy

DEATH COVER SURVIVAL BENEFIT

Some policies like money-back policies
This amount is paid to the nominee/
also make periodic payments to the life
beneficiary in the event of the death of
insured during the term of the policy
the life insured during the term of the
before maturity, known as survival
policy
benefits

MATURITY BENEFIT
This amount is paid on the maturity of the policy
if the life insured survives through the term of
the policy
Life Insurance and its features

Components Term Investment

Cover Sum Assured Sum Assured

Benefits Death Benefit Death/ Maturity/Survival Benefit

Policy Term (Duration) 5/10/20/40 years etc. 5/10/20/40 years etc.

•Regular •Regular
Premium Payment Term •Limited •Limited
•Single •Single

•Yearly •Yearly
Premium Payment •Half Yearly •Half Yearly
Frequency •Quarterly •Quarterly
•Monthly •Monthly
Types of Life Insurance

Linked/ ULIP’s
Term High risk and high return policies with fewer guaranteed
Offer only death benefit but no maturity benefit returns where returns are subject to movements in the
capital markets

Non Linked/ Traditional Money Back

Fund based plans where the benefits/ interest rates are Provide death & maturity benefits along with partial
not linked to any index and the returns are explicitly survival benefits ’to the insured during Policy Term at
stated in advance at the inception of the policy fixed intervals

Annuity & Pension

Retirement Plans which provide regular income to the
insured after retirement by investing a lump sum
amount or regular contributions during their working
life
Types of Life Insurance

Endowment
Pure Endowment
The insured is provided both death and maturity
The insured receives the maturity benefit at the end of
benefits in the plan. He receives one of these,
the policy term with no death benefit
whichever is triggered first

Group Insurance
Individual Plans
Provides insurance to a group of people who are
Provide insurance on individual basis
brought together for a common objective
Reinsurance

Insurance of Insurance Companies

GIC -
General Insurance Corporation of India
Headquarters in Mumbai-public sector company founded in 1972
ITI Reinsurance Limited -
Headquarters in Mumbai-Private sector company founded in 2016

**Today, as of 2023, 11 major reinsurance companies are operating out of India: one Indian company
and the rest foreign reinsurance companies.
Riders
Riders

• This term rider provides the rider sum assured in addition to the base sum
Accidental Death assured, to the nominee of the term life insurance policy in case the
Benefit Rider policyholder suffers an unfortunate death due to an accident within the policy
tenure.

• Under this term rider, the life assured receives a fixed amount for every day
Hospicare Rider spent at the hospital. If the policyholder is admitted to the general ward or the
ICU of the hospital, the insurer pays a fixed percentage of the sum assured.

Accidental Total And

• The rider sum assured is paid to the policyholder in case of a total and
Permanent Disability permanent disability due to an accident during the policy tenure.
Rider (ATPD)
Riders

• The rider sum assured is paid to the policyholder in a lump sum, on the
Critical Illness Rider diagnosis of any of the critical illnesses specified under the term life insurance.

• The entire/part of the sum assured is paid to the policyholder in advance if the
Terminal Illness Rider policyholder is diagnosed with a terminal illness.

• This rider waives off future term life insurance premiums if the policyholder is
Waiver of Premium unable to pay the premiums due to a job loss caused by a critical illness or
permanent total disability.
Insurance Documents
1. Proposal Form (Insurance Application Form)
Personal & Family Information

• Name, age, address, marital status, height, weight etc.

Medical History

• About existing illness, details of operation/ surgeries done, family medical history

Insurance Plan

• Type of Insurance plan, SA, Duration, Rider etc.

Previous Insurance Policies

• Details of existing insurance cover with various insurance companies

Nominee Details

• Name, age, address, relation with Nominee

Insurance Documents

2. First Premium Receipt

 After underwriting, if underwriters agree to give insurance cover, the insurance company issues First
Premium Receipt.

 Risk cover of the life assured starts on the issuance of FPR. If the death of life assured happens after
the issuance of FPR and before he receives his policy document, then also a death claim will be
given to his nominee.

 FPR is the “Evidence of the contract ” until the Policy Document/Bond is issued.
Insurance Documents

3. Policy Document/ Bond

It’s issued after the issue of FPR, when the contract of insurance comes into force. It is an
important document as it can be produced as a document in a court of law/during a claim since it’s the
“Evidence of the contract”.

4. Prospectus/ Brochure

A sales document is used to give information about the product and generate interest about the
product which carries details about the policy.

5. Endorsement

Endorsement is a document in the format prescribed by the insurer that enables the policyholder
to make modifications to his existing policy [change of address, name, etc.]
Policy Conditions

1. Nomination

 Facility provided to the policyholder to propose the name of the person(s) to whom the sum
insured should be paid by the insurer after their death.

 It gives the nominee the right to receive the policy monies in the event of the death of the life
insured.

 A nominee does have the right to the whole (or part)of the claim.

 In case the nominee is minor it is necessary to appoint an

Appointee (more than 18 years of age)
Policy Conditions

2. Married Women’s Property Act, 1874

A life insurance policy taken out under MWPA by a married man on his own life, shall be deemed to be a
trust for the benefit of his wife and children and will be outside the control of the life. insured, his creditors,
court attachments etc.

The beneficiaries of a life insurance policy affected by the MWP Act can be:

 The wife alone

 One or more children; or
 The wife and one or more children jointly
Policy Conditions

3. Assignment of Policy

Transfer of rights of the policy to another person by attaching an endorsement to the policy is called the
‘Deed of Assignment’

 The person who assigns the policy is called an ‘assignor’.

 The person to whom the policy is assigned is called the ‘assignee’

The Assignment is of 2 types

 Absolute Assignment
 Conditional Assignment
Grievance Handling Procedure
Fresh Complaints
Paper, Voice, Email Internet

IRDA Grievance Call

IGMS Portal
Centre
Follow up with Insurer to Re-examine

Insurer

Do Not Respond Respond To Complaint

Escalate

IRDAI Not Satisfactory Satisfactory Not Satisfactory

Escalate OMBUDSMAN
Closed /Consumer Forum/
Civil Court
Integrated Grievance Management System

Integrated Grievance Management System (IGMS) is an online consumer complaints registration system
created by IRDA.

All insurance Companies have integrated their own complaint logging systems to the IGMS maintained by
IRDA.

IRDA monitors the complaint and their progress in real time through IGMS.
Power / Function of Ombudsman
Any person who has a grievance against an insurer regarding below-mentioned points may
himself or through his legal heirs make a complaint in writing to an insurance ombudsman.

 Any partial or total repudiation of claim and delay in settlement of claims

 Any dispute in regard to premium paid or payable in terms of the policy
 Any dispute on the legal aspects of the policy in so far as such dispute relates to claims
 Non-issue of policy document after receipt of premium

 TAT-Resolve within 3 months from the date of complaint

 17-Insurance Ombudsman
 Resolve cases with Sum assured up to 20lac

Or we can file our cases with:

 District Forum/Consumer Court up to 20lac**

 State Commission Above 20lac to 1Cr
 National Commission Above 1Cr
Grievance Redressal Cell for IRDA
IRDA Grievance Call Centre (IGCC) is a call Centre which will be helpful in accessing grievance cell and check
the feedback online. For lodging a complaint, getting assistance in filling the grievance registration form or
for information regarding Ombudsman, customers can use any of the below channels:

• Toll-free number: 155255

• E-mail ID: complaints@[Link]
• Website: [Link]

Remember: IRDA is not vested with the power of adjudication. It can only facilitate the resolution of
grievances by taking them up with concerned insurers.

IGCC Call Centre

 Thank You
-
Any Question