INTRODUCTION

. Insurance is a mechanism by which the person exposed to the potential risk, arising out of the events
beyond his control, transfers the financial loss, in part or in full to a third party.
.[Type here] whose risk is insured is called ‘insure’ and the firm which insures the risk of loss is known as
The person
the insurer/assurance underwriter.
. The agreement/ contract is put in writing and is known as policy
. The insurer provides coverage for the potential financial loss for a fee or a consideration which is called the
premium.
. The client/ insured agrees to pay a premium to the insurance company. Such premium may be a fixed
amount that is payable in a single payment or it may be paid as a periodical payment, depending upon the
type and terms of the insurance.
. Instead of the payment of such premium, the insurance company agrees to make some payment to the
client or bear the costs of the client due to financial loss incurred on the occurrence of certain events.

How does insurance work?

. The insurance practices are generally based on the polling of risk.

. A common fund was created, often at the Village Panchayat or equivalent levels into which small
contributions from many people were pooled and the amount so collected be used to compensate for the
loss suffered by the unfortunate few out of those who contributed.
. The contribution to be made by each person is determined on the assumption that how many persons on
average may suffer losses.
. For example, in a Village, there are 500 houses, each valued at Rs. 2,00,000. Every year, on average 4

houses get burnt, resulting in a loss of Rs. 8,00,000. If all the 500 house-owners come together and

contribute Rs. 1,600 each, that will be sufficient to cover the risk of up to 4 houses getting damaged on

fire. Thus the risk of 4 house owners gets distributed to 500 house-owners. This is also called as Law of

Large Numbers.

. Thus, insurance is a cooperative device where the risk is spread over among large insurable public. The
losses occurring to one are borne by the society of insured people. “ All for one and one for all” is the basis

of cooperation.

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 FUNCTIONS OF INSURANCE
• Providing certainty – Insurance provides certainty of payment for the risk of loss due to uncertain
events.
• Protection
[Type here] - Insurance cannot prevent the risk/ loss from occurring but can compensate for losses
arising out of it.
• Risk sharing – In insurance, the loss likely to be caused by an uncertain event is spread over several
persons who are exposed to it and who prepare to insure themselves against such an event.
• Assist in capital formation - The accumulated funds of the insurer received by way of premium
payments are invested in various income-generating schemes.

HISTORY OF INSURANCE IN INDIA

.
.
In India, insurance has a deep-rooted history.
It finds mention in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya
(Arthasastra) . The writings talk in terms of pooling resources that could be redistributed in times of

. calamities such as fire, floods, epidemics and famine.

.
The modern form of life insurance came to India from England in the year 1818.
Oriental Life Insurance Company was started by Europeans to look after the needs of the European

. community and Indians were not insured by these companies. This Company however failed in 1834.
Bombay Mutual Life Assurance Society heralded the birth of the first Indian life insurance company in the

heavy extra premiums were being charged to them.

. Later foreign insurance companies started insuring Indian lives but treated them as sub-standard lives and

.
year 1870 and insured Indian life at normal rates.
Bharat Insurance Company (1896) was also one such company inspired by nationalism.

.. The Swadeshi movement of 1905 – 1907 gave rise to more insurance companies including United India in
Madras, National India, National Insurance in Kolkata, and Co-operative Assurance in Lahore.

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 . In the year 1912, the Life Assurance Companies Act and the Provident fund act were passed , The Indian
Life Assurance Companies Act, of 1912 made it necessary that the premium rate tables and periodical

.
valuations of the companies should be certified by an actuary.
But the act discriminated between foreign and Indian companies on many accounts, putting the Indian
[Type here]
companies at a disadvantage.

. In 1938 to protect the interest of the Indian insurance companies, the earlier legislation was amended with

the enactment of the Insurance Act 1938 , which consist of comprehensive provisions for effective control

.
over the activities of insurers or insurance organizations.
19th January 1956, life insurance in India was nationalised. About 154 Indian insurance companies, 16
non-Indian companies and 75 Provident societies were operating in India at the time of nationalisation.
Nationalization was accomplished in two stages; initially, the management of the companies was taken

.
over using an Ordinance, and later, the ownership too using a comprehensive bill.
The parliament of India passed the Life Insurance Corporation Act in June 1956 which was created on 1
September 1956 to spread life insurance much more widely and in particular to the rural areas to reach all

insurable persons in the country, providing them adequate financial cover at a reasonable cost. st

Important milestones in the Life Insurance business in India

1818: Oriental Life Insurance Company , the first life insurance company on Indian soil started functioning.

1870 : Bombay Mutual Life Assurance Society , the first Indian life insurance company started its business.

1912: The Indian Life Assurance Companies Act was enacted as the first statute to regulate the life

insurance business.
1928: The Indian Insurance Companies Act was enacted to enable the government to collect statistical
information about both life and non-life insurance businesses.

1938: Earlier legislation was consolidated and amended by the Insurance Act to protect the insuring
public's interests
1956: 245 Indian and foreign insurers and provident societies are nationalised by the central government.
LIC was formed. by an Act of Parliament, viz. LIC Act, 1956 , with a capital contribution of Rs. 5 crores from
the Government of India.

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Important milestones in the General Insurance business
India
1850: The General insurance business in India can trace its roots to the Triton Insurance Company Ltd ., the
first general insurance company established in the year 1850 in Calcutta by the British.
Indian Mercantile Insurance Ltd . set up, the first company to transact all classes of general
[TypeThe
1907: here]
insurance business.

Important milestones in the General Insurance business

1957: General Insurance Council , a wing of the Insurance Association of India, frames a code of conduct

for ensuring fair conduct and sound business practices.

1968: The Insurance Act was amended to regulate investments and set minimum solvency margins and the
Tariff Advisory Committee was set up.
1972: The General Insurance Business (Nationalisation) Act, 1972 (GIBNA) nationalised the general
insurance business in India with effect from 1st January 1973.

PRINCIPLES OF INSURANCE
Utmost good faith
(contract of uberrimae fidei)

. Both the insurer and the insured should display good faith towards each other regarding the contract.
. It is the duty of the insured to voluntarily make full, accurate disclosure of all facts, and material to the risk
being proposed and the insurer to make clear all the terms and conditions in the insurance contract.
. The insurer may decide to terminate the insurance contract if the insured fails to disclose significant
information.

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 Insurable Interest
. The insured must have an insurable interest in the subject matter of insurance.
. Insurable interest means some monetary interest in the subject matter of the insurance contract.
[Type here]
. The insured must have an interest in the preservation of the thing or life insured so that he/she will suffer
financially on the happening of the event against which he/she is insured.
. Note – One doesn’ t need to be the owner of the property. For example, a trustee holding property on behalf

of others has an insurable interest in the property.

Indemnity
. The principle of Indemnity states that the insured shall be compensated appropriately for the losses
to the goods by the insurer, only to the extent that the insured does not make a profit out of the loss that
occurred.
. For example , Mr A insured his goods worth Rs 10 lakhs. Part of the goods got damaged when a fire broke
out in the warehouse. He claimed a full 10 lakhs as compensation. Upon examination, it was found that only
goods worth Rs 2 lakh were damaged. Now, only Rs 2 lakh will be provided to him.
. The limit of the compensation is always subject to the sum insured and the terms and conditions that govern
the policy.
. All insurance contracts of fire or marine insurance are contracts of indemnity and the principle of indemnity
does not apply to life insurance.

Proximate Cause
.. The term proximate cause refers to the nearest cause leading to the loss.

. An insurance policy is designed to provide compensation only for such losses which are stated in the policy.

. The term "proximate cause" refers to the immediate, dominating, and most effective cause of a loss when

there are two or more factors involved.

. For example , Mr A insured his goods against fire for a total of Rs. 10 lakhs. Due to water leaks in the

warehouse, several of the goods were destroyed. He filed a claim with the insurance company for Rs. 10
lakhs in damages. The proximate cause of damage is water leakage. He had fire insurance on the goods,
therefore he won't be compensated for the loss.

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Subrogation
After the insured is compensated for the loss or damage to the property insured by him/her the right of
ownership of the such property passes on to the insurer.

This is because the insured should not be allowed to make any profit, by selling the damaged property or in
the case of lost property being recovered.
[Type here]

Contribution
. The principle of contribution states that if the loss arises and you have taken more than one insurance
policy, then the loss will be covered by all policies based on the proportion of the coverage the insurance
policy provides.
. That means the insured will have no right to recover more than the full amount of his actual loss.

. And It is the right of an insurer who has paid a claim under insurance, to call upon other liable insurers to
contribute to the loss of payment

. For example , Kapil has taken health insurance from 2 health insurance providers, say A and B. Coverage
amounts are as follows:
A. Rs 4 Lakh

B. Rs 6 Lakh
. Now suppose he gets admitted and the total claim is Rs 2 lakhs. Kapil decides to use a policy from A
Insurance and got paid Rs 2 lakhs. Kapil now goes to B and demands his claim again. Now he is not eligible
since he has already received the claim.
. However, Company A has the right to claim Rs 1.2 lakh from Company B.

Mitigation

. This principle states that it is the duty of the insured to take reasonable steps to minimise the loss or

damage to the insured property.

Suppose goods kept in a storehouse catch fire then the owner of the goods should try to recover the goods
and save them from fire to minimise the loss or damage.

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 [Type
The here]
insured must behave with great prudence and not be careless just because there is an insurance cover.
If reasonable care is not taken then the claim from the insurance company may be lost.

Insurance is not Gambling

Insurance is not the same as Gambling because under Insurance, the person insured is only compensated
for the loss suffered. In the game of Gambling, there is either profit or loss.

Sources of Income for Insurers

Insurers are not required to keep the money received under premium with themselves. They can invest the

premium amount. Thus, insurers have two sources of income- Insurance premium and investment income
(income from investment of premiums received)

TYPES OF INSURANCE

LIFE INSURANCE
.
.
A life insurance policy is a protection against the uncertainty of life.

Life insurance is a contract in which the insurer agrees to pay to the insured, (or to the person for whose
benefit the policy is taken), the assured sum of money, either on the death of the person or on his

attaining a certain age (i.e., the expiry of the certain period)

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 . The insurance company undertakes to insure the life of a person in exchange for a sum of money called the
premium
. This premium may be paid in one lump sum, or periodically i.e., monthly, quarterly, half-yearly or yearly.
. The insurance premium is tax deductible under Income Tax Act 1961.
. The
[Type here]
person whose life is insured is called the assured

Types of Life insurance policy

.
Term insurance plan
. .
Term Insurance Plans are those plans that are purchased for a fixed period of time, say 10, 20 or 30 years.
. Benefit (lump sum) is payable only on the happening of death during the term of the life insurance policy.
. These policies cover the risk of dying early and provide a lump sum to the Nominee (usually a family

member) to take care of their future needs.

. Premiums under Term insurance products are relatively the lowest as they do not have any savings
component. This is the cheapest of all the Life insurance policies. Premium depends upon the age of the
life insured. Higher the age, the higher the premium, as the risk taken by the life insurance company
increases with age.

Whole Life Policy

. Unlike term insurance plans, which expire at the end of the specified period time, this policy extends up to
the whole life of the insured.

. The premium will be payable for a fixed period (20 or 30 years) or the whole life of the assured. If the
premium is payable for a fixed period, the policy will continue till the death of the assured.

. In this kind of policy, the amount payable to the insured will not be paid before the death of the assured.

Endowment Life Assurance Policy

The endowment policy comes with the extra benefit that the policyholder will receive a lump sum amount
in case he survives until the date of maturity.

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Under the Endowment policy, the benefits (Sum assured) are payable either upon the death of the assured
(during the term of the policy) or to assured (at maturity, if he survives).

Joint Life Policy

. When the policy is taken up by two or more persons, it is called joint life policy.
[Type here]
. The premium is paid jointly or by either of them in instalments or lump sum.
. The assured sum or policy money is payable upon the death of any one person to the other survivor or

survivors.

Annuity Policy
. Under this policy, the assured sum or policy money is payable after the assured attains a certain age in
monthly, quarterly, half-yearly or annual instalments.
. The premium is paid in instalments over a certain period or a single premium may be paid by the assured.
. Generally, useful to those who prefer a regular income after a certain age.

Children’s Endowment Policy

. This policy is taken by a person for his/her children to meet the expenses of their education or marriage.

Unit Linked Insurance Plan (ULIP)

. A ULIP is an insurance plan that offers the dual benefit of investment to fulfil your long-term goals, and a
life cover to financially protect your family in case of an unfortunate event.
. The premium paid towards a ULIP is divided into two parts. A part of it is contributed to your life cover, and
the remaining is invested in the fund of your choice.
. You can choose to invest in equity, debt, or a combination of both funds as per your risk appetite and

goals.

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 FIRE INSURANCE
. Fire insurance is a contract of insurance against the loss/damage by accidental fire or other occurrences
customarily included under a fire policy.
. [Type here]
Normally, the fire insurance policy is for a period of one year after which it is to be renewed from time to

time.
. A claim for loss by fire must satisfy the two following conditions:

(i) There must be an actual loss

(ii) Fire must be accidental and non-intentional
. If overheating without ignition causes damage, it will not be regarded as a fire loss within the meaning of
fire insurance and the loss will not be recoverable from the insurer.

MARINE INSURANCE
. Marine insurance covers the physical loss or damage of ships, cargo, terminals, and any transport by which
the property is transferred, acquired, or held between the points of origin and the final destination.
. Marine insurance protects against loss by marine perils or perils of the sea.
. Marine perils are a collision of the ship with a rock, or a ship attacked by the enemies, fired and captured
by pirates and actions of the captains and crew of the ship.
. The insurer in this case is known as the underwriter.

. There are three things involved i.e., ship or hull, cargo or goods, and freight.

(a) Ship or hull insurance : Since the ship is exposed to many dangers at sea, the insurance policy is for

indemnifying the insured for losses caused by damage to the ship.

(b ) Cargo insurance : The cargo while being transported by ship is subject to many risks. These may be at

port i.e., risk of theft, lost goods or on voyage etc. Thus, an insurance policy can be issued to cover such

risks to cargo.

(c ) Freight insurance : If the cargo does not reach the destination due to damage or loss in transit, the
shipping company is not paid freight charges. Freight insurance is for reimbursing the loss of freight to the
shipping company i.e., the insured.

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[Type here]

Difference between Life, Fire and Marine Insurance

Life insurance Fire insurance Marine Insurance

Basis of difference
Subject matter The subject matter of The subject matter is The subject matter is a
insurance is human life. any physical property or ship, cargo or freight.
assets.

Element Life Insurance has the Fire insurance has only Marine insurance has
elements of protection the element of only the element of
and investment or both. protection and not the protection.
element of investment.
Insurable interest Insurable interest must Insurable interest on the Insurable interest must
be present at the time of subject matter must be be present at the time
effecting the policy but present both at the time when claim falls due or
need not be necessary at of effecting policy as at the time of loss only.
the time when the claim well as when the claim
falls due. falls due.

Duration Life insurance policy Fire insurance policy Marine insurance policy
usually exceeds a year usually does not exceed is for one year or period
and is taken for longer a year of voyage or mixed.
periods ranging from 5
to 30 years or whole life.

Indemnity Life insurance is not Fire insurance is a Marine insurance is a

based on the principle of contract of indemnity. contract of indemnity.
indemnity. The sum The insured can claim The insured can claim
assured is paid either on only the actual amount the market value of the
the happening of certain of loss from the insurer. ship and cost of goods
event or on maturity of The loss due to the fire is destroyed at sea and the
the policy. indemnified subject to loss will be indemnified.
the maximum limit of
the policy amount

Loss measurement Loss is not measurable Loss is measurable Loss is measurable

Surrender value or paid Life insurance policy has Fire insurance does not Marine insurance does
up value a surrender value or have any surrender not have any surrender
paid up value. value or paid up value. value or paid up value.

pg. 12
 [Type here]

Policy amount One can insure for any In fire insurance, the In marine insurance the
amount in life insurance. amount of the policy amount of the policy can
cannot be more than the be the market value of
value of the subject the ship or cargo.
matter.

Contingency of risk There is an element of The event i.e., The event i.e., loss at sea
certainty. The event i.e., destruction by fire may may not occur and there
death or maturity of not happen. There is an may be no claim. There
policy is bound to element of uncertainty is an element of
happen. Therefore a and there may be no uncertainty.
claim will be present claim.

OTHER INSURANCE
Motor insurance
. Motor insurance is an insurance policy meant for vehicle owners to protect them from incurring any
financial losses that may arise due to damage or theft of the vehicle.
Insurance of Motor Vehicles is covered under the Motor Vehicles Act, of 1939.
. Types of motor insurance
Third-party insurance policy: It provides coverage for any injury caused to a third party by your vehicle.
Obtaining this insurance policy is a statutory requirement. Without this policy, it is illegal to drive your
motor vehicle in India.

Own-damage insurance policy: In case of any damage to your vehicle due to fire or rain, or theft, you can

raise a claim under this policy to compensate you for the expenses incurred for repairing your vehicle.

Comprehensive insurance policy : It combines both third-party cover and own damage cover.

Property insurance
. Insurance of property of the individual and business, which is exposed to the risk of fire, theft, etc.

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Liability insurance
. Liability insurance is an insurance product that protects against claims resulting from injuries and damage
to other people or property.
. [Type here]
For example, Business owners may purchase liability insurance that covers them if an employee is injured
during business operations.

Health Insurance
.Health insurance is a type of insurance that covers medical expenses that arise due to an illness. These
expenses could be related to hospitalisation costs, the cost of medicines or doctor consultation fees.
. There are 2 types of health insurance products:

1) Indemnity-based health insurance products are sold by Non-life insurance companies and Standalone
health insurance companies. Under these products, the actual amount spent by the Life assured is paid by

the Insurance Company within the limits of the Sum assured selected. Either the amount is reimbursed to
the Life assured or the amount is paid directly to the Hospital (Cashless scheme) by the Insurance
Company.

2) Fixed benefit-based health insurance - Under this type of health insurance plan, also known as a
Defined Health Benefit Plan, a fixed amount is paid out of the sum insured for pre-determined critical
illnesses or medical conditions (viz. cardiovascular disease, cancer, kidney functioning issues, etc). If you

have certain medical conditions or are prone to certain medical conditions (due to family history, lifestyle,

etc) then such a plan is particularly useful.

Social insurance
Social insurance protects the weaker section of society who are unable to pay the premium. It includes
pension plans, disability benefits, unemployment benefits, sickness insurance and industrial insurance.
insurance etc where the insurer guarantees to pay certain amount at the happening of certain events.

Other Insurance
Includes Export credit insurance, state employee insurance, fidelity insurance, credit and privilege

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[Type here]

INSURANCE VS REINSURANCE

Reinsurance is insurance that an insurance company buys from another insurance company to protect
itself against the chance of a significant claims occurrence.

Basis of Insurance Reinsurance

differentiation

Meaning An agreement between two Reinsurance is the term for insurance

parties in which one agrees to purchased by an insurance company
compensate the other in the event when it decides not to assume the
of a loss or death is referred to as complete loss risk and instead chooses to
an insurance contract. share it with another insurer.

Protection It is given to someone or Taken by big insurance firms to withstand

something. significant losses.

Premium An insurance company receives The insurance companies split the cost of
money paid by a person. reinsurance according to a predetermined
ratio.

IRDAI

. The Insurance Regulatory and Development Authority of India (IRDAI) is a statutory body under the
jurisdiction of the Ministry of Finance, Government of India and is tasked with regulating and licensing the
insurance and re-insurance industries in India.

pg. 15
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. It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an Act of Parliament
passed by the Government of India.

.
[Type
IRDAhere]
act was passed upon the recommendations of the Malhotra committee report headed by R.N
Malhotra (Retired RBI Governor). (created in 1993)
. In April 2000 it was set up as a statutory body with its headquarters in New Delhi and later shifted to
Hyderabad in 2001.
. The IRDAI will consist of ten members: (all appointed by the Government of India)

(a) a Chairman;

(b) five whole-time members;

(c) four part-time members,

Objectives of IRDAI
• To protect the interest of policyholders;

• To promote and ensure the growth of the insurance industry.

• To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing

and competence of those it regulates;

• To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices

and put in place effective grievance redressal machinery;

• To take action where such standards are inadequate or ineffectively enforced;

insurance;
• To encourage fairness, transparency, and orderly behaviour in financial markets that deal with
• To achieve the maximum level of self-regulation in the day-to-day working of the industry.

Functions of IRDAI
• Regulate, promote and ensure orderly growth of the insurance business and re-insurance business.
• The issuance of a certificate of registration to the applicant, renewal, modification, withdrawal,
• suspension, or cancellation of such registration.

Protection of the interests of the policyholders.

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 • Specifying requisite qualifications, code of conduct and practical training for intermediaries and

agents.
• Promoting
[Type here] and regulating professional organisations connected with the insurance and reinsurance
business.
• Levying fees and other charges for carrying out the purposes of the IRDAI Act.

• Calling for information, undertaking inspections, conducting enquiries and investigations of the

organisations connected with the insurance business.

• Regulating investment of funds by insurance companies.

LIC
. The Life Insurance Corporation of India was established on 1 September 1956, when the Parliament of
. India passed the Life Insurance of India Act, nationalizing the insurance industry in India.
. Over 243 insurance companies were merged.
.. The objective of LIC is to spread Life Insurance widely and in particular to the rural areas and the socially
and economically backward classes to reach all insurable persons in the country and provide them
adequate financial cover against death at a reasonable cost.
. LIC is known as India's largest government-owned life insurance and investment corporation. The main role
of LIC is to invest in global financial markets and different government securities after gathering funds from
people through their various life insurance policies.

GIC
. The entire general insurance business in India was nationalised by General Insurance Business
(Nationalisation) Act, 1972 (GIBNA).
. The Government of India (GOI), through Nationalisation, took over the shares of 55 Indian insurance
companies and the undertakings of 52 insurers carrying on general insurance business.
. General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA.

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.It was incorporated on 22 November 1972 under the Companies Act, of 1956 as a private company limited
by shares.
. GIC was formed to superintend, control and carry on the business of general insurance.

. [Type here]
As soon as GIC was formed, GOI transferred all the shares it held of the general insurance companies to
GIC.
. Simultaneously, the nationalised undertakings were transferred to Indian insurance companies.
. After a process of mergers among Indian insurance companies, four companies were left as fully owned
subsidiary companies of GIC.

• National Insurance Company Limited

• The Oriental Insurance Company Limited
• The New India Assurance Company Limited
• United India Insurance Company Limited

. The next landmark happened on 19th April 2000, when the Insurance Regulatory and Development
Authority Act, 1999 (IRDAA) came into force.
. This Act also introduced an amendment to GIBNA and the Insurance Act, of 1938. An amendment to GIBNA
removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India.
. In November 2000, GIC was renotify as the Indian Reinsurer and through administrative instruction, its
supervisory role over the four subsidiaries was ended.
. As of March 21, 2003, when the General Insurance Business (Nationalisation) Amendment Act 2002 went
into effect, GIC was no longer a holding company for its subsidiaries.

PFRDA
. The Government of India had initiated a national project old age social and income security (OASIS) in 1999
to examine the policies related to old age income security.
. based on the recommendations of OASIS, the government decided to replace defined benefit pension
system with defined contribution pension system with respect to all new joinees of central or state
government except armed forces.
. in 2003, pension fund regulatory and development authority bill was passed by the parliament to regulate
and promote pension system in India.

. PFRDA was established in 2013 and became a permanent body. Head office in delhi.

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 Applicability of PFRDA
. The pension system was initially introduced for government employees. it is now extended to all citizens of
India and non resident Indians including self employed persons.
. it is a central
[Type here] autonomous body and is a quasi government organization with executive, legislative and
judicial powers similar to other financial sector regulators.
. PFRDA regulates the national pension system (NPS)

Functions of PFRDA
. establish grievance redressal mechanism for subscribers
. Regulates NPS and pension scheme.
. Establish development and regulate pension funds.
. protect the interest of pension fund subscribers.
. register and regulate intermediaries
. approves schemes terms and conditions and lay down norms for management of corpus of pension funds
. PFRDA acts as a pension regulator, which works towards its promotion and development.
. promote professional organization connected with the pension system
. settle disputes among intermediaries and subscribers.
. train intermediaries and educate subscribers
. regulate the assets
. conduct audit of intermediaries and other entities connected with pension funds

Intermediaries of PFRDA

Pension Fund:

. Pension fund is one of the intermediaries which has been granted a certificate of registration by PFRDA as
an authority for receiving contributions, investing them and paying the subscribers in a specified manner.

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 Central record keeping agency (CRA):
. An agency registered under PFRDA to perform functions of record keeping, accounting, administration and
customer service to pension scheme subscribers

Trustee Bank:
.[Type here]
It is a bank responsible for day to day flow of funds. providing banking facilities, receiving NPS funds from

all offices and transfer the same to intermediaries such as pension fund/ annuity service provider/ other
intermediaries.

Custodian:
. Responsible for safe keeping of securities or assets held under NPS or any other pension scheme and
providing incidental services including maintaining accounts, undertaking activities as domestic
depository.

INSURANCE TERMINOLOGIES
Underwriting
. Underwriting is the process of assessment of risk on a proposal by the Insurance company and arriving at
the decision (to accept, reject, rate-up, postpone) and the terms and conditions upon which an insurance
contract may be accepted.

Policyholder
. A policyholder is a person or group who has purchased and owns an insurance policy.

Life Assured
. The life assured refers to the person for whom the insurance is bought.
. This may or may not be the same as the policyholder.

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. For example, if you buy insurance for yourself, you will be the policyholder and the life assured. But, if you
Buy insurance for a parent, and pay the monthly premiums for them, you will be the policyholder
while the life assured will be your parent.

Insurance Policy document

[Type here]
. Insurance Policy document (or) Policy document (or) Policy constitutes the contract between the
Insurance company and the Policyholder, stating the terms and conditions of the Insurance coverage
provided by the Insurance company to the Policyholder.

Adjuster
. An insurance adjuster, also known as a claims adjuster, is a person who investigates an insurance claim to
determine if the insurer should pay for damage or injuries, and if so, how much they should pay.

Annuity
. An annuity is a series of regular and periodic payments payable in consideration of usually a lump sum.

Deductible
. The portion of the loss that you are required to pay before your insurance coverage will respond.
. For example, If you owned a policy with a Rs 200 deductible and you suffered a covered loss totalling Rs
1000, you would pay the first Rs 200 and the insurance company would pay the remaining Rs 800. If the
loss amounted to only Rs 200, you would pay the entire amount.

Coinsurance
.Coinsurance is a percentage of what the insurance will pay to cover your health care cost after any
deductibles have been met.
If you have an insurance policy with 80% coinsurance and a medical bill of Rs 1,000, the insurance will pay

80% or Rs 800 and your share of the cost would be 20% or Rs 200 (assuming there is no deductible on the
plan).

EPFO 2025 | Vyasa IAS | 8851628134, 6350119648

 Rider
. Riders are optional, extra terms that go into effect along with your basic policy , often at an additional
cost.
.[Type
They are over and above the terms of your policy.
here]
. The policyholder is liable to pay extra for riders at the time of buying the policy.
Lapse
. Termination of a policy because of failure to pay the premium
Defined benefit versus defined contribution
. The basic difference is what each plan promises its participants. A defined benefit plan specifies exactly
how much retirement income employees will get once they retire. A defined contribution plan only

specifies what the insured contributes to his plan. It does not pre-define the amount of pension.

Actual cash value

. the current cost of replacing an article with the similar article with the same condition. any item has 3 basic
values- original cost, actual cost and replacement cost.

Consequential damage
. a loss that is an indirect result of an accident or fire. For example- food spoiled through breakdown of a
refrigerator.

liability insurance
.an accident in which you are charged with injuring another person or damaging his or her property, liability
insurance pays the cost of your legal defences as well as the cost of any damages from which you are
found legally responsible.

EPFO 2025 | Vyasa IAS | 8851628134, 6350119648

 Insurance by Vyasa IAS

No fault insurance
. under no fault insurance, a person’ s own insurance company pays for financial losses such as medical
expenses and lost wages due to an accident regardless of who caused it.
it is designed to speed up claims payment to accident victims.

prohibited risk
. any class of business that an insurance company will not insure under any condition

[Type here]

EPFO 2025 | Vyasa IAS | 8851628134, 6350119648

RECENT SCHEMES RELATED TO INSURANCE

AND PENSION

PM Suraksha Bima Yojana

Objective: Providing accidental insurance to the weaker sections of society.

Launch year – 2015

Eligibility
• Any citizen of Age between 18 and 70 years
• Bank account linked with Aadhar Card
• The insurance holder has to give consent to join and enable auto-debit on or before 31st
May.