Insurance

Dr Avni Patel
Insurance

• Insurance is a form of risk management in which the insured transfers

the cost of potential loss to another entity in exchange for monetary
compensation known as the premium.

• Insurance allows individuals, businesses and other entities to protect

themselves against significant potential losses and financial hardship
at a reasonably affordable rate.
 Insurance-Meaning and definition
• Insurance is a contract between two parties. One party is the insured and the other
party is the insurer

• Insured is the person whose life or property is insured with the insurer. That is, the
person whose risks are insured is called insured.

• Insurer is the insurance company to whom risk is transferred by the insured. That is,
the person who insures the risk of insured is called insurer.

• Thus insurance is a contract between insurer and insured. It is a contract in which the
insurance company undertakes to indemnify the insured on the happening of certain
event for a payment of consideration
• According to Gosh and Agarwal, “insurance may be defined as a co-
operative form of distributing a certain risk over a group of persons
who are exposed to it’

• In the words of Jon Megi, “Insurance is a plan wherein persons

collectively share the losses of risks”.
• The document which contains all the terms and conditions of insurance (i.e.
the written contract) is called the ‘insurance policy’.

• The amount for which the insurance policy is taken is called ‘sum assured’.
The consideration in return for which the insurer agrees to make good the loss
is known as ‘insurance premium’.

• This premium is to be paid regularly by the insured. It may be paid monthly,

quarterly, half yearly or yearly.
• Peril

• A peril is an event that causes a personal or property loss by fire, windstorm,

explosion, collision premature death, sickness, floods, dishonesty etc.

• Hazard

• Hazard is a condition that may create, increase or decrease the chances of

loss from a given peril.
Characteristics of Insurance

Sharing of risk

• Insurance is a co-operative device to share the burden of risk, which

may fall on happening of some unforeseen events, such as the death of
head of family or on happening of marine perils or loss of by fire.
• Co-operative device

• Insurance is a co-operative form of distributing a certain risk over a group of persons

who are exposed to it.A large number of persons share the losses arising from a
particular risk

• Evaluation of risk

• For the purpose of ascertaining the insurance premium, the volume of risk is

evaluated, which forms the basis of insurance contract

• Payment of happening of specified event

• On happening of specified event, the insurance company is bound to make

payment to the insured. Happening of specified event is certain in life insurance,

but in the case of fire, marine of accidental insurance, it is not necessary. In such

cases, the insurer is not liable for payment of indemnity.

• A contract

• Insurance is a legal contract between the insurer and insured under

which the Insurer promises to compensate the insured financially
within the scope of insurance Policy, the insured promises to pay a
fixed rate of premium to the insurer.
• Transfer of risk

• Insurance is a plan in which the insured transfers his risk on the

insurer. This may be the reason that may person observes, that
insurance is a device to transfer some economic losses would have
been borne by the insured themselves.
Need / Benefits of Insurance
• Shifting of Risk

• Providing Security

• Providing investment opportunity

• Encouraging Savings

• Capital Formation

• Generating Employment Opportunity

• Promoting Social Welfare

Principles of Insurance
• Principle of Insurable Interest
• Principle of Utmost Good Faith
• Principle of Indemnity
• Principle of Subrogation
• Principle of Contribution
• Principle of Causa Proxima
• Principle of Mitigation of Loss
Principle of Insurable Interest

• Insurable interest means that the person opting for insurance must have pecuniary
interest in the property he is going to get insured and will suffer financial loss on the
occurrence of the insured event.   This is one of the essential requirements of any
insurance contract.  

• Therefore, a person can go for insurance of only those properties where he stands to
benefit by the safety of the property, and will suffer loss, damage, injury if any harm
takes place to such property.   Thus, if you want to insure Taj Mahal or Red Fort, you
will not be allowed to do so as you do not have any pecuniary interest in these
properties.
 Principle of utmost Good faith (Uberrima Fides)

•  Like in other contracts, the insurance contract must be based on good faith.   If
the insurance contract is obtained by way of fraud or misrepresentation it is void.

• In Insurance contracts the seller is the insurer and he has no knowledge about the
property to be insured. The proposer on the other hand knows or is supposed to
know everything about the property. The condition is reverse of ordinary
commercial contracts and the seller is entirely dependent upon the buyer to
provide the information about the property and hence the need for Utmost Good
Faith on the part of the proposer.
Material Facts Disclosure

• In the Insurance contract, the proposer is required  to  disclose to the insurer all the
material facts in respect of  the proposed insurance.   This duty of disclosing the
material facts not only applies to the material facts which are known to him but also
extends to material facts which he is supposed  to know. 

• Thus, in case of Life Insurance the proposer must disclose the true age and details of
the existing illnesses / diseases.  Similarly, in case of the insurance of a building against
fire, the proposer must disclose the details of the goods stored if such goods are of
hazardous nature
 Principle of Indemnity

•  The insurance contract should always be a contract of indemnity only  and nothing
more.  According to this principle, the insurance contract should be such that in case of
loss due to the eventualities mentioned in the contract, the insured should be  neither
better off nor worse off  after receiving the insured amount.  The main object of this
principle is to ensure that the insured is not able to use this contract for speculation or
gambling.

• Doctrine of Subrogation: This means that insurer has right to stand in the place of the
insured after settlement of claims as the insured’s right of recovery from alternate
sources is involved
Principle of Contribution

• Contribution may be defined as the “right of Insurers who have paid a

loss to recover a proportionate amount from other Insurers who are
also liable for the same loss”. The common law allows the insured to
recover his full loss within the sum insured from any of the insurers
 Principle of Causa Proxima

• PROXIMATE CAUSE:There are three types of perils related to a claim under an Insurance policy

(1) Insured Perils: These are the perils mentioned in the policy as being insured e.g. Fire, lightening,

storm etc. in the case of a fire policy (2) Excepted Perils: These are the perils mentioned in the policy

as being excepted perils or excluded perils e.g. Riot strike, flood etc. which may have been excluded

and discount in premium availed. (3) Uninsured Perils: Those not mentioned in the policy at all

either in Insured or excepted perils e.g. snow, smoke or water as perils may not be mentioned in the

policy.

• Insurers are liable to pay claims arising out of losses caused by Insured Perils and not those losses
Principle of Mitigation of Loss

• It is duty of the insured to take all the possible steps to minimize the
loss to the subject matter of insurance.

• He is expected to work in the same manner in which he would have

acted in the absence of the insurance contract and do everything that a
man of prudence would do under the circumstances to save the insured
property.
INSURANCE REGULATORY
&
DEVELOPMENT AUTHORITY
(IRDA)
 History
• IRDA was setup in 2000 as an autonomous body to regulate and
develop the business of insurance in the country as per the insurance
regulatory and development authority act,1999.

• The main objective of setting up IRDA was to promote market

efficiency and ensure consumer protection.
• IRDA is the controlling and regulatory apex body in the
country for insurance sector and its chairman and members
are appointed by Government of India. IRDA’s HQ is located
at Hyderabad.

The Authority is a ten member team of

I. a Chairman;
II. five whole-time members;
III. four part-time members,
(all appointed by the Government of India)
• To protect the interest of and secure fair treatment to policyholders.
• To bring about speedy and orderly growth of the insurance industry, for the
benefit of the common man, and to provide long- term funds for
accelerating growth of the economy.

• To ensure that insurance customers receive exact, clear and correct

information about products and services and make them aware of
their responsibilities and duties in this regard.
IRDA Duties , Power and Functions
• Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or
cancel such registration.

•  Protection of the interests of the policy holders in matters concerning assigning of

policy, nomination by policy holders, insurable interest, settlement of insurance claim,
surrender value of policy and other terms and conditions of contracts of insurance.

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

intermediary or insurance intermediaries and agents.
• Calling for information from, undertaking inspection of, conducting enquiries and
investigations including audit of the insurers, intermediaries, insurance intermediaries
and other organisations connected with the insurance business.

• Control and regulation of the rates, advantages, terms and conditions that may be offered
by insurers in respect of general insurance business not so controlled and regulated by
the Tariff Advisory Committee.

• Specifying the form and manner in which books of account shall be maintained and
statement of accounts shall be rendered by insurers and other insurance intermediaries. 

• Regulating investment of funds by insurance companies.

 
• Regulating maintenance of margin of solvency. Currently its 145% for life
insurance and GIC minimum 50Cr or 20% of net premium income.

•  Specifying the percentage of premium income of the insurer to finance

schemes for promoting and regulating professional organisations . 

• Specifying the percentage of life insurance business and general insurance

business to be undertaken by the insurer in the rural or social sector;
Functions of IRDA

 Registration (licensing) renewal of

including registration of insurance
 companies.
Licensing of insurance intermediaries such as
agents, surveyors and loss assessors, third party
administrators, brokers etc.
 official approval of agent’s training institutions.
 Monitoring all non-tariff products including pricing
of products, terms and conditions thereof, etc
 Types of Insurance Contract
• On the basis of nature of the event insurance is classified into following
categories:
• Personal Insurance
• Includes life, accident, health and sickness insurance.
• Property Insurance
• Property of any kind. Fire, marine, motor and miscellaneous..
• Liability Insurance
• Workmen’s compensation and third party
• Guarantee Insurance
• Fidelity and credit insurance ( loss arising due to fraud, breach of contract)
Further Classification of Insurance
Insurance

Non Life
Life Insurance
Insurance

Whole Life, Endowment ,

Annuity General
Miscellaneous
Insurance
Pension, ULIPS

Marine, Fire, Fidelity

Personal Guarantee, Crop,
Accident, Motor Burglary, Cattle
Vehicle etc.
Insurance Pricing

• Mean deciding the amount of premium to be charged.

• If insurers are to sell coverage willingly, they must receive premiums

that, (1) are sufficient to fund their expected claim costs and
administrative costs and (2) provide an expected profit to compensate
for the cost of obtaining the capital necessary to support the sale of
coverage.
Insurance Pricing Objective

• The rating system must generate sufficient premium income for the insurance
company to be able to pay its claims and expenses; to give a reasonable rate of
return to the investors of funds and to finance continuing growth and
expansion.

• Rate must not be unduly high as to allow abnormal gains to be earned by the
insurer. Rate should be justifiable.

• Rating system must be simple to understand.

• Rates should not be subject to too frequent changes, so that public is
not subjected to wide variation in costs after year.
Life Insurance Pricing Elements

• Rate of Death of large number of persons insured

• Occupation, Age , Life Style, Medical History determines mortality rate.

• Premium rates in case of LI are calculated on the basis of rate of deaths of

very large number of persons insured.
• Experience of large number of cases is taken into consideration before
deciding mortality rate.
• Administration cost and other expensed incurred by the insurer
• Expenditure incurred for the service provided.

• Administration cost also depend upon the frequency of premium.

• If premium is paid annually premium would be lesser compared to quarterly,

monthly , half yearly
• Income from investment of premium
• Premium accumulated is again invested and income earned on the same helps
insurance company to beat numerous expenses and benefits awarded to policy
holders.
• The pricing of an insurance product calls for the estimation of claims costs and
other business costs arising from the product and the estimation of investment
income related to the investment of premium.
 Insurance Rating Methods

• Judgement Rating
• Proposed risk is uncommon, very less or no quantitative data about similar risk
is available.
• Rate is based upon underwriter’s own opinion after evaluation of each exposure
individually.
• Each premium is exclusive and based on the judgement of the person making it.
• Normally used in Marine Insurance.
• Class Rating
• Insured risks belonging to the same class are charged the same rate per unit of
exposure.
• Rate signifies the claim experience for the class as a whole.

• Based on assumption that future losses likely to be suffered by the insured will
be generally determined by the same set of factors.
Payment of the Premium

• By Cash, Local Cheque, Demand Draft at local Branch office

• Directly through Bank

• Through Internet

• Through ECS
Grace Period

• Premium should be paid on or before due dates.

• Grace period of not less than 30 days will be allowed for half yearly/
quarterly/yearly premiums. For Monthly not less than 15 days .

• If the premium is not paid before the expiry of the days of the grace,
the policy may lapse.
Actuaries

• Experts responsible for the rate making process.

• They perform actuarial analysis of insurance rates and apply mathematical

models to insurance problems in order to make financial provisions for the
future.
Role of Actuaries
• Conceiving new forms of insurance to cater the changing needs of
consumers

• Ascertaining reserves required for meeting future responsibilities and

liabilities

• Evaluate expense and earnings and making suggestions for allocation

of surpluses

• Communicating with company officials, agents, policyholders and

regulatory bodies about company policies and practices.
• According to IRDA ( Appointed actuary) Regulations, 2000,
appointment of qualified actuary is mandatory for every life insurance
company. No life insurance company can carry on business of
insurance without an appointed actuary.
Underwriting
Underwriting

• It is the function of evaluating the subject of insurance, which may be a

person, property, profession, business or other entity, and determining, on
the basis of company’s predetermined standards, whether to insure it or not.

• Success of Insurance business depends on the precision with which the

company’s underwriter takes decision to accept or reject applications and to
determine the terms on which the risk is to be offered.
• Underwriter is the person who reviews and selects risks to be insured
by the insurance company
Principles of Underwriting

• Underwriting must ensure reasonably accurate estimation of the risk in

any insurance proposal.

• It should be based on cautious investigation of the factors which cause

that risk, so that the premium charged is adequate from the point of
view of the insurance company and at the same time, affordable to
consumer.
Underwriting Process

• Receiving Application

• Reviewing Application

• Assessing Risk and taking underwriting decision

• Policy Writing

• Issue of Acceptance letter and First Premium Receipt

Receiving Application

• Appraisal of information done by underwriters. Most of the information required

is obtainable from insurance application form. Information is categorized into

• General Information: Name, Age, Address, income, Marital Status, Occupation

• Personal Information: Information related to family and personal history

• Medical Information

• Moral Hazard Report by officer

Reviewing Application

• Application in order to be acceptable must be duly executed and must

also meet the insurance company’s underwriting principles.

• Any additional documents if required are asked for

• Application may be rejected if additional information is not received

on time
Assessing Risk and taking underwriting decision

CLASSIFICATION OF RISKS

• The Life Insurance underwriting involves classification of risks affecting the

policyholders. The factors that affect risk on the life of an individual is known as
hazard.

• The hazard may be classified as 1) Physical 2) Occupational 3) Moral.

• Physical hazard: Age, Gender, Physical Condition, Physical Impairments ,

Personal History, Family History .
• Occupational hazard: There is a social angle to this problem of occupational
hazard. People working in mines, on electricity poles, or insanitary condition like
stone crushers or road cleaning are normally the socially disadvantaged people
doing a great service to society. While facing the hazard of their occupation, should
they be penalised by paying a higher premium or exclusion of the risk?

• Whenever the proposer is employed in armed forces, his physical health is assured
to be excellent. There is a provision for regular medical examination and the army
people are categorised on grounds of health. The army personnel can insure
without any medical examination for a very high sum assured, a benefit which is
not available to the general public.
• Moral hazard

• Moral hazard occurs in the insurance industry when the insured party takes
on additional risks knowing they'll be compensated by their insurance
company

• Too much insurance may lead to moral hazard. Insurer, therefore, would
like to know how much insurance he is having or going to have. Therefore
insurance policies taken through separate proposals or revival of a lapsed
policy are important information for undertaking life risk.
 Female Life
• Certain special questions are asked to female proposals relating to pregnancy, and
previous history of miscarriages if any. These questions are health related and therefore
correct information is relevant to the insurer.

• Information relating to husband are important .

• If husband is insurable and not sufficiently insured, the underwriter would like to know
why the wife is proposing for a sum which is higher than that of her husband.
• Underwriter can take following decisions on the basis of above factors.

• Reject an Application : A risk that is unacceptable to the insurance company,

• Issue policy on substandard basis: policy may be issued with higher premium.

• Issue a policy on standard basis: Risk is within acceptable boundaries

• Issue a policy on Preferred basis: Lowest risk

Policy Writing

• Is the function of recording details of the policy in a register for further reference
in the future.

• Each accepted is recorded in the register only after it is consecutively numbered

and a review slip is prepared.

• Separate files are maintained for each proposal.

• These days computerized systems for recording the policyholders’ details ,

premium details and information are stored.
Issue of Acceptance Letter and First Premium
Receipt
• Acceptance of proposal is communicated through Acceptance letter.

• The first premium receipt is issued on the payment of premium by the

proposer.
Types of Underwriters
• Property & Casualty Underwriter
• Site inspection reports, business or personal financial statements, statistical
reports on industry
• Life & Health Underwriters
• Acquainted with effect of medical history, personal habits, lifestyle on
insurability
• Liability Underwriters
• Group Underwriters
Role of Agent in Underwriting

• Establish bond between Insurer and Insured

• He needs to work to intact interest of insurer and guide the insured.

• They are also known as Primary Line or Primary Underwriter.

Policy Servicing & Claims Settlement
Policy Servicing
• First Step: Written proposal made by the potential insured – Proposer.

• Proposal Forms: contains queries intended to extract all material information.

• Proposal Form is accompanied with

• Age Proof
• Birth Certificate, Passport, Certified copy of School – College registration if DOB is
mentioned there, Certified extracts from service register of Govt. Employees.

• Medical Reports
• If Age of insured is high or first level examination carries some adverse remarks, insurer
may ask for thorough medical examination.
• Role of Underwriter

• If Proposal is Accepted:

• First Premium Receipt

• Issued after insured has paid the first instalment of premium

• Policy Bond / Form

• Evidence of the contract of insurance.

• Constituents of Policy Bond are:

• Recital Clause : opening section of the policy

• Operative Clause: spells responsibilities, Obligations of both parties to the contract of insurance

• Conditions, Schedule etc.

• Certificate of Insurance
• In case of Motor Insurance it is issued. Provides evidence of insurance to police and
registration authorities.

• Cover Note
• When negotiations are still going on, on the provisional basis cover note is issued for
temporary time period.

• FREE LOOK PERIOD: This is the period within which, if you do not agree to the terms
and conditions of the policy after reading the same, you can return the policy immediately
and seek refund of premium from the insurance company.

• Normally, all life insurance policies and health insurance policies having a term of three
years or more have a provision for free look period
Nomination
• Process by which a person so named in the policy becomes entitled to receive
the policy amount in the event of the death of the policyholder
• It can be done at the time of commencement of policy, done later by giving
notice, change of the nominee can also be done
• Nominations does not confer any rights on the nominee if the policyholder is
still alive, but if he dies before policy expires he would be legally recognized as
a person entitled to the payment of policy amount.
 Assignment

• It is an instrument whereby the beneficial interest, title and the right under a policy
is transferred either absolutely or conditionally by one person to another person.

• Assignor forgoes all his rights, title and interest in the policy to the assignee
immediately on execution of assignment in favor of the assignee.

• Assignment should be made in writing , should be witnessed by a person. Notice of

assignment is required to be submitted to the insurance company.
Alterations
• Terms of policy can be altered in operational policy
• Name

• SA

• Adding double Accident benefit

• Term

• Mode of premium payment

• Correction in policies

Alteration Fees is required in case of reducing frequency of premium payment , increasing the
accidental benefit etc. No fees in case of some correction in Name, Age ..
Revival

• If Policyholder commits a default in making payment of the premium

within the grace period, policy would lapse.

• Policy can be revived through a fresh contract within a period of 5 years

from the date when the default in premium payment first is made.

• Revival grants insurer the right to impose fresh terms and conditions.

• Normally unpaid premiums plus interest on that is paid to revive.

Surrender Value
• Surrender Value
• Amount of money that a policy holder can withdraw on surrendering his
rights under a policy before its maturity and terminating the contract of
insurance.
• LIC allows surrender of the policy only after premiums have been paid for at
least 3 years.
• Surrender value is restricted to actual amount of premium paid plus additional
bonus attached if any.
• SV also depends upon remaining duration of the policy.
Policy Loans

• Insurance company provides loan to the policy holder subject to T &

C.

• Prescribed Form along with Policy Bond to be submitted

• Loan amount is calculated on the basis of Policy’s surrender value.

• Loan amount and interest varies from company to company

Issue of Duplicate Policy

One need to submit the original policy

• For Settlement of claim
• For the loan on policy
• on the even of surrender policy

• If the original policy is lost, insurer can issue a duplicate policy

• Requirement of issuing duplicate policy
• Advertisement to be published in English News paper having wide circulation
in state where it has been lost, at the cost of policy holder .
• A copy of the news paper should be sent within the publication of one month
to the servicing office. along with that indemnity bond and payment of charges
for preparing duplicate policy and stamp fees to be paid.
• Requirement of advertisement can be changes for the destruction of policy by
fire, mutilated policy.
Claim Settlement in Life Insurance
• Formalities for a death claim

• When a person with a life insurance policy – called a life assured – dies, a claim
intimation should be sent to the insurance company as early as possible. The
assignee or nominee under the policy can do this. So can any close relative or
the agent who handles the policy.

• The claim intimation should contain information like the date, place and cause
of death. The insurance agent has the duty to help the life assured’s family/
assignee to deal with the insurance company to fulfil the formalities for a claim.
• If the life assured dies during the term of the policy, the death claim
arises. If the death has taken place within the first two years of the
commencement of the policy, it is called an early death claim and if
the death has taken after 2 years, it is called a non early ( premature)
death claim.
• The insurance company will respond to this intimation and will ask for the following
documents:

• Filled-up claim form (provided by the insurance company)

• Certificate of death

• Policy document

• Deeds of assignments/ re-assignments if any

• Legal evidence of title, if the policy is not assigned or nominated

• Form of discharge executed and witnessed

• Other documents such as medical attendant's certificate, hospital certificate, employer's certificate,
police inquest report, post mortem report etc could be called for, as applicable.
• Incase of early death claim detailed investigation is done to assess the
genuineness of the claim.

• If the premature death has been due to an accident, it is necessary to

get a police inquiry report in lieu of the attending physician certificate.

• Suicide, if it has taken place within one year of the beginning of the
risk, exempts the insurer from the liability of the payment of the claim.
• Formalities for a maturity claim

• Where a life insurance policy is maturing, the insurance company will usually
send intimation to the policyholder along with a discharge voucher at least two
to three months in advance of the date of maturity giving details like the maturity
amount payable.

• The policyholder has to sign the discharge voucher – which is like a receipt –
have his signature witnessed and send it back to the insurance company along
with the original policy bond to enable it to make the payment.
If the policy has been assigned in favour of any other person or entity – the claim
amount will be paid only to the assignee who will give the discharge
 How To Make a Claim - Health
• One can make a claim under a Health insurance policy in two ways:
• Cashless basis and

• Reimbursement basis

• On a Cashless basis: For a claim on cashless basis, your treatment must be only at a network
hospital of the Third Party Administrator (TPA) who is servicing your policy. You have to seek
authorisation for availing the treatment on a cashless basis as per procedures laid down and in
the prescribed form.

• Please read the policy document as soon as you receive it to familiarise yourself with the
process rather than wait for a claim to arise.
• Claims on reimbursement basis: Read the clause relating to claims in your policy
document as soon as you receive it to ensure that you understand the procedure and
the documents required for making a claim on reimbursement basis.

• When a claim arises you should inform the insurance company as per procedures
required. After hospitalisation, you have to ensure that you obtain and keep ready
documents such as claim form, discharge summary, prescriptions and bills that you
should submit for a claim
How To Make a Claim - Motor

• A claim under a motor insurance policy could be:

• For personal injury or property damage related to someone else. (This person
is called a third party in this context) or
• For damage to your own, insured, vehicle. This is called an own damage claim
and you are eligible for this if you are holding what is known as a package or a
comprehensive policy.
 Own Damage Claim

• In the event of an own damage claim, that is, where your own vehicle is damaged
due to an accident, you must immediately inform insurance company and police,
wherever required, to enable them to depute a surveyor to assess the loss.

• Do not attempt to move the vehicle from the accident spot without the permission
of police and the insurance company.

• Once you receive permission for removal of the vehicle and for repairs, you can
do so.
Third Party Claim

• If you were responsible for an accident (involving your insured

vehicle) in which a third party has suffered some losses, you will be
drawn into a third-party liability claim. In such a scenario, your
insurance company will pay for the damages incurred by the third
party, under your insurance policy. 
• The first thing to do here is to file an FIR at the local police station. Ideally, the
victim will have to do this and keep a copy of the FIR with him/her.

• The third party will need the details of your vehicle insurance policy, so that he/she
can raise a claim under it

• If they sent you legal notice, inform insurer.

• Insurer will verify the incident and appoint a lawyer.

• If a court directs you to pay the damages to third party, your company will directly
pay dues to third party.
Theft Claim
• In case you find that your vehicle is stolen, First and foremost, lodge an FIR at the
nearest police station.

• intimate the insurance company of the loss. When doing so, you should submit the
following documents:
• A copy of the vehicle’s registration certificate (RC)

• A copy of your driving license

• A copy of the FIR

• The first two pages of your policy document

• A letter about the theft, addressed to the RTO

• The police department will try to trace the vehicle for about 6 months,
after which it files a Non Traceable Report.

• Following this, the RC will be transferred to the insurance company

along with a letter of subrogation.

• Once the insurer receives all relevant documents, the claim will be
settled.
Claim Settlement Ratio
• Claim Settlement Ratio is the indicator of how much death claims Life Insurance
Company settled in any financial year. It is calculated as the total number of claims
received against the total number of claims settled. Let us say, Life Insurance Company
received 100 claims and among those, it settled 98, then the claim settlement ratio is
said to be 98%. The remaining 2% claims the Life Insurance Company rejected.

• Based on this, we can easily assume how much customer friendly they are in dealing
with death claims.
Channels of Insurance Distribution
Insurance Intermediaries

• Insurance Agents

Insurance agent has been defined under Insurance Act, 1938 as an agent,
licensed under act, who receives or agrees to receive payment by way of
commission or other remuneration in consideration of his soliciting or
procuring insurance business including business relating to continuance,
renewal or revival of policies of insurance
• Insurance Agents working for a particular company are known as Captive Agent.

• Independent Agents are known as Brokers, who work for several companies

• Agent can be an individual, firm, company, banking company.

• Individual must be major and should have passed 12th Standard examination

• Obtain a license from IRDA and follow the code of condct.

• License is issued on completion of pre licensing course and pass IRDA
Examinations.

• They can not conclude the contract but they need to forward the proposal form to
the company.

• They are responsible for preparing reports, maintaining records, find new clients,
assist in claim settlement

• Insurance companies generally rely on this channel for the growth of their business.
Insurance Brokers

• A broker is an independent professional and expert in insurance

matters, who assess the requirement of a client and recommends
suitable solution for the same.

• Insurance Agents are agents of the insurance company and Insurance

Brokers are agents of the insured and therefore their principal
accountability is towards the insured.
• Different net worth is required for different categories of Brokers.

• They provide great service in creating insurance awareness, increasing

market penetration, promoting competition and improving customer
service.
TPA ( Third Party Administrators)

• They are intermediaries operating in Health Sector

• They make avail the services of a number of Hospitals and nursing homes to
policy holders.

• With the introduction of TPAs , insured can avail of the hospitalization services
without having to pay for the same.

• TPAs can be associated with any number of hospitals and work with any number
of insurance companies
Claim Settlement with TPAs
• Insurers transfer the records pertaining to medical insurance policies to
TPA.
• TPA issue identity cards to all policyholders. These cards need to be
shown at hospital at the time of availing hospitalization services
• Policyholder is required to inform TPA on its 24 hour toll free line
• Then customers are directed to a hospital with which they have tied up
agreement.
• An authorization letter of treatment is to be issued by TPA to hospitals
whereby they agree to pay for the treatment.
• After settling payment with hospital, TPA forwards all the documents
to company for consideration of claim.

• Then insurance company compensate the TPA.

Surveyors & Loss Assessors

• When a claim is reported under policy issues , it is required to evaluate the

loss or damage suffered. For this they appoint surveyors and loss assessors,
who are independent professionals, duly licensed by insurance regulatory and
development authority.

• Licensed surveyor can be included on the panel of more than one insurance
companies in India.
• They look into and verify the causes of loss or damage

• Recommend ways to save the damaged property or goods from further

destruction and make sure that the insured takes necessary steps to
reduce the loss
Corporate Agents

• It is a corporate body set up with the explicit objective of selling insurance

products.

• Concept was introduced by IRDA in order to facilitate bancassurance, a new

distribution channel.

• Unlike Individual Agents, corporate agents must necessarily have three directors
all of whom have to be certified by the IRDA for selling Insurance.

• Corporate Agents are more professional than normal agents.

Bancassurance Channel
Bancaasurance

• It is the distribution of insurance products through the bank’s

distribution channel whereby, along with a complete range of banking
and investment products and services, insurance products are also
offered through the vast network of banking services.

• It can be win - win situation for all the participants viz. banks, insurers
and the customers
BANCASSURANCE IN INDIA

 In India banking and insurance sectors are regulated by two different

entities.
 The banking sector is governed by Reserve Bank of India (RBI) and
the insurance sector is regulated by Insurance Regulatory and
Development Authority (IRDA).
 In the year 2002 the banks of India were permitted to do insurance
business for the first time.
RBI GUIDELINE FOR BANKS ENTERING INTO INSURANCE
SECTOR PROVIDES THREE OPTIONS FOR BANKS. THESE
ARE:

 Joint venture will be allowed for financially strong banks wishing to

undertake insurance business with risk participation
 For banks which are not eligible for this joint- venture option, an investment
option of up to 10 % of the net worth of the bank or Rs. 50 crore, whichever
is lower, is available.
 Any commercial bank will be allowed to undertake insure business as agent
of insurance companies. This will be on a fee basis with no-risk participation
Example
•SBI Life Insurance Company Limited
Joint venture between the State Bank of India and BNP Paribas
Assurance registered with IRDA on 30.03.2001
• Share Holdings
 Some tie ups are :
Insurance Company Bank

Corporation Bank, Indian Overseas

Bank, Centurion Bank, Vijaya Bank,
Life Insurance Corporation of India Oriental Bank of Commerce etc

National Insurance Co. Ltd. City Union Bank

United India Insurance Co. Ltd South Indian Bank

Bajaj Allianz General Insurance Co. Karur Vysya Bank and Lord Krishna
Ltd Bank
ICICI Prudential Life Insurance Co ICICI Bank, Bank of India, Citibank,
Ltd. Federal Bank, and Punjab and
Maharashtra Co-operative Bank.

HDFC Standard Life Union Bank of India

Advantages
• For Banks
• Increases customer loyalty from offering all financial products & services
under one roof
• Increase in fee based revenue

• For Insurance Companies

• Immediate access to gigantic customer base of banks

• Geographic Reach

• Increased Brand Awareness