CONCEPT OF INSURANCE & INDIAN INSURANCE MARKET

1. "The purpose of insurance is common fund is created out of small contributions from
many such owners of similar assets, this fund can be used to compensate the loss suffered
by unfortunate few."

2. Insurance may thus be defined as sharing of the losses of a unfortunate few amongst
those exposed to similar uncertain events/situations.

3. Insured is the one who holds the policy and Insurer is the company that covers the
insured.

4. Risk means possibility or chance of a loss or damage. Actually the loss/damage may or
may not happen.

5. Examples: In case of properties there are chances that they will be lost or damaged by
accidents like fire.

6. The event, whose occurrence actually leads to the loss, is known as Peril. It is the cause
of loss.

7. The Examples of perils are fire, floods, lightening, burglary, snakebite etc.

8. Hazards increase probability of loss , increase severity of damage

9. Example smoking increases chances of cancer., storage of petrol in a house will increase
damage in case of fire

10. An intermediary is a person or an agency who acts as a link between the insurance
company and the policyholders.

11. In Indian insurance market the following intermediaries are Agents , Corporate agents
, Bancassurance,Brokers, Microinsurance agents,Village level entrepreneur

12. Agents- An individual is allowed to become agent . The agent represents the insurance
company before the customer.

13. Corporate agents- corporate agent is a corporate body which acts as agent

14. Bancassurance- Banks can become corporate agents.

15. Specialist Intermediaries - Insurance surveyors, Claims investigators , Medical

examiners

16. Insurance surveyors: - The work of a surveyor is to asses losses of the policyholder for
non-life insurance claims.

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17. Claim investigators are employed by insurance companies to investigate claims relating
to crimes like theft, burglary, misappropriation of insured’s money or property by their
employees etc.

18. Medical examiners: - Medical experts [Physicians, Pathologists etc] are employed by life
insurers to examine the health condition of a prospective life to be insured and decide
about the acceptance, extra premium to be charged, etc

19. Third Party Administrators or TPA are intermediaries, licensed by IRDA and are
responsible for the processing of claims under Health Insurance.

20. An insurance policy that covers the damage caused by another person or party is
known as third party Insurance

21. Third party insurance, the insured is the first party, insurance company is the second
party while the damage done by another is referred as the third party.

PRINCIPLE OF GENERAL INSURANCE

1. Essential Elements of Valid Contract

A. Offer & Acceptance : An offer is an expression of willingness made by Insured to
contract on certain terms & conditions and when he/she accept, then it is called as
Acceptance
B. Consideration: Means mutual benefits for both parties.
C. Agreement b/w parties: Clear understanding about the subject matter which is to
be insured and accepting terms & conditions is called as ‘ CONSENSUS AD IDEM”
D. Free consent : Signing of agreement or contract without pressure.
E. Capacity of parties: People who are wise enough to take decision, carefully going
through terms & conditions of Agreement. E.g Minor, Unsound mentally ill people
are not eligible for signing contract.
F. Legality: Asset which has been insured should not be used for any illegal activities
like smuggling, kidnapping, terrorist activities.
2. What is Utmost of Good Faith /Uberrima Fidei?
➢ Both the parties i.e , Insurer & Insured should voluntarily disclose all material
facts(Information) regarding policies and about the asset or person which to be insured.
Insurer disclosed policy details in its prospectus & Insured in their proposal form.

3. What is Material Facts?

➢ All the questions which has been asked in Proposal form are materials facts and on the basis
of this only risk and pricing of policy are done. E.g Disclosing about existing illness, recent
surgeries are material facts.
4. What is Breach of Utmost Good Faith?

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 ➢ If information is not disclosed as asked in proposal form then in such case Insurance contract
become null & void i.e Insurer will not pay any claim if situation arises
5. What is Insurable Interest ?
➢ It means if someone has ownership interest in asset or life of somebody. Example A father can
have insurable interest in the life of his wife, son , daughter and thereof he will seek Health
insurance, A financier will have ownership in financed Asset like vehicle so there is insurable
interest.
6. What is Proximate Cause?
➢ It’s the root cause for any event like Car accident, Fire Incident.
7. What is Principle of Indemnity ?
➢ It means customer is put into same financial position as before the incident or accident so that
customer should not make profit out of loss of asset
➢ As per principle of indemnity if any new parts are replaced then depreciation is applied
8. Sum Insured: It is the maximum amount that insurance company promises to pay to customer
9. Average condition: If customer has taken insurance for his/her asset less than the value of asset then
average condition applied. It means if customer choses for underinsurance then insurer will pay only
proportionate amount out of claim.
10. Policy Excess ; Every proposal consists of policy excess which says customer will not get total claim as
there will be some deduction from claim amount depending upon excess mentioned in proposal form.
11. Franchise: It means Insurance co. will not pay claim up to some limit which is very less. Let say customer
claim INR 5000 , here insurer will not pay this small amount.
12. REINSTATEMENT POLICY (R I V policy ) : If customer opts for RIV policy then customer will get Sum
Insured even though Indemnity value (Depreciating value of asset) is less
13. Subrogation: It is the right exercised by Insurer to take compensation from third party(Any individual
or Insurance co.) who intentionally or unintentionally cause damage to asset after settling Claim made
by customer for his/her damaged asset
14. Salavge : When is claim is settled then damaged asset are taken by Insurer and recover amount by
selling or auctioning of asset.
15. Contribution: If customer has taken Insurance for the same asset from different Insurer then principle
of contribution applies. It means equal contribution for the claim amount will be bear by Insurance
company for the claim.

NON- LIFE (GENERAL INSURANCE) - PRODUCTS

In this module we will study various non- life [general insurance] policies.

1. Live Stock Insurance : includes insurance of cattle, poultry and fisheries .

Cattle Insurance: ‘Cattle’ refersto:

a) Milch cows and buffaloes (2 to 12 years)
b) Calves /Heifers
c) Stud Bulls

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 d) Bullocks [castrated bulls] and castrated male buffaloes, whether indigenous, exotic or
cross-bred

The policy covers only death due to:

a) Accident
b) Diseases occurring during the period of this policy.
c) Surgical operations.
d) Riot andstrike.
The policy can also be extended to cover Permanent Total Disablement (PTD) on payment of extra
premium.
i. Permanent Total Disability, which, in the case of milch cattle results in permanent and
total incapacity to conceive or yield milk
ii. in the case of stud bulls resultsin permanent and total incapacity for breeding purpose
iii. in case of bullocks, calves / heifers and castrated male buffaloes results in permanent
and total incapacity for the purpose of use mentioned in the proposal form

Exclusions:
a) Neglect, overloading, unskillful treatment or use other than for the purpose mentioned
in insurance proposal without consent of insurance company
b) Accidents and/or diseases before insurance commenced
c) Theft & clandestine [secret] sale of animal.
d) Transport by air and sea

Special conditions provide that(claims are not payble)

i) if death is due to disease occurring within 15 days of insurance policy

commencing.
ii) if ear tags are not surrendered to insurance company. If the tags are lost insurer
must be informed and animal must be retagged.

Claims Procedure:

financiers must be informed immediately and the following documents submitted within
30 days:

i) Completed claim form & ear tags

ii) Death certificate from veterinarian on insurer’s form
iii) Post mortem report, if required by insurer

Sheep & Goats

Insurance for these animals are similar to Cattle except cover is only for death and not
permanent total disablement. Identification may be by ear tagging or tattooing

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 All other policy terms and claims procedure are similar to cattle insurance.

Poultry Insurance

Poultry means birds like chicken, hen etc. They are categorized as a) layers b) broilers
a) parent stock(hatchery)
The insurance is on flock/lot basis and not single bird basis.

Insurance is similar to cattle insurance i.e. death is covered due to accident or diseases only.

Exclusions include transport by any means, natural mortality or unknown causes, improper
management or overcrowding.

2. Agricultural Pump set The insurance is for centrifugal pump sets of upto 25HP (electrical
or diesel) of approved makes used for agricultural purpose.

The policy covers loss due to unforeseen and sudden physical damage by the perils of: fire,
lightning, riot strike, malicious damage, terrorism, mechanical or electrical breakdown, burglary (by
violent forcible entry and provided the pump set is kept in a locked enclosure)

Flood risk can be covered at extra premium

3. Agriculture Insurance based on emerging new technologies

Weather Index Based Method : one standard index of weather is takenas a base.
Maximum sum insured per hectare is decided in advance.
Any deviation is noted and if the deviation reaches certain percentage say
20% then the claim comes within sum insured is paid.
Advantages: method is faster, transparent and less costly. Compared to the data
required for administration of any insurance scheme, weather data is easily
available

SCHEMES UNDER THE METHOD

1) Vima Varsha ( Deficit rainfall, Aggregate Scheme)

a) If deficit rainfall touches pre decided %, scheme becomes operative.
Weather based crop insurance schemes
a) Coverforexcessiveheat
b) Un seasonal rainfall.
c) Lowtemperature.
4. Crop Insurance

The insurance provides for loss of average yield of the selected crops due to operation of

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the following perils:
Fire, lighting, storm, Hailstorm, cyclone, flood inundation landslide, drought, dry
spells, pests/disease,
Crops that can be insured are Food crops: cereals, millets and pulses Oilseeds like groundnut,
sunflower

The scheme is also known as the National Agricultural Insurance Scheme (NAIS)

5. Weather

The insurance covers damage to crops due to weather triggers determined for all the
areas of the crop. This product is also known as Weather based Crop Insurance Scheme
(WBCIS),

6. Motor Insurance

Motor insurance provides for payments to the vehicle owner, in case of accident,

(i) damages to vehicle [O. D.]

(ii) Third Party [T.P.] Liability, due to injury to his [TP] life or property, determined as per law
against the owner of the vehicle.

7. Farmers Package

The insurance has may sections covering various risks a farmer may encounter
involving his assets. The farmer can choose the sections required. Minimum three
sections must be taken of which section 1 is compulsory and any one from sections 3, 4,
5, and 6. Discounts are given if 4 or more sections are taken.

Section are

1. Fire and allied perils: For house of pucca construction, and / or contents excluding
jewellery orvaluables.
2. Burglary
3. Agricultural pump set
4. Animal drawncarts/tangas/coaches
5. Livestock, cattle/ sheep/goats/camel/horses etc
6. Agricultural Tractor(comprehensive only)
7. TV set
8. Pedal cycle

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9. Baggage
10. Janta/ Gramin Personal Accident
11. Jan ArogyaBima

8. Package policies for house/hut

Rural houses and huts are insured against the risk of fire, lightning, riot & strikes,
malicious damage, flood storm cyclone or inundation and earthquake.
The Sum Insured is a maximum of Rs. 6000/- (5000 for the hut and 1000 for contents)

9. Package policies for shopkeepers

Like farmers package policy this policy too has various sections suitable for small
shopkeepers. A Minimum of 3 section must be selected of which I (contents) & II
sections are compulsory.
The sections are:
1. Fire for building and/or contents
2. Burglary
3. Money: in transit. In safe during & after business hours, on counter during
business hours
4. Pedal cycle
5. Fixed plateglass
6. Neon sign/glowsign
7. Baggage
8. Personal Accident
9. fidelity insurance of employees
10. Public Liability
11. Employee’s compensationLiability

10. Other rural insurance products

a) Other house hold/pet animals
b) Sub animals like silk worms, honey bees and fish fingerlings insurance is also available.
c) Horticulture /Plantation (inputs) insurance

d) Animal drawnvehicles
The insurance covers the animal for death due to disease or accident and damage
to the vehicle by fire ad allied perils and accident including burglary

HEALTH INSURANCE AND PERSONAL ACCIDENT INSURANCE

1. Mediclaim Policy–Policy covers reimbursement of medical expenses

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Which includes Cost of health check –like Pre hospitalization—30 days limit before admitting in
hospital
Post hospitalization –upto 60 days of discharge

Minimum 24 hrshospitization required. But some day care treatments not require the person to be
hospitalized like cataract, hemodialysis, and chemotherapy are also covered and reimbursed.

Cashless Facility
Under this insured person need not pay the bills if taking treatment in tie up hospitals with Insurance
companiesas they will arrange direct payments .Otherwise in a non-listed hospital he has to pay the bills
first and then seek reimbursement. This is an annual policy and has to be renewed every year.

There are some Exclusions under the policy which may vary product to product :-

A family can insure under simple policy, where family discount may be provided. Family means-
husband, wife, dependent children maximum2, dependent parents.
Proposal form should include medical history and submitted with passport photograph.

Health insurance of Life Insurers

The product is similar with regard to the Cover, which have exclusions and conditions of the
Mediclaim policy with including some exceptions

Overseas Medical Policy

The policy is for emergency medical treatment to persons travelling overseas.

Min- Max. period , Age & Coverage

The minimum period 7 days and maximum 180 days . Age covered -5 years to 70 years
Children from 3 years onward can be covered, if accompanying parents.

Currency consider for payment

Premium is payable in Rupees but cover is in US$. Age , place and duration of trip are factor deciding
premium

*The journey must commence within 14 days of the date of commencement of policy.

Critical Illness Benefit –( Age 18 years to 60 Years)

Policy holder who faces major disease like Heart Attack, Bypass surgery, Cancer, Paralysis,
Transplant of organs listed in policy will get the Sum Insured as lump sum compensation after 90
days of the commencement of the policy.

The insured must survive 30 days – 90 Days after diagnosis to claim under the policy. Re-existing
diseases are not covered.

2. Personal accident
Provides compensation if an accident results in ----

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a) Death &Permanent Total Disablement (PTD) 100% Sum Insured
b) Loss of 2 limbs(hand/leg)/sight of 2 eyes/one limb and sight of one eye 100% Sum Insured
c) Loss of one limb or sight of one eye 50% Sum Insured
d) Permanent Partial Disablement (PPD) % of Sum Insured as per disability table listed
e) Temporary Total Disablement (TTD) In policy Example loss of index finger
1% of Sum Insured per week subject to maximum Rs.5000 per week for maximum 104 weeks

The contingencies a) to d) are called Capital Benefits and in the event of any of these losses the claim
is paid inclusive of Cumulative Bonus earned.

In addition to the above these benefits, if a death occurs

I) Expenses for Carriage of dead body for a fixed amount as stated in policy
II) If the insured had minor dependent children a Sum of Rs.5000 per child for maximum 2 children
as Education Fund is also paid.

Medical expense reimbursement with extra premium

The amount payable will be 25% of the claim amount or 10% of the Sum Insured or actual whichever
is lowest .

Cumulative Bonus:

Cumulative Bonus; like mediclaim for every claim free year a cumulative bonus as of the sum insured.
An accumulation of maximum 50% of sum insured can be earned.

There are some Exclusions under this policy

Coverage and Age Limit

The policy is 24 x 7 and covers accident anywhere in the world

The policy is available for persons from 10 years to 70 years.

Janta Personal Accidents

The policy is similar to Personal Accident policy where maximum sum insured is Rs. 1 lacwith no
Cumulative bonus, Education fund and medical expenses are also not covered , with a maximum
tenure of 5 years

Gramin Personal Accidents

The policy is similar to JPA but Sum Insured is restricted to 10000 only
Only few contingency options are covered

INSURANCE - DOCUMENTS

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 PROSPECTUS:-It is document/Booklet which describe the main features of an insurance Policy like details of
the Coverage, Exclusions and all terms & conditions of the Policy and it may contain benefits
available under an insurance and example of Calculation of benefits.

In India Issuing prospectus in local Language for easy understanding for Policy buyers is a good
business practice though it is not mandatory to issue prospectus.

Proposal Form:-It is a standardized printed application form for applying insurance policy filled & signed by
proposer at the end. That’s why All the information given in proposal form should be true and
correct

As per provisions of Insurance Act 1938, a copy of proposal form [including all the attachments] is to be
provided to the insured, along with the policy for his records

Proposal Form Contents:

Proposal form generally contains Personal details of the proposer ,insured person or property
full details , Sum Assured, Riders, previous history of Insurance ,losses(Generally 3years) &
illness(Life & Health insurance),Premium payment mode(Life) and Nomination
details(Life/Accident/Health)

Personal Statement:
In life insurance personal statement is a part of proposal form to be completed along with
proposal. This contains details of the health of the person, family history, personal habits,
medical consultations and ailments, absence from work due to medical grounds etc.

In case of Illiterate proposer:

left thumb impression is to be attested by a third party with a declaration that the questions
were explained to him and answers dictated were recorded truthfully and

If questions are not in known language:

There must be a declaration [By an independent person, who knows both the languages] that
the questions were explained to proposer in the language [understood by him] and answers
dictated were recorded truthfully and were read out to the proposer who understood them
fully.
Premium Receipt:
It is the receipt of Premium paid to the insurance company subject to realization of premium
Money received

First Premium Receipt’:

In life insurance receipt for the first premium is called ‘First Premium Receipt’. If claim occurs
after First Premium Receipt is issued, the insurer is liable to pay the claim, even though the
policy is not issued.
Cover note :-

Cover note is an unstamped temporary document which is issued as a proof of insurance

before
issuance of final policy(Non- Life Policy only)

Validity of Cover note(Motor Insurance)

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 It is valid for a maximum of 60 days and is acceptable as proof of Third Party insurance which
is mandatory under the Motor Vehicle Act. Cover note becomes ineffective when the policy is
issued.

Certificate of Insurance :-
A Certificate of Insurance is required to be issued in addition to a policy under rule 141 of
Central Motor Vehicles rules 1989, In marine (transit) insurance also certificate of insurance is
issued in place of policy. But issuing of marine certificate of insurance is not compulsory.

Contents of Certificate:

It gives details of the insured, vehicle details like, type, make, model etc. place of registration of vehicle,
period of insurance , geographical area of the vehicle where it can operate, limitations as to use etc.

Policy Document

Policy document is the evidence of the insurance contract. It is stamped as per provisions of Indian
Stamps Act, it is accepted as a valid document in a court of law, in case of dispute between the insured
and the insurers.

Policy is a standard pre printed form, containing all the terms of policy- like coverage, benefits,
exclusions, conditions, claim procedure, etc.

Endorsements

Endorsements are issued as correction or to record changes to the main/Original policyeither at the
beginning of the policy or during the currency of the policy . The corrections are in the form of
memorandums which are called endorsements.

Examples:
Covering earthquake risk, which is excluded; under fire policy for the house.

Extra Endorsement:

If Correction or Change result in an increase of Risk during policy then Extra premium will be charged
to pass extra endorsement.

Example: Increase in sum insured under House Holder’s Policy.

Refund Endorsement:

When the risk decreases during the currency of the policy, the insurers may allow refund in the original
premium charged and record the change by passing a refund endorsement.

Example; In fire policy godown is converted in to house.- the difference of premium between that
applicable to godown and house is returned for the balance of the policy period.

NIL endorsements:

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 Sometimes the endorsements are required to record the change which may not involve any increase
or decrease in the risk but are for important aspects of insurance. In those cases NIL endorsements
without any extra or refund premiums are passed.

Example: Change of Nomination under life policy. Or Change of address of insured under Personal
Accident policy.

Renewal Notice

It is formal letter and generally sent to the insured well in advance to remind them about due dates
of the premiums though it is not mandatory for insurer to send any renewal notice but as a matter of
good customer service it is send.

POLICY HOLDER PROTECTION REGULATION

• The IRDA regulations 2002 provides the duties of insurers , intermediaries, pre & post sales.

Stages of insurance policy .

1. Pre-sale

• Here intermediaries are required to give all information to customer about the product so that
the customer can make decision which is in his benefit.
• Also proposal form is required to be filed up & benefit of nomination must be explained to the
proposer.
2. Post sales (after sales)
• Policy letter need to be sent to the customer informing about the free look period (life insurance) &
insurance company must ensure that language used is simple.
• After receiving policy if customer realizes that the policy he had purchased does not fulfill his need, he
can cancel the policy within 15 days of receipt of policy to the office and hid premium will be paid back
after deductions.
• In respect of life insurance where premium charged depends on age, the insurer shall ensure that the
age is admitted as far as possible, before issue of policy.
• Every insurer shall inform the insured periodically regarding requirements to be fulfilled by insured for
lodging a claim.
• Insurance company has respond within 10 days of any communication from its policy holder in all
matter related to servicing.

GRIEVANCE REDRESSAL PROCEDURE

Procedure to be followed for grievances redressal:

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 • Every insurance company has ways to address the complaints and issues of policy holder.
• If any issue is there with the policy they can approach Grievance redressal authority or grievance
cell.
• Upon receiving of complaints the grievance cell has to
(1) Record complaints & allot complaints number.
(2) Complaints letter should be given along with reference number.
(3) Grievance cell will collect paper from relevant office
(4) Grievance cell examines complaints & give decision within one months.

Insurance ombudsman
• This is the authority which is created by central government.
• If customer does not get any response from grievance cell or insurer with in one months or on
rejection of complaints he can approach to this authority.
• Time limit for making complaints to ombudsman is 1 year from the date of cause of action.

Integrated Grievance Management System Of IRDA.

• The main purpose of IGMR is to facilitate online registration of policy holders complaints & track their
status.
• For registering the complaints customer can visit https://www.irda.gov.in

OTHER AVENUES
• Policy holder can also file complaints against insurer under consumer protection act 1986.

The act deals with following:

ii) Repudiation of claims
iii) Delay in settlement of claims
iv) Delay in finalizing the claims

• Under this act policy holder has to pay very nominal fee.
• Case can also be field against the court of law against the insurance company within 3 years but it is an
expensive way of settlement.

SELLING OF INSURANCE PRODUCTS

1. RAP- Rural authorized Person, who is authorized for selling insurance.

2. Prospect is the person who has ability to pay for insurance(person with income) and also must have
need for the insurance.

3. Prospecting means finding people who might be interested in buying insurance.

Way of finding prospect.

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 4. References: asking for contact from friend, family ,relative existing policy holder.

5. Centre of influence: person who has good reputation in the area. Like sarpanch, teacher, manager,
babu etc.

6. Nests: large groups like bank employee, vayapari sangthan, etc.

7. Cold canvassing: meeting unknown people.

8. Policy holders: existing policy holder can be approached for new product and references.

PREAPPROCH :before approaching the prospect rap should collect all the essential info about the prospect and
have his presentation ready so upon MEETING THE PROSPECT RAP can discuss the advantages and how the
insurance is suitable for the buyer.

Ethical Selling: RAP should sell the product which is suitable as per the requirement of the buyer. Telling high
return and projection of fake benefits must be avoided at any cost.Terms and conditions should be told clearly
to the buyer. Churning, suggesting Clientforcancellation of old policy and subscribing to new plan for
commission must be avoided.

Communication skills

1. Communication means to convey ones message to the other. Receiver must understand the message
in order to complete the process.
2. Communication can be done in many formslike: written, oral, verbal, non-verbal and using body
language.
3. The main motive of communication is whatever the receiver has understood is the same which
sender wanted to send.
4. Communication can get distorted because of theprejudgment about the sender.
5. Poor design of message.
6. Deviation of the message from the main point.
7. The sender has not understood the receiver’s message due to use of different language, body
language.
8. Listening is the one the most important aspect of the communication.

• Active Listening:Paying attention to the speaker,Provide feedback. Allowing the speaker to

finish each point before asking questions.
• Responding Appropriately:Responding to the speaker in an appropriate manner which is
suited to the theme of the message.

• Empathetic listening: Empathy implies hearing and listening patiently, and with full
attention, to what the other person has to say, even when you do not agree with it.

Importance of after sales service:Post sale service is an opportunity to consolidate and build
trust.Insurance business is about building relationships and keeping them.

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After sales service like:Delivering premium receipts and policies, reminding policyholder about dates
of payment & renewal.Advising policyholder about charges& Helping in claim settlement.

• Customer loyalty building for persistency.Customer loyalty is very important in

insurance.it helps in growth of the company. More time, efforts and expenses are required to
bring in a new customer but to retain an old one it is not so.

In both branches life and non-life insurance, it is important to retain customer.

• Effects of loss of old customers may leads to loss of business. Loss of benefit of insurance to
the policy holder,Loss of commission income.

• Retaining old customerwill help in maintaining business flow, increase in commission

income, Important for reference purpose and may serve as testimonial for new customers.

• To achieve high level of persistency (customer loyalty) one need to do Need based
selling:Always selling polices which fits the need of the customer.

• Continues right advice: Remain in contact with policy holder and suggesting right plans for
his/her need providing appropriate information about premium and other related
information.

Dos and Don’ts for Rural Authorized Person [RAP]

RAP is the individual who is authorized for selling insurance and hence he/she is the key element in
this business process so he/she need to have good faith & integrity while doing business.
• If questioned about the authority he need to show the license if asked.
• Terms and condition of the policy must be told to the buyer before signing of the contract.
• RAP should consider the need of the buyer while suggesting policy.
• Information provided by the prospect must be kept confidential. He should disclose health
status and other habits to company in every proposal.
• He should inform the buyer about the adverse effect of not providing true information.
• He should help the policy holder in claim settlement and processing the claim request without
delay.
• RAP should ensure the compliance like Section 64-VB of Insurance Act 1938, Anti Money
Laundering [AML] and Know Your Customer {KYC] guidelines, sec 41 IA 1938.

Things to avoid

• Do not sell or conduct insurance business without valid license.

• Do not provoke the prospect to provide any misleading information.
• Sells pitch should be true and not promising any fake return just to make sales.
• Do not behave rudely to the prospect or the policy holder ort the claimant.
• Do not offer any rate other than the provided by the insurer.
• Do not force policy holders to terminate existing and to effect a new policy within three years
from the date of such termination.
• Do not ask for any return or benefit out the claim amount.

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 INSURANCE TERMINOLOGY

Absolute Assignment: The transfer of ownership of a life insurance policy from one person to
another which cannot be revoked or taken back.

Accelerated Benefits: Under this the policyholder receives benefits before death, usually in
cases of his suffering from a major disease or needing long-term care.

Accelerated Endowment: A cover in which dividend declared under the policy accumulates and
gets converted to a life insurance policy into an endowment, or to shorten the endowment term.

Accelerative Endowment: An option to use policy dividends to mature a policy as an

endowment before the regular maturity date.

Accidental Death and Dismemberment Insurance: Insurance policy that provides payment if
the insured's death is the result of an accident, or suffers a major disability due to that.

Accident: An accident is a sudden, unforeseen and involuntary event caused by external and
visible means.

Act Of God: Natural events which are beyond the control of a human being and occur without
intervention of a human being. It is difficult to prevent the occurrence with any amount of
foresight. Plans or reasonable care. E.g. earthquake, lightning, Storms etc.

Additional Premium: More premium payable by the insured as a result of some change in the
policy where the risk increased for taking some additional cover under the policy. E.g. Increase
in sum insured, taking some additional rider like Add On during currency of policy.

All Risks: Term used to describe insurance against loss of or damage to property arising from
any accidental reason except those that are specifically excluded.

Any one illness: Any one illness means continuous period of illness and it includes relapse within
45 days from the date of last consultation with the Hospital/Nursing Home where treatment may
have been taken.

Assignment: The transfer of ownership of a life insurance policy from one person to another.
Also refers to the document that effects the transfer

Assurance: A term which is used generally in life insurance to mean insurance. An assurance
means the certainty of an event like death.

Attained Age: The age an insured has reached on a given date.

Average (Condition of Average): A clause in insurance policies in which loss payable is reduced
because the insured has taken lesser insurance than insurable value. It is paid proportionately.
Loss X sum insured / market value..

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Actuary: An insurance professional who specializes in statistical information.

Backdating: A procedure for making the effective date of a policy earlier than the application
date. This is done under life insurance policy. However there is no cover from effective date of
policy to the date of taking policy.

Bad Faith: A breach of contract, on the part of either the insured or the insurer.

Beneficiary: The named person who receives the benefits of the policy upon the death of the
policyholder.

Cancellation: Termination of a policy before it is due to expire.

Cashless facility: "Cashless facility” means a facility extended by the insurer to the insured
where the payments, of the costs o f treatment undergone by the insured in accordance with the
policy terms and conditions, are directly made to the network provider by the insurer to the
extent pre-authorization approved.

Claims: Injury or loss to the insured arising due to an insured event for which the insurer is liable
to pay the compensation as per terms of cover given.

Collateral Assignment: The temporary transfer of some benefits of a life insurance policy from
one person to another, usually used as security for a loan. In the event of default, the creditor
would receive proceeds only to the extent of his interest.

Commercial lines: Insurance products that are designed for and bought by businesses, as
opposed to personal lines products, which are sold to individuals.

Commission: The fee paid to the insurance salesperson, as a percentage of the policy premium

Concealment: Hiding of any important information connected with the risk to be insured with a
view to taking insurance.

Conditions: Part of every insurance policy; qualify the various promises made by the insurance
company

Condition Precedent: Condition Precedent shall mean a policy term or condition upon which
the Insurer's liability under the policy is conditional upon.

Consequential Loss: Losses which are indirect to an invent insured. Like fire in a factory closes
it down and with the result production loss takes place. Production loss is consequential loss.
Generally it is excluded from specific policy but can be covered under a separate policy.

Co-Payment: A co-payment is a cost-sharing requirement under a health insurance policy that

provides that the policyholder/insured will bear a specified percentage of the admissible costs.
A co-payment does not reduce the sum insured.

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Convertible: A policy that may be changed to another form without evidence of insurability.
Most Term policies are convertible

Cover Note: A document issued to the insured confirming the granting of insurance. Generally
this is issued pending issue of the policy by insurers.

Cumulative Bonus: Cumulative Bonus shall mean any increase in the sum assured granted by
the insurer without an associated increase in premium.

Day Care Treatment: Day care treatment refers to medical treatment, and/or surgical
procedure which are: a) Undertaken under General or Local Anesthesia in a hospital/day care
centre in less than 24 hrs because o f technological advancement b) Which would have otherwise
required a hospitalization of more than 24 hours?

Death Benefit: The amount of money paid or due to be paid when a person insured under a life
insurance policy dies.

Decreasing Term: A type of insurance in which the premium decreases over the period of the
term and also the amount of insurance. This is taken to secure loans taken by the insured.

Deductible: A deductible is a cost-sharing requirement under a health insurance policy that

provides that the Insurer will not be liable for a specified rupee amount o f the covered expenses,
which will apply before any benefits are payable by the insurer. A deductible does not reduce the
sum insured.

Deferred Premium: Part of the premium which is to be paid in future and not immediately. The
premium payment may be quarterly or six monthly

Definitions: Part of every insurance policy which explains the special meaning of the technical
words which are used in the policy.

Disability insurance: This type of insurance provides an employee security by providing an

income if he or she become sick or injured and unable to work due to an accident or sickness.

Domiciliary Hospitalization: Domiciliary hospitalization means medical treatment for an

illness/disease/injury which in the normal course would require care and treatment at a hospital
but is actually taken while confined at home under any of the following circumstances: a) The
condition of the patient is such that he/she is not in a condition to be removed to a hospital, or b)
The patient takes treatment at home on account o f non availability of room in a hospital.

Double Indemnity: Payment of twice the basic benefit in the event of loss resulting from
specified causes or under specified circumstances such as accidental death.

Due Date: The date on which premium payment is due.

Endorsements: A written form attached to an insurance policy that alters the policy's coverage,
terms or conditions

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Emergency Care: Emergency care means management for a severe illness or injury which
results in symptoms which occur suddenly and unexpectedly, and requires immediate care by a
medical practitioner to prevent death or serious long term impairment o f the insured person’s
health

Employer’s liability insurance: Coverage protecting an employer against compensation claims,

for which the employer is liable to pay under Employees Compensation Act for accidents
occurring at work place.

Endorsements: A written form attached to an insurance policy that alters the policy's coverage,
terms or conditions

Endowment Insurance: A form of Life Insurance where the sum insured is payable to the
insured at the end of the contract period or to a beneficiary if the insured dies before that.

Excess: The first portion of a loss or claim which is to be borne by the insured. An excess can be
either compulsory which is imposed by underwriter or voluntary which is opted by the insured
to obtain premium benefit.

Exclusion: A provision in a policy that excludes the insurer's liability in certain circumstances or
for specified types of loss.

Ex-Gratia Payment: A payment made by an insurer to a policyholder where there is no legal

liability so to pay.

Expense ratio: The percentage of premium, which an insurer spends on commission,

administrative and other expenses in doing insurance business.

Free Look: A provision in which policyholders have up to certain days to examine their policies
and if they are not satisfied with it, can apply for cancellation of it.

Fidelity Guarantee Insurance: A policy that reimburses an employer, up to the stated amount,
in the event that an employee commits a dishonest act covered by the policy.

First Loss Insurance: Insurance where there are two sum insured one representing total value
at risk and other the amount up to which any loss is payable. E.g. Value of stocks in godown 10
Crores, sum insured 10 crores. But limit per policy is 2 Crores any loss up to 2 Crores will be
payable in full, if loss is more only 2 Crore will be paid.

Fire & Allied Peril insurance: Coverage protecting property against losses caused by fire and
other 11 perils which may or may not be of fire nature. E.g. flood cover.

Floater: insurance covering stocks for items that are covered at many locations without giving
any limit per location. Cover is available at one place, any place or all places.

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Grace Period: In life policy-the amount of time within which the policyholder has to pay a late
premium, usually 30-31 days, during which time the insurance is in force . in medical insurance
policy- the delayed renewal within grace period does not affect continuity of cover but claims
occurring during grace period are not paid. Generally it is 30 days.

Gross Premium: A term normally applied to total premiums before deduction for discounts and
other good features are given.

Hazard: A physical or moral feature that introduces or increases the risk.

Hospitalization: Means admission in a Hospital for a minimum period o f 24 in patient Care

consecutive hours except for specified procedures/ treatments, where such admission could be
for a period o f less than 24consecutive hours.

Inception Date: The date from which, under the terms of a policy, insurance starts and insurer’s
liability commences.

Increase in Cost of Working: Under some policies like Loss of Profits policy some cover is
provided for additional expenditure incurred by the insured solely for the purpose of reducing
the loss following an insured event.

Increasing premium: A type of life insurance in which the premiums increase over time, usually
as the amount of coverage changes, and usually in an annual policy.

Indemnify: To compensate for actual losses sustained

Illness: Illness means a sickness or a disease or pathological condition leading to the impairment
of normal physiological function which manifests itself during the Policy period and requires
medical treatment.

Acute condition: Acute condition is a medical condition that can be cured by Treatment

Chronic condition: A chronic condition is defined as a disease, illness, or injury that has one or
more of the following characteristics:—it needs ongoing or long-term monitoring through
consultations, examinations, check-ups, and / or tests—it needs ongoing or longterm control or
relief o f symptoms— it requires your rehabilitation or for you to be specially trained to cope
with it—it continues indefinitely—it comes back or is likely to come back.

Injury: Injury means accidental physical bodily harm excluding illness or disease solely and
directly caused by external, violent and visible and evident means which is verified and certified
by a Medical Practitioner.

Insured: The person whose property is insured or in whose favour the policy is issued.

Insurer: An insurance company who, in return for a premium agrees to make good any loss or
damage suffered by the person paying the premium as a result of some accident or occurrence
which is covered under the policy.

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Insurable risk: Risks for which it is relatively easy to get insurance.

Insurance: A system to make financial loss more affordable by transferring it from individuals
to large groups.

Insurance fraud: Intentional lying or concealment by policyholders to obtain payment of an

insurance claim that would otherwise not be paid.

Insurance pool: A group of insurance companies that put their assets to enable them together
to provide an amount of insurance substantially more than can be provided by individual
companies. E.g. terrorism pool, Motor Third Party Pool etc.

Insuring agreement: Part of every insurance policy; specifies what the insurance company has
agreed to pay for or to provide in exchange for the premium.

Intentional acts: Deliberate acts done on part of insured or beneficiary under the policy to gain
a benefit under a policy. Like setting fire to own property

Knock For Knock: An agreement between two insurance companies under which they agree not
to take any action against each other under subrogation in the event of any accident involving
both companies vehicles..

Lapse: When the policyholder fails to make the premium payments and the policy becomes null
and void.

Latent Disease: An illness which lies hidden for some years before it comes out itself.

Level Premium: A type of term insurance in which the premiums remain the same throughout
the term of the policy. The premium is usually more than the actual cost of protection early in the
policy, and less later in the policy. This reserve built up in the early years couples with earned
interest to make up for the underpayment later in the policy.

Liability insurance: Insurance for money the policyholder is legally required to pay because of
bodily injury or property damage caused to another person and covered in the policy.

Limit: The insurer's maximum liability under an insurance, which may be expressed 'per
accident', 'per event', 'per occurrence', 'per annum', etc

Loss: A reduction in the quantity or value of a property

Loss control: Analyzing hazards and determining a course of action to reduce the risk of loss.

Lump Sum: A settlement option where the beneficiary receives the entire proceeds of a policy at
once rather than in installments.

Malus: Loading in renewal premium due to high claim ratio in previous year/s of thepolicy.

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Material Fact: Any fact which would influence the insurer in accepting or declining a risk or in
fixing the premium or terms and conditions of the contract is material and must be disclosed by
a proposer, or by the insurer to the insured

Maturity Date: The date on which the sum insured of a policy becomes payable.

Maturity Value: The amount payable to a living insured at the end of an endowment period or
to the owner of a Whole Life policy if he lives past a certain age.

Named Perils: Perils specified in a policy as those against which the policyholder is insured.

Negligence: Failure to use the standard of care that a reasonably prudent person would exercise
in a similar circumstance.

Net Premiums: Term variously used to mean gross premiums less discounts for good features
in a risk.

Network Provider: "Network Provider” means hospitals or health care providers enlisted by an
insurer or by a TPA and insurer together to provide medical services to an insured on payment
by a cashless facility.

Non- Network: Any hospital, day care centre or other provider that is not part o f the network.

New For Old: Where insurers agree to pay the cost of property lost or destroyed without
deduction for depreciation.

No Claim Bonus (Discount): A rebate of premium given to an insured person by an insurer

where no claims have been made by that insured. Very common in motor insurance.

Non Disclosure: The failure by the insured to disclose a material fact or circumstance to the
underwriter before acceptance of the risk.

No-fault: No fault is a system in which motor policy pays for injuries to third parties without
proof of negligence of the driver being proved.

Occurrence basis: A liability coverage form that covers claims that occur during the policy
period, and for which claims can be reported to the insurance company at any time during or
after the policy period.

OPD treatment: OPD treatment is one in which the Insured visits a clinic / hospital or associated
facility like a consultation room for diagnosis and treatment based on the advice of a Medical
Practitioner. The Insured is not admitted as a day care or in-patient.

Package policy: A policy which grants a combined cover under one policy which is available
generally under different policies. While taking the policy the client has a choice to select the

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sections he would like to take. Generally when more than any numbers of sections are taken
discounts are allowed. E g householders policy , farmer’ package policy etc.

Participating Policy: A life insurance policy that is eligible for the payment of dividends by the
insurer.

Passenger Liability: The liability of a carrier to passengers.

Peril: An unexpected accidental happening, which may be covered or excluded by a policy of

insurance.

Period of Risk: The period during which the insurer can incur liability under the terms of the
policy.

Personal lines: Insurance products that are designed for and bought by individuals

Personal Accident and Sickness insurance: Insurance for fixed benefits in the event of death
or loss of limbs or sight by accident and/or disablement by accident or sickness. Accident and
sickness may be insured together or separately.

Portability: Portability means the right accorded to an individual health insurance policy holder
(including family cover) to transfer the credit gained by the insured for pre-existing conditions
and time bound exclusions if the policyholder chooses to switch from one insurer to another
insurer or from one plan to another plan of the same insurer, provided the previous policy has
been maintained without any break.

Policy: A contract for insurance between the insurance company and the policyholder.

Policy Holder: The person in whose name the policy is issued. Insured or Assured

Premium: The price of an insurance policy

Proceeds: The amount of money that the insurance company is obligated to pay for the
settlement of a life insurance policy.

Pre-Existing Disease: Any condition, ailment or injury or related condition(s) for which you had
signs or symptoms, and / or were diagnosed, and / or received medical advice / treatment within
48 months to prior to the first policy issued by the insurer.

Product Liability Insurance: These policies cover the insured's legal liability for bodily injury
to persons, or loss of or damage to property caused by defects in goods (including containers)
sold, supplied, erected, installed, repaired, treated, manufactured, and/or tested by the insured.

Professional Liability Insurance: This policy protects a professional man against his legal
liability towards third parties for injury, loss, or damage, arising from his own professional
negligence or that of his employees.

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Proposal Form: A form sent by an insurer to a person requiring insurance so as to obtain
sufficient information to allow the insurer to decide whether or not to accept a risk and what
conditions to apply if it is accepted.

Quote: A statement by an insurer of the premium he will require for a particular insurance main
terms and conditions may also be given in this.

Reasonable Charges: Reasonable charges means the charges for services or supplies, which are
the standard charges for the specific provider and consistent with the prevailing 10 charges in
the geographical area for identical or similar services, taking into account the nature of the illness
/ injury involved

Rate: The cost of a unit of insurance.

Renewable Term Insurance: Term insurance that can be renewed at the end of the term
without evidence of insurability, for a limited number of successive terms. The rates generally
increase at each renewal as the age of the insured increases.

Renewal: The process of continuing insurance from one period of risk to a succeeding one.

Reinsurance: A reinsurer takes over part of a risk originally taken by the insurer, which is called
the primary company

Reinstatement: Making good. Where insured property is damaged, it is usual for settlement to
be effected through the payment of a sum of money, but a policy may give either the insured or
insurer the option to restore or rebuild instead.

Return of Premium Rider: Provides that, in the event of the death of the insured within a
specified period of time, the policy will give back all premiums paid, in addition to the face
amount of the policy.

Risk: A measure of the possibility that the future may be surprisingly different from what we
expect. Downside risk of loss and upside risk of gain.

Risk assessment: A thorough examination of the exposures of the risk in any given activity

Rider: An addition to the original policy that covers a separate condition, such as
dismemberment or disability, or provides additional coverage.

Risk retention: A method of not transferring the risk to outsiders and funding loss using internal
money.

Risk transfer or sharing: A method of funding loss using external funds (such as insurance) or
risk sharing with another organization.

RISK: The peril insured against or an individual exposure.

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Risk Management: The identification, measurement and economic control of risks that threaten
the assets and earnings of a business or other enterprise.

Salvage: A recovery of all or part of the value of an insured item on which a claim has been paid.
The insurer will normally dispose of the item and apply the proceeds to reduce the cost of the
claim.

Schedule: The part of a policy containing information peculiar to that particular risk like name ,
address of the insured, description of the property insured, period of insured, sum insured etc.

Self insurance: Assuming risk for oneself without the benefit of an insurance company taking it
for you.

Speculative risk: An insurance term that includes the possibility of gain or loss.

Subrogation: When an insurance company, after paying a loss, seeks to recover the money from
the other party who is legally liable

Sum Insured: The maximum amount payable in the event of a claim under contract of insurance.

Third Party: A person claiming against an insured. In insurance terminology the first party is the
insurer and the second party is the insured.

Tort: A wrongful act, resulting in injury or damage, on which a civil action can be based.

Umbrella Insurance: Provides excess coverage over several primary policies, such as Fire,
Burglary, Personal accident etc. This is like a Package policy.

Underwriting: The process of determining whether coverage will be offered, what policy
provision will be included and at what price.

Underwriter: A person who accepts business on behalf of an insurer.

Universal Life: A flexible life insurance policy under which the policyholder may change the
death benefit from time to time (with satisfactory evidence of insurability for increases) and vary
the amount or timing of premium payments. Also has a cash value account which acts as a sort of
savings account that builds interest and can be borrowed against.

Utmost Good Faith: Insurance contracts are contracts of utmost good faith , which means that
both parties to the contract have a duty to disclose, clearly and accurately, all material facts
relating to the proposed insurance. Any breach of this duty by the proposer may entitle the
insurer to repudiate liability.

Vandalism: Deliberate destruction of property by anti social elements.

Variable Life: A form of whole life insurance under which the death benefit and the cash value
of the policy fluctuate according to investment performance. Most variable life insurance policies

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guarantee that the death benefit will not fall below a specified minimum, but a minimum cash
value (in the cash value account) is seldom guaranteed.

Volunteer excess: An excess opted by the insured himself while taking the insurance. The
purpose is to reduce the premium by getting additional discounts. This is applicable in addition
to Compulsory excess imposed by the insurer.

Waiver: The giving up of a right or privilege.

Waiver of Premium: This provision allows the insured to stop paying premiums when he or she
has been disabled. In most cases, the insured must be disabled for at least six months before the
waiver can take effect.

Warranty: A very strict condition in a policy imposed by an insurer. A breach entitles the insurer
to deny liability.

Wear and Tear: This is the amount deducted from claims payments to allow for any depreciation
in the property insured which is caused by its usage.

Without Prejudice: 1. Term used in discussion and correspondence. Where there is a dispute or
negotiations for a settlement and terms are offered 'without prejudice' an offer so made or a
letter so marked and subsequent correspondence cannot be admitted in evidence without the
consent of both parties concerned. 2. Term also used by an underwriter when paying a claim
which he feels may not attach to the policy. This payment must not be treated as a precedent for
future similar loss.

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