Title of the Project

IRDA(Insurance Regulatory and Development of India)

-STUDY OF INSURANCE

Name of the Researcher

(Name of Academic Course and Academic Year Details)

Example: Bachelors in Management Studies

Academic Year – 2020-21

Under the Guidance of

Name of Guide

Ms.Megha Bansal
University of Mumbai’s

Alkesh Dinesh Mody Institute for Financial and Management Studies

1
 University of Mumbai’s
Alkesh Dinesh Mody Institute For Financial and
Management Studies

Certificate

I, Professor hereby certify that Mr/Ms. , TYBMS Student of

Alkesh Dinesh Mody Institute for Financial and Management Studies, has completed the
project titled in the area of specialization for the academic
year 2020-2021. The work of the student is original and the information included in the
project is true to the best of my knowledge.

BMS Coordinator Director

External Examiner Internal Guide

2
 Declaration

I,Mr./Ms.Antima choube TYBMS Student of Alkesh Dinesh Mody Institute for

Financial and Management Studies, hereby declare that I have completed the project-
titled
IRDA(Insurance Regulatory and Development of India) during the academic
year2021-2022.

The report work is original and the information/data included in the report is true to
the best of my knowledge. Due credit is extended on the work of
Literature/Secondary Survey by endorsing it in the Bibliography as per prescribed
format.

Signature of the Student with Date

Name of Student

3
 ACKNOWLEDGEMENT

I take this opportunity with great pleasure to present before you this project on
“INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA” which
is a result of co-operation and hard work. I would like to express my deep sense of gratitude
toward all those people without whose guidance and inspiration this project would never be
fulfilled.
I’m grateful to Mumbai University for giving me the opportunity to work on this project. I
would also like to thank our Principal DR. SMITA SHUKLA for giving me such a brilliant
opportunity to present a creative outcome in the form of a project.
Any accomplishment requires the efforts of many people and this project is not different. I
find great pleasure in expressing my deepest sense of gratitude towards my project guide
MS. MEGHA BANSAL , whose guidance & inspiration right from the conceptualization to
the finishing stages proved to be very essential & valuable in the completion of the project.
I would like to thank the library staff, and my classmates for their invaluable suggestions &
guidance for my project work. Last but not the least; I’d like to thank my parents without
whose cooperation and support it would’ve been impossible for me to complete this project.

STUDENT SIGNATURE

4
SR.N TOPIC PAGE
O NO
1 INSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY OF INDIA
2 HISTORY OF INSURANCE IN INDIA
3 EXECUTIVE SUMMARY OF INSURANCE
4 PARTIES INVOVLED IN INSURANCE CONTRACT
5 ROLE AND IMPORTANCE OF INSURANCE TY
6 TYPES OF INSURANCE
7 LIFE INSURANCE
8 HEALTH INSURANCE
9 GENERAL INSURANCE
10 ADVANTAGES OF LIFE INSURANCE AND GENERAL
INSURANCE
11 FUNCTIONS OF INSURANCE
12 PRINCIPLE OF INSURANCE
13 INSURANCE FRAUD AND IT TYPES
14 LIFE INSURANCE AND GENERAL INSURANCE
15 THE ROLE AND RESPONSIBILITY OF ACTURIES
16 INSURANCE AGENT AND INSURANCE BROKERS
17 AUTHORITY OF INSURANCE AGENT
18 POLICY HOLDERS
19 TOP INSURANCE COMPANIES
20 SUGGESTIONS
21 CONCLUSIONS
22 BIBLOGRAPHY AND WEBLIOGRAPHY

5
 INTRODUCTION

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF

INDIA

Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous

apex statutory body which regulates and develops the insurance industry in India. It was
constituted by a Parliament of India act called Insurance Regulatory and Development
Authority Act, 1999 and duly passed by the Government of India.

The agency operates from its headquarters at Hyderabad, Telangana where it shifted
from Delhi in 2001. IRDA batted for a hike in the foreign direct investment (FDI) limit to 49
percent in the insurance sector from the erstwhile 26 per cent. The FDI limit in insurance
sector was raised to 49% in July 2014.

What We Do

IRDA’s Mission
Insurance Regulatory and Development Authority (IRDA) Act, 1999 spells out the Mission
of IRDA as:“... to protect the interests of the policyholders, to regulate, promote and ensure
orderly growth of the insurance industry and for matters connected therewith or incidental
thereto. ”

Functions and Duties of IRDA

Section 14 of the IRDA Act, 1999 lays down the duties, powers and functions of IRDA.

  Registering and regulating insurance companies

  Protecting policyholders’ interests
  Licensing and establishing norms for insurance intermediaries
  Promoting professional organizations in insurance
  Regulating and overseeing premium rates and terms of non-life insurance covers
  Specifying financial reporting norms of insurance companies
  Regulating investment of policyholders’ funds by insurance companies
  Ensuring the maintenance of solvency margin by insurance companies

6
Ensuring insurance coverage in rural and of vulnerable sections of society IRDA - Role,
Objectives and function
IRDA - Insurance Regulatory Development and Authority is the statutory, independent and
apex holy that governs and supervise the Insurance in India

It was constituted by Parliament of India Act called Insurance Regulatory and Development
Authority of India (IRDA of India ) after the formal declaration of Insurance Laws
(Amendment) Ordinance 2014, by the President of India Pranab Mukherjee on December on
December 26,2014.

Establishment:
 IRDA Act was passed upon the recommendations of Malhotra Committee report (7
Jan,1994),headed by Mr R.N. Malhotra ( Retried Govern , RBI)

 Main Recommendations - Entrance of Private Sector Companies and Foreign promoters

& Air independent regulatory authority for Insurance Sector in India.

 In April 2000, it was set up as statutory body, with its headquarters at New Delhi.

 The headquarters of the agency were shifted to Hyderabad Telangana in 2001.

Objectives of IRDA:
 To promote the interest and rights of policy holders.

 To promote and ensure the growth of insurance industry.

 To ensure speedy settlement of genuine claims and to prevent frauds and malpractices.

 To bring transparency and orderly conduct of in financial markets dealing with

insurance.

Organizational setup of IRDA:

IRDA is a ten member body consists of :

 One chairman ( For 5 years & maximum Age -60 years )

 Five whole-time Members (For 5 years and maximum Age -62 years)

 Four part-time Members (not more than five)

7
The chairman and members of IRDAI are appointed by Government of India.
The present Chairman of IRDAI is Mr. T.S Vijayan.

Functions and Duties of IRDA:

  Section 14 of IRDA Act,1999 lays down the duties and functions of IRDA:

  It issues the registration certificates to insurance companies and regulates them

  It protects the interest of policy holders.

 It provides license to insurance intermediaries such as agents and brokers after
specifying the required qualifications and set norms/code of conduct for them.

 It promotes and regulates the professional organizations related with insurance business
to promote efficiency in insurance sector.

 It regulates and supervises the premium rates and terms of insurance covers.

 It specifies the conditions and manners, according to which the insurance companies and
other intermediaries have to make their financial reports.

 It regulates the investment of policyholder's funds by insurance companies.

 It also ensures the maintenance of solvency margin (company's ability to pay out claims)
by insurance companies.

Related News

FDI limit in Insurance Sector has been increased to 49% from 26%, approved by The Union
Cabinet. The proposal was made by Finance Minister Arun Jaitley.

 IRDAI has celebrated 19th April, 2015 as Insurance Awareness Day at Hyderabad.
(came into existence in 2000)

 IRDAI has imposed a fine of Rs.10 lakh on TATA AIA Life Insurance for violation of
excess payment to corporate agents. TATA AIA Life Insurance is joint venture Company
formed by Tata Sons Ltd. and AIA Group Ltd. CEO and MD of the company is
Mr.Naveen Tahilyani.

 IRDAI has changed the norms related to cancellation and change of name of nominee.
The insurer will charge fee for any such modification. The fee is up to Rs. 50 for policies
obtained online and up to Rs.100 for others.

 IRDAI has imposed a fine of Rs.20 lakh on APPOLO MUNICH HEALTH

INSURANCE COMPANY for selling its policies through non-authorised insurance
selling website makemytrip.com. The CEO of APPOLO MUNICH HEALTH
INSURANCE COMPANY is Antony Jacob and the Chairman and CEO of
makemytrip.com is Deep Kalra.an.

8
 HISTORY OF INSURANCE IN INDIA

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu
( Manusmrithi ), Yagnavalkya (Dharmasastra) and Kautilya ( Arthasastra ). The writings talk
in terms of pooling of resources that could be re-distributed in times of calamities such as
fire,
floods, epidemics and famine. This was probably a precursor to modern day insurance.
Ancient Indian history has preserved the earliest traces of insurance in the form of marine
trade loans and carriers’ contracts. Insurance in India has evolved over time heavily drawing
from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of the Oriental
Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the
Madras Equitable had begun transacting life insurance business in the Madras Presidency.
1870 saw the enactment of the British Insurance Act and in the last three decades of the
nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897)
were started in the Bombay Residency. This era, however, was dominated by foreign
insurance offices which did good business in India, namely Albert Life Assurance, Royal
Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard
competition from the foreign companies.

In 1914, the Government of India started publishing returns of Insurance Companies in India.
The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate
life business. In 1928, the Indian Insurance Companies Act was enacted to enable the
Government to collect statistical information about both life and non-life business transacted
in India by Indian and foreign insurers including provident insurance societies. In 1938, with
a view to protecting the interest of the Insurance public, the earlier legislation was
consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for
effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a
large number of insurance companies and the level of competition was high. There were also
allegations of unfair trade practices. The Government of India, therefore, decided to
nationalize insurance business.
An Ordinance was issued on 19 January 1956 nationalizing the Life Insurance sector and Life
Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian,
16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all.
The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private
sector.

The history of general insurance dates back to the Industrial Revolution in the west and the
consequent growth of sea-faring trade and commerce in the 17th century. It came to India as
a legacy of British occupation. General Insurance in India has its roots in the establishment of
Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the
Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes
of general insurance business.

9
1957 saw the formation of the General Insurance Council, a wing of the Insurance
Association of India. The General Insurance Council framed a code of conduct for ensuring
fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency
margins. The Tariff Advisory Committee was also set up then.In 1972 with the passing of the
General Insurance Business (Nationalizations) Act, general insurance business was
nationalized with effect from 1 January 1973. 107 insurers were amalgamated and grouped
into four companies, namely National Insurance Company Ltd., the New India Assurance
Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance
Company Ltd. The General Insurance Corporation of India was incorporated as a company in
1971 and it commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey extending to nearly 200
years. The process of re-opening of the sector had begun in the early 1990s and the last
decade and more has seen it been opened up substantially. In 1993, the Government set up a
committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose
recommendations for reforms in the insurance sector.The objective was to complement the
reforms initiated in the financial sector. The committee submitted its report in 1994 wherein,
among other things, it recommended that the private sector be permitted to enter the
insurance industry. They stated that foreign companies be allowed to enter by floating Indian
companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999, the Insurance
Regulatory and Development Authority (IRDA) was constituted as an autonomous body to
regulate and develop the insurance industry. The IRDA was incorporated as a statutory body
in April, 2000. The key objectives of the IRDA include promotion of competition so as to
enhance customer satisfaction through increased consumer choice and lower premiums, while
ensuring the financial security of the insurance market.

10
The IRDA opened up the market in August 2000 with the invitation for application for
registrations.
Foreign companies were allowed ownership of up to 26%. The Authority has the power to
frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards
framed various regulations ranging from registration of companies for carrying on insurance
business to protection of policyholders’ interests.

In December, 2000, the subsidiaries of the General Insurance Corporation of India were
restructured as independent companies and at the same time GIC was converted into a
national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July,
2002.

Today there are 28 general insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 24 life insurance companies operating in the country.

Organizational structure
As per the section 4 of IRDA Act 1999, Insurance Regulatory and Development Authority
(IRDA, which was constituted by an act of parliament) specify the composition of
Authority. IRDAI is a ten-member body consisting of:

A Chairman - T.S. Vijayan.

Five whole-time members - R.K. Nair, M. Ram Prasad, S. Roy Chowdhary, D.D. Singh

Four part-time members - Anup Wadhawan, S.B. Mathur, Prof. V.K.Gupta, CA. Subodh Kr.
Agarwal

Note: All members are appointed by the Government of India.

Insurance Repository
Recently the Finance Minister of India announced the setting of insurance repository system.
An Insurance Repository is a facility to help policy holders buy and keep insurance policies
in electronic form, rather than as a paper document. Insurance Repositories, like Share
Depositories or mutual fund Transfer Agencies, will hold electronic records of insurance
policies issued to individuals and such policies are called electronic policies or Policies e.g.
CDSL Insurance Repository Limited ( CDSL IR).

11
 EXECUTIVE SUMMARY -INSURANCE

A contract whereby, for specified consideration, one party undertakes to compensate the
other for a loss relating to a particular subject as a result of the occurrence of designated
hazards.

The normal activities of daily life carry the risk of enormous financial loss. Many persons are
willing to pay a small amount for protection against certain risks because that protection
provides valuable peace of mind. The term insurance describes any measure taken for
protection against risks.
When insurance takes the form of a contract in an insurance policy, it is subject to
requirements in statutes, Administrative Agency regulations, and court decisions.

In an insurance contract, one party, the insured, pays a specified amount of money, called a
premium, to another party, the insurer. The insurer, in turn, agrees to compensate the insured
for specific future losses. The losses covered are listed in the contract, and the contract is
called a policy.

When an insured suffers a loss or damage that is covered in the policy, the insured can collect
on the proceeds of the policy by filing a claim, or request for coverage, with the insurance
company.
The company then decides whether or not to pay the claim. The recipient of any proceeds
from the policy is called the beneficiary. The beneficiary can be the insured person or other
persons designated by the insured.

A contract is considered to be insurance if it distributes risk among a large number of persons

through an enterprise that is engaged primarily in the business of insurance. Warranties or
service contracts for merchandise, for example, do not constitute insurance. They are not
issued by insurance companies, and the risk distribution in the transaction is incidental to the
purchase of the merchandise. Warranties and service contracts are thus exempt from strict
insurance laws and regulations.

12
Government-

Issued insurance is regulated like private insurance,but the two are very different. Most
recipients of government insurance do not have to pay premiums, but they also do not receive
the same level of coverage available under private insurance policies.
Government issued insurance is granted by the legislature, not bargained for with a private
insurance company, and it can be taken away by an act of the legislature. However, if a
legislature issues insurance, It cannot refuse it to a person who qualifies for it

Contract and Policy

An insurance contract cannot cover all conceivable risks. An insurance contract that violats a
statute, is contrary to public policy, or plays a part in some prohibited activity will be held
unenforceable in court. A contract that protects against the loss of burglary tools, for
example, is contrary to public policy and thus unenforceable.

Insurable Interest

To qualify for an insurance policy, the insured must have an insurable interest, meaning that
the insured must derive some benefit from the continued preservation of the article insured,
or stand to
suffer some loss as a result of that article’s loss or destruction. Life insurance requires some
familial and pecuniary relationship between the insured and the beneficiary.Property
insurance requires that the insured must simply have a lawful interest in the safety or
preservation of the property.

Premiums

Different types of policies require different premiums based on the degree of risk that the
situation presents. For example, a policy insuring a homeowner for all risks associated with a
home value
d at $200,000 requires a higher premium than one insuring a boat valued at $20,000.
Although liability for injuries to others might be similar under both policies, the cost of
replacing or repairing the boat would be less than the cost of repairing or replacing the home,
and this difference is reflected in the premium paid by the insured.
Premium rates also depend on characteristics of the insured. For example, a person with a
poor driving record generally has to pay more for auto insurance than does a person with a
good driving record. Furthermore, insurers are free to deny policies to persons who present an
unacceptable risk.

13
For example, most insurance companies do not offer life or health insurance to persons who
have been diagnosed with a terminal illness.

Claims

The most common issue in insurance disputes is whether the insurer is obligated to pay a
claim.
The determination of the insurer’s obligation depends on many factors, such as the
circumstances surrounding the loss and the precise coverage of the insurance policy. If a
dispute arises over the language of the policy, the general rule is that a court should choose
the interpretation that is most favorable to the insured.

Many insurance contracts contain an Incontestability

Clause to protect the insured. This clause provides that the insurer loses the right to contest
the validity of the contract after a specified period of time.
An insurance company may deny or cancel coverage if the insured party concealed or
misrepresented a material fact in the policy application. If an applicant presents an
unacceptably high risk of loss for an insurance company, the company may deny the
application or charge prohibitively high premiums. A company may cancel a policy if the
insured fails to make payments. It also may refuse to pay a claim if the insured intentionally
caused the loss or damage. However, if the insurer knows that it has the right to rescind a
policy or to deny a claim, but conveys to the insured that it
has voluntarily surrendered such right, the insured may claim that the insurer waived its right
to contest a claim.

An insurer may have a duty to defend an insured in a lawsuit filed against the insured by a
third party. This duty usually arises if the claims in the suit against the insured fall within the
coverage of a liability policy.

If a third party caused a loss covered by a policy, the insurance company may have the right
to sue the third party in place of the insured. This right is called Subrogation, and it is
designed to make the party that is responsible for a loss bear the burden of the loss. It also
prevents an insured from recovering twice: once from the insurance company, and once from
the responsible party.
An insurance company can subrogate claims only on certain types of policies. Property and
liability insurance policies allow subrogation because the basis for the payment of claims is
indemnification, or reimbursement, of the insured for losses.Conversely, life insurance
policies do not allow subrogation. Life insurance does not indemnify an insured for a loss that
can be measured in dollars. Rather, it is a form of investment for the insured and the insured
beneficiaries.

14
 THERE ARE TWO PARTIES IN CONTRACT OF INSURANCE

Insured:

The first party in the contract of insurance is the INSURED: Insured is a person who is
looking to hedge his future risk of unforeseen losses or events. There are different types and
costs of insurance policies available nowadays. The choice of the policy type depends on the
insured as to what type of risk he wants a cover for.

The insured, is the person in whose favor, the contract is operative and who is indemnified
against, or is to receive a certain sum upon the happening of a specified contingency or event.
He is the person whose loss is the occasion for the payment of the insurance proceeds by the
insurer.

Insurer:

Second party is the INSURER : Insurer or the insurance company agrees to pay for the future
financial losses of the insured against a regular payment of premium. The insurance company
assumes or accepts the risk of loss and undertakes for a consideration to indemnify the
insured or to pay him a certain sum on the happening of

The second party in the contract of Insurance a specified contingency or event.

The business of insurance may be carried on by individuals just as much as by corporations

and associations. The state itself may go into insurance business.

15
To whom the proceeds/Claims are paid?

Is it always the case that the proceeds or the claim is paid to the Insured? Not always; the
person paid may be the beneficiary designated in the policy. A common example of this
situation is a life insurance policy where the proceeds are not given to the insured but to a
third party designated by the insured.

Key Stakeholders in Insurance Business:

Any person or entity interested in a particular business is called a stakeholder. They are
affected by the business activity, and they may be part of the core decision-making team.
Many people contribute to the running of an insurance company. Aside from shareholders,
the key stakeholders in the insurance value chain are:
Consumers who buy insurance products are the main constituents of the list of stakeholders
for Insurance Industry. They may be the insured or beneficiaries or persons with insurable
interest.

Investors that support insurance companies by purchasing insurance company stock as they
believe in the industry model and invest their money in the insurance company stock.
Insurance carriers that provide insurance coverage through policies and accept the risks
covered by the policies. These are generally large insurance companies, including direct
insurers and re-insurers.
Partners who couple with insurance companies to share profits and losses. Partners include
Re-insurers, institutional investors, and trade partners. Partners also include the insurance
agencies and brokerages that distribute insurance products.

16
Internal Stakeholders:
Internal stakeholders are owners, managers, and workers. External stakeholders are the
customers and the suppliers. The community in which the organization does business also is a
stakeholder.
All the stakeholders are not equal, and different stakeholders will have varying
considerations.
These stakeholders can have direct or indirect stake in the organization and in policy-making.

Given below is a non-exhaustive list of internal stakeholders in insurance industry:

  Insurer Executives
  Product Managers
  Underwriters
  Actuaries
  Distribution Staff
  Claims Assessors
  Claims Managers
  Advisers
  Funds, Master Trusts & Corporates
  Banks & Financial Intermediaries
  Group Fund Members
  Bank Customers
  Alliance Partners
  Third Party Administrators (TPA’s)
  Service Providers
  Reinsurer

External Stakeholders:

External stakeholders are people who are not directly working within the business but are
affected in some way from the decisions of the business. The range of external stakeholders
for the insurance sector is extremely broad, and includes:

  Trade associations
  Professional bodies
  Analysts and Rating agencies
  International regulators and International bodies
  The political community

17
  Media- Learn more at www.technofunc.com. Your online source for free professional.

INSURANCE CONTRACTS

An insurance contract is a document representing the agreement between an insurance

company and the insured. Central to any insurance contract is the insuring agreement, which
specifies the risks that are covered, the limits of the policy, and the term of the policy.
Additionally, all insurance contracts specify:
Conditions, which are requirements of the insured, such as paying the premium or reporting a
loss;

Limitations, which specify the limits of the policy, such as the maximum amount that the
insurance company will pay;

Exclusions, which specify what is not covered by the contract.

Obviously, the contents of an insurance contract depends on the type of policy, what the
insurance applicant wants, and how much he is willing to pay. The details of insurance
policies are covered in Standard Insurance Policies. This article covers what are required of
valid insurance contracts, since only valid contracts are legally enforceable.
There are 4 requirements for any valid contract, including insurance contracts:
Offer and acceptance,
Consideration,
Competent parties, and
Legal purpose.

If a contract lacks any of these essential elements, then it is a void contract that will not be
enforced by any court. For instance, most contracts signed by a minor are void contracts
because they are not legally competent. A voidable contract is one that can be nullified by a
party if the other party breaches the contract, or because material information was omitted or
false in the contract. The party with the right to void can also choose to enforce it, instead.
For instance, insurance companies can often void a contract because the applicant on the
application. Thus, if someone was in an auto accident, and that person previously filled out
the insurance application. stating that he had no speeding tickets, when, in fact, he had, and
then the insurance company can void the contract and not pay the claim. Although most

18
contracts can be oral, most are written, especially insurance contracts, because of their
complexity.

Offer and Acceptance

In insurance, the offer is typically initiated by the insurance applicant through the services of
an insurance agent by filling out an application for insurance. How the offer is accepted will
depend on whether the insurance is for property, liability, or life insurance. For property and
liability insurance, the offer is the application for insurance and the payment of the 1st
premium, or the promise to do so. In most personal lines of insurance, the agent can, in most
cases, accept the offer for the company, binding the company to the contract. A binder is a
temporary contract that can be oral or written that binds the insurance company to the
contract immediately until it has a chance to examine the application, and issue a formal
policy. Through the binder, the insurance becomes effective immediately.

Most binders are written and include general information, such as the type and amount of
insurance, the name of the parties, and the time during which the binder is effective.
However, once a formal policy is issued, then the terms of the policy override the binder.
This is particularly true for oral binders, for once a written policy is issued, the parole
evidence rule makes the written policy determinative where there is any conflict between the
oral and written agreement. If a mistake was made in the policy, such as mistyping the wrong
policy value, then the contract can be reformed by correcting the mistake to prevent unjust
enrichment of either party.
However, some agents cannot bind the insurance company, in which case, the insurance
company must receive and accept the application, or it can reject it. The insurance is not
effective until the company accepts the application.

In life insurance, the agent never has the power to bind the company. In most cases, the
applicant fills out the application and pays the 1st premium. The applicant is then given a
conditional premium receipt — the most common type of receipt is the insurability premium
receipt. If the applicant is insurable according to the company’s underwriting standards, then
the life insurance becomes effective from the date of the application, or, in some cases, from
the date of the medical examination.

However, if the premium is not paid when the application is filled out, then the insurance will
not become effective until the policy is delivered and the premium is paid, and the applicant
is in good health when the policy is delivered. Some companies require that the applicant not
receive any medical treatment between the application and the delivery of the policy;
otherwise the policy will not become effective.

Thus, a conditional receipt is like a binder, but differs from it because coverage is conditional
upon the health of the applicant, occupation, and other factors. A binder does not require the
payment of a premium to become effective — often the insurer needs the time to determine
what the premium will be.

19
Contracts of Adhesion

While the insurance applicant is usually considered the one making the offer, the insurance
company dictates the terms of the contracts. The insurance applicant must accept the contract
of adhesion totally or not at all. Because of differing legal definitions and rulings provided by
different courts in the past and because of requirements imposed by state governments and
their agencies, an insurance contract has to be carefully worded to be legally effective and to
provide coverage in the way that it was intended. This is why insurance contracts offered to
the public are standardized. Another reason is because insurance companies can only
calculate competitive premiums based on actuarial studies, and these studies are based on
certain limitations and underwriting guidelines.

Thus, most insurance contracts cannot be negotiated. However, the insured can request
specific riders and exclusions to the policy. A rider (aka endorsement) is an amendment or
addition to the basic policy that allows the policy to be tailored in acceptable ways for
individual situations.

Exclusion is a loss not covered by the contract.

Because insurance contracts are generally not negotiable, the courts have created case laws to
benefit the insured. The first law, applicable to contracts generally, is that where there is an
ambiguity in a contract, the ambiguity is construed against the maker of the contract,
which, in insurance, is the insurance company. Thus, if the terms of a contract are not
specific,
then the terms are interpreted in a way that would most benefit the insured. Another case law
that has developed is the principle of reasonable expectations, which requires that any
exclusion or other qualification be conspicuous; otherwise, the insured is entitled to coverage
that he reasonably expects.

Life insurance and some health insurance contracts usually have entire contract clauses that
require the attachment of any statements, including the application, made by the insured to
the contract itself, to prevent any disputes later. Entire contract clauses also prevent
incorporation by reference, which is alluding to other written works, such as the corporate
bylaws, that the insurance applicant probably hasn’t read.

20
Personal Contracts

Property insurance contracts are personal contracts between the insured and the insurer.
Property insurance covers the insured for the financial losses of property damage or loss, not
the property itself. If the insured sells the property, the insurance does not transfer with it.
The insurance cannot be assigned to anyone else without the insurer’s consent.

However, the beneficiaries of most insurance contracts can be changed without the consent of
the insurer, but the insurer must be notified.
Consideration is the value that the parties to a contract give to each other — it is the reason
why the contract is agreed to. In insurance contracts, the insurer promises to pay for covered
losses that the insured suffers, and the insured promises to abide by the contract and pay the
premium.

Most non-insurance contracts are bilateral contracts where the promises that each party
makes are enforceable by the other party through legal proceedings. However, insurance
contracts are unilateral contracts, where only the insurer makes a legally enforceable promise
to pay for covered losses. The company cannot sue the insured for breach of contract.
However, insurance contracts are also conditional contracts — if the insured fails to pay the
premium, or fails to abide by the contract, then the insurer is not obligated to pay for any of
the insured’s losses.
Most non-insurance contracts are commutative contracts—the amounts of consideration
given by both parties are usually fairly equal. Thus, a contract to purchase real estate usually
requires a payment equal to its value. Insurance contracts are, however, lavatory contracts,
because the insurance company only has to pay if certain events occur. If they don’t occur,
the company never has to pay, even if the insured has paid premiums for decades. However,
if a covered loss does occur, then the Contracts are characterized by unequal consideration.

Competent Parties

The parties to the contract must be legally competent to agree to them. Most adults have legal
capacity to agree to contracts, unless they are intoxicated, mentally ill, or mentally retarded.
The key requirement is that the parties must know what they are agreeing to — a meeting of
the minds; otherwise, there could be no agreement. To protect minors, the law does not give
them legal capacity to agree to contracts except where specified by law.
An insurance company has legal capacity if it is licensed to sell insurance in that particular
state,and is acting within the scope of its charter.

21
Legal Purpose

All contracts must have a legal purpose to be enforceable by the courts, and, of course, most
insurance contracts do.

Performance and Discharge of Insurance Contracts

The performance required of most insurance contracts is for the insured to pay premiums and
perform any other duties that are required by the contract, while the insurer's main duty
is to pay for losses, if any occur. Most insurance contracts, such as policies for property,
liability, and health insurance, are indemnity contracts, where the insurance company is only
required to compensate for actual losses, up to the policy limits. However, some contracts,
such as life insurance policy contracts, pay the face amount of the policy. In most cases, aside
from the payment of the premium by the insured to the insurer, neither party needs to perform
until a loss,occurs, but when a loss does occur, then the insured must initiate performance
before the insurer is required to do anything.

Insurance contracts require the insured to perform specific things or require certain
conditions,
both before and after a loss, which the law sometimes categorizes as conditions precedent and
conditions subsequent. If the insured fails to perform these duties or satisfy these conditions,
then the insurance company may be relieved of its obligation to pay the claim because of the
breach of contract. However, in most jurisdictions, a court will only grant relief to an
insurer’s obligation to pay a claim if the breach is material.

A condition precedent is either a condition that must be satisfied or something that the
insured must do before or when a loss occurs and before the insurer will perform, which, in
most cases, is by paying the claim. If the insured does not satisfy a material condition
precedent, then the insurer may be relieved of paying the claim. Some common conditions
precedent includes:
Requiring the insured to notify the insurer of any loss;

Property insurance requires that the insured provide an inventory of the losses;

Disability insurance requires the insured to submit proof of disability to the insurer.A
condition subsequent is a condition that must be fulfilled after an event that required an act by
the insurer.

For example, if the insurance company wants to exercise its subrogation rights and sue a
3rd party for the insured’s cause of loss, then the insurer may require the insured to testify in
court.

22
 ROLE AND IMPORTANCE OF INSURANCE

The process of insurance has been evolved to safeguard the interests of people from
uncertainty by providing certainty of payment at a given contingency. The insurance
principle comes to be more and more used and useful in modern affairs

Not only does it serve the ends of individuals, or of special groups of individuals, it tends to
pervade and to transform our modern social order, too. The role and importance of insurance,
here, has been discussed in three phases:

(i) uses to individual,

(ii) uses to a special group of individuals, viz., to business or industry, and
(iii) Uses to the society

Uses to an individual:
Insurance provides Security and Safety:
The insurance provides safety and security against the loss on a particular event. In case of
life insurance payment is made when death occurs or the term of insurance is expired. The
loss to the family at a premature death and payment in old age are adequately provided by
insurance. In other words, security against premature death and old age sufferings are
provided by life insurance.

Similarly, the property of insured is secured against loss on a fire in fire insurance. In other
insurance, too, this security is provided against the loss at a given contingency.

The insurance provides safety and security against the loss of earning at death or in golden
age, against the loss at fire, against the loss at damage, destruction or disappearance of

23
property,goods, furniture and machines, etc.

Insurance affords Peace of Mind:

The security wish is the prime motivating factor. This is the wish which tends to stimulate to
more work, if this wish is unsatisfied, it will create a tension which manifests itself to the
individual in the form of an unpleasant reaction causing reduction in work.
The security banishes fear and uncertainty, fire, windstorm, auto-mobile accident, damage
and death are almost beyond the control human agency and in occurrence of any of these
events may frustrate or weaken the human mind. By means of insurance, however, much of
the uncertainty that centers about the wish for security and its attainment may be eliminated.

Insurance protects Mortgaged Property:

At the death of the owner of the mortgaged property, the property is taken over by the lender
of money and the family will be deprived of the uses of the property. On the other hand, the
mortgagee wishes to get the property insured because at the damage or destruction of the
property he will lose his right to get the loan replayed.

The insurance will provide adequate amount to the dependents at the early death of the
property-
owner to pay off the unpaid loans. Similarly, the mortgagee gets adequate amount at the
destruction of the property.

Insurance eliminates dependency:

At the death of the husband or father, the destruction of family needs no elaboration.
Similarly, at destruction of, property and goods, the family would suffer a lot. It brings
reduced standards of living and the suffering may go to any extent of begging from the
relatives, neighbors or friends.

The economic independence of the family is reduced or, sometimes, lost totally. What can be
more pitiable condition than this that the wife and children are looking others more
benevolent than the husband and father, in absence of protection against such dependency?
The insurance is here to assist them and provides adequate amount at the time of sufferings.

Insurance encourages saving:

The elements of protection and investment are present only in case of life insurance. In
property insurance, only protection element exists. In most of the life policies elements of
saving predominates. These policies combine the programs of insurance and savings.

The saving with insurance has certain extra advantages

24
Systematic saving am possible because regular premiums are required to be compulsorily
paid.
The saving with a bank is voluntary and one can easily omit a month or two and then
abandon the program entirely.

In insurance the deposited premium cannot be withdrawn easily before the expiry of the term
of the policy. As contrast to this, the saving which can be withdrawn at any moment will
finish within no time.

The insurance will pay the policy money irrespective of the premium deposited while in case
of bank-deposit; only the deposited amount along with the interest is paid. The insurance,
thus, provides the wished amount of insurance and the bank provides only the deposited
amount, The compulsion or force to premium in insurance is so high that if the policy-holder
fails to pay premiums within the days of grace, he subjects his policy to causation and may
get back only a very nominal portion of the total premiums paid on the policy.

For the preservation of the policy, he has to try his level best to pay the premium. After a
certain period, it would be a part of necessary expenditure of the insured. In absence of such
forceful compulsion elsewhere life insurance is the best media of saving.

Life Insurance provides profitable Investment:

Individuals unwilling or unable to handle their own funds have been pleased to find an outlet
for their investment in life insurance policies. Endowment policies, multipurpose policies,
deferred annuities are certain better form of investment

The elements of investment i.e., regular saving, capital formation, and return of the capital
along with certain additional return are perfectly observed, in life insurance.

In India the insurance policies carry a special exemption from income-tax, wealth tax, and
gift tax and estate duty. An individual from his own capacity cannot invest regularly with
enough of security and profitability. The life insurance fulfils all these requirements with a
lower cost. The beneficiary of the policy-holder can get a regular income from the life-
insurer; if the insured amount is left with him .

25
Life Insurance fulfil the needs of a person:

The needs of a person are divided into (A) Family needs, (B) Old-age needs, (C) Re-
adjustment
needs, (D) Special needs, (E) The clean-up needs.

(A) Family Needs:

Death is certain, but the time is uncertain. So, there is uncertainty of the time when the
sufferings and financial contingencies may be fall on the family. Moreover, every person is
responsible to provide for the family.

It would be a more pathetic sight in the world to see the wife and children of a man looking
for someone more considerate arid benevolent than the husband or the father, who left them
Unprovoked.

Therefore, the provision for children up to their reaching earning period and for widow up to
long life should he made. Any other provision except life insurance will not adequately meet
this financial requirement of the family. Whole life policies are the better means of meeting
such requirements.

(B) Old-age heeds:

The provision for old-age is required where the person is surviving more than his earning
period.
The reduction of income in old-age is serious to the person and his family.
If no other family member starts earning, they will be left with nothing and if there is no
property, it would be more piteous state. The life insurance provides old age funds along with
the protection of the family by issuing various policies.

(C) Re-adjustment Needs:

At the time of reduction in income whether by loss of unemployment, disability, or death,

adjustment in the standard of living of family is required. The family members will have to
be satisfied with meager income and they have to settle down to lower income and social
obligations.
Before coming down to the lower standard and to be satisfied with that, they require certain
adjustment income so that the primary obstacles may be reduced to minimum. The life
insurance helps to accumulate adequate funds. Endowment policy anticipated endowment
policy and guaranteed triple benefit policies are seemed to be a good substitute for old age
needs.

26
(D) Special Needs:

There is certain special requirement of the family which is fulfilled by the earning member of
the family. If the member becomes disable to earn the income due to old age or death, those
needs may remain unfulfilled and the family will suffer.

Need for Education. There are certain insurance policies, and annuities which are useful for
education of the children irrespective of the death or survival of the father or guardian.
Marriage.

The daughter may remain unmarried in case of father's death or in case of inadequate
provision for meeting the expenses of marriage. The insurance can provide funds for the
marriage if policy is taken for the purpose.

Insurance needs for settlement of children. After education, settlement of children takes time
and in absence of adequate funds, the children cannot be well placed and all the
education go to waste.

(E)Clean-up funds:

After death, ritual ceremonies, payment of wealth taxes and income taxes are certain
requirements which decrease the amount of funds of the family member. Insurance comes to
help for meeting these requirements. Multipurpose policy, education and marriage policies,
capital redemption policies are the better policies for the special needs.

Uses to business:

The insurance has been useful to the business society also. Some of the uses are discussed
below:

Uncertainty of business losses is reduced:

In world of business, commerce and industry a huge number of properties are employed.
With a slight slackness or negligence, the property may be turned into ashes. The accident
may be fatal not only to the individual or property but to the third party also. New
construction and new establishment are possible only with the help of insurance.

In absence of it, uncertainty will be to the maximum level and nobody would like to invest a
huge amount in the business or industry. A person may not be sure of his life and health and
cannot continue the business up to longer period to support his dependents. By purchasing
policy, he can be sure of his earning because the insurer will pay a fed amount at the time of
death.
Again, the owner of a business might foresee contingencies that would bring great loss. To
meet such situations they might decide to set aside annually a reserve, but it could not be

27
accumulated due to death. However by making an annual payment to secure immediately
insure policy can be taken.

Business-efficiency is increased with insurance:

When the owner of a business is free from the botheration of losses, he will certainly devote
much time to the business. The care free owner can work better for the maximization of the
profit. The new as well as old businessmen are guaranteed payment of certain amount with
the insurance policies at the death of the person; at the damage, destruction or disappearance
of the property or goods.

The uncertainty of loss may affect the mind of the businessmen adversely. The insurance,
removing the uncertainty, stimulates the businessmen to work hard.

Key Man Indemnification:

Key man is that particular man whose capital, expertise, experience, energy, ability to
control,
goodwill and dutifulness make him the most valuable asset in the business and whose
absence will reduce the income of the employer tremendously and up to that time when such
employee is not substituted.

The death or disability of such valuable lives will, in many instances, prove a more serious
loss than that by fire or any hazard. The potential loss to be suffered and the compensation to
the dependents of such employee require an adequate provision which is met by purchasing
adequate life-policies The amount of loss may be up to the amount of reduced profit,
expenses involved in appointing and training, of such persons and payment to the dependents
of the key man. The Term Insurance Policy or Convertible Term Insurance Policy is more
suitable in this case.

Enhancement of Credit:

The business can obtain loan by pledging the policy as collateral for the loan. The insured
persons are getting more loans due to certainty of payment at their deaths. The amount of
loan that can be obtained with such pledging of policy, with interest thereon will not exceed
the cash value of the policy. In case of death, this value can be utilized for setting of the loan
along with the interest.

If the borrower is unwilling to repay the loan and interest, the lender can surrender the policy
and get the amount of loan and interest thereon repaid. The redeemable debentures can be
issued on the collateral of capital redemption policies. The' insurance properties are the best
collateral and adequate loans are granted by the lenders.

28
Business Continuation:

In any business particularly partnership business may discontinue at the death of any partner
although the surviving partners can restart the business, but in both the cases the business and
the partners will suffer economically.

The insurance policies provide adequate funds at the time of death. Each partner may be
insured for the amount of his interest in the partnership and his dependents may get that
amount at the death of the partner.

With the help of property insurance, the property of the business is protected against disasters
and the chance of disclosure of the business due to the tremendous waste or loss.

Welfare of Employees:

The welfare of employees is the responsibility of the employer. The former are working for
the latter. Therefore, the latter has to look after the welfare of the former which can be
provision for early death, provision for disability and provision for old age.

These requirements are easily met by the life insurance, accident and sickness benefit, and
pensions which are generally provided by group insurance. The premium for group insurance
is generally paid by the employer. This plan is the cheapest form of insurance for employers
to fulfill their responsibilities.

The employees will devote their maximum capacities to complete their jobs when they are
assured of the above benefits. The struggle and strife between employees and employer can
be minimized easily with the help of such schemes.

Uses of society:

Some of the uses of insurance to society are discussed in the following sections.
Wealth of the society is protected:
The loss of a particular wealth can be protected with the insurance. Life insurance provides
loss of human wealth. The human material, if it is strong, educated and care-free, will
generate more income.

Similarly, the loss of damage of property at fire, accident, etc., can be well indemnified by
the property insurance; cattle, crop, profit and machines are also protected against their
accidental and economic losses.

29
With the advancement of the society, the wealth or the property of the society attracts more
hazardous and, so new types of insurance are also invented to protect them against the
possible losses.

Each and every member will have financial security against old age, death, damage,
destruction and disappearance of his wealth including the life wealth. Through prevention of
economic losses, instance protects the society against degradation.

Through stabilization and expansion of business and industry, the economic security is
maximized. The present, future and potential human and property resources are well-
protected.

The children are getting expertise education, working classes are free from both erations and
older people are guiding at ease. The happiness and prosperity are observed everywhere with
the help of insurance.

Economic Growth of the Country:

For the economic growth of the country, insurance provides strong hand and mind, protection
against loss of property and adequate capital to produce more wealth. The agriculture will
experience protection against losses of cattle, machines, tools and crop.

This sort of protection stimulates more production hi agriculture, in industry, the factory
premises, machines, boilers and profit insurances provide more confidence to start and
operate the industry welfare of employees create a conducive atmosphere to work: Adequate
capital from insurers accelerate the production cycle.

Similarly in business, too, the property and human material are protected against certain
losses; capital and credit are expanded with the help of insurance. Thus, the insurance meets
all the requirements of the economic growth of a country.

Reduction in Inflation:

The insurance reduces the inflationary resource in two ways. First, by extracting money in
supply to the amount of premium collected and secondly, by providing sufficient funds for
production narrow down the inflationary gap.

With reference to Indian context it has been observed that about 5.0 per cent of the money in
supply was collected in form of premium.

The share of premium contributed to the total investment of the country was about 10.0 per

30
cent.
The two main causes of inflation, namely, increased money in supply and decreased
production are properly controlled by insurance business, Insurance Need and Selling.

TYPES OF INSURANCE

Life insurance

Life insurance is insurance coverage that pays out a certain amount of money to the insured
or their specified beneficiaries upon a certain event as death of the individual who is insured.
The cover period of life insurance is usually more than a year. So this requires periodic
premium payments either monthly, quarterly or annually.

 The risks that are covered by life insurance are:

  Premature death
  Income during retirement
  Illness
  The main products of life insurance include:
  Whole life
  Endowment
  Term
  Investment –link
  Life annuity plan

Medical and health

General insurance:

General insurance is basically an insurance policy that protects you against losses and
damages other than those covered by life insurance. For more comprehensive coverage, it is
vital for you to know about the risk covered to ensure that you and your family are protected
from unforeseen losses.

  The coverage period for most general insurance are:

  Property loss for example stolen car or burnt houses
  Liability arising from damage caused by yourself to a third party
  Accidental death or injury
  The main products of general insurance includes
  Motor insurance
  Fire/house-owners/householders insurance
  Personal accident insurance
  Medical and health insurance
  Travel insurance

31
 WHAT AR VARIOUS TYPES OF LIFE INSURANCE ?

There are two basic types of life insurance policies viz. Traditional Whole Life and Term Life
Insurance. A whole life is a policy you pay till death of the policy holder and term life is a
policy for a fixed amount of time.

The basic types of life insurance policies are:

Term insurance

Term plans are the most basic form of life insurance. They provide life cover with no
savings /profits component. They are the most affordable form of life insurance as premiums
are cheaper compared to other life insurance plans.

Online term insurance plans provide pure risk cover, which explains the lower premiums. A
fixed sum of money - the sum assured – is paid to the beneficiaries if the policyholder expires
over the policy term. If the policyholder survives, there is no pay out.

Endowment plans

Endowment plans differ from term plans in one critical aspect i.e. maturity benefit. Unlike
term plans which pay out the sum assured, along with profits, only in case of an eventuality
over the policy term, endowment plans pay out the sum assured under both scenarios – death
and survival.

32
However, endowment plans charge higher fees / expenses – reflected in premiums – for
paying out sum assured, along with profits, in either scenario – death or maturity. The profits
are an outcome of premiums being invested in asset markets – equities and debt.

Unit linked insurance plans (ULIP)

ULIPs are a variant of the traditional endowment plan. They pay out the sum assured (or the
investment portfolio if its higher) on death/maturity.

ULIPs differ from traditional endowment plans in certain areas. As the name suggests,
performance of ULIP is linked to markets. Individuals can choose the allocation for
investments in stock/debt markets.

The value of the investment portfolio is captured by the NAV (net asset value). To that end,
there are many similarities between ULIPs and mutual funds. ULIPs differ in one area, they
are a combination of investment and insurance, while mutual funds are a pure investment
avenue

Whole life policy

A whole life insurance policy covers a policyholder over his life. The main feature of a whole
life policy is that the validity of the policy is not defined so the individual enjoys the life
cover throughout his life. The policyholder pays regular premiums until his death, upon
which the corpus is paid out to the family. The policy expire only in case of an eventuality as
there is no pre-defined policy tenure.

Money back policy

A money back policy is a variant of the endowment plan. It gives periodic payments over the
policy term. To that end, a portion of the sum assured is paid out at regular intervals. If the
policy holder survives the term, he gets the balance sum assured. In case of death over the
policy term, the beneficiary gets the full sum assured.

Once a goal has been identified and a value for it has been crystallized, an insurance policy is
an excellent vehicle to fund the goal. This is because one can be rest assured that even in the
unfortunate event of death or even critical illness, the sum assured will fund a future goal of
the policyholder.

Pension Policies

There are the policies that provide benefits to the insured only upon retirement. If the insured
dies during the terms of the policy, this nominee would receive the benefits either as a lump
sum or as a pension every month. The Premiums are paid over a specified period. In general,
most of the pension plans pay 25% of the cash value of the policy as in mediate income and
the remaining value is invested in an investment fund that pays out a sums at a stipulated

33
interval.

Annuity Policies

Annuity is a contract that provides an income for a specified period of time. Annuity schemes
are those wherein policyholder’s regular contributions over a period of time accumulate to
form a corpus with Insurer. The corpus is used to yield a regular income that is paid to
policyholders until death starting from the desired retirement age. Some annuity schemes
have the option to pay the survivors a lump sum amount upon the death of insured in addition
to the regular income while the insured is alive.Life insurance contracts in simple form are
different from the annuity contracts in the sense that the insurer pays in the event of the death
of insured in a life insurance contract, while in an annuity contract the insurer stops paying
upon the death of the insurer.

34
 HEALTH INSURANCE

These policies provide cover against major health care expenses like hospitalization, surgery,
critical illness, etc. The benefits could be in the form of fixed pay-outs on hospitalization or a
lump sum on diagnosis against some specified critical illnesses.

Accident benefit

This is usually an add-on cover over a basic policy and pays an additional sum assured to the
beneficiary in case of death due to accident. Since accidental death is sudden and unforeseen,
the family could be faced with issues like relocation, debt servicing and other requirement for
funds.

Retirement Planning

Indian life expectancy has improved dramatically over the years due to availability of
advanced medical facilities. However, a longer working life may not really be possible due to
occurrences of life-style induced illness and high burn-out rate. The evolving demographic
balance with plenty of young talent becoming continuously available may also be a deterring
factor to a longer working life unless one is self-employed.

Consequently, our retirement life span could well be as long as our active working life span.
This means that we have to build a solid corpus during our active life to maintain our life
style for the long post retirement life if we are to enjoy the true meaning of the word
"retirement".
Pension Plans help us build up our savings during our earning years and provide us a lump
sum on retirement. This lump sum can then provide us a retirement income by investing in an
annuity.

Provide Post Retirement Income

35
The worst situation that a retiree can face is to run out of funds late into retirement. Such a
situation may force him to seek help from friends / relatives or liquidate his fixed assets
which essentially are a compromise of self-respect. This is where insurance offers the best
solution in the form of an annuity. Annuities bought from the retirement corpus can either be
used to provide regular post retirement income for a fixed term or for the entire life.

GENERAL INSURANCE

General insurance covers insurance of property against fire, burglary, theft; personal
insurance covering health, travel and accidents; and liability insurance covering legal
liabilities. This category of insurance virtually covers all forms of insurance except life.
Other covers may include insurance against errors and omissions for professionals, credit
insurance etc. Common forms of general insurance are motor, fire, home, marine, health,
travel, accident and other miscellaneous forms of non-life insurance.
Unlike life insurance policies, the tenure of general insurance policies is normally not that of
a lifetime. The usual term lasts for the duration of a particular economic activity or for a
given period of time. Most general insurance products are annual contracts. There are
however, a few products which have a long term.

General Insurance Types and Features

Motor Insurance

You love long drives and speeding on the highways. But have you secured your lovable ride?
Motor insurance, that includes car insurance and two wheeler insurance, covers all damages
and liability to the vehicle. Moreover, according to the Motor Vehicles Act, 1988, driving a
motor vehicle without insurance in a public place is a punishable offense.

A motor vehicle can be covered either by a Liability Only policy which is a statutory
requirement and covers the legal liability for injury, death, and/or property damage caused to
a third party in the event of an accident caused by or arising out of the use of the vehicle, or a
package policy which includes the Liability Only policy and also covers the damage to
owner’s vehicle, usually called O.D. Cover.

36
The common motor insurance plans include:

Car insurance: A comprehensive coverage against physical damage and bodily injury to
the car, and also covers against third-party liability.

Two wheeler insurance: A comprehensive two-wheeler insurance policy provides hassle-free

protection to your bike or scooter against physical damage, theft and third party liability.
Commercial vehicle insurance: Commercial vehicle insurance is a Liability Only policy for
commercial vehicles across the various classes of vehicles like goods carrying vehicles –
private and public carrier, passenger carrying vehicles, miscellaneous and special types of
vehicles.

Health Insurance

Ill health can result in a major halt in your life and work. Moreover, the escalating price of
health care costs means that you would be shelling out a massive amount of money to bear
the brunt of these costs. This is the reason why you would need health insurance to cover
your medical expenses following hospitalization from sudden illnesses or expenses caused by
accidents.

This also includes cashless facility in impaneled hospitals, pre and post hospitalization
expenses, and ambulance charges. Here are some of the common types of health insurance
policies:

Individual –A health insurance policy, such as Bajaj Allianz Health Guard Individual policy,
provides cover for an individual with cashless hospitalization and other features. In case you
feel that the sum insured of your existing health insurance plan does not suffice for expenses
due to illness or accidents then opt for a cover such as the Extra Care health insurance policy
to extend your health insurance.

Family Floater Policy – A policy such as the Health Guard Family Floater Option covers
family members under a single plan. The fixed sum insured can be availed by individual
member or as a sum total for treatment of one person.

Surgery Cover – A Surgical Protection Plan provides a fixed benefit amount for specified
surgeries and helps you to take care of the expensive medical treatment in a hospital. This
benefit plan that is used for the surgical treatment of serious illnesses such as cancer, kidney
failure, and heart attack can be availed as a standalone plan or a rider.

Comprehensive Health Insurance – A high value comprehensive health insurance policy,

37
such as Health Care Supreme with a wide range of sum insured, add-on covers, special
benefit covers such as maternity benefits and dental treatments, fulfills all the healthcare
needs and ensures complete peace of mind, regardless of the situation of life you are in.

Other health insurance covers:

Personal Accident

Hospital Daily cash Allowance

Critical Illness

Travel Insurance

Despite all your planning, a trip abroad can go wrong due to medical eventualities, and non-
medical contingencies such as loss of baggage, trip delay and other incidental expenses.
Travel insurance covers the insured against these misfortunes while traveling. Catering to
people from all walks of life, Bajaj Allianz offers three different plans – Travel Companion,
Travel Elite and Student Travel. Choose a basic plan or go for extended covers as per your
requirements.

The different travel insurance policies include:

Individual travel policy

Family travel policy

Senior citizens travel policy

Student travel insurance

In addition, there are insurance companies that offer special plans such as a corporate travel
policy or a comprehensive policy for travel to a special place such as Asia.

Home Insurance

Your home is a priceless possession and possibly one of the largest financial investments that
you have made. It needs to be safeguarded from unforeseen events.
Along with your home, property insurance also protects the valuables and other assets that
are the interest of the insured.

A comprehensive cover, such as My Home, for your house as well as the

contents ensures that your home is well protected.

38
Commercial Insurance

Commercial insurance offers solutions for all sectors of the industry ranging from
automotive,
aviation, construction, chemicals, foods and beverages, manufacturing, oil and gas,
pharmaceuticals, power, technology, telecom, textiles, transport and logistics.

Some common types of commercial insurance include:

  Property insurance

  Marine insurance

  Liability insurance

  Financial lines insurance

  Engineering insurance

  Energy insurance

  Employee benefits insurance

 International insurance solutions

Social insurance

The social insurance is to provide protection to the weaker section of the society who i unable
to pay the premium for adequate insurance. Pension plan, disability benefits, sickness.
Insurance and industries are varies forms of social insurance. With the increase of the
socialistic ideas, the social insurance is a nation. The government of a country must provide
social insurance to its masses.

RISK POINT OF VIEW:-

Property Insurance: - Under the property insurance of person/ persons are insured against a
certain specified risk. The risk may be fire or marine perils, theft of property or goods,
damage to property at accident.

Marine Insurance: - Marine insurance provides protection against loss of marine perils. The
marine perils are collision with rock, or ship attacks by enemies, fire, and capture by pirates,

39
etc. these perils cause damage, destruction or disappearance of the ship and cargo and non-
payment of freight.

The scope of marine insurance had been divided into two parts: (i) ocean marine
insurance and (ii) inland marine insurance.

Fire Insurance: - Fire insurance covers risks of fire. In the absence of fire insurance, the waste
will increase not only individual but as well. With the help of fire insurance, the losses,
arising due to fire are compensated and society is not losing much. The individual is
protected from such losses and his property or business or industry will.

40
 ADVANTAGES OF LIFE INSURANCE

Life insurance offers several advantages not available from any other financial instrument;

yet it also has disadvantages.

Advantages of Life Insurance

Life insurance provides an infusion of cash for dealing with the adverse financial

consequences of the insured's death.

Life insurance enjoys favorable tax treatment unlike any other financial instrument.

Death benefits are generally income-tax-free to the beneficiary.

Death benefits may be estate-tax free if the policy is owned properly.

Cash values grow tax deferred during the insured's lifetime.

Cash value withdrawals are treated on a first-in-first-out (FIFO) basis, therefore cash value

withdrawals up to the total premiums paid are generally income-tax free.

Policy loans are income tax free.

A life insurance policy may be exchanged for another life insurance policy (or for an annuity)

without incurring current taxation.

Note: All of the above statements are generally true; however the tax benefits of life

insurance

have certain limitations which under the wrong set of circumstances can cause the tax

benefits

mentioned to be lost. Please discuss with your insurance and tax advisor.

41
Many life insurance policies are exceptionally flexible in terms of adjusting to the

policyholder’s

needs. The death benefit may be decreased at any time and the premiums may be easily

reduced, skipped or increased.

A cash value life insurance policy may be thought of as a tax-favored repository of easily

accessible funds if the need arises; yet, the assets backing these funds are generally held in

longer-term investments, thereby earning a higher return.

Disadvantages of Life Insurance

Policyholders forego some current expenditure to pay policy premiums. Moreover, life

insurance is typically purchased for the benefit of others and usually only indirectly for the

insured person.

Cash surrender values are usually less than the premiums paid in the first several policy years

and sometimes a policy owner may not recover the premiums paid if the policy is

surrendered.

42
 THE ADVANTAGES OF GENERAL INSURANCE

Would you believe that insurance goes back to the time of pirates? It was a form of protection
for the traders against pirate attacks that caused them many goods. The idea behind this
insurance is to make sure that the unfortunate traders can carry on with their lives without the
hassle of starting back from scratch. All over the world, insurance is a language understood
by many countries. They all have their different types of insurances with different meanings
and different functions. The bottom line of insurance is to help each person with their own
personal needs in their lives. It is a great way to protect life from financial constraints after an
unfortunate event caused by natural or artificial forces.
The advantages of purchasing general insurance are numerous. These advantages vary
according to its type. Generally, this kind of insurance is very beneficial because it adds value
to your life, which keeps you reminded of how precious your body and your properties are.
General insurance is a kind of insurance that is being benefited by millions. It is a non-life
policy that includes the scope of health, property, automobile, and travel. General insurance
has so many advantages. When it comes to property and fire insurance, you can be protected
from spending so much after disasters or damages to your house. Fire insurance means that
you are covered and protected from anything that is caused by fire or a disaster that resulted
to property damage. Many unfortunate events are covered by these types of insurance like
damages caused by falling trees or other objects, lighting, air craft damage, electrical
installations to name a few.
Other properties misfortunes are caused by natural disasters include volcanic eruptions,
earthquakes, storms, floods, lightning, and landslides.
Another advantage of buying general insurance is that you can have peace of mind. Auto

43
insurance is another scope of general insurance that brings one of its greatest advantages. As
a common personal insurance policy, this type is very advantageous because most of its
coverage involve benefit payments to your involved vehicle. This also includes bodily injury
or liability coverage, collision and comprehensive coverage, and property damage. The
advantage of auto insurance is that the policy becomes cheaper if you have a good driving
history. Therefore, by becoming a good driver -you have every advantage of purchasing a
general insurance policy.

Health is a very important aspect to everyone. This is why getting your health insured is an
ideal move. Personal medical plans have become widespread necessities. This scope of
general insurance policy is very advantageous because it can be a worthy safety net against
illness is great about buying health insurance policies is that you can avail of high degree
treatments and facilities in case of illness. If you have good health insurance coverage, you
can even be treated like royalty when confined in the hospital. There are medical insurance
policies that let you choose the hospital you like along with the opportunity to select a room
of your choice

44
 FUNCTIONS OF INSURANCE

What are the primary and Secondary Functions of insurance?

Insurance is defined as a co-operative device to spread the loss caused by a particular risk
over a number of persons who are exposed to it and who agree to ensure themselves against
that risk.
Risk is uncertainty of a financial loss. It should not be confused with the chance of loss which
is the probable number of losses out of a given number of exposures.
It should not be confused with peril which is defined as the cause of loss or with hazard
which is a condition that may increase the chance of loss.
Finally, risk must not be confused with loss itself which is the unintentional decline in or
disappearance of value arising from a contingency. Wherever there is uncertainty with
respect to a probable loss there is risk.
Every risk involves the loss of one or other kind. The function of insurance is to spread the
loss over a large number of persons who are agreed to co-operate each other at the time of
loss. The risk cannot be averted but loss occurring due to a certain risk can be distributed

45
among-st the agreed persons. They are agreed to share the loss because the chances of loss,
i.e., the time, amount, to a person are not known.
Anybody of them may suffer loss to a given risk, so, the rest of the persons who are agreed
will share the loss. The larger the number of such persons the easier the process of
distribution of loss, In fact; the loss is shared by them by payment of premium which is
calculated on the probability of loss.

In olden time, the contribution by the persons was made at the time of loss. The insurance is
also defined as a social device to accumulate funds to meet the uncertain losses arising
through a certain risk to a person insured against the risk.
The functions of insurance can be studied into two parts (i) Primary Functions, and (ii)
Secondary Functions.

Primary Functions:
Insurance provides certainty:
Insurance provides certainty of payment at the uncertainty of loss. The uncertainty of loss can
be reduced by better planning and administration. But, the insurance relieves the person from
such difficult task. Moreover, if the subject matters are not adequate, the self-provision may
prove costlier. There are different types of uncertainty in a risk. The risk will occur or not,
when will occur, how much loss will be there? In other words, there are uncertainty of
happening of time and amount of loss. Insurance removes all these uncertainty and the
assured is given certainty of payment of loss. The insurer charges premium for providing the
said certainty.

Insurance provides protection:

The main function of the insurance is to provide protection against the probable chances of
loss.
The time and amount of loss are uncertain and at the happening of risk, the person will suffer
loss in absence of insurance. The insurance guarantees the payment of loss and thus protects
the assured from sufferings. The insurance cannot check the happening of risk but can
provide for losses at the happening of the risk.

Risk-Sharing:

46
The risk is uncertain, and therefore, the loss arising from the risk is also uncertain. When risk
takes place, the loss is shared by all the persons who are exposed to the risk. The risk-sharing
in ancient time was done only at time of damage or death; but today, on the basis of
probability of risk, the share is obtained from each and every insured in the shape of premium
without which protection is not guaranteed by the insurer.

Secondary functions:
Besides the above primary functions, the insurance works for the following functions

Prevention of Loss:
The insurance joins hands with those institutions which are engaged in preventing the losses
of the society because the reduction in loss causes lesser payment to the assured and so more
saving is possible which will assist in reducing the premium. Lesser premium invites more
business and more business cause lesser share to the assured.
So again premium is reduced to, which will stimulate more business and more protection to
the masses. Therefore, the insurance assist financially to the health organization, fire brigade,
educational institutions and other organisations which are engaged in preventing the losses of
the masses from death or damage.

It Provides Capital:
The insurance provides capital to the society. The accumulated funds are invested in
productive channel. The dearth of capital of the society is minimized to a greater extent with
the help of investment of insurance. The industry, the business and the individual are
benefited by the investment and loans of the insurers.

It Improves Efficiency:
The insurance eliminates worries and miseries of losses at death and destruction of property.
The carefree person can devote his body and soul together for better achievement. It
improves not only his efficiency, but the efficiencies of the masses are also advanced.

It helps Economic Progress:

47
The insurance by protecting the society from huge losses of damage, destruction and death,
provides an initiative to work hard for the betterment of the masses. The next factor of
economic progress, the capital, is also immensely provided by the masses. The property, the
valuable assets, the man, the machine and the society cannot lose much at the disaster.

Importance of Insurance in Our Economy

Insurance is a risk transfer mechanism whereby the individual or the business enterprise can
shift some of the uncertainties of life on the shoulder of the other.All the people will desire to
live a cleaner, healthier, comfortable and easy life. To meet this requirement different
enterprises produce and provide goods and services. They make innovation and inventions,
which take great risk. Large responsibility falls on the shoulder of innovators and inventors.
A small error or lapse may cause numerous side effects and cause death or disability. These
types of risks highlight the importance of insurance. If there had not been insurance at the
back of all innovators the world would have never progressed. After assuring this in security
factor the enterprises started looking for new and more high-tech machines, robots and
gadgets, atomic technology, space traveling, computers, deep sea exploration, development
of Concords and Jumbos and medical technology.
All these developments could be possible with the support of insurance. In peace the
insurance provides protection to trade and industry, which ultimately contributes towards
human progress.
Thus insurance is the most lending force contributing towards economics, social and
technological progress of man. Without insurance cover all industrial, economic and social
activity of the world will come to a grinding halt. We may have our life, body or property
insured. The insurance company makes good our losses as we pay the insurance premium
regularly. Insurance is clearly of great advantage and importance. It plays following micro
economics roles: Firstly, insurance, like banking, promotes savings to individuals. Secondly,
insurance promotes investment. The insurance company can easily invest its funds in
industry,
agriculture and commerce. Thirdly, the insured person can get loans against the security of
insurance policy from insurance company or from banks. Fourthly, insurance as we all know,
protects against dangers to life and property. If a person has got his life insured, his family

48
will get enough money on his death. If he had an insurance policy for a shop, he can get
compensation for fire, theft etc. To be aware of the importance of insurance in our economy
one must know roles performed by insurance in macro-economic development.

SEVEN INSURANCE PRINCIPLES

1) Principal of Utmost Good Faith

Parties, insurer and insured should enter into contract in good faith
Insured should provide all the information that impacts the subject matter
Insurer should provide all the details regarding insurance contract
For example - John took a health insurance policy. At the time of taking policy, he was a
smoker
and he didn't disclose this fact. He got cancer. Insurance company won't pay anything as John
didn't reveal the important facts.

49
2) Principle of Insurable Interest
Insured must have the insurable interest on the subject matter
In case of life insurance spouse and dependents have insurable interest in the life of a person.
Corporations also have insurable interests in the life of it's employees
In case of life or marine insurance, insured must be the owner both at the time of entering of
entering into the insurance contract and at the time of accident.

3) Principle of Indemnity
Insured can't make any profit from the insurance contract. Insurance contract is meant for
coverage of losses only
Indemnity means a guarantee to put the insured in the position as he was before accident
This principle doesn't apply to life insurance contracts

4) Principle of Contribution
In case the insured took more than one insurance policy for same subject matter, he/she can't
make profit by making claim for same loss more than once
For example - Raj has a property worth Rs.5, 00,000. He took insurance from Company A
worth
Rs.3, 00,000 and from Company B - Rs.1, 00,000.
In case of accident, he incurred a loss of Rs.3, 00,000 to the property. Raj can claim Rs. Rs.3,
00,000 from A but after that he can't make profit by making a claim from Company B. Now
Company A can make a claim from Company B to for proportional loss claim value.

5) Principle of Subrogation
After the insured gets the claim money, the insurer steps into the shoes of insured. After
making
the payment insurance claim, the insurer becomes the owner of subject matter.
For example: - Ram took a insurance policy for his Car. In an accident his car totally
damaged.
Insurer paid the full policy value to insured. Now Ram can't sell the scrap remained after the
scrap.

6) Principle of Loss Minimization

50
This principle states that the insured must take all the necessary steps to minimize the losses
to inured assets.
For example - Ram took insurance policy of his house. In an cylinder blast, his house burnt.
He should have called nearest fire station so that the loss could be minimized.

7) Principle of Cause Proxima

Word "Cause Proxima" means "Nearest Cause"
An accident may be caused by more than one cause. In case property insured for only one
cause. In such case nearest cause of the accident is found out.
Insurer pays the claim money only if the nearest cause is insured

51
 INSURANCE FRAUD

Insurance fraud is any act committed with the intent to obtain a fraudulent outcome from an
insurance process. This may occur when a claimant attempts to obtain some benefit or
advantage to which they are not otherwise entitled, or when an insurer knowingly denies
some benefit that is due. According to the United States Federal Bureau of Investigation the
most common schemes include: Premium Diversion, Fee Churning, Asset Diversion, and
Workers Compensation Fraud. The perpetrators in these schemes can be both insurance
company employees and claimants. False insurance claims are insurance claims filed with the
intent to defraud an insurance provider.
Insurance fraud has existed since the beginning of insurance as a commercial
enterprise. Fraudulent claims account for a significant portion of all claims received by
insurers, and cost billions of dollars annually. Types of insurance fraud are diverse, and occur
in all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating
claims to deliberately causing accidents or damage. Fraudulent activities affect the lives of
innocent people, both directly through accidental or intentional injury or damage, and
indirectly a these crimes cause insurance premiums to be higher. Insurance fraud poses a
significant problem, and governments and other organizations make efforts to deter such
activities.
Causes
The “chief motive in all insurance crimes is financial profit. Insurance contracts provide both

52
the insured and the insurer with opportunities for exploitation.
According to the Coalition Against Insurance Fraud, the causes vary, but are usually centered
on greed, and on holes in the protections against fraud. Often, those who commit insurance
fraud view it as a low-risk, lucrative enterprise. For example, drug dealers who have entered
insurance fraud think it’s safer and more profitable than working street corners. Compared to
those for other crimes, court sentences for insurance fraud can be lenient, reducing the risk of
extended punishment.
Though insurers try to fight fraud, some will pay suspicious claims anyway; settling such
claims is often cheaper than legal action.
Another reason for fraud is over-insurance, when the amount insured is greater than the
actual value of the property insured. This condition can be very difficult to avoid, especially
since an insurance provider might sometimes encourage it in order to obtain greater profits.
This allows fraudsters to make profits by destroying their property because the payment they
receive from their insurers is of greater value than the property they destroy. The most
common form of insurance fraud is inflating the value of the loss.
Insurance companies are also susceptible to fraud because it's possible for fraudsters to file
claims for damages that never occurred.
Losses due to insurance fraud
It is hard place an exact value on the money stolen through insurance fraud. Insurance fraud
is deliberately undetectable, unlike visible crimes such as robbery or murder. As such, the
number of cases of insurance fraud that are detected is much lower than the number of acts
that are actually committed. The best that can be done is to provide an estimate for the losses
that insurers suffer due to insurance fraud. The Coalition against Insurance Fraud estimates
that in 2006 a total of about $80 billion was lost in the United States due to insurance fraud.

According to estimates
by the Insurance Information Institute, insurance fraud accounts for about 10 percent of the
property/casualty insurance industry’s incurred losses and loss adjustment
expenses. The National Health Care Anti-Fraud Association estimates that 3% of the health
care industry’s expenditures in the United States are due to fraudulent activities, amounting to
a cost of about $51 billion. Other estimates attribute as much as 10% of the total healthcare
spending in the United States to fraud—about $115 billion annually. Another study of all
types of fraud committed in the United States insurance institutions (property-and-casualty,
business liability, healthcare, social security, etc.)Put the true cost at 33% to 38% of the total

53
cash flow through the system. This study resulted in the book title "The Trillion Dollar
Insurance Crook" by J.E. Smith. In the United Kingdom, the Insurance Fraud Bureau
estimates that the loss due to insurance fraud in the United Kingdom is about £1.5 billion
($3.08 billion), causing a 5% increase in insurance premiums. The Insurance Bureau of
Canada estimates that personal injury fraud in Canada costs about C$500 million annually.
India forensic Center of Studies estimates that Insurance frauds in India costs about $6.25
billion annually.

Hard vs. soft fraud

Insurance fraud can be classified as either hard fraud or soft fraud.
Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto
theft, or fire that is covered by their insurance policy in order to receive payment for
damages.
Criminal rings are sometimes involved in hard fraud schemes that can steal millions of
dollars.
Soft fraud, which is far more common than hard fraud, is sometimes also referred to as
opportunistic fraud. This type of fraud consists of policyholders exaggerating otherwise-
legitimate claims. For example, when involved in an automotive collision an insured person
might claim more damage than actually occurred. Soft fraud can also occur when, while
obtaining a new health insurance policy, an individual misreports previous or existing
conditions in order to obtain a lower premium on his or her insurance policy.

54
 TYPES OF INSURANCE FRAUD

Life insurance See also: Category: Murderers for insurance money

Life insurance fraud may involve faking death to claim life insurance. Fraudsters may
sometimes turn up a few years after disappearing, claiming a loss of memory.
An example of life insurance fraud is the John Darwin disappearance case, which was an
investigation into the act of pseudocide committed by the British former teacher and prison
officer John Darwin, who turned up alive in December 2007, five years after he was thought
to have died in a canoeing accident. Darwin was reported as "missing" after failing to report
to work following a canoeing trip on March 21, 2002. He reappeared on December 1, 2007,
claiming to have no memory of the past five years

Another example is former British Government minister John Storehouse who went missing
in 1974 from a beach in Miami. He was discovered living under an assumed name in
Australia, extradited to Britain and jailed for seven years for fraud, theft and forgery.

Health care insurance

See also: Medicare fraud and Health care fraud
Health insurance fraud is described as an intentional act of deceiving, concealing, or
misrepresenting information that results in health care benefits being paid to an individual or
group.
Fraud can be committed either by an insured person or by a provider. Member fraud consists
of claims on behalf of ineligible members and/or dependents, alterations on enrollment forms,
concealing preexisting conditions, failure to report other coverage, prescription drug fraud,
and failure to disclose claims that were a result of a work-related injury.
Provider fraud consists of claims submitted by bogus physicians, billing for services not
rendered, billing for higher level of services, diagnosis or treatments that are outside the
scope of practice, alterations on claims submissions, and providing services while medical
licenses are either suspended or revoked. Independent medical examinations debunk false
insurance claims and allow the insurance company or claimant to seek a non-partial medical
view for injury-related cases.

According to the Coalition Against Insurance Fraud, health insurance fraud depletes
taxpayer-
funded programs like Medicare, and may victimize patients in the hands of certain doctors.
Some scams involve double-billing by doctors who charge insurers for treatments that never
occurred, and surgeons who perform unnecessary surgery.

55
According to Roger Feldman, Blue Cross Professor of Health Insurance at the University of
Minnesota, one of the main reasons that medical fraud is such a prevalent practice is that
nearly all of the parties involved find it favorable in some way. Many physicians see it as
necessary to provide quality care for their patients. Many patients, although disapproving of
the idea of fraud, are sometimes more willing to accept it when it affects their own medical
care. Program administrators are often lenient on the issue of insurance fraud, as they want to
maximize the services of their providers.

The most common perpetrators of healthcare insurance fraud are health care providers. One
reason for this, according to David Hyman, a Professor at the University Of Maryland School
Of Law, is that the historically-prevailing attitude in the medical profession is one of “fidelity
to patients”. This incentive can lead to fraudulent practices such as billing insurers for
treatments that are not covered by the patient’s insurance policy. To do this, physicians often
bill for a different service, which is covered by the policy, rather than that which they
rendered.Another motivation for insurance fraud is a desire for financial gain. Public
healthcare programs such as Medicare and Medicaid are especially conducive to fraudulent
activities, as they are often run on a fee-for-service structure. Physicians use several
fraudulent techniques to achieve this end.
These can include “up-coding” or “upgrading,” which involve billing for more expensive
treatments than those actually provided; providing, and subsequently billing for, treatments
that are not medically necessary; scheduling extra visits for patients; referring patients to
other physicians when no further treatment is actually necessary; "phantom billing," or billing
for services not rendered; and “ganging,” or billing for services to family members or other
individuals who are accompanying the patient but who did not personally receive any
services.
Perhaps the greatest total dollar amount of fraud is committed by the health insurance
companies themselves. There are numerous studies and articles detailing examples of
insurance companies intentionally not paying claims and deleting them from their systems,
denying and cancelling coverage, and the blatant underpayment to hospitals and physicians
beneath what are normal fees for care they provide. Although difficult to obtain the
information, this fraud by insurance companies can be estimated by comparing revenues from
premium payments and expenditures on health claims.
In response to the increased amount of health care fraud in the United States, Congress,
through the Health Insurance Portability and Accountability Act of 1996 (HIPAA), has
specifically established health care fraud as a federal criminal offense with punishment of up
to ten years of prison in addition to significant financial penalties.

Automobile insurance

Fraud rings or groups may fake traffic deaths or stage collisions to make false insurance or
exaggerated claims and collect insurance money. The ring may involve insurance claims
adjusters and other people who create phony police reports to process claims.
The Insurance Fraud Bureau in the UK estimated there have already been more than 20,000
staged collisions and false insurance claims across the UK from 1999 to 2006. One tactic
fraudster’s use is to drive to a busy junction or roundabout and brake sharply causing a

56
motorist to drive into the back of them. They claim the other motorist was at fault because
they were driving too fast or too close behind them, and make a false and inflated claim to the
motorist's insurer for whiplash and damage which can give the fraudsters up to £30,000. In
the Insurance Fraud Bureau's first year or operation, the usage of data mining initiatives
exposed insurance fraud networks and led to 74 arrests and a five-to-one return on
investment.
The Insurance Research Council estimated that in 1996, 21 to 36 percent of auto-insurance
claims contained elements of suspected fraud. There is a wide variety of schemes used to
defraud automobile insurance providers. These ploys can differ greatly in complexity and
severity.

Richard A. Derrig, vice president of research for the Insurance Fraud Bureau of
Massachusetts, lists several ways that auto-insurance fraud can occur, such as:
Staged collisions In staged collision fraud, fraudsters use a motor vehicle to stage an accident
with the innocent party. Typically, the fraudsters' vehicle carries four or five passengers. Its
driver makes an unexpected manoeuvre, forcing an innocent party to collide with the
fraudster's vehicle. Each of the fraudsters then files claims for injuries sustained in the
vehicle. A “recruited” doctor diagnoses whiplash or other soft-tissue injuries which are hard
to dispute later. Other examples include jumping in front of cars as done in Russia. The
driving conditions and roads are dangerous with many people trying to scam drivers by
jumping in front of expensive- looking cars or crashing into them. Hit and runs are very
common and insurance companies notoriously specialize in denying claims. Two-way
insurance coverage is very expensive and almost completely unavailable for vehicles over ten
years old–the drivers can only obtain basic liability. Because Russian courts do not like using
verbal claims, most people have dashboard cameras installed to warn would-be perpetrators
or provide evidence for/against claims.

Property insurance
Possible motivations for this can include obtaining payment that is worth more than the value
of the property destroyed, or to destroy and subsequently receive payment for goods that
could not otherwise be sold. According to Alfred Manes, the majority of property insurance
crimes involve arson. One reason for this is that any evidence that a fire was started by arson
is often destroyed by the fire itself. According to theUnited States Fire Administration, in the
United States there were approximately 31,000 fires caused by arson in 2006, resulting in
losses of $755million. For example, the Moulin Rouge Hotel in Las Vegas was struck by
arson twice within six years.Council compensation claims The fraud involving claims from
the councils' insurers suppose staging damages blamable on the local authorities (mostly falls
and trips on council owned land) or inflating the value of existing deHow

57
 LIFE INSURANCE VS GENERAL INSURANCE

Insurance transfers risk from you to another company, called an insurance company. This is
accomplished by you purchasing an insurance contract. For a monthly, quarterly or annual
fee called a "premium," the insurance company takes on a particular risk and ensures that
money is available in the event that the insured event occurs. Two types of insurance
people commonly purchase are life insurance and general insurance.

Types
Life insurance is a non-personal insurance contract. This means that the policyholder and the
person being insured do not have to be the same person. General insurance is always a
personal contract where the insurance company contracts with you directly for insurance
protection.

Function

Both life insurance and general insurance accept premiums in exchange for insurance
benefits.
Insurance premiums are invested into bonds or bond-like investments that produce stable and
consistent returns for the insurance company. The investments, plus premium payments, also
ensure that the insurance company can pay the promised benefits that are outlined in the
insurance policy. When you need to file a claim, both types of insurance require a claim form
for you to fill out. The payment of benefits, and the amount of the benefit that is payable, are
always spelled out in your insurance contract.

58
Significance

Life insurance insures your life or the life of someone that you have an economic interest in,
like your spouse, children, siblings or business partners. When the insured individual dies, the
life insurance policy pays a death benefit that is fixed. This is called a valued contract. A
valued contract pays a fixed sum of money, regardless of the nature of the loss insured by the
contract.
General insurance insures homes, automobiles and other personal property. This type of
insurance is sometimes referred to as "property and casualty" insurance. General insurance is
indemnity insurance. Indemnity insurance pays just enough money to you to repair or
replaced the insured property. For example, your homeowner's insurance may cover your
entire home and the contents of it. However,if your roof is damaged in a storm, the policy
only pays enough to repair the damage.

Benefits

The benefit of life insurance is that it pays off any financial obligations you have left after
you die. It can pay more than that, however, because life insurance pays a fixed amount.
Death benefits can be used to create wealth for the surviving beneficiaries, or they can be
used to replace the primary income earner's salary for a surviving spouse.
General insurance is beneficial in that the insurance ensures that, almost regardless of the
damage done, that the property will be repaired or replaced. While general insurance
generally has a maximum payout determined by the value of your property, it does not pay a
fixed amount, so you won't have to guess at how much insurance you need to purchase.

Expert Insight

Both types of insurance are necessary to protect your life and your property. They each serve
a different function and fill specific roles in your insurance plan. When buying life insurance,
only buy enough insurance to cover your current and expected future financial liabilities.
When purchasing general insurance, the maximum coverage should not extend beyond the
total replacement value of your property.

59
 THE ROLE AND RESPONSIBILITY OF ACTURIES

The daily job duties which an actuary must complete are quite vast and varied. This
individual wears many hats and must be adept with completing various tasks on a daily basis.
Although many individuals may be unaware of the responsibilities which an actuary takes on
in their job role, the position of actuary is one of an important nature.

What Is An Actuary?
An actuary deals with the business of insurance and is responsible for many areas under the
broad category of insurance. The actuary is an individual who will analyze important data
such as mortality, sickness, injury and disability rates and use that information to aid those
involved with insurance. An actuary is responsible for collecting the data to forecast future
risks and see how these predictions will affect various aspects of insurance.
General Responsibilities of an Actuary
One who accepts the role of actuary is responsible for a multitude of items. They will review
statistical information relating to rates dealing with mortality, sickness, accidents, disability
and retirement. They will take the information that they obtain from reviewing statistical data
and relay the information to individuals who need such items to successfully pursue
insurance-related interests. The general role of the actuary is to compile the data which they
collect in such a manner that it helps companies deal with payment and coverage issues.

Specific Duties of an Actuary

There are a variety of specific duties which an actuary must carry out on a daily basis. The
first duty which an actuary must undertake in their job role is to review a variety of
documents. These documents relate to statistical information, insurance plans, annuity plans,

60
pension plans, contracts and company policies. The overall goal in reviewing these various
document is to construct guidelines for which the companies can follow with their customers
and employees.

Once the actuary has reviewed all of the pertinent documents, the individual must then
construct concise tables evidencing the results of the intense document review. The tables
will diagram the statistical evidence as well as highlight the recommended route to pursue
with regard to disbursements, premiums and retirement funds.

An additional specific duty of an actuary is to determine company policy and explain such
policy and its aspects to those who will benefit from it. The actuary may also work on the
policy so that it adequately works to benefit those affected by the policy.

An actuary may also do consulting work and help various companies with their statistical
needs and company policy construction. One who is an actuary may work for a specific
corporation or many different companies and corporations.

Actuaries may also be asked to testify as expert witnesses in various forms of litigation. Their
testimony most often relates to the lifetime earnings an individual would have seen based on
a variety of factors.

One who fulfills the role of an actuary may also have to testify before public agencies with
regard to new or revised legislation affecting the companies and corporations which it works
for.
This frequently occurs when a new law is about to be passed or the company wishes a
particular piece of legislation to become law.

The actuary is also the go to individual for any questions relating to their job responsibilities
asked by the customers of the company. If the questions are best answered by the actuary,
then he/she will do so in order to present straightforward information to the public.

An actuary must also develop mathematical ideas and formulas so that the proper data can be
assessed. The actuary must use his/her mathematical abilities to format equations which will
aid in the resolution of an issue.

Traits Which All Actuaries Should Possess

There are many beneficial traits which an actuary should possess. First and foremost, an
actuary needs to possess wonderful mathematical skills. Since they will be dealing a great
deal with statistical equations and data, having such mathematical skills will help them to
excel in their job responsibilities.

Good analytical skills are another important trait which an actuary should possess as it will
help them in their job role. As they will need to analyze a variety of documents, having
analytical skills which are more than adequate will greatly benefit them in the long run.

An actuary is an individual who should possess good public speaking skills as well. In their
daily job duties, not only will they need to analyze documents and data but they will also
have to report such data results to company officials and members of the public. Therefore, in
order to best get their opinions and conclusions across in a straightforward, easy to

61
understand manner, good public speaking skills should be a prerequisite to taking on the role
of actuary.

Creativity is something which actuaries should possess. From time to time, they will need to
aid company officials in the drafting of company policy and make changes to the policy.
With a little bit of creativity, an actuary will be able to take the documentation and put such a
spin on it that it is formed into a proper and valid policy.

One who is an actuary should also have wonderful research skills. Since many of the
documents that they need to analyze will not just pop into their laps, it is important that
actuaries can do good research and find out what they need to know with regard to statistics
and pertinent documents in an efficient and expedient manner.

An actuary should also have good working computer skills. Since much of their work will
involve computers, it is important that the actuary not only be familiar with computers but
know how to maneuver around with them as well.

Comprehension skills are also a necessary component for all actuaries to possess. The actuary
is an individual who in their job role will need to analyze and interpret often-complex
documents and laws as well. If one has excellent comprehension skills they will be able to do
their job that much better.

Conclusion

An actuary is an individual who has many duties and responsibilities concomitant to their
position. If one in this job role has excellent analytical, comprehension, mathematical and
public speaking skills, they will most likely be individuals who excel at their job and produce
the highest quality work product possible. If one has all of these aforementioned skills, the
position of actuary may be the perfect one to fill.

The Importance of Actuaries

This brief article attempts to outline why actuaries could have made the difference and why
actuaries can make the difference in today’s complex financial world. It is an effort to explain
why the use of actuarial knowledge, techniques and expertise could have helped avoid or at
least mitigate the effects of the recent financial crisis.
Our profession can offer so much, yet it is understood by so few people and appreciated by
even fewer. I strongly believe that actuaries could be instrumental in helping many financial
institutions avoid serious mishaps, but more than anything else they could really add value to
an organization.
Most of what follows has been borrowed from an excellent article, “Actuaries would have
made a difference”, that was written by James Macginnitie, an actuary. It really covers all the
things that went through my mind as far as the recent financial crisis is concerned.
Personally, I strongly believe that if Banks had strong actuarial teams that were as vital and
integral to their structure as they are in insurance companies, things could have been a lot
different?

We, Actuaries, would have made a difference because:

We are used to taking a long-term view. Although this used to be a prerogative for the life
and pension actuaries, at least in our market, it is increasingly changing and becoming an
integral part of the job description of non – life actuaries as well. We learn to think how

62
things can possibly be over the long – term with life benefits becoming payable possibly over
several or tens of years in to the future, pension obligations extending for decades, and also
long-tailed casualty covers.

We understand that choosing the right model is very important, but it’s even more important
to test it and calibrate it appropriately. We have been taught not to exclude extreme events
because “such a loss will never happen or cannot reappear.” In fact, in certain lines of
business the most important aspect of the risk assessment is the fat tail that we model to cater
for those extreme events.

We understand that the distribution function for most risks is not the nice symmetric bell
curve or normal distribution that most analysts were using, but rather one of several
distribution functions that have longer, fatter tails.

The emphasis of risk analysis in capital markets on the value-at-risk (V@R or VAR)
concept, which is based on the normal distribution, was one of the problems in the recent
financial crisis. This is because the Normal Distribution usually understates the chances of
bad outcomes, both in frequency and in amount.

We, on the other hand, understand that large but infrequent events need to be included in any
model. In fact, our understanding of the latter has been a frequent cause of debate between
our profession and marketing people or executives eager to introduce a new product or show
better results by discounting the possibility of an infrequent larger risk materializing.

We understand and we know that when underwriting standards are lowered the result will be
worse experience, and these should be reflected in the price, and in any reserves set aside to
pay losses. In the recent financial crisis the problematic mortgages did not perform as
modelled because underwriting standards deteriorated (in certain cases they were not even
there). We have learned to question changes in underwriting and other aspects of operations
that might have an impact on developing experience. Our insistence on our basic actuarial
principles and our investigative approach is not always appreciated, but in many cases it was
what made a difference between saving an operation or breaking it.

Generally we do not like derivatives unless these are used for hedging purposes. We consider
derivatives on derivatives that are part of the current problems as a proxy for gambling and
not as genuine investments. In fact, we are not comfortable with any complex financially
engineered structures that seek to manipulate certain inefficiencies in the regulatory or
business environment and which depend on the presumption that we are smarter than the
others. We have been taught that whatever we do could come back and haunt us, unless
appropriate actuarial principles are followed.

We have been trained to value liabilities even in the absence of deep liquid market for them,
such as pension obligations, outstanding casualty losses and life insurance benefits. We have
been taught how to produce reasonably accurate estimates for claims that have not yet been
reported to the insurer. Similar techniques would be useful for many of the assets that are
currently being marked to nonexistent market values.

63
We are required and expected to model expectations, then measure actual results and use
those measurements to recalibrate our modelling. If only this was used in the capital markets
in a similar way?

We are accustomed to transparency. Our professional standards require an actuarial report to

back our opinion which must contain sufficient detail so that another actuary can appraise the
conclusions.

We have professional standards and we only do work for which we are qualified. We follow
professional guidance from our accrediting organizations. Our professional associations
invest a lot of time and effort to keep up to date and we must continue our professional
education throughout our careers.

We take it upon us that we have a responsibility to protect the public. The pension plans and
insurance companies promise to deliver several years into the future, benefits to survivors and
retirees and we understand that they have an obligation to do their best to make sure that
those benefits will be paid when they are needed. We aren’t perfect. There are examples of
insurers and pension plans that failed, but the frequency is relatively small, and in many cases
it was in spite of the actuary’s advice.

As regulators, legislators and central banks seek to design a better future; it would be helpful
to include more actuarial training and thinking.

64
 INSURANCE AGENT

An insurance agent is a person or an entity that represents the interest of the insurer.
According to the the current rules, an agent or corporate agent such as a bank can’t represent
more than one insurance company.
Since the insurer, also called the principal, can’t reach out to all customers individually, he
hires agents to do this job. Agents are trained and licenced entities, so it’s expected they
understand financial needs of customers and sell products that best suits customer interest.
Often that’s not the case. And one of the main factors contributing to this misguided advice is
the lack of accountability. As agents they are not accountable for the advice they give you,
but the principal or the insurance company is. So you can take the insurance company to
court or to Insurance Regulatory and Development Authority (Irda) for wrong advice but not
the agent. The insurer in turn can reprimand the agent by cancelling his licence.

INSURANCE BROKERS

But you can drag an insurance broker to court. That’s because a broker is the customer’s
agent. A broker is also a licensed and trained entity but with a different mandate. The job of

65
the broker is not to represent the insurer but customers. Brokers have a fiduciary
responsibility towards the customer. A fiduciary responsibility is a legal relationship of trust
and confidence between two parties. Brokers as fiduciary legally promise you to keep your
interest paramount. So as brokers they understand your needs and browse through several
insurers to get you the best-fit product. You can take your broker to the court in case he fails
to do his duties. You can also approach Irda who can cancel the broker’s licence if found
guilty. The idea behind making banks insurance brokers is to enforce accountability. As
brokers they will have a fiduciary responsibility towards you and will also be able to offer
products from multiple insurers at the same time.

What Are the Duties of Insurance Agents?

Lead Generation
As a salesperson, normally paid on commission, the insurance agent has the duty of
generating leads for insurance. This may include placing ads in a local newspaper or website,
going to community events, making cold calls and buying contact lists. Once he gets names
and numbers of prospects, he makes an initial call to talk about policy needs or to set up a
face-to-face meeting with the prospect.

Interview

During an initial phone conversation or meeting with a prospect, an insurance agent asks
questions and listens to information on the prospect's needs. He tries to assess the buyer's
situation to figure out which types of insurances and policy terms make the most sense.
Coverage needs, amounts, payment preferences and budget are among the basic items
discussed during this initial meeting.

Sales

Like other sales professionals, insurance agents must be skilled in the art of persuasion. Once
he understands the needs of a prospect, he can look over product options to see what is the
best match. He then makes a recommendation to the prospect. While trying to influence the
prospect, it is important to take a long-term orientation. Many insurance agents sell a lot of
policies and hope to get continued business from new customers, including annual policy
renewals. This requires honesty and a customer-centered approach.

Service

Larger insurance providers often have call centers or support teams that deal with basic
customer service questions and claims. However, independent agents and even those in
offices with larger providers typically function as the first point of service contact. If a
customer has a question about coverage or a claim, he often calls his agent to discuss options
or to get information. He may also call to cancel policies or to make additions or revisions to
coverage.

66
 AUTHORITY OF INSURANCE AGENT

An agent is a person authorized by the principal to act on the principal’s behalf and under the
principal’s control
[i]For an agency relationship to arise, the principal manifests assent to the agent that the agent
will act on the principal’s behalf and subject to the principal’s control.
An agency relationship may be implied from the words and conduct of the parties and the
circumstances of the case evidencing an intention to create the relationship irrespective of the
words or terminology used by the parties to characterize or describe their relationship
[ii]Agency is the fiduciary relation which results from the manifestation of consent by one
person, a principal, to another, an agent that the agent should act on the principal’s behalf and
subject to the principal’s control, and consent by the agent so to act
[iii]To establish a principal-agent relationship, one has to show that
[iv]a principal consented, expressly or impliedly, to an agent’s acting on the principal’s
behalf, and
The agent was subject to the principal’s control.
The principal must intend that the agent acts for him, and the agent must intend to accept the
authority and act on it.
The power of the agent results from the manifestation of the principal’s consent, and extends
no further than such manifestation
[v] Additionally, the scope of an agent’s actual authority is determined by the intention of the
principal or by the manifestation of that intention to the agent
[vi]The rules of contract interpretation apply in determining the scope of an agent’s powers

67
[vii]The authority of an agent may be actual or apparent
[viii] Actual authority is created by the principal’s manifestations to the agent, whereas
apparent authority is created by the principal’s manifestations to a third party.
Actual authority is the power of the agent to affect the legal relations of the principal by acts
done in accordance with the principal’s manifestations of consent to him/her
[ix] Actual authority is authority that the principal expressly grants to the agent or authority
to which the principal consents
[x]Actual authority may be express or implied
[xi] Express authority is created when the principal explicitly tells the agent what to do and
implied authority consists of those powers incidental and necessary to carry out the express
authority. Absent an express grant of authority, the relationship may result from implied or
apparent agency.
The authority given to the agent need not be in writing
[xii] In Weathers by v. Gore, 556 F.2d 1247 (5th Cir. Miss. 1977), the court observed that
proof of agency does not depend upon a written agreement. Further, in the absence of express
written terms creating the relationship, the existence of an agency is a factual question
Every delegation of authority carries implied authority to do all acts naturally and ordinarily
done which are reasonably necessary and proper to carry into effect the main authority
conferred
[xiii]The authority of an agent will not be extended beyond that which is given in terms, or is
necessary and proper to carry the authority given into full effect
[xiv]An agent is one who has all the powers of his principal, as to the business in which s/he
is engaged, and may conduct it conversant with the lawful customs and usage of that
particular business
[xv] An agent who has a bare power or authority must execute it himself and cannot delegate
his authority
[xvi]However, an agent may employ clerks and sub-agents, whose acts, if done in his name,
and recognized by him/her, either specially, or according to his/her usual mode of dealing
with them, will be regarded as his/her acts, and, as such, binding on the principal[xvii].
Apparent authority is authority that is conferred when the principal affirmatively,
intentionally, or by lack of ordinary care causes third persons to act upon an agent’s apparent
authority
[xviii] Apparent authority is created by the conduct of the principal which causes a third
person

68
reasonably to believe that another has the authority to act for the principal
[xix] The principal is liable only where there has been an appearance of authority created by
him
[xx]A finding of apparent authority requires evidence that a principal has communicated
directly
with the third party or has knowingly permitted its agent to exercise authority. One who deals
with another as a principal without knowledge of the existence of an agency for another
cannot invoke the doctrine of apparent authority against the real principal [xxi].
The doctrine of apparent authority rests upon the principle of estoppels, which forbids one by
his/her acts to give an agent an appearance of authority which s/he does not have and to
benefit from such misleading conduct to the detriment of one who has acted in reliance upon
such appearance
[xxii]To hold the principal liable under apparent agency theory, it must be establish that:
the principal manifested consent to the exercise of such authority
[xxiii]the third person acting in good faith had actually believe that the agent possessed such
authority,
[xxiv]the third person, relying on such appearance of authority, has changed his/her position
and injured or suffered loss
[xxv]Thus, there are three essential elements to apparent authority
[xxvi]a representation by the principal,
a reliance on that representation by a third party, and
a change in position by the third party in reliance on the representation.
The principal is estopped to deny the authority of the agent, because s/he has permitted the
appearance of authority in the agent and thereby justified the third party in relying on that
appearance of authority as though it were actually conferred upon the agent
[xxvii]However, apparent authority does not arise where the lack of the agent’s authority is
known, or should be known to the party dealing with the agent
[xxviii] Furthermore, a principal is never bound where the person dealing with the agent
knows, or has reason to know, that the agent is exceeding his authority
[xxix]Authority for an agent to make a specified contract includes, authority to make it in a
usual form and with usual terms and to do other acts incidental to its making which are, under
like circumstances, usually done
[xxx] However, authority incidental to authority to make a contract does not include authority
to perform it or accept performance, to transfer or assign it, to bring suit upon it, to alter its

69
terms, to rescind it, or to waive its conditions or otherwise diminish or discharge the
obligations of the third person.
An agent may be authorized to purchase personal property for the principal. When an agent
has authority under an agency agreement to purchase goods from a third party on the
principal’s behalf, or if the principal retained the benefits of the transaction, then the principal
is liable to the third party

[xxxi]A selling agent is authorized to do whatever is necessary and usual to carry out the
purpose of the agency. A selling agent may bind his/her principal if s/he does not exceed the
power with which s/he is actually or ostensibly vested
[xxxii]Ordinarily, authority to sell will not authorize a sale for anything but money, and does
not authorize an exchange
[xxxiii] Where the authority to perform specific acts is given in the power, and general words
are also employed, such words are limited to the particular acts authorized.
IRDA to end licensing system for insurance agents
Regulator has also been planning to treat health insurance as a stand-alone segment

Insurance Regulatory and Development Authority of India (IRDAI) today said the insurance
companies can appoint individual agents on their own from April 1.
Under the current mechanism the insurance regulator grants license to a person to become an
agent of an insurance company. "Now the appointment of agents is given to the insurance
companies. So the whole licensing system will go," IRDAI chairman T S Vijayan said.
Speaking to reporters on the sidelines of an event organized by the Confederation of Indian
Industry (CII) on Thursday, Vijayan said the new system pertaining to the appointment of
insurance agents will come into effect from the next financial year.
According to Vijayan, the regulator has also been planning to treat health insurance, which is
a part of non-life insurance activity, as a stand-alone segment. "Currently there are two lines
of business--life and non-life. Health comes under non-life. We would like to frame a
separate regulation for health insurance," he said. Earlier he released a CII report titled 'India
Insurance Vision 2015: Building a $ 250 billion customer centric and value creating industry
Replying to a question he said a move to allow the foreign reinsurance companies to do
business in India by just opening a branch here without getting incorporated is also on the
cards.

70
The CII report suggested steps that are expected to help Life Insurance industry to grow at
12% CAGR over the next decade to reach $ 160 to $175 billion while the Non-Life to grow
at 22% CAGR to reach a Gross Written Premium of $ 80 billion.

POLICY HOLDERS

Entity that owns an insurance policy and has the right to exercise all privileges under the
contract of insurance, except where restricted by the rights of an assignee (see assignment). A
policyholder may or may not be the insured, or the sole or one of the beneficiaries of the
policy.
Also called policy owner.

Five rights you have as an insurance policy holder

1. Policy holders can cancel the insurance policy within 15 days from the date of receipt of
the policy documents if they do not agree with the terms and conditions stated in the policy.

2. Ulip (unit-linked plan) holders have the right to withdraw their investment partially. They
can also switch funds in an Ulip from one plan to another without any restriction or additional
costs.

3. A policy can be surrendered after the end of the prescribed lock-in period from the date of
commencement of the policy.

4. Term of the policy can be increased or decreased by the policy holder. The sum assured
can also be increased. However, these changes may impact the amount of premium payable.

5. Policy holders can modify the mode of premium payment and switch from cheques to
direct debit or through ECS instructions to their banks.

71
 TOP INSURANCE COMPANIES IN INDIA

LIFE INSURANCE CORPORATION

When it’s about life insurance companies in India, then Life

Insurance Corporation (LIC) is a leader among all the companies in this sector. Founded in
the year 1956, LIC is a dominant player in Life Insurance Sector in India and holds a major
share of this segment. Some of the key products of LIC are Insurance Plans, Pension Plans
and Special Plans.
Winner of Multiple Awards for exceptional products and services, LIC has a strong network
of more than 2000 branches and 109 divisional offices across the country. Some of the key
policies of LIC are Jeevan Rakshak, Jeevan Sangam, Jeevan Lakshya, Bima Bachat and
Jeevan Sangam.

MAX LIFE INSURANCE

Max Life Insurance is a private sector life insurance company founded in the
year 2000 by a collaboration of Max India Limited and Mitsui Sumitomo Insurance Co. Ltd.
Winner of Global Finance Best Life Insurance Company 2014 Award, Max Life Insurance
Company has a workforce of more than 8,000 employees and over 200 offices across the
country. Super Term Plan, Whole Life Super, Maxis Super and Fast Track Super Plan are
some of the insurance plans offered by the company.
Some of the products offered by this company are Online Term Plan, Savings Plan, Child
Plan and Protection Plan.

72
RELIANCE LIFE INSURANCE

Reliance Life Insurance occupies the third position in the list of top
10 best life insurance companies in India. Headquartered in New Mumbai, the company
offers feature packed plans like Protection Plan, Retirement Plan, Unit Linked Plan, etc.
A part of Reliance Capital, Reliance Life Insurance stands among the leading life insurance
companies in India and accounts for a significant share in this sector. The company has a
wide network across the country with more than 900 branches.

KOTAK LIFE INSURANCE

Next on this list is Kotak Life Insurance (Kotak Mahindra Old

Mutual Life Insurance Limited), a private insurance company came into existence in the year
2001. Kotak Life Insurance is known for its feature packed products and its product line
consist of Insurance Plans and Group Plans.
Some of the life insurance plans offered by the company are Saral Suraksha, Platinum, Invest
Maxima and Assured Savings Plan.

SBI LIFE INSURANCE

SBI Life Insurance is next on this list, which is a collaboration of the India’s largest bank,
State Bank of India and BNP Paribas Cardif. Incorporated in the year 2001, SBI Life
Insurance’s products include Individual Plans and Group Plans. Smart Shield, Grameen
Bima, Saral Maha Anand and Smart Elite are some of the life insurance plans offered by the
company.
Winner of Best Private Life Insurance Provider Award, SBI Life Insurance is a fast growing
company and in the financial year 2013-2014, the company generated a profit of more
than Rs 700 Cr.

BAJAJ ALLIANZ LIFE INSURANCE

73
Bajaj Allianz Life Insurance came into existence in the year 2001 in
the form of a joint venture between Bajaj Finserv Limited and Allianz SE. The company
offers various products that include Term Insurance, Saving Plans, Investment Plans, ULIP,
Retirement Plans, etc. Some of its insurance plans are iSecure, Save Assure, Fortune Gain,
Invest Assure and Secure more.
Winner of Best Life Insurance Company in the Private Sector Award, Bajaj Allianz Life
Insurance has a wide network with more than 750 offices across the country.

BIRLA SUN LIFE INSURANCE

Birla Sun Life Insurance is the next company on this list, which came
into existence in the year 2000, when Aditya Birla Group and Sun Life Financial Inc. formed
a joint venture. Headquartered in Mumbai, Birla Sun Life Insurance Company offers products
that are rich in features and some of its products are Protection, Savings with Protection and
Health & Wellness.Protector Plus, Vision Star, Wealth Max and Fortune Elite are some of the
plans offered by Birla Sun Life Insurance Company. The company has a strong presence in
the country with more than 550 branches in over 500 towns and cities.

ICICI PRUDENTIAL LIFE INSURANCE

A joint venture between ICICI bank and Prudential plc

gave rise to ICICI Prudential Life Insurance Company, incorporated in the year 2000. ICICI
Prudential Life Insurance Company holds a decent share of this sector and in the financial
year 2013-2014, the company generated a total premium of more than Rs 120 Cr. Some of
the key products of the company are Term Plans, Wealth Plans, Group Plans and Retirement
Plans. Apart from offering feature packed life insurance plans, the company also performs the
Corporate Social Responsibility by contributing in the fields of Education, Health Care and
Skill Development.

TATA AIA LIFE INSURANCE

74
Tata AIA Life Insurance Company came into existence in the year 2001.
It is a joint venture between Tata Sons Limited and AIA Group Limited. Products offered by
this company include Protection Solutions, Wealth Solutions and Savings Solutions.
Some of its key plans are Maha Raksha Supreme, MahaLife Supreme, MahaLife Magic and
Money Maxima.

EXIDE LIFE INSURANCE

Exide Life Insurance Company is last on this list, which was established in the year 2001 and
presently has presence across the country with more than 200 offices.
Products offered by the company are Protection Plans, Retirement & Pension Plans and
Savings & Investment Plans. It is a fast growing insurance company and its growth can be
traced from the fact that in the financial year 2013-2014, the company generated a total
premium of more than Rs 1,800 Cr.

HDFC life insurance company ltd is long term life insurance provider with its headquarters
in Mumbai offering individual and group insurance services and incorporated on 14 August
2000. The company is a joint venture between Housing Development Finance Corporation
Ltd (HDFC), one of India’s leading housing finance institutions and a global investment
company.

75
 Case Study - IRDA slaps Rs 5 lakh fine on HDFC Life
A complaint lodged by Ms Kunti Devi, was received by IRDA on 14th April,
2009 regarding non receipt of death claims. The complaint was forwarded to
the Life Insurer on 28/07/2009.The Life Insurer vide its letter dated February
05, 2010 informed the repudiation of the death claim due to non disclosure of
‘material facts’ which was material to disclose. From the submissions of the
life insurer it is noticed that the claim was repudiated after a gap of around 12
months from the date of receipt of claim intimation.

An investigation carried out by IRDA on 18th June, 2010 revealed that the
time line adhered by the life insurer to decide on the death claim is on a higher
side. It was also noticed during the course of investigation that more than 6
months was elapsed in respect of a few more individual death claim cases
without deciding the admissibility of the death claims and in respect of a
group insurance policy one claim is outstanding for more than one year.

Decision
Wherever delays have taken place in taking decisions on the settlement of
death claims, it is considered that the Insurer has failed to adhere to the within
referred regulations. The violation of the referred regulations invites a penalty
under Section 102(B) of the Insurance Act 1938 and the Authority is
empowered to impose a penalty not exceeding Rs.5 lakh for each such
violation and punishable with fine. Considering the nature of the violation, the
Authority has come to the conclusion that it is just and proper to impose a
penalty of Rs.5 lakh. Accordingly, a penalty of Rs 5 lakhs is imposed on the
HDFC Standard Life Insurance Co Ltd.

The Life Insurer is also directed to put in place effective claim settlement
procedures and take all such measures that deem fit for both pro-active and
timely settlement of all types of claims. The procedures and measures shall
fully comply with the regulations referred above. The Life Insurer shall
confirm the action taken towards this direction within 15 days from the date of
receipt of this order.

76
 SUGGESTIONS

 The policy holder should be very careful while taking life insurance policy. He should
complete all the formalities and submit all the documents require to be submitted while
taking any life insurance policy.

 The insurance agent should take sufficient initiative to see that the insurer should receive
proper information about terms, conditions and formalities to be complete.

 The insurance company should be more efficient and competent in providing satisfactory
services to their customers in terms on timely issuance of policy, settlement of claims, etc.

 The LIC provides satisfactory services to their customers but one complaint from the
customers is that which they provide is not that much lucrative. So, has to think on increasing
the returns on investment.

 There are many types of insurance and investment plans provided by LIC like endowment
plans, child plans, whole life plans, money back plans, pensions plans, Group schemes, etc.

 It is also found that from safety and security point of view, investment in LIC is better than
other private players in India.

 It is also found that the returns that LIC provides on maturity or as a survival benefit is not
that much lucrative from investor’s point of view.

77
 CONCLUSION

To fulfill the given aims and objectives and to nature of insurance plays important.
To fulfill costumers needs and satisfy with its characteristics
Aim
The relationship between a business’s aims and its objectives is important. Aims are general
statements of what a business is seeking to achieve. They are closely related to its vision.
Objectives are much more specific. They often include quantifiable elements that specify
precise performance targets. Managers can use these objectives to monitor progress. They can
compare actual performance against the targets set out in the objectives. They can then take
corrective action if the business looks like it will fail to meet targets.
The relationship between aims and objectives can be illustrated using examples from Zurich.
The company’s vision is to be the ‘best global insurer’. This is backed-up by three key long-
term aims:
to ensure customer satisfaction
to deliver shareholder value
to be the employer of choice.

Objectives
The company has a series of objectives to help it measure progress towards these aims.
In relation to the aim of customer centricity, one of Zurich’s objectives is to achieve top
quartile customer satisfaction when compared with other companies in the financial services
industry.
This means that Zurich wants to be in the top 25% of insurance and financial services
providers for all aspects of its performance as measured by independent research.
In relation to the aim of giving shareholder value, one of Zurich’s objectives is to achieve a
return on equity of 16%. This means the company wants to achieve a £16 profit after tax for
every £100 of capital that it holds. Zurich will be able to pay dividends to its shareholders if it
makes sufficient profit.
In relation to the objective of being the employer of choice, one of Zurich’s objectives is to
secure high employee engagement scores. These are measured through employee satisfaction
surveys. A committed and motivated workforce is more likely to deliver high levels of
customer service and be loyal to the company. In other words, Zurich will be an employer of
choice.

SMART objectives
Note that all these objectives set by Zurich are measurable. In general, all business objectives
should be SMART. This means that they should be:
specific – exactly what is to happen
measurable – by quantity or proportion
achievable – capable of being achieved within available resources
relevant – to the overall business or corporate objectives
time-related – with a deadline attached.

78
Characteristics of Insurance

  It is a contract for compensating losses.

  Premium is charged for Insurance Contract.
  The payment of Insured as per terms of agreement in the event of loss.
  It is a contract of good faith.
  It is a contract for mutual benefit.
  It is a future contract for compensating losses.
  It is an instrument of distributing the loss of few among many.
  The occurrence of the loss must be accidental.
  Insurance must be consistent with public policy.

Nature of Insurance

  Sharing of Risks
  C0-operative Device
  Valuation of Risk
  Payment made on contingency
  Amount of Payment
  Large Number of Insured Persons
  Insurance is not gambling
  Insurance is not charity

79
 BIBLIOGRAPHY

BOOKS

MORDERN LAW OF INSURANCE IN INDIA -Murthy KSN; KVS Sarma

PRINCIPLES OF INSURANCE LAW -Rao S.V. Joga

STATUTES:

1. Insurance Regulatory and Development Act, 1999

2. Indian Insurance Act,

WEBSITES:

www.wikipedia.org/wiki/insurance regulatory and development authority

www.google.com

www.google.co.in

80