Insurance Loans

PROCEDURE FOR EFFECTING MOTOR INSURANCE

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 The  procedure involved in taking motor insurance
policy is as follows: (i)  First of all,
the person who is interested in taking a motor policy known as proposer, will
have to submit a proposal form with the insurer. The proposal form is divided
into three parts: (a) Identification of vehicles, Registration No., horse
power, shape and size, model, etc. (b) Risk information, past insurance, type
of policy, etc. (c) Declaration- the declaration that all information given is
true and correct. This is necessary under the principle of utmost good faith.
(ii) After having received the proposal form, the insurer will determine the
rate of premium. The insurer will charge rates according to the schedule for a
particular vehicle under particular policy. The schedule gives “basic premium”
and any amount for an additional risk is added to the basic premium while
rebate allowed is deducted from it. (iii) As soon as the amount of premium to
be charged on the proposer is determined, the same will be conveyed to the
proposer by the insurer. (iv) On receipt of the letter from the insurer, the
proposer will pay the amount of premium and the insurer will, after receiving
the premium, issue a cover note along with a certificate of insurance. The
cover not serves as an evidence of the acceptance of the risk by the insurer
till the final policy is issued.<br />
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The certificate of insurance can be produced
before the Regional Transport Authority as a proof of insurance. (v) Finally,
the insurer prepares the motor policy (to replace the cover note) and sends the
same to the insured. The motor policy is generally issued for one year. In
case, the insured wants to sell his insured motor vehicle and replace it by a
new one, the policy can be transferred to the new vehicle. The amount of
premium, if necessary, can be adjusted proportionately. Motor Policy
Conditions- The usual conditions incorporated in the motor policy are as
follows: (i) Notice of Accident- Immediately after occurrence of accident, the
same has to be brought to the knowledge of the insurer by serving a notice of
accident. (ii) Supply of data- The insured should provide all necessary
information to the insurer whenever needed. (iii) Keeping vehicle in good
condition-<br />
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It is the duty on on the part of the insured to keep his vehicle in
good condition and permit the insurer to inspect the vehicle at any time. (iv)
Double Insurance. In case, the vehicle is insured with more than one insurer,
the amount of compensation will have to be claimed in pro-rata from all the
companies. (v) Utmost good faith- The insured is supposed to observe good faith
throughout the running of the policy. He should fulfil all the terms and
conditions of the policy. (vi) Arbitration clause- If there is any dispute
between the insured and the insurer over the amount of claim, the matter will
be referred to the arbitrator. The decision of the arbitrator will be final.
(vii) Renewal of policy- When a policy is renewed, bonus in the form of
reduction of renewal premium will be allowed, provided that there was no claim
under that policy in the previous year.<br />
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(viii) Policy Information- The motor
policy contains information such as policy number, name and address of the
insured, period of insurance, registration number, horse-power, seating
capacity, date of proposal and the amount of premium, etc. (ix) Cancellation of
Policy- The insured may cancel the policy at seven days notice and demand the
return of the proportionate premium, provided that no claim has arisen during
the then current period of insurance.</div>
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PROCEDURE FOR EFFECTING MOTOR INSURANCE

The procedure involved in taking motor insurance policy is as follows: (i) First of all, the person who is interested in taking a motor...

WHAT IS RISK?

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Risk mean something that cannot
be certain an elements  of uncertainty
attached with it. It also means that the probability possibility of a certain
loss. This probability is estimated depending 
upon a large number of factors such as a person’s age, gender education,
habits etc.,  PHYSICAL HAZARD:  This risk is increased a by a few physical
factors known as physical hazards  and a
few nonphysical factors known as moral hazards. The physical hazards are in
view of the physical conditions  which
increase the possibility of risk like the physical impairment, onset of a  disease etc.,   </div>
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MORAL HAZARDS:  This occurs when the life proposer wants to
obtain an undue pecuniary benefits from a 
policy. This takes place when one person plans a suicide  after taking the policy, so that the benefits
of the policy go it his or her family members or by hiding certain facts of his
or her illness account  in the proposal
form, which may lead to his or her death the and the insurer may have to pay the
claim. The insurer controls  this moral
hazard by the careful underwriting, calling for special examinations.,  by imposing restrictive clauses waiting
periods, lien clauses etc.,  Legal hazard
too can be there due to the legal systems in the country or due to the
regulatory provisions.  It can be case of
the over insurance where in the insurer has to investigation the character and
the financial standing of the applicant. For example has the applicant already
been adequately insured or can be he afford so much of insurance from the point
of view of his income? There are all to be verified. Wherever  the life assured and the applicant are two
different persons, the insured has to be cautions about the insurable interest,
I ,e the extent of the economics loss due to the death of the assured. </div>
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Female  lives are a  having more hazard with regard to childbirth
and also a place of their residence as to whether all modern medical facilities
are available  . The risks include: 1.
Personal risk, 2. property risks,. 3,. Liability risks,. 4,. Natural
catastrophes like hurricane, earthquake, flood etc.,  affecting the society as a whole.,  Let us deal with personal risks only in this
unit.  1. PERSONAL RISKS:  These affect the individual  personally like death, disability illness,
etc.,  Untimely death  of an individual leads to certain unfulfilled
financial obligations such as a mortgage loan of the house, educational needs
to the children, social commitments like marriage of children, start-up funds
etc., If adequate risk cover is not there the death can lead to the family
coming to the street sooner  or later.
There are other exp0enses too such as a medical and funeral expenses,
settlements cost, cost of probate of the will , etc.,  The non economic   costs causes such as loss of guidance,
support loss of the apparent etc., which are called the emotional costs, can
never be compensated by the insurance company money./ That way insurance is not
a substitute for the human life . It can be only mitigate the  economic suffering of the people who are left
behind. There is also a risk of insufficient of retirement. This is a called
the risk of living  long as a against the
risk of dying early. Both can be covered through life insurance. There is a
risk  of poor  health of 
a person like losing the capacity to earn on account of an accident  or onset of a diseases etc., These lead to
the concept of health insurance. In this unit 
we have restrict  to the life
insurance angle only. </div>
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  FACTORS AFFECTING
MORTALITY:  The rate of the mortality
means that the probability of a person dying in a particular year,  i, e,. 
out of the 100 people how many may die within one year. The factors  affecting mortality are:  1. Age, 2. sex,  3. race, 
4. occupation,  5.  residence, 6. the hygienic conditions of
living,  7. personal habits,  8. longevity as revealed in the family
history I ,e hereditary factors,  9.
personal health,  10. any physical
disability,  11. body built,  12. any other details revealed in the medical
report.  NON MEDICAL  UNDERWRITING: 
An insurer can choose to underwrite a risk purely on the basis of
information declared personally in a personal statements in the personal forms.
This is a called non medical underwriting . This comes  under the umbrella  of “Uberima fides” the principle of utmost
good faith. This does not mean any 
lowering of standard of selections. Coupled  with the field representative’s like agent
field officer’s  report the personal can
be accepted. The claim experience under non medical is generally not </div>
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unfavorable . We have a lot of saving in cost due to medical
fees, hassles avoided for the proposer , simplicity in forms etc.,  </div>
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WHAT IS RISK?

Risk mean something that cannot be certain an elements of uncertainty attached with it. It also means that the probability possibility o...

THE PRINCIPLE OF OUTMOST GOOD FAITH

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We have
seen in   Unit I that for an insurance
contract to be valid and enforceable there has to be a  proposal by a the insured, its acceptance  by the insurer and the payment of the a  consideration 
to the insurer, Many commercial 
contracts  go by  the caveat emptor  principle 
(meaning  let the buyer
beware)  , which presupposes  that the parties  to the contact should not mislead the other  party, but does not make up it imperative to
disclose more than what is asked for . </div>
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However for the insurance contract , the
buyer is buying a promise based on certain information declared by him, and the
seller sells that promise and charges 
the considerations  based on and
believing  the information  furnished by the proposer. Non-discolour  of some facts can make the value  of the promise much  costlier 
than the considerations charged 
and even change the fundamentals 
based on the which the insurer gave the promise. At this point  the situations  is one-sided and heavily  prejudiced against the insurer because the
proposer has full knowledge about the risk offered for insurance while the
insurer does not have any knowledge  of
it. An argument that the insurer could have 
a good study of the risk before accepting  it is only technical and does not really
match with the overall philosophy  of
insurance</div>
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 The fact remains that with any amount  of investigation , it many may not be
practically  possible for an insurer
to  develop a reasonable  understanding 
of every risk, before accepting 
it. Further , the cost and time involved in the process would
heavily  add to the insurer’s  expenditure. 
These practicalities  make it
imperative  for the insurer to have
utmost  good faith on the insured.
Overall  insurance has to be understood
as an honest deal for a noble cause between two gentlemen.  Further the humanitarian  idea of the community contributing  to alleviate the  financial loss an unfortunate member, which
forms the bedrock of the insurance system, 
envelops  the insurance contract in
an atmosphere of trust. Though trust or good faith is cardinal to all financial
transactions , the above positions emphasizes, the importance of trust in
insurance. Hence the insurer  expects a
higher degree of good faith, termed as utmost good faith from the proposer of
insurance. Lord  justice, Scrutton,
defined the principle  of utmost faith
(or uberrima fides) in the case of Rozanes V 
Bowen (1928) as follows:.  As the
underwriter knows nothing and then man who comes to him to insure knows
everything  it is duty the assured, the
man who desires to have a policy. to make a full disclosure    to the underwriters  without being asked of all the material
circumstances, because  the underwriter
knows nothing  and the assured knows
everything. That is expressed by saying that it is a contract of utmost  good faith. 
Any circumstance  which is within
knowledge  of the insuring person and is
likely ti influence  the insurer in
deciding  whether he will  accept of refuse the risk,  or influence 
to the insurer before the contract is concluded . Sections 19 to 23 of
the Marine insurance Act, 1963,  provide
that every contract of insurance requires 
an insured  to make all a full
disclosure  of all material facts to the
insurer. For instance, when a ship is proposed for insurance, the proposer
states the details such as a age, tonnage, vessel class, sea worthiness
certifications  etc., to the
insurers </div>
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The insurer would insure  it with terms and rates applicable  to any other vessel of the same class,
tonnage age, etc., However the proposer would have an intimate knowledge  of the actual physical condition  of the ship, details of the repairs that it
underwent details of worn out machinery 
, or details of repair that are a due but postponed for some reason or
other which the insurer cannot be the reasonably  expected to know. It is possible that the
proposer has intentionally not disclosed 
some negative details  about the
ship to the insurer.  If the insurer had
come to know of these details about the he might have insured it only with
some  additional conditions, or with an
additional premium or even he might not have insured the ship at all. In such a
case, the action of the proposer  in
within with holding  these vital details
from the insurer is not in keeping  with
the principle  of utmost good faith.   In the context  of insurance covering Consequential Loss,
which protects against loss of profits and loss of expenses  such as a rent etc., emanating put of the
insured event (The concepts of Consequential 
Loss or Loss of profits insurance are described  in detail in Unit 5, ), the doctrine of
utmost good faith gives a clear understanding 
that in the event of damage the insured will follow sound
accounting  procedures and take all
reasonable  steps to minimize the
resulting loss. In other words, if and when a loss or occurs, the insured are
expected to perform  all the actions
normally expected of them, as though they were not insured.</div>
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THE PRINCIPLE OF OUTMOST GOOD FAITH

We have seen in Unit I that for an insurance contract to be valid and enforceable there has to be a proposal by a the insured, its acc...

THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA) ACT, 1999

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 The  Insurance 
Regulatory  And development
authority Bill was approved by the Lok Sabha 
on December 1,1999,  and
after  approval  of the Rajya Sabha  was enacted as a the  Insurance 
Regulatory  And development
authority  (IRDA), act, 1999. The IRDA  Act 1999, was gazetted  on April 
19, 2000, .As per  the first   Schedule 
of the IRDA Act, 1999, certain amendments  were made to the Insurance   Act, 
1938, the Life Insurance  
Corporation  Act, 1956, and  the general Insurance   Business nationalization  Act, 1972, to pave the way for  liberalizations  of the Insurance   sector. The preamble  of the IRDA act calls it.  An Act to provide for the establishment  of an authority  to protect the interest  of holders of Insurance   policies  
to regular  promote and
ensure  orderly  growth of the 
industry  and for matters
connected  there with or a incident  thereto....</div>
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 In terms of the  IRDA act and 
amendments  to the Insurance  Act, the office of the Controller  of Insurance  
has become  redundant  under normal circumstances, . However the
Central  Government  retains its powers  to appoint a person  to be the Controller  of Insurance  
in certain  specific  situations. The authority  is a body corporate  having 
perpetual  succession  and common 
seal. It consists  of a
Chairperson  and other members  not exceeding to the nine in number of whom
not more  than five would serve full time
and not more than four would serve time part time,  to be appointed by the Central
Government  from amongst persons of
ability , integrity  and standing who
have the knowledge  or experience   of life insurance,  general 
Insurance   actuarial  science , finance economic  law, accountancy, administration  or any other discipline  which in the opinion  of the central  government shall be useful of the
Authority  . As per the Act, the
Chairperson  would hold  office for a term of 5 year or until the age
of 65 years.  The whole time members  would hold office  for a term of 5 years, or until  the age of 62 years.  A part time member would not  office 
for a term not exceeding 5 years. </div>
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The duties of the IRDA have been spelt out in the Act as to
regulate  promote and ensure  orderly growth  of the Insurance   business and reinsurance   business. The powers  and functions 
of the IRDA have been listed out as follows.  1. 
Issue to the applicant a certification 
of registration , renew,  modify,
withdrawn,  suspend , or cancel such
registration.  2.  Protection of the interests  of the policy holder in matters  concerning 
assigning  of policy,  nomination 
by policy holder insurable 
interest  settlement  of 
Insurance   claim, surrender value
of the policy and other terms and a 
conditions  of contract of
Insurance  . 3. Specifying  the requisite 
qualifications  code of the
conduct  and practical  training 
for intermediary  or
Insurance   intermediaries  and agents. 
4. Specifying  the code of
conduct  for surveyors  and the loss assessors.  5. 
Promoting  efficiency  in the conduct   of Insurance   business. 6. 
Promoting and regulations 
professionals  organizations  connected with the insurance with and
reinsurance  business.  7. Levying 
fees and other charges or carrying 
out the purpose  of the IRDS Act,:
8. Calling for information  from,
undertaking  inspection  and conducting  enquiries intermediaries  and other organizations  connected 
with the insurance  business. 9.  Control and regulations of the rates,
advantage  terms and  condition 
that may be offered by  insurance
in respect  of general insurance  business not so controlled  and regulated by TAC under section  64U of the insurance   Act 1938: 
10. Specifying  the form and
manner in th which  books and of
account  will be maintained and statement
of the accounts will be rendered by the insurers  and insurance 
intermediaries.<br />
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SNAP-SHOTS OF THE ECONOMY. A student  of insurance 
should have  an overview  of the external environment  in which the insurers are functioning  at present at and are expected  to function 
in the future. The  trends called
out the from contemporary literature give a 
rough indication  of the extent to
which is the insurers  need to prepare
themselves  to face the challenges.  Economics 
liberalizations has caused cascading 
effects on various aspects of the Indian economy. The country’s  transformation  from a 
conventional agricultural economics 
to an industrialized  economy has
raised  a volley of new  a challenges 
to the nation’s 
infrastructure  especially on the
service sector. India has crossed new milestones in the diverse areas  such as a 
exploration of the oils in the high seas,  launching of artificial  satellites 
creations of  state of the art
power plants and  refineries  acquiring 
of business process  from
different  countries  and higher inflow of the foreign  direct 
investment. All  these have
been  created by the a bigger market for
the support systems  including  insurance.<br />
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<br />
Growth potential in insurance sector is the a well-researched phenomenon
any where  in the world. It depends on
several  macro economic  parameters. Collectively exhausting  but not 
mutually  exclusive  parameters 
of insurance growth are gross direct premium  (GDP), level and a growth rate,
agriculture  production and productive
energy generations  and incremental  consumption 
infrastructure level and strategy of the further, implementation  corporate sector and the industry  inflation 
targeting and containment capital market 
volume and  returns  money and the banking growth rate projections
of the economy and business  confidence
level  to determine the spirit of
times.   Changes in the consumers  demographics, largely determine  reorientation 
of insurance business. The insurance sector has been has to translate  demographic 
realities into the opportunities 
for growth . The country’s 
progress  in terms of financial
knowledge, rapid technologies innovation 
communication , and internet 
technologies  evolving  business environment and the  globalizations,  liberalizations,  conglomerations,  more distribution  channels, and the increasing  educations 
are clear  drivers and the of
change  that the insurance sector  can tap for is growth. As per the Swiss
investment  bank, Credit Suisse
India’s  Gross Domestic  Product 
(GDP), at around Rs. 41,00,000 crore, has been it is a crossed the
trillion  dollar mark for the first time
in History  in April 1007, when  the rupee appreciated  to below 
41 level  against the US dollar.
India has  thus joined the  elite 
club of the  12 countries  with a 
trillion  dollar economy. The
annual  growth rate in 2007 is over 9 per
cent and over a period f time hovering 
around 8 to 9 per cent. During the first three quarters  of 2006-2007, 
the six, core infrastructure industries. 
Viz.,  Crude petroleum,
refinery,  electricity , finished
steel,  cement and coal  grew 
approximately  at 8.3 per cent as
compared  to 5.5  per cent in the previous  year. 
The index of industrial 
production  showed a rise of the
10.6, per  cent as a against the 8.3 per
cent of the  previous fiscal,  The 
three categories  of industry  manufacturing , mining and  electricity , also fuelled  the growth 
of the economy. The automobile, industry 
registered  a total production of
8.2 million  vehicle in the same period
with a  growth a  percentage 
of a  15.91, per cent.<br />
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The number
of the passenger  cars crew by 20.76 per
cent, two wheelers, by 13.45 per cent, three-wheelers, grew by the 20.76, per
cent  two-wheeler grew by 13.45 per cent,
. Automobiles exports  registered  a growth of 28.74, per cent over the previous
year. Till December 2006, India was a 
had a total  telephone  subscription 
of nearly  190 millions phones.
The responsibility  of providing  insurance coverage  for there these  landmark 
achievement  of the  nation’s 
progress  is vested  with Indian 
insurance companies  who have an
a  to assess and accept to the risk  for insurance and reinsure the portion  of the risk 
that is beyond  their  in the retention  capacity in the international market.   Growth in various  sectors 
cells for corresponding regulatory 
changes as well. In a acknowledgments 
of the scope  of regulatory  overlaps 
and realizing  the increasing  need for the regulatory  convergence a 
High level  Co-ordination,  Committee on a Capital or Financial Markets,
comprising  the heads the of the  regulatory institutions  meet periodically  to ensure a 
certain degree of effectiveness 
of supervision , consistency  in
regulation  and harmonization of the
supervisory  practice  between the banking, securities  and insurance supervisors</div>
</div>

THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA) ACT, 1999

The Insurance Regulatory And development authority Bill was approved by the Lok Sabha on December 1,1999, and after approval of th...

SAFEGUARDS IN NON MEDICAL UNDERWRITING

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The information 
given by the proposer in the personal form in is checked by agent field
officer from the their personal knowledge . In 
additional they give a special report called confidential report . In
case the proposer is an employee in an organizations , it is possible to check
the details with his employees if required, If the proposer is a female ,
the  insurer can insist  on certain minimum  educational qualification if she is not
employed.  Normally an insurer may grip
give up to Rs. 50,000 for un employed persons and Rs. 1,00,000 for other male
lives under what can be called as, non medical  
general category up to the age of 40. 
There can be another category called non medical special, which is a
meant for the both male and female employed category up to the rs. 8,00,000 .
Age  restrictions  can be there up to age of 45.  Special categories of people can be
considered under non medical scheme  like
people working in defense  service and
also professional like doctors, engineers, chartered accountants,  architects etc., </div>
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  Here the sum assured can go up to the Rs.
8,00,000. Similarly  ladies who are
income tax payees in view of their income from rentals, business, investments
etc.,  Provided  they are fairly educated can be
considered  under non medical categories
.  There can be a few restrictions  with regard to the products, term maximum
maturity age, etc.,  depending  on the life. 
Age being the basis of premium calculations  has to be the proved beyond doubt by the
means of evidences like the school leaving 
certificate  , employer’s
certificate  passport etc., </div>
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  MEDICAL UNDERWRITING:  Beyond 
the non medical limits it is necessary to take the help of a medical
report to assess the risk. The non medical 
format takes care of the factors that a person should normally be aware
of the whereas the medical format goes to the beyond it to give the insurer
certain vital information. After the field worker’s initial scrutiny hence they
are called the primary underwriters , comes the role of a medical examiner in
assessing the risk. The examination brings out certain information that the
proponent may be knowing but still intentionally  trying to suppress it or he may not be  revealing 
them inadvertently or he may be a it is the  ignorant of that information. </div>
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  FEMALE LIVES UNDERWRITING:  IN view of the physiological conditions of
women, their increased risk due to the child birth, gynecological conditions ,
the social factors pertaining to their 
status like married, spinster, widow etc.,  we have a large number of factors
affecting  their mortality which are
described below.  In view of the need for
insurance as well as a  the capacity to
pay, it is a essential to divide the women into 3  categories as followed: 1. Women who are
gainfully employed and having an income. 
2. Women who are not employed but are in receipt of certain  income like rentals business investments  etc., 
3.  Women who have no income.  A part from the above risk assessment  include their marital status like married
single widow etc.,  The women who are
working are and earning independently  
come on par a with working men. The women who have only unearned  income are still eligible for life insurance
in view of status like income  tax
assessee, wealth  tax assessee, etc., The
third group needs a careful examinations as there will not be the any monetary
loss in that heir absence . The premiums are normally paid by their  husband or beneficiaries . The questions of
moral hazard is crucial in these cases and with the abundant cautions the
insurer may offers pure savings plans or deferred annuity plans, so that no
body  gains unduly by the death of the
assured. The widow with a young child may be considered  with the offspring being the nominee.,  Similarly in the case of married women with
no income  there is no obvious need for
life insurance . However in view of the emotional loss due to the death of the
wife and the wife being a  source of
indirect  income of the family in
the  shape of the household duties  rendered by her to the family, the
insurers  may be considered
favorably  subject to the husband’s
insurance children insurance.  A part of
the from the above the cultural background of the family to which the lady
belongs and the place of residence like metro city or rural area where medical
facilities are not available immediately 
also plays the part in the deciding the quantum of life insurance .
Undoubtedly expect the earning 
category  women, the other cases
come under medical  category  preferably medical examinations being  done by a lady medical examiner. </div>
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If a male
gynecologist does the tests it should include the pervaginal examination with
the proposer’s  consent , which is the
compulsory  for virgins too up to a
certain age. A female extra premium is being charged  wherever required especially in the case of
semi-literate  /illiterate ladies.  In view of peculiar  physiological conditions of ladies, it is
necessary to impose a few restrictions 
like pregnant ladies beyond 3 months of pregnancy will not be
considered. Proposals within 6 months of normal delivery  and within 1 year of caesarian delivery  will not be 
entertained. However if regular menstruation  has commenced 
then the proposal can be considered 
3 months after delivery.  In a few
cases we may accept the proposal with 1 year pregnancy  clause if menstruation has not recommenced. A
clause  is normally a restrictive
condition in the policy imposed by the insurer going by the few factors
affecting mortality  with reference to the
particular  risk being underwriting  . Wherever a normal full-time delivery  has not taken place, the proposal can be
accepted with a one time single extra premium.</div>
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</div>

SAFEGUARDS IN NON MEDICAL UNDERWRITING

The information given by the proposer in the personal form in is checked by agent field officer from the their personal knowledge . In ...

PREMIUM CALCULATION FOR GROUP SCHEMES

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The concept of
rebate for large sum assured is not applicable. It depends on many factors such
as a  types of scheme, amount  of benefits age profiles, and premium
rates  applicable as per the
professional/ occupation of the group. Premium depends  whether it is only risk coverage or it
involves accumulations or funding. Hence 
complete data is required  from
the mas ter policy holder for calculation of premium.  There should be minimum percentage  for example 75% to join the group
insurance  scheme. Otherwise there will
be anti selection against  the insurer i,
e only the old and sick will join the scheme. All new members should compulsorily  join in order to improve  the age profile of the group. Those people  who did not volunteer to join  the scheme initially  may not be allowed to join a on a later date
to avoid anti selection .  The scale  of benefit usually uniforms  and there is not choice for the
individual  . Some times the groups are
categories  as managerial, supervisory,
clerical and subordinate and accordingly 
different benefits are given  to
different categories.  The insurer always
has a right to call for the medical examination 
if the sum assured exists the free cover limit for a particular  life warrants a medical test.</div>
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  EXPERIENCE RATING: Life cover is normally
granted for one year under group schemes and it 
renewed every year providing 
fresh data. This gives oppertunity 
for the underwriting to  revise
the premium on the basis of the composition of the group as well as based on
the claim experience of earlier year. This kind of rating on the best basis of
claim experience is called experience rating. 
This can be profit sharing ,  I
,e  returning or adjusting a part of the
earlier year’s  premium for the next year
if the claim experience is favorable or revision of the premium upward of the
scheme is making  losses due to the  more claims. 
Thus, experience ratings is a vital means of adding flexibility to group
underwriting.  RENEWAL OF GROUP
SCHEMES:  Normally a notice is sent to
the master policy holder to renew the scheme 2 months in advance. Here the
insurer adds 10 to 20% to the existing premium and calls for the same  under the hope that the inclusions  for the year would be taken care  of. The master policy holder provides the
additions and deletions on the renewal date. On the receipt of the above the
renewal premium  is calculated and
adjusted as per the hoc amount received from the master policy holder.</div>
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 OCCUPATIONAL RATINGS:  As we have seen so
far occupations plays an important  part
in the assessing the risk in both individual 
and group underwriting  . The risk
varies depending  on the
occupation./  profession. Hence it is
necessary to have a close look at the occupations  and arrive at some extra premiums ratings as
per the following typical groups mentioned.</div>
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1.  AMUSEMENT AND SPORTS .,  a. horse racing jockeys  (flat racing).  b. jockey 
(hurdles).  c. riding boys.  d. gentlemen riders.  e. trainers of horse.  f. cinema stunt actors and coachers.  g. polo players and instructors.  h. professional athletes– bicycles racers/
motorcycle racers, boxers, wrestlers,  I.
theaters  and circus artists– acrobats,
trapeze.,  j. explorers.,   2. 
CONSTRUCTION:”   a. scaffolder
steel erector,  b. painter.  c. tunneling/,  d. air compressor operator.,  civil engineer, structural engineer,  e. dumper, shovel driver.,  f. winch driver., g. conveyor
operator.,  h. power loader
operator.,  I. roof bolter .,  j. timber man.,  k. borer., 
l. driller ., m. tunnel miner., 
n. tunneller using explosions.  3.
CLIMBING AND MOUNTAINEERING:  a. include
all forms of mountaineering  , rock
climbing and caving,., b.  hill
climbing  – tracking.,  c. all climbers and guides., 4. DRIVERS.  a. public carriers (passenger or goods with
national permit).,  5.
MANUFACTURER.,  a. acid.,  b. led burners.,  c. explosive and ammunition.,  d. salvage operations.,  e. handling explosives.,  6. MARINE 
INDUSTRY:  a. persons employed in
submarines., including  war risk., commissioned
officers and other ranks.,  b.
drivers.,  c. merchant marine– employed
in ships carrying oil and other inflammable product.,  7. OIL AND NATURAL GAS:  a. drilling 
assistance, fire fighter, mechanics., crane operators., top man.,
rig  man, and derrick men.,  8. SEWERS AND SEWAGE DISPOSERS:  a. laborers and cleaners and inspectors of
underground  duties.,  9. AVIATION: 
a. include private and club aviation ., 
b. pilots with license .,  c.
aerobatic flying , air facing.,  d.  ballooning, gliding.,  e., paragliding.,  f. parachuting.,  g. sky diving.,  h. sky surfing./.,I. diving sports.,  j.
diving as a  pastime, special
expeditions.,  k. internal exploration of
wrecks.,  l. all motor sports.,  m. motor cycle racing.,  . n. sprint events.,  o. motor sports car user like sports car.,
saloon car, mud racing, etc.,  p. power
boat racing and yachting.,  q. army and
navy person/air force officers. These are all only typical grouping or
occupations. Many new professions such as bungee jumping  which is not listed., will also included on
individual basis while underwriting the risk. </div>
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REINSURANCE;  Under both
individual and group underwriting the insurer may cede some portion of his risk
to another insurer  may cede some portion
of his risk to another insurer in order to share the risk. The other insurer is
called the reinsurer and this process is called reinsurance. Further
insurance  is pooling risk so that the
loss  is shared by the entire group. Thus
the actual loss becomes average loss. The risk also gets  reduced 
by applying the theory the actual loss becomes average loss., The risk
also gets reduced by the applying the theory of law of large numbers. This
helps in assessing the future risk more accurately. These are some of the
typically  retention limits for life
insurance   about beyond which the risk
is ceded to a reinsurer. Individual assurance expect term assurance : Rs. 40
lakhs.,  Convertible term assurance and
one-year renewal term assurance : Rs. 30 lakhs.,  These are for 
standard lives whereas for substandard lives the retention limit may be
Rs. 20 lakhs for individual assurance and Rs. 15 lakhs for term assurance.
Retention  limit for riders like female
critical illness accident., cover congenital disability cover and critical
illness riders will be further lower for reinsurance purpose.</div>
</div>
</div>

PREMIUM CALCULATION FOR GROUP SCHEMES

The concept of rebate for large sum assured is not applicable. It depends on many factors such as a types of scheme, amount of benefits...

MARINE POLICY CONDITIONS OR CLAUSES IN A MARINE POLICY

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In order to satisfy the varied requirements of the
insured’s  suitable conditions are
incorporated in marine policy. These conditions are  the clauses which are found in the
policy.  There are many conditions  under which a policy is issued but we shall
discuss  the most important among
them:  (1). ASSIGNMENT CLAUSES:  According to this clauses a marine policy is
freely assigned to any person  who has
insurable interest or why who may acquire 
it at some later date. Generally a cargo policy is assigned by the
endorsement and delivery and a hull policy 
by specific endorsement. (2). 
LOST OR NOT LOST CLAUSES:  
When  the insured happens to take
insurance after the date of shipment and it is a not known whether the subject
matter of the be  insured a is lost or
safe either to him or to the insurer on the date of insurance, by this clauses,
the insurer undertakes to indemnify  any
loss which might   have occurred during
the period between the date of shipment 
and the date of issue of the policy.<br />
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(3).  INCHMAREE  CLAUSES:  
This clauses covers perils  other
than the perils of the sea, such as a 
losses caused by the negligence of the matter master, crew pilots etc,
or by the explosives  or any other
latent  defect in the machinery of the
vessel.  It d\rivers its name  of the ship . Inchmaree”  which 
was a waiting  time to depart when
due to the negligence of the a member of the crew  the boiler burst . It was a  decided and that this was not covered by the
term,. Perils  of the sea” and could be
not met by the insurer. Subsequently 
this clause began to the be insured in marine policies.  (4). AT AND FROM CLAUSES:  In case of the a marine policy contains the
words, at and from ir covers  the subject
matter while it is lying at the port of departure  and from the time at the ship sale. But if it
contains the word from only  risk is
covered only  from the time of departure
and not previous to that. The insurer’s not liable for any  loss arising in the process of loading the
cargo from the shore of the ship. But this risk can be covered by the
inclusion  of the Craft  etc., clauses” . (5).  SUE AND LABOUR CLAUSE: This clause authorize
at the insured as also his employees to take all reasonable  and necessary steps to preserve the subject
matter of insurance when  in danger, and
further the insurers agree to contribute 
their share of the any expenses which may be insured in this connection
. Equity  demands that the insured  should act as if the were not insured.<br />
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 (6).
RUNNING DOWN CLAUSE OR COLLISION CLAUSE: 
This clause providers that the insurer under a hull policy agrees  to bear three fourth of the liability for
loss of damage to the vessel owing a to collision  with another vessel. (7) TOUCH AND STAY CLAUSE;  This clause permits the ship to touch and
stay at such ports and in such orders as mentioned in the policy. If nothing
specific  in this regard  is mentioned in the policy, the ship must
touch and stay at ports which are usually 
called at that particular trade routes.<br />
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 (8).  RE-INSURANCE CLAUSE; The marine reinsurance
is effective exactly in the same manner as a in the other branches  of insurance., The re insurer is liable only
to the  original insurer. is also not
liable, As insured has no direct dealing with the re-inurer  is also not liable. As insured has no direct
dealing with the re-insurer he cannot approach for the settlement of claim to
the re-insurer. (9).  VALUATION  CLAUSE; 
This clause specifies the subject matter insured in the policy  I, e, the description of the good insured,
along with as many details pertaining to the quantity shipping marks weights
number of cases.<br />
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MARINE POLICY CONDITIONS OR CLAUSES IN A MARINE POLICY

In order to satisfy the varied requirements of the insured’s suitable conditions are incorporated in marine policy. These conditions are ...

IMPORTANCE /ADVANTAGE OF INSURANCE

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 The importance
of insurance cannot be undermined in the present  day when uncertainty is prevailing  everywhere . In the words of Din scale, no
one in the modern word  can afford to be
without  insurance. The importance  of insurance is not only limited to an
individual or to a family. It is a spread over the entire nervous, systems  of business and over the country as a whole.
As such It can be studied under the following headings:  </div>
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  1. IMPORTANCE TO AN INDIVIDUAL: (1). The
main advantage  of insurance is to offer
security and safety to  the  insured against uncertainty.  (2). 
The insurance protections  gives
mental peace to the insured and enables 
him to eliminate  constant  fear about the  loss of the his  possession. 
(3). It included  the habits of
savings  among the people especially in
the case of the  life  insurance 
(4).  It assists the insured  to avoid or minimize loss by the making
recommendations  through various channels
of advertisements from the insurers. 
(5). The  insurance policy can be
a pledged as a security for getting loan. 
(6). It supplies old-age pensions 
to the life policy holders.   (7).
Life  insurance is a means of the
capitalizations  of money. In case of the
assured  dies  before the maturity of the policy.  (8). The assured gets tax benefits u/s 80c in
life  insurance.  (9).  insurance
has made it possible  to increased the
efficiency of the insured in determining what risk should be insured against
and what risk he can afford to face himself. 
(10). The amount invested in the form of the premium  in Life 
insurance policies  fetches high
returns to assured by the way of the 
periodical and maturity bonus. </div>
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IMPORTANCE TO BUSINESS.: (1).  A
trader can get a bank loan  easily if his
stick or property is insured  as a  insurance providers a sense of security  to the lenders.  (2). Businessmen  can concentrate on their  business activities without spending  more time on the safeguarding their  properties. 
(3) .  insurance enables the
business to operate in the event of the 
loss of properties and human lives as a loss  is finally indemnified.  (4). The owner of the business concern, by
taking an  insurance policy, reduces  uncertainty 
of business losses and the be sure of his earnings and smooth running of
his business.  (5) . Insurance providers
adequate provisions  for the grant of the
social security and welfare  measures  like employees state  insurance., life policies old age,
pension,  and accident policies for the
benefit or employees . Due to the age pension and accident policies,  for the benefit of employees,. Due to these
provision , employees take more interest in the working of the business.   (6). The key men   insurance providers protections  to the industry in case of the death of the
professional  executives .  (7). 
insurance indirectly reduces the cost of manufacturing  goods. 
(9).  The working populations feel
a sense of security  if there is an  insurance  
(10) Rapid  industrialization  is made possible by the insurance as its
funds are employed  in the
development  of business and
industry.   </div>
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  IMPORTANCE 
TO SOCIETY: (1). Life insurance providers social security to a
family.  (2).  The insurance fulfils its social obligations  by providing employment opportunities  to the general public. (3) insurance funds
are employed for the development of basis human facilities  like housing, electricity, eater and
sanitation etc.,  (4). insurance
distributes the loss of few among a 
large group of society. (5). insurance has the effect of raising the
standard  of living of the people.    4. IMPORTANCE TO NATION:  (1). insurance increase national savings.   (2). It develops  the money market.   (3). It contributes to the national
plans.  (40.  It earns foreign exchange.  (5).  
It relieves the government  from
the liability of providing  for the
dependents in the event of the bread winner’s 
death.  TERMS USED IN
INSURANCE:  There are certain terms which
are used by the very often in insurance. 
These terms require some explanation. 
1. INSURER: The party who agrees to pay compensation  to the happening of a contingency is known as
insurers. generally the insurance company 
are the insurers.  2.  INSURED: The party who has taken a
policy  for his life or property in the
insurance company is called insured.  3.
PREMIUM: It is the consideration for which the insurer gives protections to the
insured . It is the price of the insurance cover.   (4) POLICY: It refers to the documents  which contains the terms are and conditions
of the insurance contract. It is a issued by the insurance company.  (5). 
INSURED AMOUNT:  The amount for
which the risk is insured  is called the
insured amount the or policy money or face value of the policy.  (6),. PERIL: It is an event the causes a
personal property loss.    (7).  PROPOSER : The person who sends the proposal
form fro taking an insurance policy is known as proposer.  (8). BENEFICIARY:  The person 
to whom policy amount will be paid in the event of the death of the
assured   is called beneficiary .  (9). HAZARDS: 
It refers  to a condition that may
create, decreases of increase the chance of the 
from given peril. Hazard, of two types: 
(a) Physical hazards, an objective characteristic increasing the chance
of the  loss, such as the age, or health
of the an insured person or the locations,. use and  constructions,  of insured, property, the productions, of gun
powder in a building.,  (b) Moral hazard:
a subjective  characteristic  increases the chance of the loss such as s
dishonesty  negligence a or
insanity.  (10) RISK:  It is a defined as a  phenomenon 
closely associated with the uncertain 
events or perils such as a  fire,
storms, collision to which the object the is the exposed or a hazard  or set a of a hazardous  conditions 
are a which may be cause a  loss
or the probability  of a loss or
occurring  otherwise.  (11). 
REINSURANCE:  It is a
sub-insurance, which are the insurer may effect if the thinks  that the 
he has insured a big risk and wants his liability  to be shared by others persons in it is a
insured insurers. For example, if insurance company, X insurers a part of
the  it with a amount another insurance
company. Y it has be effected a re-insurance. In  such as a 
case, X will be called the reinsured and Y the reinsurer,. The reinsured  can claim the loss from reinsurer  only where when he  has himself paid the loss the to the insured  persons under the original contract.  There are a two provides principles
methods  of effecting reinsurance cover</div>
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.
They are:  (a) . FACULTATIVE REINSURANCE:  It is a also known as  “ Specific Reinsurance” . It is a form which
concerns itself it is the with specific insurance transactions.,  . It is a necessitates  consideration  of each risk separately 
and accordingly each contract  is
a written to be the on its own merit.  
(b). TREATY REINSURANCE: The reinsurer 
and the direct insurer enter into the a treaty which is the a formal
legally binding  agreement that the
former shall concept a accept a sp0ecified portion of any risk covered by the
that the former shall accept a specified 
portion of any risk covered by the latter. A treaty embraces future
contractors as well as those in existence at the time the agreement is
executed. Treaty reinsurance may be: 
(1). Quota  share treaty or fixed
share treaty. (2) Surplus treaty, (3) Excess of loss treaty and . (4). Excess
of loss ratio treaty or stop-loss treaty. </div>
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12.DOUBLE INSURANCE:  If an
insured insurers the same subject  matter
with two or more insurance companies  and
the total sum insured is more than the value of the subject matter, it will be
a case of over insurance  by the  means of double  insurance . For example. if a person  for Rs. 15 Lakhs each. But being a  contract of indemnity  , he cannot recover  from his insurance  more than the amount the of actual loss. The
only benefit of double  insurance  is than in the event of loss, in the insured
can recover the amount of loss from his insurers  in any order he like. It gives him protection
in case one (or More)  of his
insurance  insurers become insolvent. </div>
</div>
</div>

IMPORTANCE /ADVANTAGE OF INSURANCE

The importance of insurance cannot be undermined in the present day when uncertainty is prevailing everywhere . In the words of Din sc...

ERECTION ALL RISKS (EAR ) INSURANCE

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This policy is to
offer comprehensive  and adequate
insurance protections against  all risks
involved in the erections  of machinery
and plant  as well as steel structures of
any kind of the . This policy has become 
an indispensable  part of the
progress  in all industrialized  countries. Large projects such as the  erections of thermal power station,
Fertilizer plants oil refineries of the installations  of complete factory facilities, bring about
so much  many risks for both the
contractors and the principles that it is so only  possible 
to bear the risks in an economical manner by the taking out an EAR
insurance. SCOPE OF COVER: This is a comprehensive insurance cover that is
available  to the client in respect  of any sort of the contingency  from the moment  the materials are unloaded  on the site of the project   works and the continuous during  storage, physical erections and till the test
run is the over which covers all physical losses or damage as under:<br />
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LOCATION RISK: Fire, Lightning , Theft
and Burglary.  (2).  HANDLING RISKS: Impact  from falling 
objects , collision,  failure  of chanes or tackles.  (3). OPERATIONAL RISKS:   Failure 
of safety  devices, leakage of the
electricity  insulations failure short
circuit , tearing apart on the account 
centrifugal forces, explosion.  
(4).  RISKS OF HUMAN ELEMENT:
Carelessness, Negligence, defaults  in
erections Malicious damage, strike and riots., 
(5).  ACTS OF GOD: Storm,
Tempest,.  Hurricane, Flood,
Earthquake.,   UM INSURED;  The sum insured is the value of the  machinery plant which has to be replaced at
the time and condition it was a  just
prior to the accident. The sum insured should represent totally  erected value of the property as at the site
in the questions  and hence comprises
numerous elements  besides  the basic cost of materials imported and
indigeneously  procured. The sum  insured for a project  is arrived at as given below: Prime cost of
machinery Bare cost, Freight  Duties
Excise paid that the point of origin by the if any, + Super visions cost that
the  at the point of destination if any +
Super vision cost of the point of loading 
if any + customs excise  duty at
the point of discharge  if any+
warehouses  charges if any + clearing  and forwarding  expenses 
+ Fabrication charges+ Handling 
charges+ Erections super visions 
and other incidents  and other
overheads. It is to be noted that various 
above expenses  are reimbursed at
the time of the claim to the extent they are included in the sum insured.  </div>
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BASIS OF INDEMNITY:   In the event of the  loss or damage , the insured will be
indemnity  for the expenses
necessary  to restore  the damage machinery or plant to its
conditions  immediately before the
occurrence of the damage. Partial repair costs are met if the same be part of
the final repairs and do not increases total repair costs, of the cost  of repairs to be in excess of the value of
the item  before the loss, the settlement
will be as for total loss. The cost  of
the any improvement and modification 
will not be any event be the insurer’s 
liability and conditions of average will apply.  On payments 
of a claim the insured shall be   reinstate the sum insured by payments of a
pro-rata premium from date of loss to expiry 
date.  Extra charges towards
overtime, night works, work on a holidays payable, if the same was initially
agreed  upon the and requisite additional
premium paid there of. Express freight does not include air freight . It refers
only to the faster surface  freight.
Express  freight does not include air
freight. It refers only to faster freight. Risks  with totally erected  value 
exceeding  Rs. 50 crores  should be referred to TAC for rating
through  Regional office/ Head office.
The rates are all tariffed according to the type of risk. Any deviation
adhering  to the terms and rates will be
construed as a breach   of tariff. It is
hence, necessary  that in the case of the
doubt, , references should be  made to
Regional Office/ Head office. Even  where
provisional rating the is involved , it should be as per regulations<br />
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</div>

ERECTION ALL RISKS (EAR ) INSURANCE

This policy is to offer comprehensive and adequate insurance protections against all risks involved in the erections of machinery and p...

CLASSIFICATION OF RISK

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There are two main classes of risk:
1. Uninsurable Risk. 2. Insurable Risk. (1). Uninsurable Risk- It refers to
those risk where the mortality rate is so high as to make the premium for the
assured completely prohibitive. Proposals for such proposals are altogether
rejected by the insurer. In other words, proposals received from persons who
are suffering from cancer or serious heart ailment or tuberculosis of the last
stage where the death is sure to happen in the near future would be the
uninsurable risk. (2). Insurable Risk- An insurable risk is one which can be
insured on standard terms and conditions or otherwise. Such risks can further
be divided into two categories: (a) Standard Risk- It is also known as normal
or average risk. It refers to insurable lives which include not only the
persons who are 100% healthy, but will also include some persons who have a
history of minor illness or have some minor physical defects which will not
appreciably affect longevity. Since this group consists of persons of both
higher degree of risk and lower degree fo risk within  a specified range, the rates of premium are
uniform for all forming part of the standard group. (b) Sub-standard Risk- It
is also known as “under average risk”, ‘impaired life’ or ‘C-category life’
risk. It refers to those risks which do not meet the standards set for
insurance at regular rates and are below standard at ‘mortality risks’. In
fact, these risks are neither so good as in the standard category nor are they
so bad to be rejected outright. These risks carry a degree of risk above the
maximum limit of the standard class and are usually insured for an additional
amount of premium, because the mortality rates are higher than assumed while
calculating the premiums. </div>
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  INVESTMENT OF
FUNDS- The life fund represents the accumulated liabilities of the insurance
company towards policyholders and is to be kept as trust money. The company
invests it to earn the assumed interest. The supreme consideration in the
investment of life fund is to preserve the interest of the policyholders.
Principles of Investment- The following are the basic principles or canons of
investment policy for an insurer: (I) Safety and Security- The primary purpose
of investment of life fund is not to earn profits, as the insurer is merely a
trustee, but to maintain complete security. Therefore, the securities in which
it may be invested should never at any time fall in their face value. According
to statutory guidelines (amended), the insurer is required to invest the life
fund in the following manner: At least 25% in Government securities; Another
25% either in Government securities or other approved securities; (II)
Liquidity- The life fund should be invested in such a way that they may be
readily convertible whenever claims are payable. To ensure the proper degree of
liquidity, investments are so made that the maturities will occur at intervals
adjusted to meet the needs of maturing policies. As a provision against sudden
demand for surrender values or policy loans, the insurer may keep a part of the
fund in cash or in such securities which can be realized quickly and without.
This could be used to meet a sudden contingency or to avail of an exceptional
investment opportunity. (III) Profitability- </div>
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The insurer must earn at least the
assumed rate of interest otherwise there will be a loss. The investments should
be made in such securities which can yield the highest return but not at the
cost of safety. It has been realized that safety and profitability are apposed
to each other and so a fair and balanced policy of investment should be
observed. (IV) Diversification- The investment of the funds should be
diversified. It means spreading over investments among different classes of
securities so that risks and returns are adjusted. The diversification can be
according to time factor. It provides maximum security and yields an
efficient  rate of return. So the
principle of “not having all one’s eggs in one basket” should be adopted. (V)
Aid to Life Business- The funds should be invested in those projects or
activities which may provide more and more employment opportunities and may
also increase the standard of living of the people, so that the insurer can get
the benefits of the lower mortality rate and increase in new business. </div>
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VALUATION- The term ‘valuation’ has been defined as a periodical examination of
the financial position of an insurance company meant to judge the adequacy of
the insurance fund and to calculate its profit or loss. It is used for
comparing the actual results of mortality experienced, interest earned and
expenses incurred with the predetermined figures. It also helps in the
calculation of any surplus which might be available for distribution as
profits. According to Section 28 of the Life Insurance Act 1956, 95% of the
profit of life insurance must be distributed to the policyholders by way of
‘Bonus’ on with profit policies and the remaining 5% has to be utilized for
such purpose as the Government may determine. The valuation process: The Valuation
process involves the following steps- (I) Calculation of Net Liability- In life
insurance, the claim must arise either on the death of the assured or expiry of
the policy period. The difference between the present value of the future
premiums to be received and the present value fo future liability on all
policies in force is to be taken as “Net liability” for life insurance
companies. The calculation of net liability on all outstanding policies is done
by experts called ‘actuaries’. The LIC of India makes the valuation of its net
liability every two years. The process by which net liability is determined by
an actuary is called actuarial valuation. (II) Calculation of Life Assurance
Fund</div>
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The difference in Life Revenue account is to be taken as closing balance
of the Life Assurance Fund. In other words, the excess of income over
expenditure of a life insurance business during the current year is merged into
reserve called Life Assurance Fund. (III) Calculation of Surplus or Deficiency-
The final stage in the valuation process is ascertainment of surplus or
deficiency. The comparison of net liability with life assurance fund will
reveal surplus or deficiency. If the former is less than the latter one,
surplus is created and when the former is more than the latter, deficiency is
arrived</div>
</div>
</div>

CLASSIFICATION OF RISK

There are two main classes of risk: 1. Uninsurable Risk. 2. Insurable Risk. (1). Uninsurable Risk- It refers to those risk where the mort...

CLAIMS CONCEPTS AND PRACTICE

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 In the previous
unit, we have discussed about the customer service angle of the insurer’s
business. In insurance, the customer looks forward to the insurer as the source
of solace when the insured tragedy hits. He expects him to come to his help
when he needs him the most, like the proverbial friend in need. The consumer of
the insurance product, having fulfilled his part of the obligation of the
insurance contract by paying the premium, waits in expectation, worrying how the
big insurance company will react to his loss and whether it would fulfill its
part of the promise. He is weak as an individual or as a corporate, pitted
against an insurance company. When he is further weakened by the disaster that
has struck him, he would not like to fight a legal battle with the insurer.
However, when confronted with a loss, he would be only too quick to be offended
by any act of discourteousness, insensitivity or injustice from the side of the
insurer. For the insurer, the acid test of the insurance contract is when the
claim occurs and the insured expects all the services that the insurer can
provide.<br />
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This is an unexpected happening for the insured. But for the insurer,
he should always be on the alert, expecting someone to suffer a loss and lodge
a claim. He needs to be in a position to render whatever service is expected of
him as per the contract of insurance. He needs to render it with as much
promptness and sensitively as possible in order to retain the customers
goodwill. He needs to look into the claims professionally enough to ensure that
the claim is payable within the framework of the contract, that the quantum of
the amount claimed does not exceed the amounts stipulated under the contract,
and that there is no moral or morale hazards involved in the claim. In having a
proper system for claims settlement, the insurer primarily fulfills his
contractual obligations to the insured in return for the premium that the
company has received. By handling the claim professionally, he insurer ensures
that his company pays only to the extent that it is bound to pay as per the
contract and not for anything beyond its purview. If the insurer settles the
claim recklessly, beyond what he has agreed for, he compromises on his
company’s interests and sends a negative feedback to the market that he is
careless and can be fooled. If he pays less, he loses customer goodwill,
exposes himself to legal quarrels, and in the process tells the market that he
does not deliver what he promises and is not trust worthy.<br />
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 In essence, the
insurer needs to handle the claim professionally enough to fulfill his promise
to the insured, as well as to retain the goodwill of the market and attract
more business in the process. Some authors opine that claims settlement is the
biggest advertisement fo an insurer. Losses can be identified under different
types, based on certain characteristics. Some of them are listed below.
Definite Loss: In this type of loss, the events that caused the loss should
have (at least in principle) taken place at a known time, in a known place, and
from a known cause. The losses, automobile accidents, and worker injuries meet
this criterion. The types of losses that may be definite only in theory (Eg.
occupational diseases where prolonged exposure to injurious conditions would be
involved, but where no specific time, place or cause is identifiable) do not
fall under this type. In definite losses, the time, place and cause of a loss
are clear enough that a reasonable person, with sufficient information, can
objectively verify all the three elements. Accidental Loss: In this type, the
event that constituted  the trigger of a
claim would be fortuitous or at least outside the control of the beneficiary of
the insurance. The loss would be ‘pure’ in the sense that it results from an
event for which there is only the opportunity for cost.,.<br />
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This is in contrast
to small losses where the above incidental costs may be several times the size
of the expected cost of losses and where paying such costs are not in the
interests of the insured. Calculable Loss: A calculable loss is one in which
there are two estimable elements (even if not formally calculable) the
probability of loss, and the attendant cost. Probability of loss is generally
an empirical exercise, while cost has more to do with the ability of a
reasonable person in possession of a copy of the insurance policy and  a proof of loss associated with a claim
presented under that policy to make a reasonably definite and objective
evaluation of the amount of the loss recoverable as a result of the claim</div>
</div>

CLAIMS CONCEPTS AND PRACTICE

In the previous unit, we have discussed about the customer service angle of the insurer’s business. In insurance, the customer looks forw...

CHANGES IN THE INDIAN INSURANCE MARKET IN RECENT TIMES

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The history
and evolution  of the Indian  general insurance market have been
discussed  in detail  in Unit 
1. It is  generally regarded  that the market  evolved into a fairly  modern from by the middle  of the 1930s . During  this period the Indian  market 
came out of  its adolescence  and started 
addressing  problems similar  to those faced by the more markets . We have
seen that the combined offers of the market and the Government lead to the
enactment  of the insurance act,
1938.,  In the early  1990s 
the need for further changes in the insurance market was  voiced by a various  segment in both the national  and international market. The consequent  changes and the succession of events  that has 
formed  the market the way  it is today are discussed  here. The insurance companies  were 
widely criticized  for
inefficiencies  arising  out 
overstaffing , governmental 
interferences  in management ,
lack of the freedom in decision  making,
waning  company, loyalty  as well as 
deficiencies in the system, which could 
neither provide  enough
motivation  for  meritorious 
employees,  nor effectively  penalize  
employees  for non-performances or
lethargy. Professionalism  in the
industry started  declining  and the industry’s  growth 
rate got largely limited  to the
rates  of inflation and the returns  the companies 
could earn by the investing  their
surplus  funds.  With market 
penetration  becoming  static, 
the insurers  were criticized  as indifferent to the country’s  needs 
and the  Government  was criticized  for  it
is this a being  over-protective of the
nationalized  industry  by not 
allowing  competition   from private players.<br />
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THE MALHOTRA
COMMITTEE  REPORT ON INSURANCE REFORMS
1994, : The central Government  responded  to the situation  by setting up a high-power  committee  on re forms 
in insurance sector on April  7,
1993, headed  by R. N. Malhotra,  former 
Governor  Reserve Bank of
India.,  To examine  the reforms required  in the insurance sector,  This committee  is popularly 
referred  to as the Malhotra
committee.  The committee  interacted 
with the insurance companies their staff unions, various  chambers 
of commerce  trade bodies  and a cross sections  of the country’s  public, and a made a  detailed 
analysis  of the present  Indian insurance industry . It also visualized  the shape of things to come in the future
.and put forward its recommendations  for
the insurance industry  on January 7,
1994, . The Malhotra committee’s report recommended  that both life  and non life insurance sectors  should be a 
gradually  opened for the  private 
participation  and
recommended  entry to foreign  companies 
through joint  ventures  established 
in India with Indian partners. The Committee  prescribed 
a minimum  paid-up capital  for new insurers  as not less than Rs. 100 crores . Which would
be backed by the well-defined solvency standards., This Committee
recommended  that the regulatory  apparatus should be activated  even in the present  set up of the nationalized  insurance sector and amongst  others 
things recommended  the
established  of a strong  and effective 
Insurance Regulatory Authority, (IRA) 
in the form of  a statutory   autonomous 
board on the lines of Securities 
and Exchange  Board of India
(SEBI) . By way of detail  the Committee
recommended  retention  of all major tariff for some  period 
of time, and progressive, liberalization.,<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7MVM26Tca2WJiTKboMZOgxsZkcVfnFqQYRSbhYuFs0LvpjmuZZxZuDxEzURAf7h4WlHpcHInK4jVN7C22TXwtRAMMoP_G0YCQZ2I2yHbXrAI3cP1q_ToU2WM2gFbO8p7WMTpYd7izBN4/s1600/business-woman.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7MVM26Tca2WJiTKboMZOgxsZkcVfnFqQYRSbhYuFs0LvpjmuZZxZuDxEzURAf7h4WlHpcHInK4jVN7C22TXwtRAMMoP_G0YCQZ2I2yHbXrAI3cP1q_ToU2WM2gFbO8p7WMTpYd7izBN4/s400/business-woman.jpg" width="400" /></a></div>
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The recommended  of the Malhotra committee were discussed  across the country  at different 
forums ,  including  the management  of the life insurance corporation  the General insurance corporations, it's
a  subsidiary  companies 
trade unions, chambers  of
commerce and  various consumer
interest  groups . The Consultative  committee 
of the Parliament and  the
ministry  of finance also held  discussions of the Report the committee  on Reforms 
in sector with the various 
stakeholders  in the market .
After prolonged  deliberations , the
government  accepted  the Committee’s recommended  to set up an autonomous  interim insurance Regulatory Authority
(IRA).  THE (INTERIM) INSURANCE
REGULATORY AUTHORITY , 1996: In his 
1995, Budget speech  the Finance
Minister  announced  the Governments  views on the subject  as follows an intern  insurance regulatory Authority (IRA)  was 
formed  accordingly  on January 23. 1996, by  a Government resolution , pending the
enactment  of comprehensive  legislation, which would take  time. The IRA 
came into the  existence  with Mr. N. Rangachari as  its full time Chairman,  two part time member  and a 
skeletal secretariat,  The
IRA  through seminars, discussions  and press 
releases  made an attempt to
create  awareness   about the modern  trends in insurance among various
segments  of the insured,<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnedEMvbOCyP6aVmiGSw29B58WrBkuYigQouHwPvdfCtvs5KRJfCb5ZSPFLA-c5i0m31uX-e9KOeWGBv27iaxQH5Zwsf3XCneO6TJNxfc2bsoKt3_Gsl-9uZi6dWATO4wqi37We_5PNPs/s1600/business-insurancess.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="266" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnedEMvbOCyP6aVmiGSw29B58WrBkuYigQouHwPvdfCtvs5KRJfCb5ZSPFLA-c5i0m31uX-e9KOeWGBv27iaxQH5Zwsf3XCneO6TJNxfc2bsoKt3_Gsl-9uZi6dWATO4wqi37We_5PNPs/s400/business-insurancess.jpg" width="400" /></a></div>
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However it did
not have sufficient  legislative  power to brings about any significant  change to the insurance industry .
Though  the Government had vested  the powers 
of the Controller  of insurance  with the Chairman  of the IRA, no serious  change could be  made in the 
working of the government  owned
public sector  insurer’s  Then the Finance Minister in his  budget 
speech of July ,1996, announced 
that in keeping  with the trend of
liberalization  the non-statutory  insurance Regulatory Authority  would be a made statutory  and suitably 
empowered  so that it would have
been sufficient  teeth to play an
effective  regulatory role. In the
Statement  of object  and Reasons, 
necessitating  the submission  of the insurance Regulatory Authority  Bill to the 
parliament   in December , 1996,
in the Finance Minister observed  that
the insurance industry required a high degree or regulations . He pointed  out that the insurance Act 1938,
provides  for the institution  of the Controller  of insurance to act as a strong  and powerful 
supervisory  and regulatory  authority 
with powers to direct advise  cautions  prohibit , investigation  inspect, prosecute , search, seize  fine, amalgamate , register and regulate  insurance companies  . It was 
also conceded that the Government 
was seized of the fact  that
after  the nationalizations  of the Life Insurance industry in 1956, and
the General insurance Industry  in 1972.
The role  of the  controller 
of insurance had gradually 
diminished  in it's a  significance.<br />
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The insurance regulatory
Authority Bill was a  submitted  to the Parliament in by the December 1996,
but had  to be withdrawn  to incorporate certain  changes 
suggested  by the member  of parliament In 1997, when it was shelved
once against  due to opposition  from some quarters . In 1997, the Bill was
presented  a third  time by the new Government. The house felt
that Bill needed  to be studied  by multi party  parliament 
Committee under Mr. Murli Deora., Then 
M. P. This committee  made fresh
changes to the bill and the same was a 
subsequently  cleared  by the Council  of Ministers . The revised  bill termed as the Insurance Regulatory  and Development Authority Bill was
accordingly submitted  to the
parliament  for it's a consideration.</div>
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CHANGES IN THE INDIAN INSURANCE MARKET IN RECENT TIMES

The history and evolution of the Indian general insurance market have been discussed in detail in Unit 1. It is generally regarded ...