Insurance Loans: LIFE INSURANCE

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...

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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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 ...

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 ...

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...

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