LIFE & GENERAL

INSURANCE

Types of Insurance

Insurance

General Insurance
Life Insurance
1.
2.
3.
4.
5.

Fire Insurance
Marine Insurance
Accident/Motor Insurance
Health Insurance
Liability Insurance

1.
2.

Individual Insurance
Group Insurance

1.
2.

With Profits
Without Profits

LIFE INSURANCE

The contracts of life insurance in India are

governed by the Insurance Act,1938 and Life
Insurance Corporation Act,1956.
The life insurance business was nationalized
on January 19, 1956. And on Sept 1 st, same
year, under Sec.3 of the Life Insurance
Corporation Act, 1956, the LIC came in to
being as an important step towards
mobilizing savings.

LIFE INSURANCE CONTRACT

A contract of life insurance is a contract by

which the insurer, in consideration of the
payment of certain sums,called premiums,
undertakes to pay a certain sum of money on
the death of a person whose life is insured, or
on the expiry of a certain period, whichever
is earlier.
The premium may be paid in a lump sum or by
periodical installments.

INSURABLE INTEREST

In life insurance, the assured must have

insurable interest in the life insured,
otherwise the contract of insurance is void.
A person has insurable interest in the life of
another if he will sustain some pecuniary
loss on the death of the person whose life is
insured.
The insurable interest must exist at the time
of contract of insurance.

Contd..[INSURABLE INTEREST]

In life insurance, there are three cases in which

insurable interest is presumed.
Every person is presumed to have insurable
interest in his own life up to any amount.
Likewise, a husband is presumed to have
insurable interest in the life of his wife and vice
versa.
A person is deemed to have an insurable
interest in the lives of those who are dependent
upon him.

Right of Insurer..
to Avoid Insurance Policy

Contract of life insurance, like other

contracts of insurance, is a contract of
Uberrmae fedei, and therefore full
disclosure must be made to the insurer of
every material circumstance which is known
to the assured and which would influence
the judgment of a prudent insurer in
fixing the premium, or determining
whether to take risk.

.Right of Insurer..
to Avoid Insurance Policy

In the event of failure to disclose any such circumstance, the insurer

can avoid the policy [Mithoolal Nayak vs. L.I.C of India(1962)].

The deceased knowing that he had suffered from heart

suffered, had stated in the proposal that he did not suffer
from any ailment.Held, this was a statement on a
material matter and that he had fraudulently
suppressed the fact which was material be disclosed and
the insured knew the statement to be false when he
made it.Held, the insurer(Life Insurance Corporation of
India) were entitled to avoid the claim on the policy on
the grounds available to them under Section 45.
[Krishnawanti vs L.I.C.of India(1975)]

Surrender Value
Surrender value is the amount which insurer is
prepared to pay to the assured in case he does
not continue a policy for the agreed period of
time and surrenders his right, title and interest
under the policy to the insurer.
Before the policy acquires any surrender value it
should have run for a certain number of
years.The surrender value of the policy goes on
increasing as more and more premiums are paid.

Loan on Policies
The insurers usually offer the assured a facility of
loan on the life policies on which a certain
number of premiums have been paid.
The loan is granted on the security of the policy,
and is limited by the amount of surrender
value.It may be paid back within a certain period.
If it is not paid during the term of the assurance,
it is recovered from the payment due at the time
of the maturity of the policy.

Proof of Age and Death

The rates of premium for most life policies depend
upon the age of the life assured at the time of
effecting the policy.
It is, therefore, essential that the correct age should
be stated in the proposal form. Proof of age may be
given at the time of the proposal or subsequent to
the issue of the policy.When it is given, the insurer
writes the words age admitted on the policy.
Age can be proved by production of a certified copy
of an entry in the Register of Births kept by the
local bodies or other available evidences.

Assignment & Nomination:

Distinction
ASSIGNMENT:
1.Assignment may be
NOMINATION:
made by an
1.Nomination may be
endorsement on the made by mentioning the
policy itself or by a name of the nominee in
separate instrument.the policy or
endorsement thereon.
2.On assignment, the
2.In case of nomination,
property in the policythe policy continues to
passes to the
be at the disposal of the
assured during his
assignee.
lifetime.

Assignment & Nomination:

Distinction

3.An assignee gets the

right of the owner of
the policy and he may
deal with the policy in
any manner he likes.
4.In case of
assignment, the
money is to be paid to
the assignee.

3.A nominee gets only

beneficial interest in the
policy. He gets a right in
the policy only on the
death of the assured.
4.In case of nomination,
money is to be paid to
the nominee , if he
survives the assured.

Assignment & Nomination:

Distinction

5.An assignment is
made for the purpose
of transferring the
rights, etc. under the
policy to the
assignee.
6.Assignment is
irrevocable.

5.A nomination is made

so that the beneficiary
may recover the amount
when the policy matures
after the death of the
assured.
6.Nomination can be
revoked at any time
before the maturity of
the policy by giving a
notice to the insurer.

Types of Policies:
The two basic elements in a life insurance cover
are (a) death cover and (b) risk cover.
The insurance plans that provide only the death
covers i.e., the benefits are paid on the death of
the insured person are called as Term Assurance
Plans, else, the plans under which the benefits
are paid on the survival of the insured within a
specified period are called as Pure Endowment
Plans. All insurance covers are a mix of these
basic elementary plans.
.. [Contd]

Types of Policies:
1.Classification based on time:
a.Whole life: Whole term,Limited Term, Convertible
b.Limited, Convertible,Renewable
2.Classification based on investment objective:
a.Endowment Plans: Pure, Joint, Double, Anticipated
b.Participating plans: Money back policies
3.Classification based on premium payment:
a.Single premium policies
b.Level premium policies

Types of Policies:
4.Classification based on claim payment:
a. Fixed Sum Policies
b. Annuity Policies
5.Classification based on number of
persons assured:
a.Single life
b.Multiple Life
c.Last survivorship policy

LET US FIRST TRY AND UNDERSTAND WHAT A ULIP IS

ULIP: IT IS A MARKET LINKED INVESTMENT WHERE THE PREMIUM PAID IS INVESTED

IN FUNDS

DIFFERENT OPTIONS ARE AVAILABLE, LIKE 100% EQUITY, BALANCED, DEBT, LIQUID
ETC AND ACCORDING TO THE FUND SELECTED, THE RISKS AND RETURNS VARY.

THE COSTS ARE UPFRONT AND ARE TRANSPARENT, THE INVESTMENT MADE IS
KNOWN TO THE INVESTOR (AS HE IS THE ONE WHO DECIDES WHERE HIS MONEY
SHOULD BE INVESTED).

THERE IS A GREATER FLEXIBILITY IN TERMS OF PREMIUM PAYMENTS WHICH MEANS A

PREMIUM HOLIDAY IS POSSIBLE.

YOU CAN ALSO INVEST SURPLUS MONEY BY WAY OF TOP UPS WHICH WILL INCREASE
YOUR INVESTMENT IN THE FUND AND THEREBY PROVIDE A PUSH TO RETURNS AS
WELL.

THE HIGHER OF THE SUM ASSURED OR FUND VALUE IS PAID AT THE MATURITY OR
INCASE OF DEATH.

FEATURES OF ULIP
MAIN FEATURES
LIFE PROTECTION
DISABILITY
CRITICAL ILLNESS
SURGERIES
DEATH DUE TO ACCIDENT

ADDITIONAL FEATURES
INVESTMENT AND SAVINGS
CAPITAL GAINS
MORTALITY CHARGES
FLEXIBILITY
ADJUSTABLE LIFE COVER
INVESTMENT OPTIONS
TRANSPARENCY
OPTIONS TO TAKE ADDITIONAL COVER AGAINST
LIQUIDITY
TAX PLANNING

ULIP

WHAT IS A UNIT FUND?

THE ALLOCATED (INVESTED) PORTIONS OF THE PREMIUMS AFTER DEDUCTING
FOR ALL THE CHARGES AND PREMIUM FOR RISK COVER UNDER ALL POLICIES IN
A PARTICULAR FUND AS CHOSEN BY THE POLICY HOLDERS ARE POOLED
TOGETHER TO FORM A UNIT FUND.

WHAT IS A UNIT?
IT IS A COMPONENT OF THE FUND IN A UNIT LINKED POLICY.

ULIP

WHAT IS A UNIT FUND?

THE ALLOCATED (INVESTED) PORTIONS OF THE PREMIUMS AFTER DEDUCTING
FOR ALL THE CHARGES AND PREMIUM FOR RISK COVER UNDER ALL POLICIES IN
A PARTICULAR FUND AS CHOSEN BY THE POLICY HOLDERS ARE POOLED
TOGETHER TO FORM A UNIT FUND.

WHAT IS A UNIT?
IT IS A COMPONENT OF THE FUND IN A UNIT LINKED POLICY.

NAV (NET ASSET VALUE)

THE INVESTMENT IS DENOTED AS UNITS AND IS

REPRESENTED BY THE VALUE THAT IT HAS
ATTAINED AT THAT POINT OF TIME .THIS IS
KNOWN AS NET ASSET VALUE (NAV).
FOR EXAMPLE : AN INVESTOR HAD INVESTED
RS.10,000/- IN A UNIT LINKED PLAN AND THE
NAV AT THE TIME OF INVESTMENT WAS RS.10/THEN THE NUMBER OF UNITS HELD BY THE
INVESTOR WILL BE
= 10,000/10
=1000 UNITS

ULIP options related to life stage

A.)

ULIPs FOR RETIREMENT PLANNING

B.)

ULIPs FOR LONG TERM WEALTH CREATION

1.) Single premium - Regular premium plan
2.) Guarantee plans Non guarantee plans
3.) Life Stage based Non life Stage based

C.)

ULIPs FOR CHILDRENS EDUCATION

D.)

ULIPs FOR HEALTH SOLUTIONS

Features of ULIP plan

Protection and safety as in any insurance policy

Savings
Flexibility
Adjustable Life Cover
Investment Options
Transparency
Death Benefits
Disability
Benefits over critical illnesses
Surgeries
Tax Benefits ; And More

Why ULIP is so
attractive?

TRANSPARENCY Plan as per life stage needs through market led

investments as compared to traditional investment plan
INSURANCE COVER plus INVESTMENT
FLEXIBILITY- switching as per market movements to capitalize on
investment opportunities across the equity and debt markets and benefit
from the vagaries of stock/debt markets
MULTIPLE INVESTMENT OPTIONS:

Aggressive ULIPs
balance

(which invest 80%-100% in equities,

in debt)
Balanced ULIPs
(invest around 40%-60% in equities)
Conservative ULIPs (invest up to 20% in equities)

GENERAL INSURANCE:
Introduction: The object of all laws is to
protect the person and property of all
individuals in any society. Risk is inherent in
various facets of human life and there is an
incessant urge among human beings to lead a
protected and secured life.
According to Abraham Maslow, a famous psychologist, next to
survival comes safety and security in the hierarchy of needs
of any human being.

GENERAL INSURANCE:
One of the ideal devices for avoiding such
exigencies of insecurity is the concept of
insurance.
Whereas, life insurance takes care about the
contingencies that affect life, general
insurance embraces a wide range of risks
pertaining to subject matters other than life.
General Insurance embraces within its fold
insurance of different kinds of property,
which include fire, marine, contingency,
liability, motor and accident insurances etc

DEFINITION OF
FIRE INSURANCE BUSINESS

Fire Insurance has not been defined in the

Insurance Act,1938 instead, fire insurance
business is defined, as the business
effecting, otherwise than incidentally to
some other class of insurance business,
contracts of insurance against the risks
insured against in fire insurance
policies
Insurance Act,1938[Sec.2(6)(a)].

Characteristics of
Fire Insurance Contract

1.It is a contract of indemnity:The assured

can in the event of loss recover the actual
amount of loss from the insurer.This is subject
to the maximum amount for which the
subject matter is insured.
2.It is a contract of uberrimae fedei: The
assured and the insurer have to disclose
everything which is in their knowledge and
which will affect the contract of insurance.

Characteristics of
Fire Insurance Contract

3.The assured must have insurable

interest in the subject matter both at
the time of insurance and at the time of
loss.This insurable interest must be capable
of valuation in terms of money.
4.The risk covered by fire insurance
contract is the loss resulting from fire or
some cause which is the proximate
cause of loss.

Characteristics of
Fire Insurance Contract

.It is subject to the principles of

subrogation and contribution.
6.It is a contract from year to
year:It can, however, be renewed
if the assured pays the premium
during the days of grace.
5

Meaning of Marine Insurance

Marine insurance is a contract whereby the

insurer undertakes to indemnify the insured,
in manner and to the extent thereby by
agreed, against marine losses, i.e. the losses
incident to marine adventure.

Need of Marine Insurance

Once the goods are moved out from the
warehouse of the seller, they are no more in
the custody of the seller or the buyer. They
are rather in the hands of a third party called
the carrier. During the transit loss can arise
from:
Fire, explosion
Contact with water
33

Contd..
Accident
Breakage
Theft
Pilferage
Non-delivery
Exposure to these risks and the fact that the
goods are in possession of a third party
enhances the chances of loss.

Marine Insurance

Property
Insurance

Liability
Insurance

Cargo
Insurance

Collision Liability
Insurance

Hull & Machinary Insurance

Protection &
Indemnity Ins.

Loss of Income
Insurance

Other Liability
Insurance

Distinction Between Fire & Marine Insurance on

the one hand, and Life Insurance on the other.

Fire Insurance and

Marine Insurance

Life Insurance

1.Certainty of event:
* In case of Fire and Marine
Insurance the event insured
may or may not happen at all

1.Certainty of event:
* The event (death) is
bound to happen sooner
or later.

2.Indemnity:
* The contract of fire and
marine insurance are
contracts of indemnity.

2.Indemnity:
* The sum assured is payable
irrespective of any proof of
loss and to the full extent of
the amount assured in the
event of death of the assured.

Distinction Between Fire & Marine Insurance on

the one hand, and Life Insurance on the other.
3.Valuation of Insurable

interest:
*In fire and marine insurance,
the insurable interest of the
assured must be capable of
valuation in terms of money
4.Time of Insurable Interest:
*In fire insurance, the insurable
interest must be present both at
the time of insurance and at the
time of loss.
In marine insurance, it must be
present at the time of loss.

3.Valuation of Insurable
interest:
*In case of Life insurance,this
is not just possible
4.Time of Insurable Interest:
*In Life insurance, it must exist at
the time of the contract.It need not
be present at the time when the
policy falls due.

Distinction Between Fire & Marine Insurance on

the one hand, and Life Insurance on the other.
5.Duration of Contract of
Insurance:
*A contract of fire insurance is a
contract from year to year.It comes
to an end after the expiry of the
year.Though it can be renewed if
the insured expresses his
willingness to do so and pays the
premium.
*A contract of marine insurance is
for a particular voyage.

5. Duration of Contract of
Insurance:
*A contract of life insurance is a
continuing contract.It lapses if
premium is not paid regularly at
the specified times.

What is Bancassurance?
Distribution of insurance products through a banks
distribution channels.
According to IRDA, bancassurance refers to banks
acting as corporate agents for insurers to distribute
insurance products
Life Insurance Marketing and Research

Associations
insurance
dictionary
defines
bancassurance as the provision of life insurance
services by banking and building societies.

Bancassurance in India
In the year 2002 the banks of India were
permitted to do insurance business for the
first time.
It is regulated by both RBI and IRDA as it is
combination of bank and insurance.
It is a Win-Win Strategy
Example: SBI Life Insurance Company Ltd
has tie up with SBI.

RBI guideline for banks

entering into insurance sector
Joint venture will be allowed for financially
strong banks wishing to undertake insurance
business with risk participation;
For banks which are not eligible for this jointventure option, an investment option of up to
10 % of the net worth of the bank or Rs. 50
crore, whichever is lower, is available.
Any commercial bank will be allowed to
undertake insure business as agent of
insurance companies. This will be on a fee
basis with no-risk participation.

The
Insurance
Regulatory
and
Development
Authority
(IRDA)
guidelines for the bancassurance are:
Each bank that sells insurance must have a
chief insurance executive to handle all the
insurance activities;
All the people involved in selling should
under-go mandatory training at an institute
accredited by IRDA and pass the examination
conducted by the authority;
Commercial banks may become corporate
agents for one insurance company
Banks cannot become insurance brokers.

Bancassurance Sales
Models

Separate Sales Force

Minimum integration between the staff
of the
partners and merely utilize the customer database
for insurance product prospecting.
Hand in Glove
Sales force of the insurer utilizing the resources of
the bank (customer base, brand infrastructure ,
bank staff expertise).
Bank staff sells simply package product, but act as
introducers & in the case of more complex products
the insurers financial planner undertake the
constructive selling process and final lead closure.
High interaction between the bank and insurers
staff.

 Fully Integrated

Insurance sales process is wholly

owned by the bank staff while the
insurer acts only as a product and
service provider.
Exploitation of banks strength and
does not utilize the skills of the
insurer.

Advantage for the Banks

Revenue diversification
Satisfaction of more financial needs under
the same roof
Customer retention-Increase in customer
loyalty
More profitable resource utilization
Enriched work environment
Establish sales oriented culture

Advantage for the Insurance

Companies
Revenue and channel diversification
Quality customer access
Quicker geographical reach creation of brand
equity
Increase in volume and profit
Improved brand equity

Advantage for the

Consumer

Enhanced convenience
One stop shopping for all financial services
Innovative and better product ranges
More credible solution

WHAT IS CLAIM ???

Claim is a right of insured to receive
the amount secured under the policy of
insurance contract promised by Insurer.

Claim Payment

Procedure for Claim settlement

Policy document submission
Age Proof
Internal enquiry
Original Deed of assignment (if any)
Other documents (Receipt of Payment etc)

Claim Procedure
Health Insurance Claim (for non-cashless claims)
Notice of claim should be lodged within 24 hours.
The insured should submit 'discharge summary' of the
hospital/nursing home along with original
hospital/medical bills,reports of the labs and
investigation reports.In other words every item in the
claim bill should be supported.
Leave certificate from the employer, wherever needed.
Fitness certificate from the Doctor

Claim Procedure
Once the documents are received, the
insurer sends a post-dated cheque few days
in advance.
In case, the original policy is reported to be
lost, the matter is examined in detail to
ascertain the genuineness of claim and is
settled on the basis of indemnity and public
notification, if found genuine.

 If an individual has to file his own insurance claim,

the following points should be borne in mind: a) Keep all receipts and arrange them in
chronological order
b) Get the claim form from the insurance company
c) Prepare copies of the original for the purpose of
claim submission
d) Review and dispatch documents
e) Understand the fine print in the policy document

Filling Claim Form

Claim form is then filled which is usually self-explanatory
in nature. In this claim form, queries such as the
individuals health-insurance cover details, reimbursement
of the medical expenses statement details, purpose of
hospitalization, personal details and identification proof
and similar details are asked from the customer.
After filling the necessary details, it must be accompanied
with the relevant documents. These relevant documents
can be further classified into 2 groups:
i) Medical Documents
ii) Policy Documents

FACTORS AFFECTING
THE CLAIM

 The policy should be in force on the date of the

event.
The risk and cause of event should be covered by
the policy.
The cause of loss or the event should be directly
related to the loss. A remote cause has no place in
the settlement.
The loss should not have been caused with an
intention to gain from the situation.

 Sufficient documentary evidence of loss should be

presented along with the application form.
Multiple claims and reciprocal claims will be settled as
per the terms of the contract of insurance.
Presence of insurable interest, in case of the property
insurances, at least at the time of happening of event
or loss sufferings. Without having the insurable
interest in the subject matter, no person can get
benefit or compensation.

GUIDELINES FOR
CLAIMS SETTLEMENT BY
IRDA

 Except in cases of a marine insurance cover, where

current market practices do not insist on a written proposal
form, in all cases, a proposal for grant of a cover, either for
life business or for general business, must be evidenced by
a written document. It is the duty of an insurer to furnish
to the insured free of charge, within 30 days of the
acceptance of a proposal, a copy of the proposal form.
Forms and documents used in the grant of cover may,

depending
upon the circumstances of each case, be made available in
languages recognized under the Constitution of India.
In filling the form of proposal, the prospect is to be guided

by the
provisions of Section 45 of the Act. Any proposal form
seeking
information for grant of life cover may prominently state
therein
the requirements of Section 45 of the Act.

 Where a proposal form is not used, the insurer shall

record the information obtained orally or in writing, and
confirm it within a period of 15 days thereof with the
proposer and incorporate the information in its cover
note or policy.
Wherever the benefit of nomination is available to
the proposer, in terms of the Act or the conditions of
policy, the insurer shall draw the attention of the
proposer to it and encourage the prospect to avail the
facility.
Proposals shall be processed by the insurer with
speed and efficiency and all decisions thereof shall be
communicated by it in writing within a reasonable
period not exceeding 15 days from receipt of proposals
by the insurer.