Most important summery
points exam point of view IC -38 Insurance exam
The idea of insurance
took birth thousands of years ago. Yet, the business of
insurance, as we know it
today, goes back to just two or three centuries.
1. History of insurance
Insurance has been known
to exist in some form or other since 3000 BC. Various
civilisations, over the
years, have practiced the concept of pooling and sharing
among themselves, all
the losses suffered by some members of the community.
Let us take a look at
some of the ways in which this concept was applied.
2. Insurance through the
ages
Babylonian Traders The
Babylonian traders had agreements where they
would pay additional
sums to lenders, as a price for
writing off of their
loans, in case a shipment was lost or
stolen. These were
called ‘bottomry loans’. Under these
agreements, the loan
taken against the security of the
ship or its goods had to
be repaid only if and when the
ship arrived safely,
after the voyage, at its destination.
Traders
Bharuch and Surat
from Practices similar
to Babylonian traders were prevalent
among traders from
Bharuch and Surat, sailing in Indian
ships to Sri Lanka,
Egypt and Greece._
Greeks The Greeks had
started benevolent societies in the late
7th century AD, to take
care of the funeral - and families
- of members who died.
The Friendly Societies of
England were similarly
constituted._
Inhabitants
Rhodes
of The inhabitants of
Rhodes adopted a practice whereby,
if some goods were lost
due to jettisoning1 during
distress, the owners of
goods (even those who lost
nothing) would bear the
losses in some proportion._
Chinese Traders Chinese
traders in ancient days would keep their goods
in different boats or
ships sailing over the treacherous
rivers. They assumed
that even if any of the boats
suffered such a fate,
the loss of goods would be only
partial and not total.
The loss could be distributed and
thereby reduced._
3. Modern concepts of
insurance
In India the principle
of life insurance was reflected in the institution of the
joint-family system in
India, which was one of the best forms of life insurance
down the ages. Sorrows
and losses were shared by various family members in
the event of the
unfortunate demise of a member, as a result of which each
member of the family
continued to feel secure.
The break-up of the
joint family system and emergence of the nuclear
family in the modern
era, coupled with the stress of daily life has made it
Jettisoning means
throwing away some of the cargo to reduce weight of the ship and restore
balance
4
necessary to evolve
alternative systems for security. This highlights the
importance of life
insurance to an individual.
i. Lloyds: The origins
of modern commercial insurance business as
practiced today can be
traced to Lloyd’s Coffee House in London.
Traders, who used to
gather there, would agree to share the losses, to
their goods being
carried by ships, due to perils of the sea. Such losses
used to occur because of
maritime perils, such as pirates robbing on the
high seas, or bad sea
weather spoiling the goods or sinking of the ship
due to perils of the
sea.
ii. Amicable Society for
a Perpetual Assurance founded in 1706 in London
is considered to be the
first life insurance company in the world.
4. History of insurance
in India
a) India: Modern
insurance in India began in early 1800 or thereabouts, with
agencies of foreign
insurers starting marine insurance business.
The Oriental
Insurance Co. Ltd
Life The first life
insurance company to be set up
in India was an English
company_
Triton Insurance Co.
Ltd. The first non-life insurer to be established in
India
Bombay Mutual Assurance
Society Ltd.
The first Indian
insurance company. It was
formed in 1870 in Mumbai
National
Company Ltd.
The oldest insurance
company in India. It was
founded in 1906 and it
is still in business.
Insurance
Many other Indian
companies were set up subsequently as a result of the
Swadeshi movement at the
turn of the century.
Important
In 1912, the Life
Insurance Companies Act and the Provident Fund Act were
passed to regulate the
insurance business. The Life Insurance Companies Act,
1912 made it compulsory
that premium-rate tables and periodical valuation of
companies be certified
by an actuary. However, the disparity and discrimination
between Indian and
foreign companies continued.
The Insurance Act 1938
was the first legislation enacted to regulate the
conduct of insurance
companies in India. This Act, as amended from time
to time continues to be
in force. The Controller of Insurance was
appointed by the
Government under the provisions of the Insurance Act.
b) Nationalisation of
life insurance: Life insurance business was nationalised
on 1st September 1956
and the Life Insurance Corporation of India (LIC)
was formed. There were
170 companies and 75 provident fund societies
doing life insurance
business in India at that time. From 1956 to 1999, the
LIC held exclusive
rights to do life insurance business in India.
5
Summary
• Insurance is risk
transfer through risk pooling.
• The origin of
commercial insurance business as practiced today is traced to
the Lloyd’s Coffee House
in London.
• An insurance
arrangement involves the following entities like:
S Asset,
S Risk,
s Peril,
s Contract,
S Insurer and
s Insured
• When persons having
similar assets exposed to similar risks contribute into a
common pool of funds it
is known as pooling.
• Apart from insurance,
other risk management techniques include:
s Risk avoidance,
s Risk control,
s Risk retention,
Risk financing and
S Risk transfer
• The thumb rules of
insurance are:
•/ Don’t risk more than
you can afford to lose,
s Consider the likely
outcomes of the risk carefully and
S Don’t risk a lot for a
little
Key Terms
1. Risk
2. Pooling
3. Asset
4. Burden of risk
5. Risk avoidance
6. Risk control
7. Risk retention
8. Risk financing
9. Risk transfer
20
Summary
a) The role of customer
service and relationships is far more critical in the case
of insurance than in
other products.
b) Five major indicators
of service quality include reliability, assurance,
responsiveness, empathy
and tangibles.
c) Customer lifetime
value may be defined as the sum of economic benefits
that can be derived from
building a sound relationship with a customer over
a long period of time.
d) The role of an
insurance agent in the area of customer service is absolutely
critical.
e) IRDA has launched an
Integrated Grievance Management System (IGMS)
which acts as a central
repository of insurance grievance data and as a tool
for monitoring grievance
redress in the industry.
f) The Ombudsman, by
mutual agreement of the insured and the insurer can
act as a mediator and
counsellor within the terms of reference.
g) Active listening
involves paying attention, providing feedback and
responding
appropriately.
h) Ethical behaviour involves
placing the customer’s interest before self.
Key terms
a) Quality of service
b) Empathy
c) Integrated Grievance
Management System (IGMS)
d) Customer Protection
Act, 1986
e) District Consumer
Forum
f) Insurance Ombudsman
g) Body language
h) Active listening
i) Ethical behaviour
Answers to Test Yourself
Answer 1
The correct option is
III.
Sum of economic benefits
that can be achieved by building a long term
relationship with the
customer is referred to as customer lifetime value.
50
Summary
• Insurance involves a
contractual agreement in which the insurer agrees to
provide financial
protection against specified risks for a price or
consideration known as
the premium.
• A contract is an
agreement between parties, enforceable at law.
• The elements of a
valid contract include:
i. Offer and acceptance
ii. Consideration,
iii. Consensus ad-idem,
iv. Free consent
v. Capacity of the
parties and
vi. Legality of the
object
• The special features
of insurance contracts include:
i. Uberrima fides,
ii. Insurable interest,
iii. Proximate cause
Key Terms
1. Offer and acceptance
2. Lawful consideration
3. Consensus ad idem
4. Uberrima fides
5. Material facts
6. Insurable interest
7. Proximate cause
101
Summary
a) Insurance in some
form or other existed many centuries ago but its modern
form is only a few
centuries old. Insurance in India has passed through many
stages with government
regulation.
b) Health of its
citizens being very important, governments play a major role in
creating a suitable
healthcare system.
c) Level of healthcare
provided depends on many factors relating to a
country’s population.
d) The three type of
healthcare are primary, secondary and tertiary depending
on the level of medical
attention required. Cost of healthcare rises with
each level with tertiary
care being the costliest.
e) India has its own
peculiar challenges such as population growth and
urbanization which
require proper healthcare.
f) The government was
also the first to come up with schemes for health
insurance followed later
by commercial insurance by private insurance
companies.
g) The health insurance
market is made up of many players some providing the
infrastructure, with
others providing insurance services, intermediaries such
as brokers, agents and
third party administrators servicing health insurance
business and also other
regulatory, educational as well as legal entities
playing their role.
Key terms
a) Healthcare
b) Commercial insurance
c) Nationalization
d) Primary, Secondary
and Tertiary Healthcare
e) Mediclaim
f) Broker
g) Agent
h) Third Party
Administrator
i) IRDAI
j) Ombudsman
122
Summary
a) The first stage of
documentation is the proposal form through which the
insured informs about
herself and what insurance she needs
b) The duty of
disclosure of material information arises prior to the inception
of the policy, and
continues throughout the policy period
c) Insurance companies
usually add a declaration at the end of the Proposal
form to be signed by the
proposer.
d) Elements of a
proposal form usually include:
i. Proposer’s name in
full
ii. Proposer’s address
and contact details
iii. Bank details in
case of health policies
iv. Proposer’s
profession, occupation or business
v. Details and identity
of the subject matter of insurance
vi. Sum insured
vii. Previous and
present insurance
viii.Loss experience
ix. Declaration by the
insured
e) An agent, who acts as
the intermediary, has the responsibility to ensure all
material information
about the risk is provided by the insured to insurer.
f) The process of
scrutinising the proposal and deciding about acceptance is
known as underwriting.
g) In health policies, a
Prospectus is also provided to the insured and he has to
declare in the proposal
that he has read and understood it
h) Premium is the
consideration or amount paid by the insured to the insurer
for insuring the subject
matter of insurance, under a contract of insurance.
i) Payment of premium
can be made by cash, any recognised banking
negotiable instrument,
postal money order, credit or debit card, internet, etransfer,
direct credit or any
other method approved by authority from time
to time.
j) A certificate of
insurance provides proof of insurance in cases where it may
be required
k) The policy is a
formal document which provides an evidence of the contract
of insurance.
1) A warranty is a
condition expressly stated in the policy which has to be
literally complied with
for validity of the contract.
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m) If certain terms and
conditions of the policy need to be modified at the time
of issuance, it is done
by setting out the amendments / changes through a
document called
endorsement.
n) The most important
rule of construction is that the intention of the parties
must prevail and this
intention is to be looked for in the policy itself.
o) Money Laundering
means converting money obtained through criminal means
to legal money and laws
to fight this have been introduced worldwide and in
India
p) An agent has a
responsibility to follow the Know Your Customer guidelines
and obtain documents as
required by these guidelines.
Key Terms
a) Policy form
b) Advance payment of
premium
c) Certificate of
Insurance
d) Renewal notice
e) Warranty
f) Condition
g) Endorsement
h) Money Laundering
i) Know Your Customer
147
Summary
a) A health insurance
policy provides financial protection to the insured person
in the event of an
unforeseen and sudden accident / illness leading to
hospitalization.
b) Health insurance
products can be classified on the basis of number of people
covered under the
policy: individual policy, family floater policy, group
policy.
c) A hospitalization
expenses policy or Mediclaim reimburses the cost of
hospitalization expenses
incurred on account of illness / accident.
d) Pre hospitalization
expenses would be relevant medical expenses incurred
during period up to the
defined number of days (generally 30 days) prior to
hospitalization and will
be considered as part of claim.
e) Post hospitalization
expenses would be relevant medical expenses incurred
during period up to the
defined number of days (generally 60 days) after
hospitalization and will
be considered as part of claim.
f) In a family floater
policy, the family consisting of spouse, dependent
children and dependent
parents are offered a single sum insured which
floats over the entire
family.
g) A hospital daily cash
policy provides a fixed sum to the insured person for
each day of
hospitalization.
h) Critical illness
policy is a benefit policy with a provision to pay a lump sum
amount on diagnosis of
certain named critical illness.
i) High Deductible or
Top-up Covers offer cover for higher sum insured over
and above a specified
chosen amount (called threshold or deductible).
j) The fixed benefits
cover provides adequate cover to the insured person and
also helps the insurer
to effectively price his policy
k) A Personal Accident
(PA) Cover provides compensation in the form of death
and disability benefits
due to unforeseen accidents.
1) Out-patient covers
provide for medical expenses like dental treatments,
vision care expenses,
routine medical examinations and tests etc. that do
not require
hospitalization.
m) A group policy is
taken by a group owner who could be an employer, an
association, a bank’s
credit card division, where a single policy covers the
entire group of
individuals.
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n) Corporate Floater or
Buffer Cover amount helps meet excess expenses over
and above the family sum
insured.
o) Overseas Mediclaim /
Travel Policies provide cover to an individual against
exposure to the risk of
accident, injury and sickness during his stay
overseas.
p) Corporate Frequent
Travelers’ Plan is an annual policy whereby a corporate
takes individual
policies for its executives who frequently make trips outside
India.
q) Many terms used in
health insurance have been standardized by IRDA by
regulation to avoid
confusion especially for the insureds.
Answers to Test Yourself
Answer 1
The correct option is
II.
Though the duration of
cover for pre-hospitalization expenses would vary from
insurer to insurer and
is defined in the policy, the most common cover is for
thirty days
pre-hospitalization.
Answer 2
The correct option is I.
As per IRDA guidelines,
a 30 days grace period is allowed for renewal of
individual health
policies.
Self-Examination
Questions
Question 1
Which of the below
statement is correct with regards to a hospitalization
expenses policy?
I. Only hospitalization
expenses are covered
II. Hospitalization as
well as pre and post hospitalization expenses are covered
III. Hospitalization as
well as pre and post hospitalization expenses are covered
and a lumpsum amount is
paid to the family members in the event of
insured’s death
IV. Hospitalization
expenses are covered from the first year and pre and post
hospitalization expenses
are covered from the second year if the first year is
claim free.
199
Summary
a) Health insurance is
based on the concept of morbidity which is defined as
the risk of a person
falling ill or sick.
b) Underwriting is the
process of risk selection and risk pricing.
c) Underwriting is required
to strike a proper balance between risk and
business thereby
maintaining the competitiveness and yet profitability for
the organisation.
d) Some of the factors
which affect a person’s morbidity are age, gender,
habits, occupation,
build, family history, past illness or surgery, current
health status and place
of residence.
e) The purpose of
underwriting to prevent adverse selection against the insurer
and also ensure proper
classification and equity among risks.
f) The agent is the
first level underwriter as he is in the best position to know
the prospective client
to be insured.
g) The core principles
of insurance are: utmost good faith, insurable interest,
indemnity, contribution,
subrogation and proximate cause.
h) The key tools for
underwriting are: proposal form, age proof, financial
documents, medical
reports and sales reports.
i) Medical underwriting
is a process which is used by the insurance companies
to determine the health
status of an individual applying for health insurance
policy.
j) Non-medical
underwriting is a process where the proposer is not required to
undergo any medical
examination.
k) Numerical rating
method is a process adopted in underwriting, wherein
numerical or percentage
assessments are made on each aspect of the risk.
1) The underwriting
process is completed when the received information is
carefully assessed and
classified into appropriate risk categories.
m) Group insurance is
mainly underwritten based on the law of averages,
implying that when all
members of a standard group are covered under a
group health insurance
policy, the individuals constituting the group cannot
anti-select against the
insurer.
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The above list is only
indicative. Additional information/documents may be
required depending on
specific case details or depending upon claim
settlement
policy/procedure followed by particular insurer.
Test Yourself 5
are paid upfront by
Assistance Company and later claimed
from insurance company.
I. Bail bond cases
II. Personal accident
claims
III. Overseas travel
insurance claims
IV. Untenable claims
Summary
a) Insurance is a
‘promise’ and the policy is a ‘witness’ to that promise. The
occurrence of insured
event leading to a claim under the policy is the true
test of that promise.
b) One of the key rating
parameter in insurance is the claims paying ability of
the insurance company.
c) Customers, who buys
insurance is the primary stakeholder as well as the
receiver of the claim.
d) In Cashless claim a
network hospital provides the medical services based on
a pre-approval from the
insurer / TPA and later submits the documents for
settlement of the claim.
e) In reimbursement
claim, the customer pays the hospital from his own
resources and then files
claim with Insurer / TPA for payment.
f) Claim intimation is
the first instance of contact between the customer and
the claims team.
g) If a fraud is
suspected by insurance company in case of insurance claim, it is
sent for investigation.
Investigation of a claim could be done in-house by an
insurer/TPA or be
entrusted to a professional investigation agency.
h) Reserving refers to
the amount of provision made for all claims in the books
of the insurer based on
the status of the claims.
i) In case of a denial,
the customer has the option, apart from the
representation to the
insurer, to approach the Insurance Ombudsman or the
consumer forums or even
the legal authorities.
281
j) Frauds occur mostly
in hospitalization indemnity policies but Personal
accident policies also
are used to make fraud claims.
k) The TPA provides many
important services to the insurer and gets
remunerated in the form
of fees.
Self-Examination
Questions
Question 1
Who among the following
is considered as primary stakeholder in insurance
claim process?
I. Customers
II. Owners
III. Underwriters
IV. Insurance
agents/brokers
Question 2
Girish Saxena’s
insurance claim was denied by insurance company. In case of a
denial, what is the
option available to Girish Saxena, apart from the
representation to the
insurer?
I. To approach
Government
II. To approach legal
authorities
III. To approach
insurance agent
IV. Nothing could be
done in case of case denial
Question 3
During investigation, of
a health insurance claim presented by Rajiv Mehto,
insurance company finds
that instead of Rajiv Mehto, his brother Rajesh Mehto
had been admitted to
hospital for treatment. The policy of Rajiv Mehto is not a
family floater plan.
This is an example of fraud.
I. Impersonation
II. Fabrication of
documents
III. Exaggeration of
expenses
IV. Outpatient treatment
converted to in-patient / hospitalization
Question 4
Under which of the
following condition, is domiciliary hospitalization is covered
in a health insurance
policy?
The condition of the
patient is such that he/she can be removed to the
Hospital/Nursing Home ,
but prefer not to
282
I.
S The nature of goods
stored/manufactured, i.e., non-hazardous,
hazardous,
extra-hazardous etc.
ii. Marine Insurance
S Method of packing
i.e., whether in single gunny bags or double gunny
bags, whether in new
drums or second hand drums; etc.
S The nature of goods
(e.g. whether the machinery is new or second hand)
iii. Motor Insurance
S Cubic capacity of
engine (private car)
The year of manufacture
S Carrying capacity of a
truck (tonnage)
•S The purpose for which
the vehicle is used
S The geographical area
in which it is used
iv. Personal Accident
Insurance
S The exact nature of
occupation
S Age
•S Height and weight
S Physical disabilities
etc.
v. Health Insurance
S Any operations
undergone
S If suffering from Diabetes
or Hypertension
vi. Common features
S The fact that previous
insurers had rejected the proposal or charged
extra premium, or
cancelled, or refused to renew the policy
S Previous losses
suffered by the proposer
306
Summary
a) The process of
insurance has four elements (asset, risk, risk pooling and an
insurance contract).
b) An asset may be
anything that confers some benefit and is of economic
value to its owner.
c) A chance of loss
represents risk.
d) Condition or
conditions that increase the probability or severity of the loss
are referred to as
hazards.
e) The mathematical
principle, that makes insurance possible is known as
principle of risk
pooling.
f) The elements of a
valid contract include offer and acceptance,
consideration, legality,
capacity of the parties and the agreement between
parties.
g) Indemnity ensures
that the insured is compensated to the extent of his loss
on the occurrence of the
contingent event.
h) Subrogation means the
transfer of all rights and remedies, with respect to
the subject matter of
insurance, from the insured to the insurer.
i) The principle of
contribution implies that if the same property is insured
with more than one
insurance company, the compensation paid by all the
insurers together cannot
exceed the actual loss suffered.
j) All insurance
contracts are based on the principle of Uberrima Fides.
k) The existence of
‘insurable interest’ is an essential ingredient of every
insurance contract and
is considered as the legal pre-requisite for insurance.
1) Proximate cause is a
key principle of insurance and is concerned with how
the loss or damage
actually occurred and whether it is indeed as a result of
an insured peril.
Key terms
a) Asset
b) Risk
c) Hazard
d) Risk pooling
e) Offer and acceptance
f) Lawful consideration
g) Consensus ad idem
h) Uberrima fides
313
Summary
a) The first stage of
documentation is essentially the proposal forms through
which the insured
informs about herself
b) The duty of
disclosure of material information arises prior to the inception
of the policy, and
continues even after the conclusion of the contract
c) Insurance companies
usually add a declaration at the end of the Proposal
form to be signed by the
insurer
d) Elements of a
proposal form include:
i. Proposer’s name in
full
ii. Proposer’s address
and contact details
iii. Proposer’s
profession, occupation or business
iv. Details and identity
of the subject matter of insurance
v. Sum insured
vi. Previous and present
insurance
vii. Loss experience
viii.Declaration by the
insured
e) An agent, who acts as
the intermediary, has the responsibility to ensure all
material information
about the risk is provided by the insured to insurer.
f) The process of
scrutinising the proposal and deciding about acceptance is
known as underwriting.
g) Premium is the
consideration or amount paid by the insured to the insurer
for insuring the subject
matter of insurance, under a contract of insurance.
h) Payment of premium
can be made by cash, any recognised banking
negotiable instrument,
postal money order, credit or debit card, internet, etransfer,
direct credit or any
other method approved by authority from time
to time.
i) A cover note is
issued when preparation of policy is pending or when
negotiations for insurance
are in progress and it is necessary to provide
insurance cover on
provisional basis.
j) Cover notes are used
predominantly in marine and motor classes of business.
k) A certificate of
insurance provides existence of insurance in cases where
proof may be required
l) The policy is a
formal document which provides an evidence of the contract
of insurance.
342
m) A warranty is a
condition expressly stated in the policy which has to be
literally complied with
for validity of the contract.
n) If certain terms and
conditions of the policy need to be modified at the time
of issuance, it is done
by setting out the amendments / changes through a
document called
endorsement.
o) The most important
rule of construction is that the intention of the parties
must prevail and this
intention is to be looked for in the policy itself.
Key Terms
a) Policy form
b) Advance payment of
premium
c) Cover note
d) Certificate of
Insurance
e) Renewal notice
f) Warranty
343
By loading the premium
the higher probability of claims or occurrence of
large claims is taken
into consideration.
Example
i. Normal rate of
premium is charged for cargo shipped by liners or other
vessels, which comply
with the prescribed standards. However, if an over¬
aged or under-tonnage
vessel ships the cargo then extra premium is
charged.
ii. In personal accident
insurance if the insured is engaged in hazardous
pursuits like
mountaineering, racing on wheels, big game hunting etc. extra
premium is charged.
iii. In health insurance
if there are adverse features at the time of
underwriting, it can
also lead to loading of premium.
Sometimes loading of
premium is also done for adverse claims ratio, as in case
of motor insurance or
health insurance policies.
As per the recent
regulation of IRDAI Individual claim based loading cannot be
applied. Loading can
only be applied to the overall portfolio, based on objective
criteria.
b) Imposition of
warranties
Insurers incorporate
appropriate warranties to reduce the physical hazard.
Some examples are
provided below.
Example
i. Marine cargo
A warranty is inserted
to the effect that goods (e.g. Tea) are packed in tin lined
cases.
ii. Burglary
It is warranted that the
property is guarded by a watchman for twenty four
hours.
iii. Fire
In fire insurance, it is
warranted the premises would not be used beyond normal
working hours.
iv. Motor
It is warranted that the
vehicle will not be used for speed testing or racing.
369
D. Sum Insured
It’s the maximum amount
that an insurance company will indemnify as per
policy condition. An
insured has to be very careful in choosing the limit of
indemnity, for that is
the maximum amount that would be reimbursed at the
time of claim.
The sum insured is
always fixed by the insured and is the limit of liability under
the policy. It is an
amount on which rate is applied to arrive at the premium
under the policy.
It should be
representative of the actual value of the property. If there is over
insurance, no benefit
accrues to the insured and in case of under insurance, the
claim gets
proportionately reduced.
1. Deciding the sum
insured
Under each class of
business the insured should be advised of the following
points which have to be
borne in mind while deciding the sum insured:
a) Personal accident
insurance: The sum insured offered by a company
can be a fixed amount or
it can also be based on the insured’s income.
Some insurance companies
may give a benefit equal to 60 times or 100
times of the insured’s
monthly income for a particular disability. There
could be an upper limit
or ‘cap’ on the maximum amount.
Compensations can vary
from company to company. In group personal
accident policies the
sum insured may be fixed separately for each
insured person or may be
linked to emoluments payable to the insured
person.
b) Health insurance: The
sum insured is available within a certain range. It
depends on the age
bracket too. Let us say for age group of 25 -40 years
the insurer may offer a
sum insured of 10 lakhs or higher and for age
group of 3 months to 5
years it could be 2 lakhs or so.
c) Motor insurance: In
case of motor insurance the sum insured is the
insured's declared value
[IDV]. It is the value of the vehicle, which is
arrived at by adjusting
the current manufacture's listed selling price of
the vehicle with
depreciation percentage as prescribed in the IRDA
regulations.
Manufacturer's listed selling price will include local duties /
taxes excluding
registration and insurance.
IDV = (Manufacturer’s
listed selling price - depreciation) + (Accessories that
are not included in
listed selling price-depreciation) and excludes
registration and
insurance costs.
The IDV of vehicles that
are obsolete or aged over 5 years is calculated by
mutual agreement between
insurer and the insured. Instead of depreciation,
IDV of old cars is
arrived at by assessment of vehicle’s condition done by
surveyors, car dealers
etc.
IDV is the amount of
compensation given in case a vehicle is stolen or suffers
total loss. It is highly
recommended to get IDV which is near the market
375
value of the car.
Insurers provide a range of 5% to 10% to decrease IDV to
the insured. Less IDV
would mean lesser premium.
d) Fire insurance
In fire insurance the
sum insured may be fixed on the basis of market value
or reinstatement value
for buildings / plant and machinery and fixtures.
Contents are covered on
the basis of their market value which is cost of the
item less depreciation.
e) Stocks insurance
In case of stocks, sum
insured is their market value. The insured will be
reimbursed at the cost
at which these stocks can be purchased in the market
to replace the damaged
raw material, after the loss.
f) Marine cargo
insurance
It is an agreed valued
policy and the sum insured is as per the agreement
between insurer and
insured at the time of contract. Normally it would
consist of the sum of
cost of the commodity plus Insurance + freight i.e. CIF
value.
g) Marine hull insurance
In marine hull
insurance, the sum insured is the value, agreed between the
insured and the insurer
at the beginning of the contract. This value would be
arrived at by a
certified valuer after an inspection of the hull/ship.
h) Liability insurance
In case of liability
policies, the sum insured is the liability exposure of the
industrial units based
on the degree of exposure, geographical spread.
Additional legal costs
and expenses may also form part of claim
compensation. The sum
insured is decided by the insured based on the
above parameters.
Test Yourself 4
Suggest an insurance
scheme for a doctor to protect him from any claims of
negligence against him.
I. Personal accident
insurance
II. Liability insurance
III. Marine hull
insurance
IV. Health insurance
376
Summary
a) Process of
classifying risks and deciding into which category they fall is
important for rate
making.
b) Underwriting is the
process of determining whether a risk offered for
insurance is acceptable,
and if so, at what rate, terms and conditions the
insurance cover will be
accepted.
c) A rate is the price
of a given unit of insurance.
d) The basic objective
of rate making is to ensure that price of insurance
should be adequate and
reasonable.
e) ‘Pure premium’ is
suitably loaded or increased by adding percentages to
provide for expenses,
reserves and profits.
f) The term hazard in
insurance language refers to those conditions or features
or characteristics which
create or increase the chance of loss arising from a
given peril.
g) The objective of
imposing deductible / excess clauses is to eliminate small
claims.
h) No claim bonus is a
powerful strategy to improve underwriting experience
and forms an integral
part of rating systems.
i) Sum insured is the
maximum amount that an insurance company will
indemnify as per policy
condition.
Key terms
a) Underwriting
b) Rate making
c) Physical hazards
d) Moral hazards
e) Indemnity
f) Benefit
g) Loading of premium
h) Warranties
i) Deductibles
j) Excess
377
Summary
a) A householder’s
insurance policy only provides coverage on losses incurred
to an insured property
from hazards or events named in the policy. The
perils covered will be
clearly spelt out.
b) Householder’s
insurance covers the structure and its contents against fire,
riots, bursting of
pipes, earthquakes etc. Apart from the structure, it covers
the contents against
burglary, housebreaking, larceny and theft.
c) Package or umbrella
covers give, under a single document, a combination of
covers.
d) For a householder’s
insurance policy generally there are two methods of
fixing the sum insured:
Market Value (MV) and Reinstatement Value (RIV).
e) Shopkeeper’s
insurance usually covers damage to the shop structure and
contents due to fire,
earthquake, flooding or malicious damage; and
burglary. Shop insurance
can also include business interruption protection.
f) Motor insurance
covers the loss of vehicles and the damages to them due to
accidents and some other
reasons. Motor insurance also covers the legal
liability of vehicle
owners to compensate the victims of the accidents
caused by their
vehicles.
Key terms
a) Householder’s
insurance
b) Shopkeeper’s
insurance
c) Motor insurance
394
G. Jewelers’ Block
Policy
In recent years India
has emerged as a leading center in world trade for
jewelry, especially
diamonds. Imported raw diamonds are cut, polished and
exported. It takes care
of all risks of a jeweler whose business involves sale of
articles of high value
in small bulk like jewelry gold & silver articles, diamonds
and precious stones,
wrist watches etc. The trade involves stocking these
expensive items in large
quantity and moving them between different premises.
1. Coverage of Jeweler’s
Block Policy
Jewelers block policy
covers such risks. It is divided into four sections.
Coverage under Section 1
is compulsory. The insured can avail of other sections
at her option. It’s a
package policy.
a) Section I: Covers
loss of or damage to property whilst in the premises
insured, as a result of
fire, explosion, lightning burglary, house-breaking,
theft, hold-up, robbery,
riot, strikes and malicious damage and
terrorism.
b) Section II: Covers
loss or damage whilst the property insured is in the
custody of the insured and
other specified persons.
c) Section III: Covers
loss or damage whilst such property is in transit by
registered insured
parcel post, air freight etc.
d) Section IV: Provides
cover for trade and office furniture and fittings in
the premises against the
perils specified in Section I.
Each section is
separately rated for calculating premium.
2. Important exclusions
are:
a) Dishonesty of agents,
cutters, goldsmiths,
b) Property kept during
public exhibition
c) Lost whilst being
worn / carried for personal purpose
d) Property not kept in
safe outside business hours
e) Property kept in
display windows at night
f) Loss due to
infidelity of employees or members of the insured family is
not covered.
Fidelity guarantee cover
should also be taken by the insured for full
protection.
3. Premium
Risks are rated on
merits of each case. Different premium rates are applied for
each section with
discounts for exclusive round the clock watchman, close
412
Summary
a) Fire insurance policy
is suitable for commercial establishments as well as for
the owner of property,
and for individuals / financial institutions who have
financial interest in
the property.
b) Variants of fire
policy include:
v' Market value basis policy
Rreinstatement value
policies
S Declaration policy
s Floater policy
c) Consequential Loss
(CL) Policy or Business Interruption (Bl) policy provides
indemnity for loss of
what is termed as gross profit - which includes Net
Profit plus Standing
Charges along with the increased cost of working
incurred by the insured
to get the business back to normalcy, as soon as
possible to reduce the
final loss.
d) Burglary policy is
meant for business premises like factories, shops, offices,
warehouses and go-downs
which may contain stocks, goods, furniture
fixtures and cash in a
locked safe which can be stolen.
e) Money insurance
policy is designed to cover the losses that may occur while
cash cheques/postal
orders/postal stamps are being handled.
f) Money insurance
policy provides cover under two sections: transit section
and premises section.
g) Fidelity guarantee
insurance indemnifies employers against the financial loss
suffered by them due to
fraud or dishonesty of their employees by forgery,
embezzlement, larceny,
misappropriation and default.
h) Types of fidelity
guarantee policy include: individual policy, collective
floating policy,
positions policy and blanket policy.
i) Bankers indemnity
policy is a comprehensive cover, drafted for the banks,
NBFC's and other
institutions who deal with operations involving money,
considering the special
risks faced by them regarding money and securities.
j) The major policies
that fall under engineering insurance include:
S Contractors All Risks
Policy
S Contractors Plant
& Machinery Policy
Erection All Risks
Policy
Machinery Breakdown
Policy
v' Boiler and Pressure
Plant Policy
s Machinery Loss of
Profits Policy
S Deterioration of Stock
Policy
Electronic Equipment
Policy
S Advance Loss of Profit
Cover
426
k) The Industrial All
Risks Policy was designed to cover, industrial properties -
both manufacturing and
storage facilities, anywhere in India under one
policy.
1) Marine insurance is
classified into: marine cargo and marine hull.
m) Cargo policies are essentially
voyage policies, i.e. they cover the subject
matter from one place to
another.
n) Different types of
marine policies include:
s Specific policy
•S Open policy
S Open cover
•S Duty and increased
value insurance
•S Delay in start up
o) Marine hull covers
are essentially of two types: covering a particular voyage
and covering a period of
time.
p) A public liability
policy covers liability arising out of fault / negligence of
the insured causing
third party personal injury or property destruction.
q) Product liability
policies cover liability of the insured related to defect in
the product causing
death, bodily injury or illness or even damage to the
property of third
parties.
r) Professional
indemnities are designed to provide insurance protection to
professional people
against their legal liability to pay damages arising out of
negligence in the
performance of their professional duties.
Key Terms
a) Fire insurance of
Property
b) Burglary insurance
c) Money insurance
d) Fidelity guarantee
insurance
e) Bankers’ indemnity
insurance
f) Jewelers block policy
g) Engineering insurance
h) Industrial All risk
insurance
i) Marine insurance
j) Hull insurance
k) Liability policy
427
Summary
a) Settling claims
professionally is regarded as the biggest advertisement for an
insurance company.
b) Policy conditions
provide that the loss be intimated to the insurer
immediately.
c) If the claim amount
is small, the investigation to determine the cause and
extent of loss is done
by an officer of the insurer. But for other claims it is
entrusted to independent
licensed professional surveyors who are specialists
in loss assessment.
d) In general the claim
form is designed to get full information regarding the
circumstances of the
loss, such as date of loss, time, cause of loss, extent of
loss, etc.
e) Claims assessment is
the process of determining whether the loss suffered
by the insured is caused
by the insured peril that there is no breach of
warranty, the quantum of
loss suffered by the insured and the insurers
liability under the
policy.
f) Settlement of the
claim is made only after obtaining a discharge under the
policy.
g) Arbitration is a
method of settling disputes arising out of contracts.
Key terms
a) Intimation of loss
b) Investigation and
Assessment
c) Surveyors and Loss
Assessors
d) Claim forms
e) Adjustment and
Settlement
f) Disputes in claim
settlement
g) Arbitration
448
J. Micro insurance and
health insurance for poorer sections
Micro-insurance products
are specifically designed to aim for the protection of
low income people from
rural and informal sectors. The low income people
form a sizable part of
our population and usually don’t have any health security
cover. Therefore, this
low value product, with an affordable premium and
benefit package, is
initiated to help these people to cope with and recover from
common risks. Micro
insurance is governed by the IRDA Micro Insurance
Regulations, 2005.
These products come with
a small premium and typically, the sum insured is
below Rs.30,000, as
required vide the IRDA micro-insurance regulations, 2005.
Such covers are mostly
taken on a group basis by various community
organizations or
non-governmental organizations (NGOs) for their members. The
IRDA’s rural and social
sector obligations also require that insurers should sell a
defined proportion of
their policies as micro-insurance products, to enable
wider reach of
insurance.
Two policies
particularly created by PSUs to cater to the poorer sections of
society are described
below:
1. Jan Arogya Bima
Policy
Following are the
features of Jan Arogya Bima Policy:
a. This policy is
designed to provide cheap medical insurance to poorer
sections of the society.
b. The coverage is along
the lines of the individual Mediclaim policy.
Cumulative bonus and
medical check-up benefits are not included.
c. The policy is
available to individuals and family members.
d. The age limit is five
to 70 years.
e. Children between the
age of three months and five years can be covered
provided one or both
parents are covered concurrently.
f. The sum insured per
insured person is restricted to Rs.5,000 and the
premium payable as per
the following table.
Table 2.1
Age of the person
insured Up to 46
years
46-55 56-65 66-70
Head of the family 70
100 120 140
Spouse 70 100 120 140
Dependent child up to 25
years 50 50 50 50
For family of 2+1
dependent child 190 250 290 330
For family of 2+2
dependent 240 300 340 380
174
children
• Premium qualifies for
tax benefit under Section 80D of the Income Tax Act.
• Service tax is not
applicable to the policy.
2. Universal Health
Insurance Scheme (UHIS)
This policy is available
to groups of 100 or more families. In recent times even
individual UHIS Policies
were made available to the public.
Benefits
Following is the list of
benefits of universal health insurance scheme:
•Medical reimbursement
The policy provides
reimbursement of hospitalization expenses up to
Rs.30,000 to an
individual / family subject to the following sub limits.
Table 2.2
Particulars Limit
Room, boarding expenses
Up to Rs.150/- per day
If admitted in ICU Up to
Rs.300/- per day
Surgeon, Anaesthetist,
Consultant, Specialists
fees, Nursing expenses_
Up to Rs.4,500/- per
illness/
injury
Anaesthesia, Blood,
Oxygen, OT charges,
Medicines, Diagnostic
material and X-Ray,
Dialysis, Radiotherapy,
Chemotherapy, Cost of
pacemaker, Artificial
limb, etc.
Up to Rs.4,500/- per
illness/
injury
Total expenses incurred
for any one illness Up to Rs. 15,000/-
•Personal accident cover
Coverage for death of
the earning head of the family (as named in the
schedule) due to
accident: Rs.25,000/-.
•Disability cover
If the earning head of
the family is hospitalised due to an accident / illness
compensation of Rs. 50/-
per day will be paid per day of hospitalisation up to
a maximum of 15 days
after a waiting period of three days.
•Premium
Table 2.3
Entity Premium
For an individual
Rs.365/- per annum
For a family up to five
(including the first
three children)
Rs.548/- per annum
175
For a family up to seven
(including the first
three children and
dependent parents)_
Rs.730/- per annum
Premium subsidy for BPL
families For families below the poverty line
the Government will
provide a
premium subsidy._
176
K. Rashtriya Swasthya
Bima Yojana
The government has also
launched various health schemes, some of them
applicable to particular
states. To extend the reach of health benefits to the
masses, it has
implemented the Rashtriya Swasthya Bima Yojana in association
with insurance
companies. RSBY has been launched by the Ministry of Labour
and Employment,
Government of India, to provide health insurance coverage for
the below poverty line
(BPL) families.
Following are the
features of Rashtriya Swasthya Bima Yojana:
a. Total sum insured of
Rs. 30,000 per BPL family on a family floater basis.
b. Pre-existing diseases
to be covered.
c. Coverage of health
services related to hospitalization and services of
surgical nature which
can be provided on a day-care basis.
d. Cashless coverage of
all eligible health services.
e. Provision of smart
card.
f. Provision of pre and
post hospitalization expenses.
g. Transport allowance
of Rs.100/- per visit.
h. The Central and State
Government pays the premium to the insurer.
i. Insurers are selected
by the State Government on the basis of a competitive
bidding.
j. Choice to the
beneficiary between public and private hospitals.
k. Premium to be borne
by the Central and State governments in the
proportion of 3:1.
Central Government to contribute a maximum amount of
Rs. 565/- per family.
1. Contribution by the
State Governments: 25 percent of the annual premium
and any additional
premium beyond Rs 750.
m. Beneficiary to pay
Rs. 30/- per annum as registration fee/ renewal fee.
n. Administrative cost
to be borne by the State Government.
o. Cost of smart card
additional amount of Rs. 60/- per beneficiary would be
available for this
purpose.
p. The scheme shall
commence operation from the first of the month after the
next month from the date
of issue of smart card. Thus, if the initial smart
177
cards are issued anytime
during the month of February in a particular
district, the scheme
will commence from 1st of April.
q. The scheme will last
for one year till 31st March of next year. This would be
the terminal date of the
scheme in that particular district. Thus, cards
issued during the
intervening period will also have the terminal date as 31st
March of the following
year.
Claim settlement to be
done through TPA’s mentioned in the schedule or by
the insurance company.
The settlement is to be made cashless as far as
possible through listed
hospitals.
Any one illness will be
deemed to mean continuous period of illness and it
includes relapse within
60 days from the date of last consultation with the
hospital.
178
L. Pradhan Mantri
Suraksha Bima Yojana
The recently announced
PMSBY covering personal accident death and
disability cover
insurance has attracted lot of interest and the scheme
details are as under:
Scope of coverage: All
savings bank account holders in the age 18 to 70
years in participating
banks are entitled to join. Participating banks must tie
up with any approved
non-life insurer who will offer a Master Policy to such
bank for the cover. Any
person would be eligible to join the scheme through
one savings bank account
only and if he enrols in more than one bank, he
gets no extra benefit
and the extra premium paid will stand forfeited.
Aadhar would be the
primary KYC for the bank account.
Enrollment Modality /
Period: The cover shall be for the one year period
from 1st June to 31st
May for which option to join / pay by auto-debit from
the designated savings
bank account on the prescribed forms will be
required to be given by
31st May of every year, extendable up to 31st August
2015 in the initial
year. Initially on launch, the period for joining may be
extended by Govt, of
India for another three months, i.e. up to 30th of
November, 2015.
Joining subsequently on
payment of full annual premium may be possible on
specified terms.
Applicants may give an indefinite / longer option for
enrolment / auto-debit,
subject to continuation of the scheme with terms as
may be revised on the
basis of past experience. Individuals who exit the
scheme at any point may
re-join the scheme in future years through the
above modality. New
entrants into the eligible category from year to year or
currently eligible
individuals who did not join earlier shall be able to join in
future years while the
scheme is continuing.
Benefits under the
insurance are as follows:
Table of Benefits Sum
Insured
Death Rs. 2 Lakh
Total and irrecoverable
loss of both
eyes or loss of use of
both hands or
feet or loss of sight of
one eye and
loss of use of hand or
foot
Rs. 2 Lakh
Total and irrecoverable
loss of sight of
one eye or loss of use
of one hand or
foot
Rs. 1 Lakh
Joining and Nomination
facility is available by sms, email or personal visit.
Premium: Rs.12/- per
annum per member. The premium will be deducted
from the account
holder’s savings bank account through ‘auto debit’ facility
in one instalment on or
before 1st June of each annual coverage period.
However, in cases where
auto debit takes place after 1st June, the cover
179
shall commence from the
first day of the month following the auto debit.
Participating banks will
deduct the premium amount in the same month
when the auto debit
option is given, preferably in May of every year, and
remit the amount due to
the Insurance Company in that month itself.
The premium would be
reviewed based on annual claims experience but
efforts would be made to
ensure that there is no upward revision of
premium in the first
three years.
Termination of cover:
The accident cover for the member shall terminate:
1. On member attaining
the age of 70 years (age nearest birth day) or
2. Closure of account
with the Bank or insufficiency of balance to keep the
insurance in force or
3. In case a member is
covered through more than one account, insurance
cover will be restricted
to one only and the other cover will terminate
while the premium shall
be forfeited.
If the insurance cover
is ceased due to any technical reasons such as
insufficient balance on
due date or due to any administrative issues, the
same can be reinstated
on receipt of full annual premium, subject to
conditions that may be
laid down. During this period, the risk cover will be
suspended and
reinstatement of risk cover will be at the sole discretion of
Insurance Company.
180
M. Pradhan Mantri Jan
Dhan Yojana
This financial inclusion
campaign for Indian citizens in Banking Savings St Deposit
Accounts, Remittance,
Credit, Insurance and Pension in an affordable manner
was launched by the
Prime Minister of India, Narendra Modi on 28 August 2014
as announced on his
first Independence Day speech on 15 August 2014. This
scheme has set a world
record in bank account opening during any one week.
Aimed at including
maximum number of people in the banking mainstream
An account can be opened
in any bank branch or Business Correspondent (Bank
Mitra) outlet. PMJDY
accounts are being opened with Zero balance. However, if
the account-holder
wishes to get cheque book, he/she will have to fulfill
minimum balance
criteria.
Special Benefits under
PMJDY Scheme
1. Interest on deposit.
2. Accidental insurance
cover of Rs.1.00 lac
3. No minimum balance
required.
4. Life insurance cover
of Rs.30,000/-
5. Easy Transfer of
money across India
6. Beneficiaries of
Government Schemes will get Direct Benefit Transfer in
these accounts.
7. After satisfactory
operation of the account for 6 months, an overdraft
facility will be
permitted
8. Access to Pension,
insurance products.
9. Accidental Insurance
Cover
10. RuPay Debit Card
which must be used at least once in 45 days.
11. Overdraft facility
upto Rs.5000/- is available in only one account per
household, preferably
lady of the household.
As on 13th May 2015, a
record 15.59 Crore accounts have been opened with a
balance in account of
Rs. 16,918.91 Crores. Of these, 8.50 Crore accounts
have been opened with
zero balance.
181
N. Personal Accident and
disability cover
A Personal Accident (PA)
Cover provides compensation due to death and
disability in the event
of unforeseen accident. Often these policies provide
some form of medical
cover along with the accident benefit.
In a PA policy, while
the death benefit is payment of 100% of the sum insured,
in the event of
disability, compensation varies from a fixed percentage of the
sum insured in the case
of permanent disability to weekly compensation for
temporary disablement.
Weekly compensation
means payment of a fixed sum per week of disablement
subject to a maximum
limit in terms of number of weeks for which the
compensation would be
payable.
1. Types of disability
covered
Types of disability
which are normally covered under the policy are:
i. Permanent total
disability (PTD): means becoming totally disabled for
lifetime viz. paralysis
of all four limbs, comatose condition, loss of both
eyes/ both hands/ both
limbs or one hand and one eye or one eye and
one leg or one hand and
one leg,
ii. Permanent partial
disability (PPD): means becoming partially disabled
for lifetime viz. loss
of fingers, toes, phalanges etc.
iii. Temporary total
disability (TTD): means becoming totally disabled for a
temporary period of
time. This section of cover is intended to cover the
loss of income during
the disability period.
The client has choice to
select only death cover or death plus permanent
disablement of Or Death
plus permanent disablement and also temporary
total disablement.
2. Sum insured
Sums insured for PA
policies are usually decided on the basis of gross monthly
income. Typically, it is
60 times of the gross monthly income. However, some
insurers also offer on
fixed plan basis without considering the income level. In
such policies sum
insured for each section of cover varies as per the plan opted.
3. Benefit plan
Being a benefit plan, PA
policies do not attract contribution. Thus, if a person
has more than one policy
with different insurers, in the event of accidental
death, PTD or PPD,
claims would be paid under all the policies.
182
4. Scope of cover
These policies are often
extended to cover medical expenses, which reimburses
the hospitalization and
other medical costs incurred following the accident.
Today we have health
policies which are issued to cover medical/
hospitalization expenses
incurred consequent to an accident. Such policies do
not cover diseases and
their treatment and instead cover only accident related
medical costs.
5. Value added benefits
Along with personal
accident, many insurers also offer value added benefits like
hospital cash on account
of hospitalization due to accident, cost of
transportation of mortal
remains, education benefit for a fixed sum and
ambulance charges on the
basis of actual or fixed limit whichever is lower.
6. Exclusions
Common exclusions under
personal accident cover are:
i. Any existing
disability prior to the inception of policy
ii. Death or disability
due to mental disorders or any sickness
iii. Directly or
indirectly caused by venereal disease, sexually transmitted
diseases, AIDS or
insanity.
iv. Death or disability
caused by radiation, infection, poisoning except
where these arise from
an accident.
v. Any injury arising or
resulting from the Insured or any of his family
members committing any
breach of law with criminal intent.
vi. Death or disability
or Injury due to accidental injury arising out of or
directly or indirectly
connected with or traceable to war, invasion, act
of foreign enemy,
hostilities (whether war be declared or not), civil war,
rebellion, revolution,
insurrection, mutiny, military or usurped power,
seizure, capture,
arrests, restraints and detainments.
vii. In the event the
insured person is a victim of culpable homicide, i.e.
murder. However, in most
policies, in case of murder where the insured
is not himself involved
in criminal activity, it is treated as an accident
and covered under the
policy.
viii.Death/Disablement/Hospitalization
resulting, directly or indirectly,
caused by, contributed
to or aggravated or prolonged by child birth or
from pregnancy or in
consequence thereof.
183
ix. While the
Insured/Insured Person is participating or training for any sport
as a professional,
serving in any branch of the Military or Armed Forces
of any country, whether
in peace or war.
x. Intentional
self-injury, suicide or attempted suicide (whether sane or
insane)
xi. abuse of intoxicants
or drugs and alcohol
xii. whilst engaging in
aviation or ballooning, whilst mounting into,
dismounting from or
travelling in any aircraft or balloon other than as a
passenger (fare paying
or otherwise) in any duly licensed standard type
of aircraft anywhere in
the world
Certain policies also
exclude loss arising out of driving any vehicle without a
valid driving license.
PA policies are offered
to individuals, family and also to groups.
Family Package Cover
Family package cover may
be granted on the following pattern:
• Earning member
(Persons Insured) and Spouse, if earning:
Independent capital sum
insured for each, as desired, within usual
limitations as in
individual.
• Spouse (if not earning
member): usually 50 percent of the capital sum
insured of the earning
member. This may be limited to a specified upper
limit e.g. Rs.1,00,000
or Rs. 3,00,000.
• Children (between the
age of 5 years and 25 years): usually 25 percent
of the capital sum
insured of the earning parent subject to a specified
upper limit e.g. Rs.
50,000 per child.
Group Personal Accident
Policies
Group Personal Accident
Policies are usually annual policies only renewal being
allowed on anniversary.
However, non-life and standalone health insurers may
offer group personal
accident products with term less than one year also to
provide coverage to any
specific events.
Following are different
types of group policies:
• Employer and Employee
relationship
These policies are
granted to firms, association etc. to cover:
• Named employees
184
• Unnamed employees
• Non Employer-Employee
relationship
These policies are
granted to associations, societies, clubs, etc. to
cover:
• Named members
• Members not identified
by name
(Note: Employees may be
covered separately)
Broken bone policy and
compensation for loss of daily activities
This is a specialised PA
policy. This policy is designed to provide cover against
listed fractures.
i. Fixed benefit or
percentage of sum insured mentioned against each
fracture is paid at the
time of claim.
ii. Quantum of benefit
depends on the type of bone covered and nature of
fracture sustained.
iii. To illustrate
further, compound fracture would have higher percentage
of benefit than simple
fracture. Again, percentage of benefit for femur
bone (thigh bone) would
have higher percentage over benefit of finger
bone.
iv. The policy also
covers fixed benefit defined in the policy for loss of daily
activities viz. eating,
toileting, dressing, continence (ability to hold
urine or stools) or
immobility so that insured can take care of cost
associated to maintain
his/her life.
v. It also covers
hospital cash benefit and accidental death cover.
Different plans are
available with varying sums insured and benefit
payout.
