history & practice of ins. bit 87

8/8/2019 History & Practice of Ins. BIT 87

1/111

History of insuranceHistory of insuranceand conceptsand concepts

Insurance: A promise of compensationInsurance: A promise of compensationfor specific potential future losses infor specific potential future losses in

exchange of a consideration.exchange of a consideration.


2/111

INSURANCEINSURANCE- - H ISTORY H ISTORY

T rade across various continents and countries has been T rade across various continents and countries has been prevailing since ancient T imes prevailing since ancient T imes

I t appears that in 3000 B. C ., C hinese merchants shippedI t appears that in 3000 B. C ., C hinese merchants shippedtheir goods by boats on rivertheir goods by boats on river -- w ays using the current of w ays using the current of w ater. w ater.

T he goods of various merchants used to be distributed in T he goods of various merchants used to be distributed in

different boats so that if any of the boats crashed againstdifferent boats so that if any of the boats crashed againstrocks or capsized in sloping do w n w aters, then the loss isrocks or capsized in sloping do w n w aters, then the loss isshared by all rather than falling on a single individual.shared by all rather than falling on a single individual.


3/111

INSURANCE H ISTORY .INSURANCE H ISTORY .

A bout 500 yrs later came the concept of transfer of risk from A bout 500 yrs later came the concept of transfer of risk frommerchants tomerchants to Babylonian money lendersBabylonian money lenders w ho charged w ho chargedhigher interest to buyer to purchase the goods for export.higher interest to buyer to purchase the goods for export.

E xporters faced loss or damage to cargo/ ships by sinkingE xporters faced loss or damage to cargo/ ships by sinkingof ship, w eather damage, accidents, attack by pirates in theof ship, w eather damage, accidents, attack by pirates in thehigh seas, etc. adversely affecting the business.high seas, etc. adversely affecting the business.

T he moneylenders gave loan at higher rate of interest T he moneylenders gave loan at higher rate of interestagainst theagainst the

Pledging of ship (bottomry contracts)Pledging of ship (bottomry contracts)Pledging the goods (respondentia contracts)Pledging the goods (respondentia contracts)T he loan money is to be T he loan money is to be paid back only if the journey paid back only if the journey w as completed. w as completed. I n case the ship or cargo is lost at seaI n case the ship or cargo is lost at seathe moneylender agreed to cancel/ w aive the loan.the moneylender agreed to cancel/ w aive the loan.


4/111


A round 300 B. C . the Greek and R oman Burial and A round 300 B. C . the Greek and R oman Burial andBenevolent societies called C ollegia provided help inBenevolent societies called C ollegia provided help inmeeting the burial expenses to w ido w s and orphans.meeting the burial expenses to w ido w s and orphans.Later these C ollegia developed into guilds w hich issuedLater these C ollegia developed into guilds w hich issued

contracts to member for payment in the event of death,contracts to member for payment in the event of death,disability or sickness.disability or sickness.Marine I nsurance is the oldest of the modern branches of Marine I nsurance is the oldest of the modern branches of insurance, appears to have been started in I taly sometimeinsurance, appears to have been started in I taly sometimein the 13in the 13 thth century and spread to other parts of the w orld.century and spread to other parts of the w orld.Lombard merchant of N orthern I taly, w ho came toLombard merchant of N orthern I taly, w ho came toE ngland issued marine insurance on 20.9.1547E ngland issued marine insurance on 20.9.1547


5/111


S hipS hip -- o w ner or cargo o w nero w ner or cargo o w ner used to w rite the descriptionused to w rite the description of of thethe ship or the cargoship or the cargo as the case may be on a sheet of paperas the case may be on a sheet of paper w ith w ith details of goods/ship, destinationdetails of goods/ship, destination and other relatedand other relatedinformation.information.T hose w ho agreed to accept a portion of the risk w rote their T hose w ho agreed to accept a portion of the risk w rote theirnames under the description of the risks and put theirnames under the description of the risks and put theirterms of the agreement. T his is ho w the termterms of the agreement. T his is ho w the term under w riterunder w ritercame into being.came into being.

S hipS hip -- o w ners seeking insurance and the individuals w hoo w ners seeking insurance and the individuals w hoorganized themselves into groups of under w riters found theorganized themselves into groups of under w riters found thecoffee houses of London convenient meeting places.coffee houses of London convenient meeting places.


6/111

INSURANCE H ISTORY INSURANCE H ISTORY

I n early 1688I n early 1688 one of the coffee houses o w ned by E d w ard Lloydone of the coffee houses o w ned by E d w ard Lloyd , soon, soonbecame the leading meeting place as it provided facilities tobecame the leading meeting place as it provided facilities tounder w riters. U nder w riters later entered into agreement w ith Lloyds tounder w riters. U nder w riters later entered into agreement w ith Lloyds tocreate Lloyds E xchange.create Lloyds E xchange.

Modern marine insuranceModern marine insurance had its origin in 1779 AD . Lloyds w ere thehad its origin in 1779 AD . Lloyds w ere the pioneers having issued S .G. (ship & Goods) policy forms pioneers having issued S .G. (ship & Goods) policy formsBy 1894 the London Market became dominating the marine insurance,By 1894 the London Market became dominating the marine insurance,it excluded w ar risk from the coverageit excluded w ar risk from the coverageI n 1894, the I nstitute of London U nder w riters ( I LU ) came intoI n 1894, the I nstitute of London U nder w riters ( I LU ) came into

existence.existence.I LU simplified the policy form and revised I nstitute C argo C lauses,I LU simplified the policy form and revised I nstitute C argo C lauses, w hich came into effect from 1.1.1982 w hich came into effect from 1.1.1982


7/111

INSURANCEINSURANCE- - H ISTORY ..H ISTORY ..

Fire I nsuranceFire I nsurance in the modern era can be traced to Germany w here a firein the modern era can be traced to Germany w here a fireassociation kno w n as the Feuer C asse w as orgainsed in 1591association kno w n as the Feuer C asse w as orgainsed in 1591

Great Fire of LondonGreat Fire of London broke out in 1866, w hich destroyed the Londonbroke out in 1866, w hich destroyed the London

city for five days, provided impetus for modern fire insurancecity for five days, provided impetus for modern fire insurance

A fter the fire an E nglish N icholas Barbon entered in the construction A fter the fire an E nglish N icholas Barbon entered in the constructionbusiness of rebuilding the London city and also started I nsuring thebusiness of rebuilding the London city and also started I nsuring thene w ly built houses against loss by fire.ne w ly built houses against loss by fire.

First successful fire insurance C o. in US w as a Mutual insurance C o.First successful fire insurance C o. in US w as a Mutual insurance C o.founded in 1752 by Benjamin Franklin and a group of his associatesfounded in 1752 by Benjamin Franklin and a group of his associates


8/111

INSURANCEINSURANCE- - H ISTORY ..H ISTORY ..

First A ccident I nsuranceFirst A ccident I nsurance policy w as sold by a chartered policy w as sold by a charteredC ompany found by British Parliament in 1848 to sellC ompany found by British Parliament in 1848 to sell

protection to rail/road travelers protection to rail/road travelers

I n 1866 cameI n 1866 came boiler explosion coverboiler explosion cover issued by Hartfordissued by HartfordS team Boiler I nspection and I nsurance C o.S team Boiler I nspection and I nsurance C o.

In 1886 came the

In 1886 came the liability insuranceliability insurance to employers againstto employers againstthe employees prompted by the labour related la w s passedthe employees prompted by the labour related la w s passed

by various S tates.by various S tates.


9/111

INSURANCE H ISTORY ..INSURANCE H ISTORY ..

I n 1889 came theI n 1889 came the public liability insurance public liability insurance

Motor liability insuranceMotor liability insurance came in 1898 and first motorcame in 1898 and first motor

damage insurance came in 1899damage insurance came in 1899

A concept developed w here the losses of fe w shall be A concept developed w here the losses of fe w shall beshared by many contributing small amountsshared by many contributing small amounts


10/111

R isk R isk -- Probability of LossProbability of Loss -- U ncertaintyU ncertainty

R isksR isks R isksR isksA ccident A ccident FailuresFailuresD eathD eath U nemploymentU nemploymentD isablementD isablement Price risePrice riseT heft/ R obbery T heft/ R obbery E conomic changesE conomic changes

Fire, etcFire, etc Political changes, etc.Political changes, etc.

Pure risksPure risks Fundamental risksFundamental risks

R esultR esult -- O utcome may beO utcome may be May be adverse or better in longMay be adverse or better in long A dverse from expected result A dverse from expected result

Probability of financial Loss/Probability of financial Loss/E

xpensesE

xpenses ??UNCERTAINTY UNCERTAINTY


11/111

C lassification of R isksC lassification of R isksPure

R isk Pure

R isk

--( no gain, loss or no loss)( no gain, loss or no loss)-- fire , motorfire , motor acdtsacdts..S peculative R isk S peculative R isk -- Change in fashion, stock trading,Change in fashion, stock trading,

etc. leading to either gain or lossetc. leading to either gain or lossParticular R isk Particular R isk -- a house on fire, bank robbery a house on fire, bank robbery Fundamental R isk Fundamental R isk -- economic, social, political changeseconomic, social, political changesD ynamic R isk D ynamic R isk -- changes in price level, income andchanges in price level, income andoutput, technological changesoutput, technological changesS

taticR

isk S

taticR

isk --

no change in economy, dishonesty of ano change in economy, dishonesty of apersonperson


12/111

T ypes of Pure R isk

Personal R isksR isk of premature deathR isk of insufficient income during retirementR isk of poor health

R isk of unemploymentProperty R isk

D irect LossIndirect ( consequential) Loss

Extra ExpensesLiability R isks - compensation and legal expenses


13/111

A RISK OF TRADE A RISK OF TRADE is a loss due to a specified event sayis a loss due to a specified event sayfire, storms burglary etc., These are classified and their fire, storms burglary etc., These are classified and their frequency in already assessed.frequency in already assessed.

A TRADE RISK A TRADE RISK is a risk of loss inherent in the trade itself.is a risk of loss inherent in the trade itself.Broadly speaking we can say loss of profit as a result of Broadly speaking we can say loss of profit as a result of change due to market collapse, political factors etc.,change due to market collapse, political factors etc.,

Risk of trade is insurableRisk of trade is insurable as it is already assessed,as it is already assessed,

Trade risk is yet to be classified and hence majority of Trade risk is yet to be classified and hence majority of these are not covered.these are not covered.

W hat R isk of a business can be covered ?


14/111

R isk and I nsuranceR isk and I nsuranceIt is noted from the history thatIt is noted from the history that different groups of peopledifferent groups of peoplefacing similar risks came togetherfacing similar risks came together to contribute for the lossesto contribute for the lossesof few of them.of few of them.Traders/exporter by sea or water faced similar risks Traders/exporter by sea or water faced similar risks--Sinking of Sinking of boat, collision, piracy boat, collision, piracy D wellers faced different but similar risksD wellers faced different but similar risks-- Fire, lightning, etcFire, lightning, etcMotor owners faced the risks of Motor owners faced the risks of-- MotorMotor acdtacdt., Liability, etc.., Liability, etc.R isk:R isk: The The likelihood of loss in futurelikelihood of loss in future , which may or may not, which may or may nothappen was the cause of concern to public. Various methodshappen was the cause of concern to public. Various methodsused in the past until insurance was found to be right choice toused in the past until insurance was found to be right choice toget protection from heavy lossesget protection from heavy losses

Insurance was used asInsurance was used as a tool of risk managementa tool of risk managementThe insurance was thus The insurance was thus classified in different categoriesclassified in different categories -- FireFireInsurance, Marine Insurance, Motor Insurance, etc.Insurance, Marine Insurance, Motor Insurance, etc.N o doubt precautions and loss controlN o doubt precautions and loss control (R isk Management)(R isk Management)

were also adopted. were also adopted.


15/111

C oncept of I nsuranceC oncept of I nsuranceI nsurance is based on this conceptI nsurance is based on this concept --

transfer of risk from an individual to a group ortransfer of risk from an individual to a group orcommunitycommunityS haring of loss by all on equitable basisS haring of loss by all on equitable basis

200 motorbikes in a town valued R s.30,000 each.200 motorbikes in a town valued R s.30,000 each.02 motor bikes are either stolen or totally damaged02 motor bikes are either stolen or totally damagedevery year. Loss = R s.60,000.every year. Loss = R s.60,000.

R ate of contribution= L/Vx1 00,R ate of contribution= L/Vx1 00,L= Loss, V=total value.L= Loss, V=total value.R s.60,000/6 000000x100 = 1% on value.R s.60,000/6 000000x100 = 1% on value.Each member to contribute= 1% of R s.30,000 i.e.Each member to contribute= 1% of R s.30,000 i.e.R s.300R s.300

but is that all ?........but is that all ?........


16/111

C oncept of I nsurance .C oncept of I nsurance .

I t is possible that after a lossI t is possible that after a loss fe w members do not pay.fe w members do not pay.T o avoid such situations, the contribution can be taken in T o avoid such situations, the contribution can be taken inadvanceadvanceT o T o organiseorganise a system it shall require somea system it shall require some expensesexpenses as w ellas w ellI t is also possible that theI t is also possible that the estimateestimate of loss of only t w o m/cof loss of only t w o m/cmay deviatemay deviateT o solve it, the contribution can be suitably increased to T o solve it, the contribution can be suitably increased toR s.600 per member to meet expenses and deviationsR s.600 per member to meet expenses and deviations

S o, from individual point of vie w , insurance is an economicS o, from individual point of vie w , insurance is an economicdevice w hereby an individual substitutes a smalldevice w hereby an individual substitutes a smallcontribution for a large uncertain financial losscontribution for a large uncertain financial lossI t eliminates the risk of financial loss that an individualI t eliminates the risk of financial loss that an individualmay suffer by loss/damage to his propertymay suffer by loss/damage to his property


17/111

Ho w I nsurance C o. use C oncept of I nsuranceHo w I nsurance C o. use C oncept of I nsurance

I nsurance C ompanies w ork on large scale and in anI nsurance C ompanies w ork on large scale and in anorganized mannerorganized manner

C ollect premium contribution in advance from a largeC ollect premium contribution in advance from a largenumber of membersnumber of members

C ompensate the fe w sufferersC ompensate the fe w sufferers

C ollect/maintain statistical data to find the behavior of C ollect/maintain statistical data to find the behavior of various categories of insurances or policies and segments of various categories of insurances or policies and segments of insured membersinsured members


18/111

Ho w I nsurance C o. use C oncept of I nsurance .Ho w I nsurance C o. use C oncept of I nsurance .

U seU se probability theory probability theory to predicts the expected loss andto predicts the expected loss andanalyseanalyse ititFix the premium in a scientific mannerFix the premium in a scientific manner based on past databased on past dataanalysis and changes expected for each product.analysis and changes expected for each product.T he T he rate should be near accuraterate should be near accurate other w ise I nsuranceother w ise I nsuranceC ompany shall suffer a loss.C ompany shall suffer a loss.W hile fixing premium or contribution, addition is also done While fixing premium or contribution, addition is also doneforfor administrative expenses, provision for futureadministrative expenses, provision for futurecontingencies and profitcontingencies and profit in the rate of premiumin the rate of premiumS ell the different insurance products inS ell the different insurance products in large numberslarge numbers totospread the risk spread the risk T o invest the idle or surplus funds available w ith insurer to T o invest the idle or surplus funds available w ith insurer toearn anearn an investment incomeinvestment income


19/111

Probability theory / La w of Large N umbersProbability theory / La w of Large N umbers

Probability theory is based onProbability theory is based on -- ho w many times the sameho w many times the samekind of event iskind of event is repeated over a large number of trialsrepeated over a large number of trials

T he T he events to be examined are those w hich are uncertain,events to be examined are those w hich are uncertain,may happen or may not happen (bet w een 0 to 1)may happen or may not happen (bet w een 0 to 1)

T he frequency T he frequency w ith w hich an event happens or repeated w ith w hich an event happens or repeatedreflects the actual probability of an event occurring inreflects the actual probability of an event occurring infuture if the cases involved (observed) are largerfuture if the cases involved (observed) are larger

T he T he larger is the samplelarger is the sample under examination, the moreunder examination, the moreaccurate shall be the estimate of probability. I nsurance C o.accurate shall be the estimate of probability. I nsurance C o.should have large volume of data of a longer period.should have large volume of data of a longer period.


20/111

Probability theory / La w of Large N umbers Probability theory / La w of Large N umbers

T here should be larger contributors or insurance contracts T here should be larger contributors or insurance contractsto w hich la w of probability shall be applied (large no. of to w hich la w of probability shall be applied (large no. of

policies should be sold) policies should be sold)

E xpenses incurred by I nsurerE xpenses incurred by I nsurer -- A dministrative expenses in A dministrative expenses in procuring premium, other management expenses, taxes, procuring premium, other management expenses, taxes, provision for contingencies; and profit provision for contingencies; and profit

T he rate of contribution is accordingly added/loaded to T he rate of contribution is accordingly added/loaded tomeet these expenses and profit.meet these expenses and profit.


21/111


B ut if we study T wo small samplesB ut if we study T wo small samples-- 1000 houses each1000 houses eachY r Y r burnt houses ( I ) burnt houses ( II )burnt houses ( I ) burnt houses ( II )11 0707 161622 1111 040433 1010 101044 0909 121255 1313 0808 T otal T otal 5050 5050

C hance of lossC hance of loss 10 houses/yr/1 00010 houses/yr/1 000 10 houses/yr/1 00010 houses/yr/1 000E stimate of probabilityE stimate of probability -- 10/1 000=.01 10/1 000=.01 same in both cases,10/1 000=.01 10/1 000=.01 same in both cases,but the variation of loss per year is different:but the variation of loss per year is different:

Loss per yearLoss per year 77-- 1313 0404--1616

T his problem can be reduced by the insurance companies by observing a T his problem can be reduced by the insurance companies by observing alarger samplelarger sample over a period of large number of years and adjust theover a period of large number of years and adjust the

probability w ith margin of errors or variations. probability w ith margin of errors or variations.


22/111


W H AT I f things may not happen in the future as they w ere WH AT I f things may not happen in the future as they w ereexpected ?expected ?T hen the estimate of probability used to calculate the price T hen the estimate of probability used to calculate the price

may be inaccurate and contribution (premium) may bemay be inaccurate and contribution (premium) may beinsufficient to meet the liabilities and expenses.insufficient to meet the liabilities and expenses.

A ctuaries w ork on the la w of probability A ctuaries w ork on the la w of probability and the expectedand the expecteddeviations to arrive at the price or rate of premium so thatdeviations to arrive at the price or rate of premium so thatthe insurance cos. do not suffer the loss by selling itsthe insurance cos. do not suffer the loss by selling its

products. products.


23/111

D efinition of I nsuranceD efinition of I nsuranceI ndividual Point of vie w I ndividual Point of vie w : An economic device whereby the individual can: An economic device whereby the individual cansubstitute a small relatively definite cost( premium) for a large uncertainsubstitute a small relatively definite cost( premium) for a large uncertainfinancial loss. Insurance provides:financial loss. Insurance provides:

Security Security-- counter balance of risk counter balance of risk R elief from the burden of uncertainty R elief from the burden of uncertainty Freedom from worry of financial lossFreedom from worry of financial loss

From the point of vie w of societyFrom the point of vie w of society :: A mechanism which relieves the A mechanism which relieves theindividual citizens, and the industry from the burden of carrying onindividual citizens, and the industry from the burden of carrying onthemselves the various risks they are likely to face from day to day.themselves the various risks they are likely to face from day to day.Insurance reduces the risk and uncertainty for the society as a wholeInsurance reduces the risk and uncertainty for the society as a whole

S preading of lossS preading of loss to a large number of similar units/policy holders which isto a large number of similar units/policy holders which isaffordableaffordablePrediction for the pricePrediction for the price charged is based on scientific predictions based oncharged is based on scientific predictions based onstatistical data to be sufficient to meet losses and expenses in futurestatistical data to be sufficient to meet losses and expenses in future


24/111

Purpose and N eed of I nsurancePurpose and N eed of I nsurance

Assets are created with efforts and generate income, comforts, Assets are created with efforts and generate income, comforts,services etc. Insurance providesservices etc. Insurance provides protection to economic value protection to economic valueof assets in case of an accident( fire, floods, EQ, breakdowns,of assets in case of an accident( fire, floods, EQ, breakdowns,etc)etc)The loss so caused may not be bearable for an individual but the The loss so caused may not be bearable for an individual but the

contribution to Insurance fund or price is made far less andcontribution to Insurance fund or price is made far less andaffordableaffordableH uman beings are also assets, D eath, disability, disease,H uman beings are also assets, D eath, disability, disease, acdtsacdts,,old age, etc. cause lot of hardship to individual and society. Lifeold age, etc. cause lot of hardship to individual and society. LifeI nsurance provides relief and takes care.I nsurance provides relief and takes care.

Insurance isInsurance is counter balance of risk counter balance of risk and provides socialand provides socialsecurity security The entrepreneur is in a position to The entrepreneur is in a position to continue the businesscontinue the businessfearlessly and contribute to growth of the Economy.fearlessly and contribute to growth of the Economy.


25/111

Purpose and N eed of I nsurance .Purpose and N eed of I nsurance .

For society it helps inFor society it helps in reducing the uncertainty of risk reducing the uncertainty of risk R educe financial burden on the societyR educe financial burden on the society by providing financialby providing financialhelp to dependents on death of earning member andhelp to dependents on death of earning member and lumsumlumsumamount on maturity or pension to surviving old citizensamount on maturity or pension to surviving old citizensB y B y predicting the future losses more accurately predicting the future losses more accurately and making and making necessary rating/premium structure which is affordablenecessary rating/premium structure which is affordable

The accuracy of insurers prediction of future losses is based on Law of The accuracy of insurers prediction of future losses is based on Law of large numbers.large numbers.B y analysing the past experience of a large number of homogenousB y analysing the past experience of a large number of homogenousexposure units over a long period, the probability of loss can be predictedexposure units over a long period, the probability of loss can be predictednear accuracy.near accuracy.

B y selling their products over different segments and wideB y selling their products over different segments and widegeographical area, the risk could be wisely spread to havegeographical area, the risk could be wisely spread to havelesslessadverse impact on the price of I nsuranceadverse impact on the price of I nsurance


26/111

R ole of I nsurance in E conomic D evelopmentR ole of I nsurance in E conomic D evelopment

For economic development Investments are necessary.For economic development Investments are necessary.Investments are made into Insurance policies by publicInvestments are made into Insurance policies by publicInsurance Cos. builds huge funds for long term savings (Policies)Insurance Cos. builds huge funds for long term savings (Policies)of public and channelise into investing in different projectsof public and channelise into investing in different projectsmeant for economic growthmeant for economic growth

Insurance Cos. also invest in Govt. securities , housing and otherInsurance Cos. also invest in Govt. securities , housing and otherinfrastructures of the country and contribute to economicinfrastructures of the country and contribute to economicdevelopment of the country.development of the country.Ins. Premium is held in trust by Ins. Cos. and immediateIns. Premium is held in trust by Ins. Cos. and immediatepayments/compensations are made available to policy holderspayments/compensations are made available to policy holderson loss/damage so as to enable them to carry on their economicon loss/damage so as to enable them to carry on their economicactivity.activity.Insurance provides security/protection to individuals as well asInsurance provides security/protection to individuals as well asto Industries, thus protecting their capital and help developmentto Industries, thus protecting their capital and help development


27/111

R ole of I nsurance in E conomic D evelopment ..R ole of I nsurance in E conomic D evelopment ..

R isks create uncertainty in future and is severe handicap inR isks create uncertainty in future and is severe handicap ineconomic activity. Insurance removes the fear, worry and anxiety economic activity. Insurance removes the fear, worry and anxiety of uncertainty and encourages entrepreneurshipof uncertainty and encourages entrepreneurship

Lending of money by banks and financial institutions is madeLending of money by banks and financial institutions is madeeasy and Insurance provides them collateral security easy and Insurance provides them collateral security

Insurers participate with several loss prevention, Industrial safety Insurers participate with several loss prevention, Industrial safety organizations for risk management advicesorganizations for risk management advices

Insurers arrange preInsurers arrange pre--insurance risk inspections and suggestinsurance risk inspections and suggestimprovement in the risk to control/reduce the risk improvement in the risk to control/reduce the risk

Invisible exportInvisible export******************************


28/111

I nsurance MarketI nsurance MarketI nsurance companiesI nsurance companies -- life and nonlife and non -- life,life,

R einsures,R einsures,I ntermediariesI ntermediaries -- brokers,brokers,C orporate A gent,C orporate A gent,

other distribution channels,other distribution channels,T P A s., Medical E xaminers, T P A s., Medical E xaminers,surveyors,surveyors,Buyers of I nsurance,Buyers of I nsurance,IRDA , I nsurance C ouncils,IRDA , I nsurance C ouncils,O mbudsmen,O mbudsmen,E ducational I nstitutionsE ducational I nstitutions


29/111

I nsurance Market

W orld over there are thousands of I nsurers w ith large World over there are thousands of I nsurers w ith large volumes of capitalisation and funds, employing large volumes of capitalisation and funds, employing largenumber of employees and huge no. of people and businessnumber of employees and huge no. of people and businessorganisations as buyers of insurance productsorganisations as buyers of insurance products

I n I ndia, before nationalization of general insurance C os.I n I ndia, before nationalization of general insurance C os.there w ere 107 companies operating in the market, boththere w ere 107 companies operating in the market, bothI ndian and ForeignI ndian and Foreign

Govt. took over all the C os. I n 1971 and brought GeneralGovt. took over all the C os. I n 1971 and brought GeneralI nsurance Business ( N ationalization) A ct, 1972 to regulateI nsurance Business ( N ationalization) A ct, 1972 to regulatethe general insurance business in I ndia.the general insurance business in I ndia.

From 1.1.1973 a single holding co.From 1.1.1973 a single holding co. -- General I nsuranceGeneral I nsuranceC orporation of I ndia w ith 4 subsidiary C os. w ereC orporation of I ndia w ith 4 subsidiary C os. w ereestablished to make general insurance businessestablished to make general insurance businessoperationalise in I ndia.operationalise in I ndia.


30/111

I nsurance Market .I nsurance Market .

GICGIC- - H O at Mumbai.H O at Mumbai. -- Policy matters relating to entirePolicy matters relating to entiregeneral insurance business, A viation business, cropgeneral insurance business, A viation business, cropinsurance. T he four subsidiaries operated under the overallinsurance. T he four subsidiaries operated under the overalldirection of G ICdirection of G IC

T he N ational I nsurance C o. Ltd T he N ational I nsurance C o. Ltd -- H O at KolkataH O at KolkataT he N e w I ndia A ssurance C o. Ltd T he N e w I ndia A ssurance C o. Ltd -- H O at MumbaiH O at MumbaiT he O riental I nsurance C o. Ltd. T he O riental I nsurance C o. Ltd. -- H O at N e w D elhiH O at N e w D elhiT he U nited I ndia I nsurance C o. Ltd. T he U nited I ndia I nsurance C o. Ltd. -- H O at C hennaiH O at C hennai

O perationsO perations -- each subsidiary co. had similar structure w ith 4each subsidiary co. had similar structure w ith 4tierstiers

Branch officeBranch office D ivisional O fficeD ivisional O ffice R egional O fficeR egional O fficeHead O ffice at top.Head O ffice at top.

U nder w riting limits and financial po w ers w ere w ell definedU nder w riting limits and financial po w ers w ere w ell definedso that proposal and expenses are taken care of at theso that proposal and expenses are taken care of at theappropriate levels smoothly and expeditiously.appropriate levels smoothly and expeditiously.


31/111

I nsurance Market I nsurance Market

Previously for claims, officers at different grads w erePreviously for claims, officers at different grads w ere provided w ith financial authority on behalf of C o. to settle provided w ith financial authority on behalf of C o. to settleor scrutinize the claim for final settlement.or scrutinize the claim for final settlement.I nsurance business/premium w as procured from theI nsurance business/premium w as procured from themarket through insurance agents and development officersmarket through insurance agents and development officersof the C ompany. D irect business could brought directly byof the C ompany. D irect business could brought directly by T ied Business officers. T ied Business officers.

I n I ndia I nsurance business is regulated under T heI n I ndia I nsurance business is regulated under T heI nsurance A ct, 1938. I n 1999 vide IRD A ct this A ct w asI nsurance A ct, 1938. I n 1999 vide IRD A ct this A ct w asamended and an I nsurance R egulatory and D evelopmentamended and an I nsurance R egulatory and D evelopment A uthority w as established to regulate the I nsurance A uthority w as established to regulate the I nsurancebusiness.business.IRDA allo w ed private sector to open & register insuranceIRDA allo w ed private sector to open & register insurancecompanies and conduct the insurance business. A cap oncompanies and conduct the insurance business. A cap onthe capital investment by foreign insurers up to 26% w asthe capital investment by foreign insurers up to 26% w asfixed to participate w ith any I ndian I ns. C o.fixed to participate w ith any I ndian I ns. C o.


32/111

I nsurance Market I nsurance Market A t Present: A t Present:

Life I nsurerLife I nsurer -- 2323N onN on -- life I nsurerlife I nsurer -- 2323EC GC EC GC -- 0101R einsurerR einsurer -- GICGIC- - 0101

Buyers of general insurance policiesBuyers of general insurance policies -- property propertyo w ners, motor o w ners, factory o w ners, traders,o w ners, motor o w ners, factory o w ners, traders,

professionals, commercial establishments, etc. or professionals, commercial establishments, etc. orthe entire population in a w ay or the other.the entire population in a w ay or the other.


33/111

I nsurance Market .I nsurance Market .I ntermediaries w ere introduced by IRDA A ct throughI ntermediaries w ere introduced by IRDA A ct through

various regulations various regulations --

A gents A gents -- their educational qualification, Licensing of A genttheir educational qualification, Licensing of A gent w ith fee, training, validity period of the license, R ene w als, w ith fee, training, validity period of the license, R ene w als,disqualifications, predisqualifications, pre -- recruitment examination and code of recruitment examination and code of conduct.conduct.

C orporate A gentsC orporate A gents --A firm A firmA company formed under C ompanies A ct, 1956 A company formed under C ompanies A ct, 1956

A bank, R egional rural bank, C oop. Bank, C oop. S ociety A bank, R egional rural bank, C oop. Bank, C oop. S ocietyPanchayatPanchayat/Local authority/Local authorityN GO or as approved by the IRDA N GO or as approved by the IRDA


34/111

I nsurance Market .I nsurance Market .Practical training and examination for thePractical training and examination for thecorporate insurance executive and the staff corporate insurance executive and the staff meant to procure the insurance businessmeant to procure the insurance business

C ode of C onduct is laid do w n for the A gentsC ode of C onduct is laid do w n for the A gentsin conducting insurance business.in conducting insurance business.R emittance of premium collected from theR emittance of premium collected from theclient should be deposited by the agent w ithclient should be deposited by the agent w iththe concerned I nsurer w ithin stipulatedthe concerned I nsurer w ithin stipulatedtime.time.T he agent shall get a remuneration as T he agent shall get a remuneration asspecified by IRDA for the class of businessspecified by IRDA for the class of business


35/111


BrokerBroker -- D irect Brokers and R einsurance BrokersD irect Brokers and R einsurance Brokers

A broker can be an individual or a firm w hose fulltime A broker can be an individual or a firm w hose fulltimeoccupation is to place insurance business to variousoccupation is to place insurance business to variousI nsurers.I nsurers.Minimum amount of capital:Minimum amount of capital:D

irect BrokerD

irect BrokerR

s. 50,00,000R

s. 50,00,000R einsurance BrokerR einsurance Broker R s.250,00,000R s.250,00,000C omposite BrokerC omposite Broker R s.25,00.000R s.25,00.000Foreign participation can be up to 26% onlyForeign participation can be up to 26% only

R emuneration shall be specified by the IRDA from time toR emuneration shall be specified by the IRDA from time totimetime


36/111


I nsurance S urveyorI nsurance S urveyor -- A risk surveyor or loss A risk surveyor or lossassessor is very helpful inassessor is very helpful in --

pre pre -- acceptance risk inspection to adviseacceptance risk inspection to advise

I nsurer about various features of the risk toI nsurer about various features of the risk tohelp insurers to under w rite a proposal, andhelp insurers to under w rite a proposal, andalsoalso

assess the amount loss payable at the time of assess the amount loss payable at the time of loss/damage occurred by an insured peril.loss/damage occurred by an insured peril.


37/111

I nsurance Market ..

Medical E xaminers: For life insurance, Healthinsurance they are called to examine the insured persons and certify their health and insurability. I nGeneral insurance cattles are examined by Vet.D octors for insurance and claim settlement.

IRDA to regulate, promote and ensure orderlygro w th of I nsurance I ndustry in the country. I t hasauthority of issuing license to - insurers, brokers,agents, T P A s., etc.


38/111

I nsurance Market .I nsurance Market .I nsurance C ouncils - IRDA is advised by insurancecouncils in insurance I ndustry matters. A ll Lifeinsurers are member of Life I nsurance C ouncil andsimilarly all N on - life insurers are member of General I nsurance C ouncil.TAC-

Formed underI

nsurance A

ct, 1938 toregulate premium rates, advantages, terms andconditions of different insurance policies, etc. I thas also standardized the w ordings of different

policies. Ho w ever w ith detariffing every insurer

has its o w

n rating system.N

o w

the role of TAC

isto collect statistics of the I ndustry


39/111


O mbudsman - cases upto financial limit of R s. 20 lacsI ts a redressal system of public grievance to resolvegrievances of policy holders against I nsurer, Brokersefficiently w ith least expensesO mbudsman is a counsel and mediator and decides on the

basis of facts of the case submitted by both parties todisputeLa w yers are not allo w ed to argue the case on their behalf T he insurer has to comply w ith the recommendations of

ombudsman w ithin 15 daysI f recommendation of O mbudsman is not accepted by thecomplainant, then the ombudsman shall pass an a w ard in 3months to w hich the complainant shall give his acceptanceT he a w ard of ombudsman is not binding on complainant


40/111


E ducational I nstitutionsI nsurance I nstitute of I ndia - A ssociate &Fello w shipT he I nstitute of A ctuaries of I ndiaC hartered I nsurance I nstitute LondonC hartered Property C asualty U nder w ritersS ociety -USA

I ndian I nstitute of I nsurance & R isk ManagementI ndian I nstitute of S urveyors & A djusters


41/111

I nsurance T ransactionI nsurance T ransactionI nsurance contract is a legal contractI nsurance contract is a legal contractO ffer & A cceptanceO ffer & A cceptance -- I nsured is the proposerI nsured is the proposer -- proposal form to offer proposal form to offercoverage to the risk affecting his interest (property, liability, etc)coverage to the risk affecting his interest (property, liability, etc)I nsurer is the accepter of proposal to perform certain services orI nsurer is the accepter of proposal to perform certain services or

provide the financial cover on happening of an event causing loss. provide the financial cover on happening of an event causing loss.C onsiderationC onsideration -- Premium is the consideration paid by I nsured andPremium is the consideration paid by I nsured and

promise to indemnify/(compensate) on happening of an event is the promise to indemnify/(compensate) on happening of an event is theconsideration from I nsurerconsideration from I nsurerFree consentFree consent -- I nsurance contract/(policy) shall reflect the agreementI nsurance contract/(policy) shall reflect the agreementand free consent of both partiesand free consent of both parties -- Both parties must understand theBoth parties must understand thesubject matter of insurance and coverage provided including dos andsubject matter of insurance and coverage provided including dos anddon'tsdon'tsC apacityC apacity -- Both parties should be competent to enter into a contract.Both parties should be competent to enter into a contract.Minors and persons of unsound mind cannot enter a contract.Minors and persons of unsound mind cannot enter a contract.Legal objectLegal object -- T he object of contract must be legal T he object of contract must be legal -- stolen goods cannotstolen goods cannotbe insuredbe insured


42/111

I nsurance T ransaction I nsurance T ransaction

R isk/subject matterR isk/subject matter

u

bIns

I nsurerI nsured Intermediaries( help)

R ely/trust on what is told about s/m

Can make enquiries/inspection

D ecide about cover to be offered

D ecide the price to be charged

H e alone knows about s/m

D escribe the risk properly

Ask for the cover required

Look for the insurer who canoffer better service and price


43/111

I nsurance C ontractI nsurance C ontract

O nly I nsured (proposer) kno w s about the risk or s/m of O nly I nsured (proposer) kno w s about the risk or s/m of

insuranceinsuranceHe must tell everything about the risk and not w ithholdHe must tell everything about the risk and not w ithholdanything, to I nsureranything, to I nsurerI nsured must kno w w hat coverage is required so thatI nsured must kno w w hat coverage is required so that

agreement and free consent could be developedagreement and free consent could be developedS election of I nsurer shall depend upon price, service andS election of I nsurer shall depend upon price, service andsecuritysecurityI nsurer should understand the risk or s/m and in case of I nsurer should understand the risk or s/m and in case of confusion may make enquiries and physical inspection ,confusion may make enquiries and physical inspection ,survey or medical examn.,etc.survey or medical examn.,etc.T ype of coverage to be granted to insured suiting him. T ype of coverage to be granted to insured suiting him.T he price at w hich the cover to be granted to insured. T he price at w hich the cover to be granted to insured.


44/111

I nsurance C ontractI nsurance C ontract

Insurance

Contracts are further subject to certain principles

Insurance

Contracts are further subject to certain principles

U tmost good faithU tmost good faithI nsurable interestI nsurable interest

I ndemnityI ndemnityProximate causeProximate cause

I i lI i l


45/111

I nsurance erminologyI nsurance erminologyI nsurance

I nsurerProposalPremiumC onsiderationU nder w riterPolicyE ndorsementS ubject matter of I nsuranceR isk PerilS um I nsured T

erm/PeriodC onditions A ssignmentLiability

C laim

Premium R eserveGross D irect PremiumPremium C ededN et Premium (Business)E xpense R atioLoss R atiosMortalityLloyds ( I nstitution in London)Mortality ( D eath R ates)Morbidity (other than death loss rates)Protection & I ndemnity A ssociations A

ctuary WarrantiesR epresentationE x- gratia


46/111

I nsurance T erminology .I nsurance T erminology .Market A greementR

ene w

alC over - noteC ertificate of I nsuranceD eclarationsO pen PolicyS pecific policyFloaterE xcess/ D eductibleI BNR S alvageC oinsuranceR

einsurance T otal LossC onstructive T otal Loss ( CT L) A bandonment A verage

A ctual T otal Loss

Particular A

verageN o claim bonusMalusR eplacement

Valued Policy/ A greed Value PolicyU nvalued PolicyFull ValueFirst LossI ncreased Value I nsurance T ime Policy Voyage policyInstitute

Cargo

ClausesI nland T ransit C lause

S olatium fund A rbitrationC opayment


47/111

D ocumentsD ocuments -- Proposal formProposal formProposal formProposal form -- is an offer to purchase an insuranceis an offer to purchase an insuranceProposal form contains questions designed to elicit all materialProposal form contains questions designed to elicit all materialinformation about the particular risk ( s/m of insurance)information about the particular risk ( s/m of insurance)C ommon questions in different types of proposal forms:C ommon questions in different types of proposal forms:N ame & address of the Proposer, occupation, ageN ame & address of the Proposer, occupation, age

Address of B usiness location Address of B usiness locationD escription of trade business or profession carriedD escription of trade business or profession carriedD etails of Subject matter of insuranceD etails of Subject matter of insuranceSum insuredSum insuredPast claimsPast claims

Past insurance history and if any insurer refused coverPast insurance history and if any insurer refused coverPeriod for which insurance cover is requiredPeriod for which insurance cover is requiredProhibition of rebate ( payment of commission)Prohibition of rebate ( payment of commission)D eclaration about correctness of the answersD eclaration about correctness of the answersSignature of the insured, date, etc.Signature of the insured, date, etc.


48/111

Proposal form ..Proposal form ..O ther questions will depend upon class of insurance:O ther questions will depend upon class of insurance:

FireFire --Construction, occupancy and situation of premises, productConstruction, occupancy and situation of premises, productstored/manufactured, layout plan of various blocks/buildings, etc.stored/manufactured, layout plan of various blocks/buildings, etc.MotorMotor -- Cubic capacity ( power), carrying capacity of the vehicle, yr of Cubic capacity ( power), carrying capacity of the vehicle, yr of manufacture, geographical area of operation, etc.manufacture, geographical area of operation, etc.Personal A cdt./ MediclaimPersonal A cdt./ Mediclaim -- O ccupation of insured person, age height andO ccupation of insured person, age height and

weight, physical defect/disability, past claim experience, etc. weight, physical defect/disability, past claim experience, etc.MarineMarine -- Proposal is not essential but the following details are given by Proposal is not essential but the following details are given by insured to effect marine insuranceinsured to effect marine insurance--

N ame of shipper or client, full description of the goods to be insured,N ame of shipper or client, full description of the goods to be insured,Method of packing,Method of packing,

voyage or mode of transit, voyage or mode of transit,cover required and conditions of insurancecover required and conditions of insurancename of vessel,name of vessel,sum to be insured,sum to be insured,past claim experience, etc.past claim experience, etc.


49/111

D ocumentsD ocuments -- PolicyPolicyI nsurance PolicyI nsurance Policy -- an evidence of I nsurancean evidence of I nsurancecontractcontractHeadingHeading -- name & address of Company and its logoname & address of Company and its logoPreamble or R ecital C lausePreamble or R ecital C lause Introduction of theIntroduction of theparties to the contract, Insurer and Insured.parties to the contract, Insurer and Insured.Proposal made by insured and is a basis of contractProposal made by insured and is a basis of contract

Premium having been paid or agreed to pay in advancePremium having been paid or agreed to pay in advanceInsurer shall provide cover detailed in the policy Insurer shall provide cover detailed in the policy O perative clauseO perative clause -- The Insurer promises to indemnify The Insurer promises to indemnify on occurrence of an event insured against in theon occurrence of an event insured against in theschedulescheduleE xceptionsE xceptions -- Exclusions applicable to the contractExclusions applicable to the contract

D tD t P liP li


50/111

D ocumentsD ocuments -- Policy .Policy .Policy S chedulePolicy S chedule -- N ame & address of theN ame & address of theinsuredinsuredN ature of business/professionN ature of business/profession

Period of insurancePeriod of insurancePremium amount sum insured/ limit of liability Premium amount sum insured/ limit of liability

Policy numberPolicy numberD ate of issue of policy D ate of issue of policy D escription of property insuredD escription of property insuredR eference to any special exclusion, conditions orR eference to any special exclusion, conditions or

aspects of coveraspects of cover Attestation or signature clause Attestation or signature clause-- policy is signedpolicy is signedby by authorisedauthorised signatory signatory Policy ConditionsPolicy Conditions


51/111

D ocumentsD ocuments -- Policy Policy T he recital clause T he recital clause

T he recital clause is designed to introduce and identify the parties and T he recital clause is designed to introduce and identify the parties andto bring the various elements of the policy together such as proposal,to bring the various elements of the policy together such as proposal,schedule and policy w ording. T his clause is often today incorporatedschedule and policy w ording. T his clause is often today incorporated w ithin the operative clause (see belo w ). w ithin the operative clause (see belo w ).

T he operative clause T he operative clause T his w ill outline the circumstances under w hich the insurance is active. T his w ill outline the circumstances under w hich the insurance is active. T his section is sometimes referred to as the I nsuring C lause, but w ill T his section is sometimes referred to as the I nsuring C lause, but w illal w ays be recognizable due to the information that it contains.al w ays be recognizable due to the information that it contains.T he O perative C lause w ill outline the perils of the policy (exactly w hat T he O perative C lause w ill outline the perils of the policy (exactly w hatis covered under the insurance), and may contain informationis covered under the insurance), and may contain information

pertaining to the policy exclusions and any excesses/deductibles pertaining to the policy exclusions and any excesses/deductiblesapplicable to the policy. T he O perative C lause w ill not appear in everyapplicable to the policy. T he O perative C lause w ill not appear in every

policy, especially those that are formatted as a scheduled policy. policy, especially those that are formatted as a scheduled policy.

D t D t


52/111

D ocuments D ocuments C over noteC over note -- A document issued to ackno w ledge the coverage granted A document issued to ackno w ledge the coverage grantedand in force to the insured pending issuance of policy. I n motorand in force to the insured pending issuance of policy. I n motorI nsurance coverage is important as vehicle cannot ply w ithoutI nsurance coverage is important as vehicle cannot ply w ithoutinsurance coverinsurance coverI t states the insurance is in force and brief details of coverI t states the insurance is in force and brief details of coverC ertificateC ertificate --I n motor a certificate of insurance is required giving details of policy,I n motor a certificate of insurance is required giving details of policy,motor vehicles, period of insurancemotor vehicles, period of insuranceI n marine insurance again a certificate can be issued to certify coverageI n marine insurance again a certificate can be issued to certify coveragegranted to insured.granted to insured.R ene w alsR ene w als -- A n informative notice from insurer to insured nearer to A n informative notice from insurer to insured nearer toexpiry of the policy, w ith details of property and rene w al premiumexpiry of the policy, w ith details of property and rene w al premiumE ndorsementE ndorsement -- For any modification in terms and conditions of theFor any modification in terms and conditions of the

policy, a document is issued specifying the changes applicable to the policy, a document is issued specifying the changes applicable to the policy during the policy period. T he endorsement is part of the policy. policy during the policy period. T he endorsement is part of the policy.

C hange in sum insured, change of addressC hange in sum insured, change of addressC hange of insurable interest on sale or death, etc.C hange of insurable interest on sale or death, etc.C ancellation of insurance, etc.C ancellation of insurance, etc.


53/111

L ighter momentsL ighter moments- - hurry w orry and curryhurry w orry and curry !The Japanese eat very little fat and suffer fewer heartThe Japanese eat very little fat and suffer fewer heart

attacks than the British or Americans.attacks than the British or Americans.On the other hand, the French eat a lot of fat and alsoOn the other hand, the French eat a lot of fat and alsosuffer fewer heart attacks than the British or Americans.suffer fewer heart attacks than the British or Americans.

The Chinese drink very little red wine and suffer fewer The Chinese drink very little red wine and suffer fewer heart attacks than the British or Americans.heart attacks than the British or Americans.The Italians drink excessive amounts of red wine and alsoThe Italians drink excessive amounts of red wine and alsosuffer fewer heart attacks than the British or Americans.suffer fewer heart attacks than the British or Americans.

Conclusion: Eat & drink what you like.Conclusion: Eat & drink what you like. It's English that kills you .It's English that kills you .


54/111

It has not happened for years together, whyIt has not happened for years together, whyshould I go for insurance?should I go for insurance?

An example of impossibility can be quoted say the 9/11 An example of impossibility can be quoted say the 9/11incident where insurance companies were washed out.incident where insurance companies were washed out.

Hyderabadis never in their dreams thought of taking cover Hyderabadis never in their dreams thought of taking cover for flood. When the encroached drains could not containfor flood. When the encroached drains could not containrains for 2 days, the resultant floods had washed awayrains for 2 days, the resultant floods had washed awayscore of vehicles, property etc.,score of vehicles, property etc.,

So, Risk is inherent in human existence. Human life andSo, Risk is inherent in human existence. Human life andmaterial possessions are constantly exposed to loss or material possessions are constantly exposed to loss or damage due to the mechanizations of fortuitousdamage due to the mechanizations of fortuitous

circumstancescircumstances


55/111

C lassification of General I nsurance BusinessC lassification of General I nsurance BusinessBroad classification:Broad classification:Fire I nsuranceFire I nsurance

Marine insurance ( C argo and Hull)Marine insurance ( C argo and Hull)Miscellaneous I nsuranceMiscellaneous I nsuranceMotor insuranceMotor insuranceT heft/Burglary insurance T heft/Burglary insuranceA ll R isks insurance A ll R isks insuranceMoney I nsuranceMoney I nsurance

Personal A ccident insurancePersonal A ccident insuranceHealth insuranceHealth insuranceGlass insuranceGlass insuranceLiability insuranceLiability insuranceProfessional I ndemnity I nsuranceProfessional I ndemnity I nsuranceFidelity Guarantee insuranceFidelity Guarantee insurance

BusinessInterruption insuranceBusiness

Interruption insurancePackage insurancesPackage insurances -- House, office, shopHouse, office, shop

E ngineering I nsuranceE ngineering I nsuranceS tandard insurance policiesS tandard insurance policies to cover the financial losses caused byto cover the financial losses caused by

various perils w ere devised over a period of time: various perils w ere devised over a period of time:


56/111

Fire insurance policyFire insurance policy -- to cover loss to assetsto cover loss to assetsand stock caused by fire and allied perilsand stock caused by fire and allied perils

FactoryI

nsuranceFactoryI

nsurance--

FireI

nsuranceFireI

nsurance


57/111

Loss of profit insuranceLoss of profit insurance T his policy offers a T his policy offers asolution by covering profit lost due to reduction in turnoversolution by covering profit lost due to reduction in turnover

arising from interruption of business follo w ing damage to thearising from interruption of business follo w ing damage to the property insured. T his policy can be taken only in conjunction property insured. T his policy can be taken only in conjunction w ith Fire Policy or Machinery Breakdo w n policy. due to fire or w ith Fire Policy or Machinery Breakdo w n policy. due to fire or

machinery breakdo w nmachinery breakdo w n


58/111

Marine/ T ransit insurance policyMarine/ T ransit insurance policy -- Loss/damage toLoss/damage togoods dispatched w hilst in the transit from one place togoods dispatched w hilst in the transit from one place to

another placeanother place


59/111

Hull I nsuranceHull I nsurance --Covers any loss or damage to ships, tankers, bulk carriers, smallerCovers any loss or damage to ships, tankers, bulk carriers, smaller

vessels, fishing boats and sailing vessels. vessels, fishing boats and sailing vessels.


60/111

H ull insuranceH ull insurance for coverage to vessels/shipsfor coverage to vessels/shipsGas T anker/VesselGas T anker/Vessel


61/111

Burglary insurance policyBurglary insurance policy -- T heft by use of force T heft by use of force

to contents in the business premises or storesto contents in the business premises or stores


62/111

Package insurancesPackage insurances -- House, office, etc.House, office, etc.S pecially designed to meet the insurance

S pecially designed to meet the insurance

requirements of a householder.requirements of a householder.


63/111

S hop I nsuranceS hop I nsurance -- T his is a package policy T his is a package policyspecially designed for small shopkeepers.

It is aspecially designed for small shopkeepers.

It is asingle policy combining the various insurancesingle policy combining the various insurance

requirements of shopkeepers.requirements of shopkeepers.

Personal A cdt I nsurance policyPersonal A cdt I nsurance policy A ccidentalA ccidental


64/111

Personal A cdt. I nsurance policyPersonal A cdt. I nsurance policy -- A ccidental A ccidentaldeath, disablement to individuals and in groupdeath, disablement to individuals and in group

due to accidentsdue to accidents


65/111

Flight I nsuranceFlight I nsurance -- P A coverP A cover

Private C ar I nsurancePrivate C ar I nsurance --


66/111

Private C ar I nsurancePrivate C ar I nsurancecovers Legal liability as per MV A ct and also coverscovers Legal liability as per MV A ct and also covers

loss or damage to the insured vehicle and itsloss or damage to the insured vehicle and its

accessoriesaccessories


67/111

H ealth insurance/MediclaimH ealth insurance/Mediclaim-- E xpenses incurredE xpenses incurredfor hospitalization due to accident or diseasefor hospitalization due to accident or disease


68/111

T ravel I nsurance T ravel I nsurance -- C overs Medical E xpensesC overs Medical E xpenses w hilst traveling abroad for business / holiday / w hilst traveling abroad for business / holiday /

employment / studies.employment / studies.


69/111

Cash in transit and cash in safeCash in transit and cash in safe-- MoneyMoney w

hilst taken from office to bank and vice versa and w

hilst taken from office to bank and vice versa andmoney kept in safe after office hoursmoney kept in safe after office hours

M hi B kd IM hi B kd I l dl d


70/111

Machinery B reakdown InsuranceMachinery B reakdown Insurance-- loss/damage toloss/damage tomachineries due to breakdo w nmachineries due to breakdo w n


71/111

E lectronic E quipment I nsuranceE lectronic E quipment I nsurance T his is a T his is a

specially designed policy w

hich covers accidentalspecially designed policy w

hich covers accidentalloss or damage to electronic equipment.loss or damage to electronic equipment.


72/111

C ontractors Plant and Machinery I nsuranceC ontractors Plant and Machinery I nsurance -- y ycovers all different types of machinery used forcovers all different types of machinery used for

handing material or construction.handing material or construction.


73/111

C ontractors A ll R isks I nsuranceC ontractors A ll R isks I nsurance -- speciallyspeciallydesigned to give financial protection to the C ivildesigned to give financial protection to the C ivil

E ngineering C ontractors in the event of an accidentE ngineering C ontractors in the event of an accidentto the civil engineering w orks under construction.to the civil engineering w orks under construction.


74/111

Marine C um E rection I nsuranceMarine C um E rection I nsurance P j tP j t


75/111

Marine C um E rection I nsuranceMarine C um E rection I nsurance -- ProjectProjectinsurance including transit of Plant and Machineryinsurance including transit of Plant and Machinery

and other equipment or materials. C overs all physicaland other equipment or materials. C overs all physicalrisks w hich a project is exposed to during storagerisks w hich a project is exposed to during storage

and erection.and erection.

W orkman compensation InsuranceW orkman compensation Insurance E mployer sE mployer s


76/111

W orkman compensation Insurance W orkman compensation Insurance-- E mployersE mployerslegal liability to w ards employees due tolegal liability to w ards employees due to

accident w

hilst on dutyaccident w

hilst on duty T he policy covers statutory liability of an employer for the T he policy covers statutory liability of an employer for thedeath of or bodily injuries or occupational diseases sustaineddeath of or bodily injuries or occupational diseases sustainedby the w orkmen arising out of and in course of employment.by the w orkmen arising out of and in course of employment.


77/111

Fidelity InsuranceFidelity Insurance-- to cover the losses toto cover the losses to

employer by dishonesty of the employeesemployer by dishonesty of the employees


78/111

Professional I ndemnity I nsuranceProfessional I ndemnity I nsurance -- T his policy T his policyis meant for professionals to cover liability falling onis meant for professionals to cover liability falling on

them as a result of errors and omissions committedthem as a result of errors and omissions committedby them w hilst rendering professional service.by them w hilst rendering professional service.

Liability insuranceLiability insurance--public liability Policy coverspublic liability Policy covers


79/111

Liability insuranceLiability insurance public liability Policy covers public liability Policy coversthe amount w hich the insured becomes legally liablethe amount w hich the insured becomes legally liable

to pay as damages to third parties as a result of to pay as damages to third parties as a result of accidental death, bodily injury, loss or damage to theaccidental death, bodily injury, loss or damage to the

property belonging to a third party. property belonging to a third party.

Product Liability I nsuranceProduct Liability I nsurance -- covers all sumscovers all sums


80/111

Product Liability I nsuranceProduct Liability I nsurance covers all sumscovers all sums(inclusive of defence costs) w hich the insured(inclusive of defence costs) w hich the insuredbecomes legally liable to pay as damages as abecomes legally liable to pay as damages as a

consequenceconsequence

D irectors and O fficers Liability InsuranceD irectors and O fficers Liability Insurance-- ThisThis


81/111

D irectors and fficers Liability InsuranceD irectors and fficers Liability Insurance This Thiscover is suitable for those D irectors & key officers whocover is suitable for those D irectors & key officers whoare in a decisionare in a decision --making position. These directors andmaking position. These directors and

officers in pursuance of their duties may take someofficers in pursuance of their duties may take someactions which may be in violation of certain statutes oractions which may be in violation of certain statutes or

Indian Laws.Indian Laws.


82/111


83/111

Plate Glass I nsurancePlate Glass I nsurance -- covers all kinds of covers all kinds of accidental breakages of the plate glass fixed toaccidental breakages of the plate glass fixed to

display w indo w s or sho w cases of commercialdisplay w indo w s or sho w cases of commercialestablishmentsestablishments ..


84/111

C attle I nsuranceC attle I nsurance -- I ndemnity under the policyI ndemnity under the policy w ill be the sum insured or market value prior to w ill be the sum insured or market value prior to

illness w hichever is less. T he indemnity is limited toillness w hichever is less. T he indemnity is limited to75% of S um I nsured in case of a P TD claim.75% of S um I nsured in case of a P TD claim.

Precaution is better than curePrecaution is better than cure I h eI h e


85/111

Precaution is better than curePrecaution is better than cure-- I have aI have amediclaim insurance policy to get the best treatmentmediclaim insurance policy to get the best treatment


86/111

I s the claim payable ?I s the claim payable ? A ll the dos. & don'ts. C ome into action A ll the dos. & don'ts. C ome into action

Q i k di l f l i !Q i k di l f l i !


87/111

Q uick disposal of a claim !Q uick disposal of a claim !


88/111

I s there any insurance ?I s there any insurance ?

ff


89/111

R ole of I nsuranceR ole of I nsurance

Fire I nsuranceFire I nsurance


90/111

Standard Fire and Special perils Policy Standard Fire and Special perils Policy Provides coverage against specified perils namely:Provides coverage against specified perils namely:FireFire LightningLightningE xplosion/ I mplosionE xplosion/ I mplosion A ircraft damage A ircraft damageR iot & S trike Malicious damageR iot & S trike Malicious damage Bush fireBush fireS torm, tempest, flood, inundation, etc.S torm, tempest, flood, inundation, etc.I mpact damage by others vehicleI mpact damage by others vehicleS ubsidence, landslide, rock slideS ubsidence, landslide, rock slideBursting & O verflo w ing of w ater tanks, apparatus, pipesBursting & O verflo w ing of w ater tanks, apparatus, pipesMissile testing operationsMissile testing operationsLeakage from automatic sprinklersLeakage from automatic sprinklersRS MD cover, Flood etc. can be excludedRS MD cover, Flood etc. can be excluded T errorism cover can be granted on payment of addl. Premium w ith T errorism cover can be granted on payment of addl. Premium w ithRS MDRS MDE xcess of 5% of each claim or R s.10000 in case of A ct of God; R s.10000E xcess of 5% of each claim or R s.10000 in case of A ct of God; R s.10000inin other casesother cases


91/111

D ifferent Fire policiesD ifferent Fire policies


92/111

ppR einstatement Value PolicyR einstatement Value Policy

S um insured should represent the reinstatement orS um insured should represent the reinstatement orreplacement valuereplacement valueN o depreciation or w ear and tear shall applyN o depreciation or w ear and tear shall apply

D eclaration Policy for stocks/storesD eclaration Policy for stocks/storesMinimum S I R s. O ne crore and at any one place R s. 25Minimum S I R s. O ne crore and at any one place R s. 25lacslacsD eclaration of stock lying in godo w n to be submitted toD eclaration of stock lying in godo w n to be submitted toI nsurer in the next monthI nsurer in the next monthD eclarations to be averaged out and premium adjustedD eclarations to be averaged out and premium adjustedaccordinglyaccordinglyPremium retention 50% of the provisional premiumPremium retention 50% of the provisional premium

D ifferent Fire policies .D ifferent Fire policies .


93/111

Floating policyFloating policyO ne sum insured floated over more than one godo w nO ne sum insured floated over more than one godo w nHighest rate applicable to any godo w n shall be chargedHighest rate applicable to any godo w n shall be chargedon S I .on S I .10% extra shall be charged on total premium as floater10% extra shall be charged on total premium as floaterextraextra

Long term policyLong term policy -- for Dw elling/Home insurance for 3 yrs.for Dw elling/Home insurance for 3 yrs. W ith 10% discount on the premium W ith 10% discount on the premium

Business interruption policyBusiness interruption policy -- Gross profit ( N et profit+Gross profit ( N et profit+S tanding charges) is insured against business interruptionS tanding charges) is insured against business interruptioncaused by insured perilcaused by insured peril

Marine I nsuranceMarine I nsurance


94/111

Marine I nsuranceMarine I nsuranceCargo Insurance:Cargo Insurance:O verseasO verseas-- Import or ExportImport or Export

Institute Cargo ClausesInstitute Cargo Clauses-- A, B , C A, B , CInstitute Cargo ClauseInstitute Cargo Clause-- Air Air

D uty InsuranceD uty InsuranceD omesticD omestic-- Inland TransitInland Transit

Inland Transit ClausesInland Transit Clauses-- A, B , C A, B , CH

ull InsuranceH

ull Insurance-- Vessels,B

arges, etc. Vessels,B

arges, etc.Institute Time Clause ( H ulls)Institute Time Clause ( H ulls)Postal ConsignmentsPostal Consignments

Marine I nsuranceMarine I nsurance -- I mport/ E xportI mport/ E xport


95/111

Marine I nsuranceMarine I nsurance I mport/ E xportI mport/ E xport

ICCICC- -CC : C overs provided: C overs provided --

Fire or explosionFire or explosionS tranding, grounding, sinking of the vessel or craftS tranding, grounding, sinking of the vessel or craftO verturning or derailment of vehicleO verturning or derailment of vehicleC ollision or contact of vessel or conveyance w ith an external objectC ollision or contact of vessel or conveyance w ith an external objectD ischarge of cargo at port of distressD ischarge of cargo at port of distressGeneral A verageGeneral A verageS alvage chargesS alvage charges

Jettisoning Jettisoning

ICCICC- - BB: I n addition to the above: I n addition to the aboveE arthquake, Volcanic eruption or lightning,E arthquake, Volcanic eruption or lightning,W ashing overboard Washing overboardS ling lossS ling lossE ntry of sea, lake or river w ater into vessel or craftE ntry of sea, lake or river w ater into vessel or craft

ICCICC- -A A : A ll R isks except exclusions specified in the clause: A ll R isks except exclusions specified in the clause

Material I nformation for R ating &Material I nformation for R ating &U d i iU d i i


96/111

U nder w ritingU nder w ritingProposal form is not necessary,Proposal form is not necessary, a letter proposinga letter proposing

for insurance policy or a declaration form isfor insurance policy or a declaration form issubmitted w ith follo w ing information:submitted w ith follo w ing information:N ame of proposer/consignor/ I nsuredN ame of proposer/consignor/ I nsuredFull description of goods to be insuredFull description of goods to be insuredN ature of commodity to be insuredN ature of commodity to be insured -- Hazardous,Hazardous,nonnon -- hazardous, solid, liquid, fragile item/precioushazardous, solid, liquid, fragile item/preciousitemitemPacking in detailPacking in detail -- in bales or bags, cases orin bales or bags, cases orbundles, crates, drums or barrels, loose packing,bundles, crates, drums or barrels, loose packing,

cardboard cartons or in bulk, in container, etc.cardboard cartons or in bulk, in container, etc.S tandard packing combat every level of roughS tandard packing combat every level of roughhandling, climatic and environmental hazardhandling, climatic and environmental hazard

RATIN G & UNDER WRITIN G ..RATIN G & UNDER WRITIN G ..


97/111

Value of the interest (s/m) to be insured w ith Value of the interest (s/m) to be insured w ithbreakupbreakup CI F+10% plus duty, etc.CI F+10% plus duty, etc.

Voyage and Mode of T ransit: Voyage and Mode of T ransit: Journey from and to .. via.. Journey from and to .. via..Mode of conveyance to be usedMode of conveyance to be used -- by rail/road/sea orby rail/road/sea orby air; or it may be a combination of t w o or moreby air; or it may be a combination of t w o or moreN ame of vessel, B/L; A irlines, A WB; R ail/ R oad,N ame of vessel, B/L; A irlines, A WB; R ail/ R oad,consignment N ote; Postal receiptconsignment N ote; Postal receiptI f transshipment requiredI f transshipment requiredI s it entire transit or aI s it entire transit or a tail end risk tail end risk details of oceandetails of oceancoveragecoverage

C over R equired:C over R equired: T he risks required to be T he risks required to beinsured againstinsured against

Comparison between the institute cargo clauses (A), (B) & (C)Comparison between the institute cargo clauses (A), (B) & (C)


98/111

A comparative analysis of the institute Cargo Clauses (A), (B) & (C)A comparative analysis of the institute Cargo Clauses (A), (B) & (C)

Type of risksType of risksCovered (Covered ( DD ) not covered () not covered ( UU )) AA BB CCLoss / damage reasonably attributable to:Loss / damage reasonably attributable to:

1. Fire or explosion1. Fire or explosion DD DD DD2. Vessel/Craft being stranded, grounded, sunk or 2. Vessel/Craft being stranded, grounded, sunk or

capsized.capsized. DD DD DD3. Overturning/derailment of land conveyance.3. Overturning/derailment of land conveyance. DD DD DD4. Collision or contact of vessel, craft or conveyance4. Collision or contact of vessel, craft or conveyance

With any external object other then water.With any external object other then water. DD DD DD5.5. Discharge of cargo at a port of distressDischarge of cargo at a port of distress DD DD DD

6. Earthquake, volcanic eruption, lightning6. Earthquake, volcanic eruption, lightning DD DD UU7. General average and salvage charges incurred to7. General average and salvage charges incurred to

avoid loss from any cause except those excludedavoid loss from any cause except those excluded DD DD DD8. General average sacrifice8. General average sacrifice DD DD DD

AA BB CC


99/111

9. Jettison9. Jettison DD DD DD1010.. WashingWashing overboardoverboard DD DD UU1111.. EntryEntry of of sea,sea, lakelake or or river river water water intointo thethe vessel,vessel,

craft,craft, hold,hold, conveyance,conveyance, container,container, liftlift vanvan or or place place of of storagestorage.. DD DD UU

1212.. Rainwater Rainwater damagedamage DD UU UU1313.. TotalTotal lossloss of of anyany package package lostlost overboardoverboard or or

droppeddropped whilstwhilst loadingloading or or unloadingunloading fromfromvesselvessel or or craftcraft.. DD DD UU

1414.. PiracyPiracy.. DD UU UU1515.. DeliberateDeliberate damagedamage or or destructiondestruction by by wrongfulwrongful actact

of of anyany person person or or persons, persons, (i(i..ee.. by by maliciousmalicious acts)acts) DD UU UU(Can(Can be be coveredcovered by by maliciousmalicious DamageDamage ClauseClause for for II..CC..CC (B)(B) andand (C)(C) uponupon payment payment or or extraextra premium) premium)

1616.. InIn thethe eventevent of of frustrationfrustration of of thethe voyagevoyage resultingresultingfromfrom aa risk risk covered,covered, extraextra chargescharges incurredincurred ininunloading,unloading, storingstoring andand forwardingforwarding toto destinationdestination DD DD DD

AA BB CC17 Reasonable charges for averting or minimizing loss17 Reasonable charges for averting or minimizing loss


100/111

17. Reasonable charges for averting or minimizing loss17. Reasonable charges for averting or minimizing lossrecoverablerecoverable under under thisthis insuranceinsurance andand alsoalso thosethoseincurred,incurred, toto pursue pursue recoveryrecovery rightsrights againstagainst carriers,carriers,

bailees bailees or or thirdthird parties parties.. DD DD DD1818.. Other Other or or extraneousextraneous perils perils allall involvinginvolving aa fourtuityfourtuity

andand fromfrom externalexternal causes(s),causes(s), for for exampleexample::DamageDamage asas aa resultresult of of shiftingshifting inin heavyheavy weather weather DD UU UUImproper Improper stowagestowage DD UU UU

RoughRough handlinghandling DD UU UUBreakage,Breakage, leakage,leakage, denting,denting, scratching,scratching, crushing,crushing,crumpling,crumpling, chipping,chipping, chafagechafage DD UU UUH eatingH eating sweatingsweating DD UU UUInfestation,Infestation, mould,mould, mildew,mildew, rust,rust, countycounty damagedamage DD UU UU

H ook H ook andand slingsling damagedamage DD UU UUContactContact withwith mud,mud, oilsoils andand acids,acids, damagedamage by byother other cargocargo DD UU UU


101/111

AA BB CCS hortage, theft, pilferage, nonS hortage, theft, pilferage, non --deliverydelivery DD UU UU

O ther loss/damage caused fortuitously and fromO ther loss/damage caused fortuitously and fromexternal cause or causesexternal cause or causes DD UU UU

1919.. liabilityliability under under BothBoth toto blame blame collisioncollision ClauseClause of of BillBill of of LadingLading.. DD DD DD

Marine I nsurance D omesticMarine I nsurance D omestic -- I nland T ransitI nland T ransit


102/111

Marine I nsurance D omesticMarine I nsurance D omestic I nland T ransitI nland T ransit

I nland T ransit C lause CI nland T ransit C lause C-- Provides cover for the risks of fireProvides cover for the risks of fire

and lightning only and lightning only

I nland T ransit C lause BI nland T ransit C lause B -- Provides physical loss or damage toProvides physical loss or damage tothe insureds goods caused by the insureds goods caused by--

Fire, lightning,Fire, lightning,breakage of bridges,breakage of bridges,collision with or by the carrying vehicle,collision with or by the carrying vehicle,overturning of the vehicle or derailment or accidents of likeoverturning of the vehicle or derailment or accidents of likenature to the carrying railway wagon/vehiclenature to the carrying railway wagon/vehicle

I nland T ransit C lause A I nland T ransit C lause A-- Provides cover for all risks exceptProvides cover for all risks exceptthose specifically excludedthose specifically excluded

E xclusionsE xclusions


103/111

xclusionsxclusions

Loss or damage to willful misconduct of the assuredLoss or damage to willful misconduct of the assuredO rdinary leakage, breakage, wear and tear, ordinary loss orO rdinary leakage, breakage, wear and tear, ordinary loss or

weight/volume weight/volumeInsufficiency in packing Insufficiency in packing Inherent viceInherent viceD elaysD elaysLoss due to financial default or insolvency of the vessel owner.Loss due to financial default or insolvency of the vessel owner.Charterers or operatorsCharterers or operatorsN uclear PerilsN uclear PerilsMaliciousD amageMaliciousD amageW ar and SRCC W ar and SRCC


104/111

MO TO R IN SUR ANC EMO TO R IN SUR ANC E

Features of Package PoliciesFeatures of Pack

history & practice of ins. bit 87

Documents