B&FS - Session Insurance

PGDM - B&FS
2019-21
Underwriting, Bonuses
&
Insurance Products
By
Pawan Saluja
salujapawan27@gmail.com
Underwriting
Underwriting - Introduction
Underwriting is process of evaluating the risk of insuring a -
• home,
• car,
• driver or
• individual
Underwriting is process of evaluating the risk of insuring a -
• home,
• car,
• driver or
• individual
in case of life, health or general insurance to determine if it’s profitable for the insurance company
to take the chance on providing coverage.
Underwriting – Importance
Person responsible for underwriting is known as Underwriter.

An underwriter is responsible for the classification, analysis and selection of the risks presented
to them. Underwriters have obligation to be extra careful -
• in choosing the individuals to be insured from the group of proposer, to protect the company from
adverse selection
• in setting a fair price in line with the risk that each individual presents to the pool
adverse selection
Adverse selection is a situation where an insurance company accepts too many proposers who bring a higher
than average risk to the pool.
adverse selection
Underwriters’ assessment of the risk will influence the premium to be charged.

adverse selection
Underwriters’ assessment of the risk will influence the premium to be charged.
An underwriter who fails to do this can affect the stability of an insurance company’s business.
Underwriting – Guidelines
Different companies have different guidelines as to how risks are -
• classified,
• priced and
• selected
• classified,
• priced and
• selected
If an existing disease is not considered suitable for cover by a certain company, another company might
cover it to some extent with the payment of extra premium.
• classified,
• priced and
• selected
If an existing disease is not considered suitable for cover by a certain company, another company might
cover it to some extent with the payment of extra premium.
Underwriters work within these defined guidelines with the aim of ensuring that the company continues
to operate efficiently.
Underwriting – Process
The process of insurance underwriting is as follows:

u

u
Collect information about the applicant

u
Analyse the risk associated


u
Estimate the potential exposure


u
Determine the probability of loss


u
Accept (or reject) the proposal


u
Classify & rate into a ‘risk group’ to calculate the premium


u
Issue the Insurance policy

Classify & rate into a ‘risk group’ to calculate the premium

Underwriting
-
Medical, Non-medical, Financial
Underwriting – Medical
When underwriter checks the medical records of the proposer for the past few years and
insist on medical check-up (case to case basis).
Medical check-up can be either general or more comprehensive.

Medical check-up can be either general or more comprehensive.
If the proposer is found to be in perfect health, then they would be considered as low risk by the
underwriter.
Insurance companies maintain a schedule that determines the degree of

medical tests required depending upon -

• proposer’s age,

• medical history and


• medical history and
• the amount of insurance, cover they are requesting.

Medical – Guidelines
Risk Cover /
18-30 Years 31-40 Years 41-50 Years
Age Group
Up to Rs 2 Lakhs Nil Nil
Full Medical Report
Rs 2-5 Lakhs Nil Full Medical Report
Full Medical Report
Rs 5-10 Lakhs Full Medical Report +
HIV Test
Full Medical Report
+ Full Medical Report
HIV Test +
Rs 10-20 Lakhs HIV Test
+
Blood Serum Test
Full Medical Report
Rs 20-30 Lakhs HIV Test +
HIV Test
+
Blood Serum Test
Rs 30- 40 Lakhs Full Medical Report +
+ Routine Urine Analysis
HIV Test
Blood Serum Test +
Full Medical Report + HIV Test
+ Routine Urine Analysis +
Above Rs 40 Lakhs HIV Test Blood Serum Test
+ +
Blood Serum Test Routine Urine Analysis
+
Comprehensive Trail making Test
Risk Cover /
18-30 Years 31-40 Years 41-50 Years
Age Group
Up to Rs 2 Lakhs Nil Nil
Full Medical Report
Rs 2-5 Lakhs Nil Full Medical Report
Full Medical Report
Rs 5-10 Lakhs Full Medical Report +
HIV Test
Full Medical Report
HIV Test +
Rs 10-20 Lakhs HIV Test
+
Blood Serum Test
Full Medical Report
Rs 20-30 Lakhs HIV Test +
HIV Test
+
Blood Serum Test
Rs 30- 40 Lakhs Full Medical Report +
+ Routine Urine Analysis
HIV Test
Blood Serum Test +
Full Medical Report + HIV Test
+ Routine Urine Analysis +
Full medical report includes ECG,
Above Rs 40 Lakhs HIV Test Blood Serum Test
fasting blood sugar, blood count and
+ +
blood pressure test, it may also
Blood Serum Test Routine Urine Analysis
include certain kidney and liver tests.
+
Comprehensive Trail making Test
Underwriting – Non-medical
In non-medical underwriting, instead of a medical report the insurance is based on the physical
characteristics of the individual
In non-medical underwriting, instead of a medical report the insurance is based on the physical
characteristics of the individual
Non-medical insurance underwriting carries more risk to the insurer hence higher chances of
adverse selection, consequently, these policies may be priced at a higher rate.
Safeguards adopted in non-medical business by insurer:

• a restriction on selection (female lives);

• putting limits on the sum insured;

• a restriction on maximum, entry age / term / maturity age

• a restriction on the types of insurance plans allowed / high risk plans

• a restriction on the types of insurance plans allowed / high risk plans
• limiting cover to certain categories of lives (based on education, social and economic background)
Underwriting – Financial
What's your life worth ?

Priceless
Priceless
isn’t it?
Priceless
isn’t it?
But no insurance company in the world will agree with this argument.
Priceless
isn’t it?
But no insurance company in the world will agree with this argument.
Insurance companies treat human life like any other asset, basis argument that it has the potential to generate
income and, assign a monetary value to arrive at amount of insurance cover that a person can take.
Insurance company measure the economic value of a life or how much the life is worth in
monetary terms through Human Life Value (HLV).
Insurance company measure the economic value of a life or how much the life is worth in
monetary terms through Human Life Value (HLV).
Insurance company measure HLV as a yardstick to determine how much insurance cover a
person should have.
Human Life Value (HLV) calculation : Simple method
.
Below example explains the calculation of human life value for Alok:
Annual income Rs. 4,00,000 per annum.

Taxes & personal expenses Rs. 8,000 per month
Net monthly contribution to family Rs. 25,000 per month
Net
. annual contribution to family Rs. 3,00,000 per annum
Bank FD rate 8%
Human life value calculation 3,00,000 / 8%
= 3,00,000 / 0.08
= 37,50,000

Net
Bank FD rate 8%
= 3,00,000 / 0.08
= 37,50,000
Insurance amount required (HLV) Rs. 37,50,000


Net
Bank FD rate 8%
= 3,00,000 / 0.08
= 37,50,000
Rs 37,50,000 invested in Bank FD at 8% interest rate will give annual return of 37,50,000 × 0.08 = Rs. 3 lakhs PA

Net
Bank FD rate 8%
= 3,00,000 / 0.08
= 37,50,000
Rs 37,50,000 invested in Bank FD at 8% interest rate will give annual return of 37,50,000 × 0.08 = Rs. 3 lakhs PA
Assumptions: Constants - FD rates remains at 8%, Salary at Rs 4 lakhs PA,

Underwriting – IRDAI regulation
Underwriting – IRDAI regulation
The regulations require that the decision on the proposal must be conveyed to the proposer
within 15 days of receiving the proposal.
Understanding Bonuses
Bonuses
Bonus – entitlement
Policyholders who purchase participating insurance policies (with-profit

policies) are entitled to participate in the profits of the insurance
company.

company.
These profits are distributed to the policyholders in the form of

bonuses.

company.

bonuses.
There are four types of bonus given by insurance companies.

company.

bonuses.
There are four types of bonus given by insurance companies.
• simple revisionary bonus;

• compound revisionary bonus;
• terminal bonus; and
• interim bonus.
1 Bonus – Simple revisionary
The insurance company declares this bonus and adds the declared
bonus to the sum insured.
This is paid out at the time of the claim or the maturity of the policy, or
at any other time as specified by the insurance company.
Ex. Understanding Bonuses

ABC insurance company declares a bonus of 5% for every Rs.
1,000 sum insured then the bonus will be Rs. 50.

If Smita has bought a policy for a sum insured of Rs. 1,00,000

then her share of the bonus will be Rs. 5,000.

If Smita has bought a policy for a sum insured of Rs. 1,00,000

then her share of the bonus will be Rs. 5,000.
This amount declared will remain the same until the time it is
paid out.
2 Bonuses – Compound revisionary
Under this method the insurance company computes the annual bonus
on a compound interest basis, i.e.
The bonus is added to the sum insured and the next year’s bonus is
calculated on the enhanced amount.
The insurance company has declared a bonus of 5% of the sum
insured. Rahul has a sum insured of Rs. 5,00,000 so
the bonus will be Rs. 25,000. Hence Rahul’s payable maturity
amount will increase to: Rs 5 lacs + Rs 25 K = Rs 5.25 lacs
The insurance company has declared a bonus of 5% of the sum
insured. Rahul has a sum insured of Rs. 5,00,000 so
the bonus will be Rs. 25,000. Hence Rahul’s payable maturity
amount will increase to: Rs 5 lacs + Rs 25 K = Rs 5.25 lacs
In the next year, the insurance company declares a bonus of 3%

of the sum insured. This year Rahul’s payable maturity
amount will increase to: Rs 5.25 lacs + Rs 15,750 = Rs 5,40,750
3 Bonus – Terminal bonus
For long-term policies, of say 20, 25 or 30 years, the insurance company

may give a terminal bonus on maturity along with the sum insured and
the regular bonuses.

This bonus is given as an incentive to the insured to continue with the

company for long-term until the end of the policy.


Some companies may declare the terminal bonus every year, but it
accrues and is payable only on the maturity of the policy.


Some companies may declare the terminal bonus every year, but it
accrues and is payable only on the maturity of the policy.
This bonus is also known as a ‘persistency bonus’.

4 Bonus – Interim bonus
A valuation has to be made every year by insurance companies, by law.
Policies on which death claims are made or which mature between the
two valuation dates also contribute to the surpluses, although this is
disclosed only in the valuation made after their closure.
As these policies have left the insurance company’s books before the
valuation date, they will not participate in the process of valuation.
However, insurance companies pay an ‘interim bonus’ to such policies at

the rates as at the last valuation.
However, insurance companies pay an ‘interim bonus’ to such policies at

the rates as at the last valuation.
In India, the payment of interim bonus is made mandatory under

section 112 of the Insurance Act 1938.
Insurance
Products
Insurance products - why
Various reasons for which a person needs financial protection are -

• Protection of Income, they are earning currently and will earn in future
• Protection against unexpected and untimely medical needs

• Protection of child’s education / marriage need

• Protection of Assets and liabilities

• Protection of family’s maintenance

• Protection of family’s maintenance
Proper financial plan ensure protection for all these needs along with providing the 3 benefits of
protection, return on investment and tax benefits.
Insurance products - Basic elements
Life insurance companies offer various plans covering the risk of
• Dying too early
• Living too long

• Dying too early
• Living too long
Most insurance plans offered in India have two basic elements

• Dying too early
• Living too long
• Death cover – this amount is paid to the nominee / beneficiary in the event of death of the life insured during the
term of the policy.
• Dying too early
• Living too long
term of the policy.
• Maturity benefit – this amount is paid on the maturity of the policy if the life insured survives through the term of
the policy.
• Dying too early
• Living too long
term of the policy.
• Maturity benefit – this amount is paid on the maturity of the policy if the life insured survives through the term of
the policy.
Some policies like money-back policies also make periodic payments to the life insured during the term of the
policy before maturity, known as survival benefits.
1
Insurance products - Pure Term plan
1
This is the most basic plan and simplest form of insurance offered.
1
In term plan the life insurance company promises to pay a specified amount (sum insured)
if the insured dies during the term of the plan.
1
If the life insured survives the entire duration of the plan, then they will not be entitled to
anything, meaning that there is no maturity benefit with such policies.
1
If the life insured survives the entire duration of the plan, then they will not be entitled to
anything, meaning that there is no maturity benefit with such policies.
So in short, this plan offers only death cover in the event of the death of the life insured during
the period of the plan
1
Key points:
1
Key points:
• Term insurance are the simplest form of insurance plans & offers only death cover.
1
Key points:
• Term insurance plans are the cheapest insurance plans available.

1
Key points:
• Tenure: Term plans offer protection only for a specified term. Normally the term starts from 5 years
and runs to 10, 15, 20, 25 years or any other term chosen by the insured and agreed by the insurer.
1
Key points:
• Protection against liabilities: to cover larger liabilities like home / car loans, term insurance cover
is the best solution.
1
Key points:
• Protection against liabilities: to cover larger liabilities like home / car loans, term insurance cover
is the best solution.
• Insurance companies, under some term plans, allow the life insured to increase or decrease the death
cover during the term of the plan.
1
Insurance products - Term plan - RoP
1
Some insurance companies offer variants of term insurance plans in the form
of return of premium (RoP) plans.
1
If the life insured dies during the term of the plan, the insurance company pays the specified
amount (sum insured) to the nominee / beneficiary.
1
If the life insured survives the entire policy tenure, then on maturity the insurance company returns
part of the premium or the entire premium, to the life insured according to the terms of the policy.
1
If the life insured survives the entire policy tenure, then on maturity the insurance company returns
part of the premium or the entire premium, to the life insured according to the terms of the policy.
In another variant of term insurance plans, some companies also pay some interest along with the premium
on the maturity of the plan if the life insured survives until maturity.
1
Insurance products - Pure Term Vs RoP
1
If you had to choose between a term insurance plan and a return of premium plan,
which one would you choose

1
If you had to choose between a term insurance plan and a return of premium plan,
which one would you choose
and why?
2
Insurance products - Pure endowment plan
2
A pure endowment plan is the opposite of a term insurance plan.

2
In this plan the life insurance company promises to pay the life insured a specified amount
(sum insured) only if they survive the term of the plan.
2
If the life insured dies during the tenure of the plan, then they will not be entitled to anything.
2
If the life insured dies during the tenure of the plan, then they will not be entitled to anything.
So in short, this plan offers only maturity benefit in the event of the life insured surviving the entire
tenure of the plan. There is no death cover.
3
Insurance products - Endowment insurance plan
3
An endowment insurance plan is basically a combination of

3
a term insurance plan

+
a pure endowment plan
3

+
Endowment plan offers -

3

+
• death cover if the life insured dies during the term of the policy or
3

+
• death cover if the life insured dies during the term of the policy or
• survival benefit if the life insured survives until the maturity of the policy.
3
Key points:
3
Key points:
• Maturity benefit: Endowment insurance plans pay a specified amount on maturity

of the plan if the life insured survives the entire term of the plan.
3
Key points:
• Maturity benefit: Endowment insurance plans pay a specified amount on maturity

of the plan if the life insured survives the entire term of the plan.
• Death cover: These plans also have a death cover element. If the life insured dies
before the maturity of the plan then the death cover benefit is paid to the nominee/beneficiary.
3
Key points:
• Savings element: After deducting the death cover charges and administration charges
from the premium, the remaining amount is invested. The returns earned are later
paid back to the life insured in the form of bonuses.
3
Key points:
Plans where PH are entitled to participate in the profits of the insurance company are known as ‘with-profits’ plans
or ‘participating’ plans.
3
Key points:
Most endowment, money-back and whole life plans are participating plans.
3
Key points:
Plans in which the policyholders are not entitled to participate in the profits of the insurance company are known
as ‘without-profits’ plans or ‘non-participating’ plans.
3
Key points:
Plans in which the policyholders are not entitled to participate in the profits of the insurance company are known
as ‘without-profits’ plans or ‘non-participating’ plans.
Pure term insurance plans are an example of without-profit plans.

3
Key points:
• Goal-based investment: these plans can also be bought for accumulating money for
specific plans like a child’s higher education or marriage etc.
3
Key points:
• Goal-based investment: these plans can also be bought for accumulating money for
specific plans like a child’s higher education or marriage etc.
• Some insurance companies also allow partial withdrawal or loans against these policies.
4
Insurance products - Whole life insurance plan
4
A term insurance plan with an unspecified period is called a whole life plan.
4
Some plans also have a savings element to them. The insurance company declares bonuses
for these plans based on the returns earned on investments.
4
• As the name of the plan specifies, this plan covers the individual throughout their entire life.
4
• On the death of the life insured, the nominee/beneficiary is paid the sum insured along with the bonuses
accumulated up until that point in time.
4
• On the death of the life insured, the nominee/beneficiary is paid the sum insured along with the bonuses
accumulated up until that point in time.
• During the individual’s lifetime they can make partial withdrawals to meet emergency requirements. An
individual can also take out loans against the policy.
Case Study - I
What is the difference between Endowment insurance plan
and
Whole life insurance plan

5
Insurance products - Convertible insurance plans
5
These insurance plan can be converted from one type to another.

5
For example, a term insurance plan can be converted into an endowment plan or
a whole life plan or any other plan as allowed by the insurance company.
5
A convertible plan is useful when the life insured cannot initially afford to pay a higher premium.
5
They can start with a term insurance plan with a lower premium and then later convert it into an
Endowment plan or a whole life plan with a higher premium.
5
They can start with a term insurance plan with a lower premium and then later convert it into an
Endowment plan or a whole life plan with a higher premium.
Also, at the time of the plan conversion the life insured is not required to undergo a medical check-up,
there is no further underwriting decision to be made.
6
Insurance products - Annuities
6
An annuity is a series of regular payments from an annuity provider (insurance company)

to an individual (called the annuitant) in return for a –
6

• lump sum (purchase price) or
• instalment premiums for a specified number of years.

6

According to the way the purchase price is paid, annuities can be either:
6

According to the way the purchase price is paid, annuities can be either:
• an immediate annuity; or
• a deferred annuity.
6
An annuity is the reverse of a life insurance policy.

6
In life insurance the insurance company takes on the risk, but with an annuity the annuitant
takes on the risk that they won’t die in a very short space of time after paying the purchase price.
6
There are several different types of annuity available such as a

6
There are several different types of annuity available such as a
• joint life,
• last survivor/life annuity with return of purchase price/increasing annuity

7
Insurance products - Group insurance plan
7
A group insurance policy provides insurance protection to a group of people who are
brought together for a common objective. The group of people can be:
7
– employees of an organisation;
7
– customers of a bank;
7
– members of a trade union;

7
– members of a professional body like an association of accountants; or

7
– members of a professional body like an association of accountants; or
– any other group of people who have come together with a commonality of purpose or are linked to each
other for a common objective.
7
• In a group insurance policy the insurance co. issues one master policy covering all
the members of the group. E.g., insurance company issuing master policy covering
all employees. The employer would be known as the ‘master policyholder’.
7
• The contract of insurance is between the master policyholder and the insurance company.
The employees are not a direct party to the insurance contract.
7
• The contract of insurance is between the master policyholder and the insurance company.
The employees are not a direct party to the insurance contract.
• Group insurance schemes are also used by the Government as instruments of social welfare to provide
insurance cover to the masses (people below the poverty line).
8
Insurance products - Unit linked insurance plan (ULIP)
8
Unit-linked policies carry a higher risk than with-profit policies and

contain fewer guarantees. However, they are much more flexible.
8

Unit-linked policies are suited to people prepared to undertake some investment risk to obtain
the benefits of flexibility.
8

Unit-linked policies are suited to people prepared to undertake some investment risk to obtain
the benefits of flexibility.
Returns are subject to movements in the capital markets where investments such as equities (shares) are traded.
8
Key points
8
Key points
• Unit-linked insurance plans (ULIPs) offer the benefits of both life insurance and returns
on investment.
8
Key points
on investment.
• In traditional plans the insurance company takes a decision on the investments to be made on behalf of
the insured. However, in a ULIP the insured has a variety of funds to choose from like equity funds, debt
funds, balanced funds and money market funds etc. for their investments.
8
Key points
on investment.
• In traditional plans the insurance company takes a decision on the investments to be made on behalf of
the insured. However, in a ULIP the insured has a variety of funds to choose from like equity funds, debt
funds, balanced funds and money market funds etc. for their investments.
• ULIPs give the insured the option to participate in the growth of the capital markets.
8
Key points
• On the death of the insured the sum insured or the market value of the investment
(fund value), whichever is higher, is paid.
8
Key points
• On maturity of the plan the fund value is payable.

8
Key points
• Settlement option: instead of taking a lump sum amount, some plans provide the policyholder with the
option to receive the maturity benefit amount as a structured payout (periodic instalments) over a period
of time (say, 5 years or any time up to 5 years) after maturity.
8
Key points
• Settlement option: instead of taking a lump sum amount, some plans provide the policyholder with the
option to receive the maturity benefit amount as a structured payout (periodic instalments) over a period
of time (say, 5 years or any time up to 5 years) after maturity.
This is known as the settlement option. If the policyholder wishes to take the settlement option, they need to
inform the insurance company well in advance.
Case Study - II
Case Study - II
If you had to choose between a ULIP and a traditional policy (term/endowment/whole life),
Which one would you opt for?

Case Study - II
If you had to choose between a ULIP and a traditional policy (term/endowment/whole life),
Which one would you opt for?
What are the points that you would consider in taking a decision on this?
Assignment
Assignment
Assignment
9
Insurance products - Child plans
9
Child insurance plans help parents to save for their children’s future financial needs
such as education, marriage etc.
9
• Child insurance plans offer the dual benefit of savings along with insurance.
9
• Child insurance plans offer the dual benefit of savings along with insurance.
• It is important to note that the child does not have any income of their own. Instead, they are entirely
financially dependent on their parents. The parent pays the premium to the insurance company towards
accumulating money for the child’s future financial needs.
9
• In these plans, risk on the life of the insured child will begin only when the child reaches
a specified age as stated in the policy.
9
The time gap between the policy start date and the date of commencement of risk is
called the deferment period.
9
• The date on which the risk will commence at the end of the deferment period is known as the
deferred date. The deferred date will be a policy anniversary.
9
• The date on which the risk will commence at the end of the deferment period is known as the
deferred date. The deferred date will be a policy anniversary.
• There is no insurance cover during the deferment period.

9
• When the child reaches the age of majority (18 years old) the title of the policy
will be automatically passed on to the insured child.
9
This process is known as vesting. The date on which the policy title passes to the
child is known as the vesting date.
9
This process is known as vesting. The date on which the policy title passes to the
child is known as the vesting date.
• After vesting the policy becomes a contract between the insurer and the insured person
(the child in this case).
9
• Some child insurance plans come with a built-in ‘waiver of premium’ rider,
whereas in some other child plans parent can opt for the WoP rider for
a small additional premium.
9
In this case if the parent dies during the policy term the insurance company will continue to pay the
premiums on behalf of the parent (until the child reaches the age of majority) and the policy is left intact.
9
The child receives the benefit at the end of the policy term according to the policy terms and conditions.
9
The child receives the benefit at the end of the policy term according to the policy terms and conditions.
• Child insurance plans can be taken out in the form of endowment plans, money-back plans or ULIPs.
10
Insurance products - Money-back policies

10
Money-back policies combine the dual benefits of savings and insurance, and are
somewhat similar to endowment plans in terms of features.
10
• In an endowment plan, the policyholder receives the maturity benefit at the end of the policy term.
However, in money-back policies ‘partial survival benefits’ are paid to the policyholder during the
term of the policy at specific intervals.
10
• In an endowment plan, the policyholder receives the maturity benefit at the end of the policy term.
However, in money-back policies ‘partial survival benefits’ are paid to the policyholder during the
term of the policy at specific intervals.
• The policyholder may receive the survival benefits in fixed proportions or variable proportions during the
policy term as per the terms and conditions of the policy.
10
• The benefits received by the policyholder at specific intervals are tax-free according to
prevailing tax laws.
10
• The benefits received by the policyholder at specific intervals are tax-free according to
prevailing tax laws.
• If the policyholder dies during the policy term, the nominee or beneficiary receives the
entire sum insured along with the accrued bonus (if any) without the deduction of survival benefits
that have already been paid to the insured.
Case Study - III
Case Study - III
Kirtan has taken out a 20-year money-back policy from ABC insurance company.
The sum insured is Rs. 20,00,000. He has nominated his wife Sumedha as the beneficiary.
Case Study - III
Under the money-back policy that he has taken out he will receive 25% of the survival benefit after 5, 10 and 15
years and the remaining balance of 25% of the survival benefit will be payable in the 20th year.
Case Study - III
Under the money-back policy that he has taken out he will receive 25% of the survival benefit after 5, 10 and 15
years and the remaining balance of 25% of the survival benefit will be payable in the 20th year.
However, Kirtan dies in a car accident. Sumedha is a housewife and was financially dependent on her husband.
Kirtan’s death occurred in the 11th year after he took out the policy.
Case Study - III
Total benefits received by Kirtan & his family under the policy.
Case Study - III
Kirtan had already received a percentage of the survival benefit (Rs. 10,00,000) in
the 5th and 10th years.
Case Study - III
Kirtan had already received a percentage of the survival benefit (Rs. 10,00,000) in
the 5th and 10th years.
In this case Sumedha will receive the entire Rs. 20,00,000 as the sum insured, even though
a percentage (Rs. 10,00,000) of the sum insured has already been paid to Kirtan in the 5th and
10th years of the policy.
11
Insurance products - Salary saving schemes (SSS)

11
Salary saving schemes (SSS) are intended to cater to the needs of the working classes.
11
• In SSS insurance company has an arrangement with the employer, whereby the employer
deducts the premium from the employee’s salary and passes it on to the insurance company
every month.
11
every month.
• As the premium is deducted from their salary before it reaches the employee, they do not need to worry
about defaulting on the premium.
11
every month.
• As the premium is deducted from their salary before it reaches the employee, they do not need to worry
about defaulting on the premium.
• The insurance company also benefits as it receives the consolidated premium from the employer for all the
employees who have enrolled on the scheme.
11
A salary saving scheme is not a specific insurance plan.

11
It is just a convenient arrangement to collect the premium.

11
It is just a convenient arrangement to collect the premium.
It can be used for a term plan, an endowment plan or any other plan as offered by the insurer
under the SSS arrangement.
Assignment

B&FS - Session Insurance

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B&FS - Session Insurance

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PGDM - B&FS

Underwriting is process of evaluating the risk of insuring a -

Underwriting is process of evaluating the risk of insuring a -

Person responsible for underwriting is known as Underwriter.

Person responsible for underwriting is known as Underwriter.

Person responsible for underwriting is known as Underwriter.

Person responsible for underwriting is known as Underwriter.

Person responsible for underwriting is known as Underwriter.

Underwriters’ assessment of the risk will influence the premium to be charged.

Person responsible for underwriting is known as Underwriter.

Underwriters’ assessment of the risk will influence the premium to be charged.

Different companies have different guidelines as to how risks are -

Different companies have different guidelines as to how risks are -

Different companies have different guidelines as to how risks are -

The process of insurance underwriting is as follows:

The process of insurance underwriting is as follows:

The process of insurance underwriting is as follows:

Analyse the risk associated

The process of insurance underwriting is as follows:

Analyse the risk associated

Estimate the potential exposure

The process of insurance underwriting is as follows:

Analyse the risk associated

Estimate the potential exposure

Determine the probability of loss

The process of insurance underwriting is as follows:

Analyse the risk associated

Estimate the potential exposure

Determine the probability of loss

Accept (or reject) the proposal

The process of insurance underwriting is as follows:

Analyse the risk associated

Estimate the potential exposure

Determine the probability of loss

Accept (or reject) the proposal

Classify & rate into a ‘risk group’ to calculate the premium

The process of insurance underwriting is as follows:

Analyse the risk associated

Estimate the potential exposure

Determine the probability of loss

Issue the Insurance policy

Classify & rate into a ‘risk group’ to calculate the premium

Medical check-up can be either general or more comprehensive.

Medical check-up can be either general or more comprehensive.

Insurance companies maintain a schedule that determines the degree of

Insurance companies maintain a schedule that determines the degree of

Insurance companies maintain a schedule that determines the degree of

• medical history and

Insurance companies maintain a schedule that determines the degree of

• medical history and

• the amount of insurance, cover they are requesting.

Safeguards adopted in non-medical business by insurer:

Safeguards adopted in non-medical business by insurer:

• a restriction on selection (female lives);

Safeguards adopted in non-medical business by insurer:

• a restriction on selection (female lives);

• putting limits on the sum insured;

Safeguards adopted in non-medical business by insurer:

• a restriction on selection (female lives);

• putting limits on the sum insured;

• a restriction on maximum, entry age / term / maturity age

Safeguards adopted in non-medical business by insurer:

• a restriction on selection (female lives);