Guide for Health Insurance - IC - 27

Key for Associateship Examination

Guide for
Health Insurance
(Paper No. IC-27)

Authored by:
Dr. Rakesh Agarwal
B.Com(H),M.Com(BIM),L.L.B, PGJMC, M.B.A, F.C.A.,
DISA,F.I.I.I, FRMAI, Ph.D
Editor
The Insurance Times

Published By :
The Insurance Times
The First monthly Journal on Insurance in India in service
since 1981

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The Insurance Times

G
© Dr Rakesh Agarwal
1st Edition October 2011
2nd Edition September 2015
3rd Edition June 2016
4th Edition January 2017
5th Edition December 2017
6th Edition December 2018

ISBN : 978-93-81489-01-7
Cost : ` 1500 for Study Kit containing
MCQ Guide, Ebook, and Online Mock Test

All Rights reserved by the publishers. No part of this

publication can be published or reproduced in any form, by
shuffling of questions, remodelling of questions or by any
means i.e., electronic, mechanical, including photocopying
without the prior permission of the publishers.

Every effort has been made to avoid errors or omissions in

this publication. This is a guide book prepared on the basis
of syllabus of Insurance Institute of India for Associate Exam
to assist candidates to pass in exam successfully.

The publishers will not be responsible for loss or damage due

to errors in this publication. Any error, mistake may be brought
to our notice, which shall be taken care in the next edition.
All disputes subject to Kolkata Jurisdiction.

WARNING: Do not Xerox the book. The Book may tear away
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 Guide for Health Insurance - IC - 27

Preface

We are happy to launch the 6th edition of Guide to

Health Insurance (IC-27).

Recently III has revised the syllabus and now all the
papers will be in Multiple Choice format.

We have covered thoroughly the whole syllabus pre-

scribed by I.I.I and the questions and answers are given
based on each chapter. The book has been prepared
carefully to cover almost all types of questions that can
be asked in exam.

We hope the candidates will find this book very useful

in preparing for the examination. Please do go through
the tips given in this book for clearing the exam suc-
cessfully.

We are thankful to Shyam Agarwal, Associate Editor,The

Insurance Times and Dr Abhijeet Chattoraj for valuable
inputs in the book and their untiring effort in prepara-
tion of the guide.

Though we have tried to make this publication error

free, if you come across any error please email/fax us
so that we can correct the same in next edition.

We wish you best of luck for the examination.

- Editor in Chief,
R. G. Agarwala
The Insurance Times

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The Insurance Times

Tips for passing the exam successfully

1. Plan out your study programme in advance so

that you do not leave any important topic.
2. We have covered questions in various pattern
and options so that the concept of subject is
clear to the candidates. Since the questions may
be twisted in the exam it is not advisable to
mug up the questions.
3. Before appearing in the examination try to solve
questions in exam conditions by setting up time
and solving the questions as if appearing in exam.
4. Do not consult too many things at a time
otherwise you will confuse everything. Go step
by step.
5. When you view the question paper in the exam
do not try to read all questions instantly as it will
waste your time and if you don't know answers
of some question you will get tensed.
6. Go through the first page and answer only the
questions which you are sure as there is
provision for negative marking. Likewise go

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 Guide for Health Insurance - IC - 27

through all the pages and mark answers only

which you are confident of being correct.
7. Read and read carefully before answering any
question as the question might have been
twisted.
8. Before deciding the answer give stress on the
logic and you will get the correct answer.
9. Always keep some time to review the paper.
10. Once you complete reading a chapter in book,
attempt for online mock test. If you do not score
well again go to the chapter and study again
and reattempt the questions until you get good
marks.
11. In the new pattern of questions the questions
are large so before answering read questions
very carefully. A single not or negative or positive
construction may change the answer, so check
whether question is asking in affirmative or
negative.
12. When you receive the question paper first
answer the questions in which you are confident.
Say you know 40 out of 100 question then
answer them so that you are confident of

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The Insurance Times

securing this mark. After this you again start

from beginning and read question twice/thrice if
you have confusion.
13. As more and more exams are being conducted
in MCQ pattern the level of difficulty is
increasing. A new trend has started where you
may find that most answers are right. Out of
this you will have to select the best option which
best resembles the question.
14. Adopt Elimination technique. For example out of
5 option first try to figure out the option which
is absolutely wrong. So go on eliminating the
wrong options to arrive at the correct option.
15. Don't leave any question unanswered. Since
there is no negative marking attempt all the
questions. Try to arrive at the most likely
answer.
16. In many questions you will find the answer All
above. Most likely in such type of questions the
answer will be All the above. But again exercise
caution become they may intentionally give this
option to confuse you.
17. Do not leave any chapter. Focus on all chapters
equally. MCQ questions are set from a pool of

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 Guide for Health Insurance - IC - 27

questions. At times it happens that from a

particular chapter many questions are set. You
leave any chapter at your sole risk.
18. Along with this guide study the Ebook given
along with this book including the Online Mock
Test for assessing your preparation.
18. Relax, relax and relax while answering. Avoid
anxiety. If you will take strain then chances are
that you may answer incorrectly even the
questions you know.
19. Well we wish you Best of Luck for the exam
and hope you clear the paper in the coming
attempt.

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Contents

Important Points to remember in all Chapters

Introduction to Health Insurance and
the Health System in India 11

Health Financing Models and

Health Financing in India 25

Health Insurance Products in India 32

Health Insurance Underwriting 42

Health Insurance Policy Forms and Clauses 65

Health Insurance Data, Pricing and Reserving 87

Regulatory and Legal Aspects of

Health Insurance 101

Customer Service in Health Insurance 110

Health Insurance Fraud 120

Reinsurance 137

MCQ Questions & Answers

Chapter -1
Introduction to Health Insurance and
the Health System in India 147

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 Guide for Health Insurance - IC - 27

Chapter -2
Health Financing Models and
Health Financing in India 188

Chapter -3
Health Insurance Products in India 221

Chapter -4
Health Insurance Underwriting 240

Chapter -5
Health Insurance Policy Forms and Clauses 279

Chapter -6
Health Insurance Data, Pricing and Reserving 326

Chapter -7
Regulatory and Legal Aspects of
Health Insurance 369

Chapter -8
Customer Service in Health Insurance 393

Chapter -9
Health Insurance Fraud 417

Chapter -10
Reinsurance 455

Additional Questions 481

Answers for all Chapters 502

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 Guide for Health Insurance - IC - 27

Introduction to Health Insurance

and the Health System in India

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Important Points to Remember

What is health insurance?

Health insurance is a method in which on payment of pre-
miums the insurance company agrees to pay the policy-
holder the cost of medical expenses incurred subject to a
specified terms and conditions during the policy period.

Health insurance in India, sold through insurance compa-

nies is known as private health insurance or commercial
health insurance.

The health insurer usually provides either direct payment

to hospital (cashless facility) or reimburses the expenses
associated with illnesses and injuries. The type and
amount of health care costs that will be covered by the
health plan are specified in advance.

The commonest form of health insurance policies in India

cover the expenses incurred on Hospitalization, though a
variety of products are now available which offer a range
of health covers, depending on the need and choice of the
insured.

Definitions:
Insurance that compensates the insured for expenses or
loss incurred for medical reasons, as through illness or
hospitalization. - Dictionary.com

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 Guide for Health Insurance - IC - 27

Health insurance in a narrow sense would be 'an indi-

vidual or group purchasing health care coverage in ad-
vance by paying a fee called premium.' In its broader
sense, it would be any arrangement that helps to defer,
delay,reduce or altogether avoid payment for health care
incurred by individuals and households. - World Health
Organisation

A policy that will pay specified sums for medical ex-

penses or treatments. Health policies can offer many op-
tions and vary in their approaches to coverage. -
Entrepreneur.com

The term health insurance (popularly known as Medical

Insurance or Mediclaim) is a type of insurance that cov-
ers your medical expenses. A health insurance policy is
a contract between an insurer and an individual /group in
which the insurer agrees to provide specified health insur-
ance cover at a particular premium. - GIC Council

Features of health insurance

v The insurer agrees to indemnify.
v The insured in respect of all medical expenses he in-
curs for treatment
v As per terms and conditions specified in the policy
v On payment of a small contribution known as pre-
mium
v Unlike other forms of insurance in health insurance
there is a third party health care provider ie hospitals
without which health insurance has no meaning

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Multiple Choice
Question/Answers

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 Guide for Health Insurance - IC - 27

Chapter 1

Introduction to Health Insurance

and the Health System in India

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Model Questions Bank - Set I

1. Health insurance is a way to

distribute_________ associated with the
variation of individual health care
expenditures by pooling costs over time
and over people.
a. Financial risk b. Health risk
c. Insurance risk d. Pooling risk
e. Payment risk

2. What are covered under Health

insurance?
a. Hospital stay b. Medicines
c. Surgery d. Doctor's fees
e. all of these

3. Why is health insurance offered by

insurance companies commonly known
as Private Health Insurance or
Commercial Health Insurance?
a. Both the names are used randomly
b. to avoid confusion between public insurance
companies owned by government.

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 Guide for Health Insurance - IC - 27

c. since insurance is a private matter.

d. since insurance is sold commercially through
agents.
e. all of these.

4. Which is incorrect in respect of health

insurance system?
a. Health insurance insures an individual from
expenses incurred due to any variation in their
health
b. It collects an upfront contribution known as
premium
c. This contribution is pooled over some people
d. Health insurance is similar to other types of
insurance available in the market
e. This primarily covers health expenses of an
individual

5. The health insurance offered by

insurance companies is commonly
known as
a. Private health insurance
b. Commercial health insurance
c. Individual health insurance
d. Public health insurance
e. Both a and b
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Answers - Chapter 1 27. a. supply side moral

hazard
Set - I 28. b. insurer
1. a. Financial risk 29. d. cover towards
2. e. all of these unpredictable illnesses
3. b. to avoid confusion 30. e. 71%
between public 31. d. not insured
insurance companies 32. a. cost of healthcare,
owned by government. surgical procedures,
4. c. This contribution is doctor's fees and
pooled over some medicines
people 33. d. providing financial
5. e. Both a and b access to healthcare
6. a. Health care provider providers and
7. e. a, b and c above preservation of
8. e. All of these individual savings.
9. b. Premium 34. a. true
10. c. third party 35. b. minimizes
11. e. a,b and c 36. d. a and b, both
12. e. All of these statements are correct
13. c. imperfect market 37. d. a and b
14. e. a, b and c 38. d. a and b
15 d. Hospitalisation policies 39. d. 5%
16. a. both of them 40. d. All of them
17. b. insurer 41. d. All of them
18. a. senior persons are 42. a. early part of 19th
more keen to take century
insurance 43. b. 1912
19. b. young persons 44. c. A new insurance act
20. c. less risky more was passed to bring
profitable life and nonlife under a
21. c. underwriting single act.
22. a. the insured 45. a. Number of life insurers
23. d. a and b merged to form LIC
24. a. Insured's end 46. d. 1973
25. c. healthcare provider 47. d. 2000
26. b. demand side moral 48. c. 1948
hazard 49. b. blue collared workers

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 Guide for Health Insurance - IC - 27
of formal private Private sector and
sector pharmaceutical sector
50. e. all of these 27. e. All of these
28. a. Anganwadi workers
Set - II
29. d. all of these
1. c. 1954 30 .c. Accredited Social
2. e. all of these Health Activist
3. c. 1986 31. b. Sub centre
4. e. all of these 32. d. all of these
5. b. employers and 33. e. six
employees 34. e. all of these.
6. e. National Rural Health 35. d. specialist doctors
Mission 36. c. CHC should have at
7. c. State machinery least 50 beds
8. d. Marketing 37. e. all of these.
9. b. National, State 38. d. medical college
10. a. nutritional support hospitals
programme 39. e. medical colleges
11. d. Integrated Child 40. d. All of these
Development Scheme 41. e. all of these
12. d. Statements (i) and (ii) 42. c. doctors of other
are true medicines - 60%
13. e. All the above 43. a. Pharmaceutical industry
14. b. Finance Ministry 44. d. 75%
15. e. All of these 45. b. higher
16. e. All of these 46. a. upward revision of
17. d. All of these prices, especially for
18. a. Medical and public newer drugs
health matters 47. b. National
19. a. Centre and states Pharmaceuticals Pricing
20. d. all of these Authority
21. e. all of these. 48. d. a, b and c are true
22. d. Both (i) and (ii) are 49. e. All of the above
true 50. d. none of these
23. d. all of these
24. d. All the three
Set - III
25. e. Special Health Officer 1. b. Hospitalisation
26. b. Public health sector, insurance

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