LEARNING MATERIAL 2011

NATIONAL CENTRE FOR INSURANCE LEARNING

NARENDRAPUR
Some thoughts…
Few preliminary observations:

1. The inspiration for the project came in the chamber of Shri K P Brahma, GM(P) when it was suggested
that we print a book & make it available to the aspirants in the Class I Promotion exercise.

2. Our fundamental tenet is – the Democracy of knowledge. We believe that in the Age of Information-
availability of information should be just a click away for everyone. The competitive edge of a user
group should come from the depth of understanding & utilisation of the available information.
(Incidentally , we at NCIL practice what we preach. We are trying to share with all NICians on the
Company Intranet- all material - as basic reference or as PPT. Our endeavour is to further enrich &
expand this information base.)

3. This is a Team Work. It is a compilation of the work earlier done at Ahmedabad & somewhat updated
& re-organised by the team at HO/ NCIL in Kolkata.

4. For us at NCIL- this was our maiden foray in the field of editing. We tried to learn on the run. In
retrospect we feel that we were somewhat overambitious to begin with- both in terms of tight time
schedule & the content. Our initial target was to create a reference source which will have its utility
beyond the current Promotion exercise & to ensure an uniform layout throughout the content.

5. We have partly succeeded in this but at the cost of time overrun.

6. The material is in your hands now. We await your feedback to improve on this in the next edition.

7. With our one edition experience, we have started working on the next one right now. Please mail
your inputs to- s.singh@nic.co.in, s.k.pradhan@nic.co.in, a.k.das@nic.co.in,
u.bhattacharya@nic.co.in

We acknowledge with thanks the role of all who have inspired &/or contributed to this project now
or in the earlier versions. At the same time, with humility, we regret our editorial shortcomings-
which we hope to overcome with more experience.

Team NCIL
 Contents

1. FIRE INSURANCE 1 - 24
2. BUSINESS INTERUPTION (LOP) 26 - 40
3. INDUSTRIAL ALL RISK 42 - 46
4. ENGINEERING INSURANCE 48 - 76
TESTS 76 - 118
5. MISCELLANEOUS INSURANCE 120- 138
TESTS 138-- 173
6. MOTOR INSURANCE 173- 206
TESTS 206- 218
7. MARINE INSURANCE 240- 254
8. AVIATION INSURANCE 256- 299
TESTS 299-324
9. RE-INSURANCE 326- 337
TESTS 338-352
10. FINANCE TESTS 354- 408
11. HUMAN RESOURCE * 420 – 469
TESTS 496-502
( * Page numbering error)

This book is for private circulation amongst NICians only.

 STANDARD FIRE POLICY PROVISIONS
BASIC PRINCIPLES OF FIRE INSURANCE CONTRACT:

Insurable Interest :
Essential Feature – The legal right to insure.
§ By ownership,
§ Bailer/ Baillie,
§ Leaser/ Lessee;
§ By Agreed Bank Clause;
§ Goods held in trust; etc.

Actual time when the interest should exist – both at the time during issuance of
policy and also at the time of claim. Assignment of Insurable interest in various
situations

Utmost Good Faith

The contract put the proposer in a superior position- facts material to the risk with

FIRE INSURANCE
example - duty of utmost good faith evolves-reciprocal duty- breach of duty may
make the contract void or voidable depending upon the nature of the breach-
breach of condition - duration of observance of the duty-before accepting the risk,
throughout the policy- following a loss.

Indemnity
Fire Policy is a strict indemnity policy.

THIS INSURANCE IS MEANT FOR:

•Buildings
•Plant and machinery
•Furniture, fixtures and fittings
•Other contents
•Electrical installations
•Stocks of raw materials and finished goods
•Stocks in process

WHO CAN TAKE THE POLICY?

•Those who are having insurable interest in the property

•Owners
•Lessor/lessee
•Mortgagors/mortgagees
•Bailees
2 3
 •Trustees
•Financial institutions that have advanced loans against the property.
PERILS COVERED UNDER STANDARD FIRE & SPECIAL PERILS
POLICY:
•Fire- Excl. inherent vice, undergoing heating & drying, burning of
property by public authority.
•Lightning.
•Explosion/ Implosion excl. to pressure vessels by own explosion/
implosion.
•Aircraft Damage.
•Riot, Strike& Malicious Damage
•Storm including hailstorm, cyclone, typhoon, tempest, hurricane,
tornado, flood & inundation.
•Impact damage- rail/road vehicles or animals not belonging to the
insured/ occupier.
•Subsidence & landslide/ rockslide.
•Bursting, overflowing of water tanks, apparatus & pipes.
•Missile testing operations.
•Leakage from automatic sprinklers.
•Bush fire- excl. forest fire.
The loss/ damage under above perils may be of fire or non-fire in nature. Both
types of losses are covered under the policy. In other words the policy is Material
Damage policy which covers physical losses to the insured property arising out of
all above perils.
STFI – Storm, tempest, flood and inundation (Flood group of perils) and RSMD –
Riot, Strike, Malicious Damage can be opted out with reduction in premium rate.
A LOSS OR DAMAGE MAY BE SAID TO BE BY FIRE WHEN:
•There must be ignition (accompanied with heat &/or flame i.e. some kind
Chemical reaction - oxidation/addition of oxygen from air). A loss or
damage may be said to be by fire when there has been ignition of insured
property which was not intended to be ignited. When insured property
has been damaged otherwise than by ignition as a direct consequence of
the ignition of other property not intended to be ignited.
•Damage by smoke, sparks, water etc. consequent on ignition of other
property.
•Fire must be accidental and fortuitous.
4 5
•All incidental losses like water damage while fighting fire, re-fuelling
charges of the Fire Extinguishers used to fight fire, etc. covered.
EXCLUSIONS UNDER THE FIRE POLICY:
•Excess- Applicable to all risks except dwellings with individual owners
For policies having S.I.upto Rs. 10 crs, per location:
5% of claim amount subject to a minimum of Rs 10,000
For policies having S.I.more than Rs. 10 crs but upto Rs. 100 crs. per
location:
5% of claim amount subject to a minimum of Rs 25,000
For policies having S.I.more than Rs. 100 crs but upto Rs. 1500 crs. per
location:
5% of claim amount subject to a minimum of Rs 5,00,000
For policies having S.I.more than Rs. 1500 crs but upto Rs. 2500 crs. per
location:
5% of claim amount subject to a minimum of Rs 25,00,000
For policies having S.I.more than Rs. 2500 crs per location:
5% of claim amount subject to a minimum of Rs 50,00,000
N.B. Excess is applicable per event per Insured
•War perils.
•Nuclear losses.
•Pollution, contamination unless caused by insured perils.
•Curios, documents etc. >10,000Rs., Goods held in trust or on commission
unless specifically covered
•Change of temp. (Stocks in cold storage)
•Pure electrical fires.
•Architects etc. fees (beyond 3% of claim amount) & Removal of debris
(beyond 1% of claim amount).
•Consequential losses.
•Spoilage due to cessation of process.
•Theft- during/ after loss.
•Earthquake.
•Shifting of property to other place – But Mechanical items & equipments are
covered for 60 days if shifted for repairs/ renovation etc.
•Terrorism damage.
Out of the above exclusions certain are covered as ADD-On Covers. e.g. of insured property on expiry of 7 days
Terrorism, Earthquake, architects fees(beyond 3% of claim amount) & removal 3. Cessation of cover on material alteration, if unoccupied for more than 30
of debris(beyond 1% of claim amount), spoilage (due to cessation of process), days or passage of insurable interest
curios /documents etc. > Rs.10,000/- can be covered for actual value under Misc. 4. Loss covered under any marine policy is not payable
Department (subject to declaration). 5. Cancellation
6. Duties of the Insured in the event of an occurrence giving rise to a claim
EXTENSIONS OR ADD ON COVERS OF FIRE POLICY: 7. Rights of the Insurer in the event of a claim
8. Fraudulent means by Insured forfeits all benefits under the policy
•Architects, surveyors and consulting engineers' fees – in excess of 3% of 9. Insurer's rights to reinstate or replace the property in case of a claim
claim amount. 10. Average clause
•Removal of Debris –in excess of 1% of claim amount. 11. Contribution
12. Subrogation
•DOS in cold storage due to power failure/ change of temperature due to
13. Arbitration
insured Peril.
14. All communications by insured to be in writing
•Forest fire. 15. Reinstatement of Sum Insured after a claim
•Impact Damage- Own vehicles.
•Spontaneous combustion. CLAUSES
•Omission to insure additions, alterations & extensions.
•Earthquake (fire & shock). OMISSION TO INSURE, ALTERATIONS, EXTENSIONS CLAUSE
•Spoilage (material damage) covers.
•Leakage & Contamination cover. •Buildings, plant & machinery, furniture, fixtures and fittings can be
covered up to 5% of the sum insured without specific insurance.
•Temporary removal of stocks.
•5% additional premium to be paid at inception.
•Loss of rent.
•Within 30 days of expiry of policy all such additions, etc. to be declared
•Additional rent for alternative premises.
and premium on this account to be adjusted.
•Start up expenses.
•Escalation (upto 25%) TEMPORATY REMOVAL OF STOCKS- CLAUSE

NEW ADD ON COVERS FILED WITH IRDA •Up to 10% of stocks in process can be covered whilst lying at un specified
locations undergoing process.
1. Housebreaking •10% extra premium to be paid in advance.
2. Electrical apparatus clause
•No adjustment of premium.
3. Spontaneous combustion (wording modified)
4. Insurance of jetties, docks and other properties erected in water & •Stocks in excess of 10% of sum insured to be covered specifically.
damage by water borne bodies clause
5. Boiler explosion damage clause REINSTATEMENT VALUE CLAUSE
6. Start up/shut down expenses clause
7. Accidental damage clause •For building, plant & machinery, electric installations, F/F/F only.
•Sum Insured to represent Reinstatement value of the property insured.
GENERAL CONDITIONS OF FIRE AND SPECIAL PERILS POLICY: •In the event of loss payment for Reinstatement Value of property of same
kind or type, improvements, if any, to be borne by the insured.
1. Misrepresentation, non-discloser of material facts by the insured makes •Depreciation not to be deducted.
the policy voidable
2. Cessation of cover on fall or displacement (other than by an insured peril) •Average clause is still applicable

6 7
 •Reinstatement of property is compulsory.
•Within 6 months intimation to reinstate to be given to insurer & actual re-
instatement to be completed within 12 months- extension possible with
prior approval of insurer. Otherwise it will follow normal indemnity
without RIV basis.
•Reinstatement possible at other site provided liability of the insurers is
not increased.
LOCAL AUTHORITIES CLAUSE
•Extension for Reinstatement Value policies endorsed by Local Authority
Clause. Wherever RIV Clause is attached Local Authority Clause is a
must to attach.
•No additional premium for this extension.
•Covers additional cost to comply with local regulations in reinstating the
property.
•Liability if reduced under policy- under clause also reduced
proportionately.
•Applies only to the damaged property, prior to extension losses not
covered, additional tax, duty etc. not payable.
AGREED BANK CLAUSE
•To be applied when financial institution is interested.
•Any money payable to be paid to ‘Bank’.
•Notice by Co. to 'Bank' sufficient.
•Adjustment, settlement, arbitration- if made by 'Bank' binding on the
insured.
•Alteration etc. in risk not to prejudice 'Bank' interest.
•Co. will be subrogated of 'Bank's rights of recovery from insured on
payment.
DESIGNATION OF PROPERTY CLAUSE
•Available without additional premium
•Whatever designation is given to a particular item of property in Insured's
books of accounts is accepted as such by the Insurers.
DECLARATION POLICY
•Applicable for policy covering stocks only. To take care of frequent
fluctuations in stocks/stock values, Declaration Policy can be granted
8 9
subject to the following conditions (Standard Declaration Clause J to be
inserted).
• To take care of frequent fluctuations in the SI of stock (i.e. current asset)
this policy is issued.
• The minimum sum insured shall be Rs 1 crore in one or more locations
and the sum insured shall not be less than Rs. 25 lakhs in atleast one of
these locations. It is necessary that the declared values should
approximate to this figure at sometime during the policy year.
• Reduction in SI not allowed during the currency of policy.
• Maximum refund on downward adjustment 50% and no upward
adjustment is allowed.
• Basis of valuation- The basis of value for declaration shall be the Market
Value only anterior to the loss.
• If after occurrence of any loss it is found that the amount of last
declaration previous to the loss is less than the amount that ought to have
been declared, then the amount which would have been recoverable by
the insured shall be reduced in such proportion as the amount of said last
declaration bears to the amount that ought to have been declared.
Basis- Monthly declarations based on either
a) The average of the values at risk on each day of the month or
b) The highest value at risk during the month shall be submitted by the Insured
latest by the last day of the succeeding month.
If declarations are not received within the specified period, the full sum insured
under the policy shall be deemed to have been declared. It is not permissible to
issue declaration policy in respect of:
• Insurance required for a short period.
• Stocks undergoing process.
• Stocks at Railway sidings
FLOATER POLICY
•Floater Policy can be issued for stocks at various locations under one
Sum Insured (The Standard Floater Clause I, Annexure A shall be
attached to such policies).
•Unspecified locations are not allowed.
•Applicable Fire Rate= Highest rate applicable to any of such locations
+10%
•Presence of "Kutcha" construction under any location may be ignored for
rating.
•If stocks are in godown/ process blocks in same compound, no floater
extra premium.
•In case Stocks in a process block are covered under the Floater Policy and
 the rate for the process block is higher than the storage rate, the process N.B:- It is not permissible to split sum insured of the same property under various
rate plus 10% loading shall apply. policies for different periods of insurance to derive advantage of deferred
installments for payment of premium. Notwithstanding the above, different
FLOATER DECLARATION POLICIES policies may be issued for stocks where circumstances necessitate issuance of
such policies.
•Floater Declaration policy (ies) can be issued subject to a minimum sum
insured of Rs 2 Crores and compliance with the Rules for Floater and Minimum Premium: Minimum premium shall be Rs.100/- per policy except for
Declaration Policies respectively. risks ratable under Section III and 'Tiny Sector Industries' under Section IV where
•The minimum retention shall be 80% of the annual provisional premium. the minimum premium shall be Rs. 50/ per policy.
•Standard Floater Clause I and Declaration Clause J – both shall be
PARTIAL INSURANCE : It is not permissible-
attached to Floater Declaration policy.
•to issue a policy covering only certain portions of a building.
VALUED POLICY
Notwithstanding this, the plinth and foundations or only the foundation
of a building may be excluded.
When market value cannot be ascertained, agreed value policy can be issued for
work of art, curious, etc. •to issue a policy covering only specified machinery (except Boilers),
parts of machine or accessories thereof housed in the same block/
LONG TERM POLICY building.
•N.B. Where portions of a building and/or machinery therein are under
It can be issued only for dwellings issued for minimum period of three years and different ownership, it is permissible for each owner to insure separately
maximum can be for any number of years but discount is maximum for 10 years – but to the full extent of his interest on the building and/or machinery
Policies for a period exceeding 12 months shall not be issued except for therein. In such cases, the Insured's interest shall be clearly defined in the
"Dwellings". policy.
•Rates for Short Period Insurance: Policies for a period of less than 12
Mid-term Cover may be granted for the deleted perils of STFI &/or RSMD. months shall be issued at the rates set out hereunder:
Generally, it is not permissible to grant mid-term cover for STFI and/or RSMTD
perils. The following provisions shall apply, where such covers are granted mid- For a period not exceeding 15 days 10% of the Annual rate
term: –do– 1 month 15% of the Annual rate
Insurers must receive specific advice from the insured accompanied by payment
–do– 2 months 30% of the Annual rate
of the required additional premium in cash or by draft. This additional premium
shall not be adjusted against existing Cash deposits or debited to Bank guarantee. –do– 3 months 40% of the Annual rate
–do– 4 months 50% of the Annual rate
Mid-term cover shall be granted for the entire property at one complex –do– 5 months 60% of the Annual rate
/compound/location covering the entire interest of the Insured under one or more –do– 6 months 70% of the Annual rate
policy(ies). Insured shall not have any option for selection.
–do– 7 months 75% of the Annual rate
Cover shall commence 15 days after the receipt of the premium. –do– 8 months 80% of the Annual rate
–do– 9 months 85% of the Annual rate
The premium rates as under shall be charged on short period scale (as per Rule 8) For a period exceeding 9 months The full Annual rate
on full sum insured at one complex/compound/location covering the entire N.B.: Extension of short period policy (ies) shall not be permitted..
interest of the insured for the balance period i.e. up to the expiry of the policy.
CANCELLATION OF POLICY:
Payment of Premium: Premium shall be paid in full and shall not be accepted in
installments or by deferred payments in any form. •At insured's option – Short period scale.

10 11
 •At Insurer's option – Pro-rata.
•Replacement of policy by new annual policy with same or higher S.I.-
Pro-rata
SUM INSURED
FIRE INSURANCE POLICY- SI SHOULD BE ADEQUATE –
OTHERWISE FOR UNDERINSURANCE WE NEED TO APPLY PRO-
RATA CONDITION OF AVERAGE CLAUSE.
• S.I. represents the limit of liability under the policy.
• S.I. is the amount on which the premium is charged.
• Consequences of insuring for < or > than actual value of property is
underinsurance or over insurance.
SUM INSURED FOR BUILDINGS:
•Original cost- Inadequate for insurance purpose except when new.
•Book value- Not considered in Insurance (Adequate only for the first
year and not for succeeding years- considering the depreciation aspect).
•Market value- Present cost less depreciation for age and/ or usage.
•Reinstatement value- Present cost of replacement ( No depreciation
applied)
•Formulae: Market Value = Reinstatement Value less (-) Depreciation.
•Land value not to be included.
•No fixed rate of depreciation- it depends upon the age and future
expected life.
•Items like electrical installations and fittings to be included in the
building value.
SUM INSURED FOR PLANT & MACHINERY:
•SI = Landed cost at site + installation charges.
•Reasonable depreciation depending upon the age and future life to be
deducted.
•RIV policy has no depreciation.
•Items like accessories, electrical fittings and other things which are
necessary for running of the machinery to be included in the machinery
value.
SUM INSURED FOR STOCKS
•Raw materials- Cost price including all the expenses like octroi, freight
etc. to bring up to the place.
12
•Stocks in Process: Cost of raw materials + process cost including labour,
etc.
•Finished goods –Manufacturer - Cost of manufacturing.
•Wholesaler - Purchase price from manufacturer.
•Retailer- purchase price from wholesaler
•Profit not to be included - exception Declaration Policy
TARIFF PROVISIONS
•General Rules & Regulations
•Standard Fire and Special Perils Policy
•Dwellings, Offices, Hotels, Shops Located outside the compounds of
Industrial/Manufacturing Risks
•Industrial Manufacturing Risks
•Utilities located outside the compound of Industrial/Mfg. Risks
•Storage Risks (Godown &/or in Open) outside the compound of
industrial/mfg. Risks.
•Tank Farms/Gas Holders outside the compound of Industrial/MFG.
Risks
•Add-on Covers
•Annexure A : Standard Clauses
•Annexure B : Proposal Form
RATING OF STADARD FIRE & SPECIAL PERIL POLICY
RATING UNDER THE POLICY DEPENDS UPON THE FOLLOWING
FACTORS:-
• Occupancy
• Construction
• Fire Extinguishing Appliances.
• Option to delete RSMD &/or STFI Add on covers.
• Voluntary Higher Deductible (Excess) opted by Insureds.
• Claims experience
• Principle of 'One Risk One Rate' –whichever will be higher of Process
(Mfg.) risks, or ii) Storage risk,
• Entire property in one complex/ compound will attract the same rate
irrespective of kind of occupancy (Mfg./ storage/ utilities etc.).
• Dwelling exempted from the above rule.
• Two or more factories in the same compound /independent products – per
se rating if detached, otherwise the highest rate.
13
FOR STORAGE RISKS RATING DEPENDS UPON OCCUPANCY- TYPE CLAIMS
OF STORAGE
DUTIES & RESPONSIBILITIES BEFORE LOSS:
•Non- hazardous
•Category I goods •To intimate insurer-
•Category II goods •In case of any fall / displacement of building or any part without
•Category III goods operation of any insured peril within 7 days.
•Open storage •Alterations of trade, manufacturing, occupational change immediately.
•Tank farms, etc. •If un-occupancy for more than 30 days.
•Change of interest by sale etc.
For simple risk like dwellings, offices, hotels, shops etc. rating Per Se i.e. on its
own without considering other occupancies in the building. DUTIES & RESPONSIBILITIESAFTER LOSS (CLAIM PROCEDURE):

FOR MULTIPLE OCCUPANCIES:- •Intimation to fire brigade, police, etc.

•Loss minimization exercise to be taken by the insured.
•For Entire Building Tariff Rate Rs. 1.80%o less De-Tariff Discount. •Notice to insurer within 14 days.
•For Contents of individual owner - Per Se (Partially on-merit). •Co operation with surveyor when appointed.
•Lodge claim within 15 days with supporting documents.
DISCOUNTS APPLICABLE
•Furnish particulars of other insurances available with the affected
•For fire fighting appliances. properties.
•Enforce rights against third parties.
•For deletion of certain perils like STFI & RSMD
•If sum insured is more than 50 Crores – for claim experience.
COST REDUCTION MEASURES
•For opting voluntary deductibles.
•Discount for paid up capital. •Opt for clause like Designation of Property clause- No Extra premium.
•De-Tariff Discounts for good features/ technical features/ ISO •Insure non-stock items on Reinstatement Value basis.
Certification or other Accreditations. •For non-stocks items opt for 'Omission to insure …. Clause' and see that
at the end of policy within 30 days the insured send the declaration.
RATING OF RISKS IN MULTIPLE OCCUPANCIES
•Go for stocks declaration policy for finished goods and raw materials,
send declarations in time to take the maximum advantage.
One of the principles of rating in fire insurance is that if risks with different degrees
of fire hazards are close to one another then the higher hazard risk may cause •Floater cum declaration policy decision depends upon the fluctuations in
spread of fire to other risks close by. Hence this factor should be considered while the stock levels.
rating a risk. For simplification the tariff has allowed per se rating for contents of •When many locations are covered and when it is not possible to keep a
each insured as per their occupancy. track of sum insured at every location, better to go for a floater policy.
•Opt for suitable voluntary excess.
SILENT RISK: •Keep fire fighting system in good working condition, obtain periodical
certificates.
•Factories where no manufacturing / storage activities are carried out •Intimate to the insurer when in any unit production stops for more than 30
continuously for 30 days or more. days.
•Premium rate is lower than working rate. •Advice decrease in sum insured immediately.
•The silent rates are not applicable if a risk goes silent following a loss •As far as possible go for annual cover- avoid short period covers they are
under the policy. costly.
14 15
 •Though it is cost saving it is not advisable to go for deletion of flood, etc.
unless the unit is situated in area where chances of flood are NIL-
However this should be a thoughtful decision.
•Riot etc. perils not to be deleted.
•Premium can be saved by deleting from the cover the value of plinths and
foundations of the buildings.
•
Category 'C' : Upto Rs. 5.00 lacs (no provision)
In case, Interruption Loss is reported, estimate amount of loss is to be added with
estimate amt. of loss under M.D. Policy and then surveyor would be appointed.
FINANCIAL AUTHORITY FOR SETTLEMENT OF FIRE CLAIMS.

ISSUES RELATED TO FIRE CLAIMS: Administrative Officer : Rs. 1,00,000/-

Assistant Manager : Rs. 2,50,000/-
•The processing and settlement of claims constitute one of the most Deputy Manager : Rs. 10,00,000/-
important functions in an insurance organization. Indeed, the payment Manager : Rs. 15,00,000/-
of claims may be regarded as the primary service of insurance to the D.C.C. : Rs. 30,00,000/-
client. The prompt and fair settlement of claims is the hall mark of good Regional Manager : Rs. 40,00,000/-
service to the insuring public. R.C.C. : Rs. 80,00,000/-
Deputy General Manager : Rs. 100,00,000/-
•The proper settlement of claim requires a sound knowledge of the law,
General Manager : Rs. 200,00,000/-
principles and practices governing insurance contracts and in particular,
Chairman-cum-Managing Director : Rs. 400,00,000/-
a thorough knowledge of the terms and conditions of the standard
policies and various extensions and modifications there under. H.C.C. : --- Actuals.---
•Finally we can conclude that prudent underwriting of the policy ensures
Under Fire Insurance variety of buildings, machinery, equipments and stocks are
prompt settlement of claims which is main stream to satisfy the insured. involved. In addition to a competent surveyor it is recommended that the
Company officials should visit the site of loss as far as possible.
INTIMATION OF CLAIM: If the estimated loss is within Rs.20,000/- and loss of profits claim is not involved,
the underwriting office shall have the discretion to waive an independent survey
•Claim intimation is to be given in time along with estimated amount of and settle the claim on the basis of the claim form and other supporting documents
loss. In case, claim intimation is delayed, proper clarification is required after being satisfied that it is admissible under the policy and that the amount
to be obtained. Further, amount of loss is not ascertainable instantly, then claimed is reasonable and consistent with the extent of damage. Where necessary,
sum insured of the affected property may be the point of consideration for an official in the underwriting office may inspect the damage.
the purpose of appointment of surveyor.
PROCESSING OF CLAIMS:
•On receipt of claim intimation, the first step is to examine the policy from
the underwriting point of view to confirm the acceptance of liability The documents generally required for processing fire claims:
under the policy. • Copy of the policy complete with term, conditions and
• warranties
•Claim is registered and claim no. is allotted and surveyor is appointed • Section 64VB compliance confirmation
based on the estimated amount of loss declared.
• (iii) Claim form duly completed by the insured
•As per present practice, the financial authority for appointment of • (iv) Survey report which should include:
surveyor is same as the financial authority for settlement of claim. • Occurrence of loss
•As per IRDA guide line, the surveyors are categorized as'A', 'B' and 'C' to • Indication of the cause of loss
survey and assess the loss under Fire and Engineering Deptt. with the • Establishment of liability
limit of under noted estimated amount of loss. • Assessment of loss
• Confirmation of compliance of policy terms, conditions
•
Category 'A' : Above Rs. 20.00 lacs (LOP-above 50.00 lacs) • warranties
•
Category 'B' : Above Rs. 5.00 lacs ( do -upto 50.00 lacs) • Admissibility of the claim
16 17
 • Photographs •Gross Assessed Loss
• Police Report* (i) Fire Brigade Report * •Less: Under insurance
*these two reports may be waived if the survey report is clear and does not cause •Less: Excess
and doubt on the occurrence as well as extent of loss. •Net Loss Payable
CLAIMS ARISING OUT OF ACT OF GOD PERILS:
C. Market Value Basis (Stock) –
Documents like newspaper cuttings, photographs and meteorological reports are • Gross Loss
helpful in substantiating such losses. Where the incident is localized, not reported • Less: Salvage
in the media, the surveyor should enquire about the incident from local • Gross Assessed Loss
government/statutory authorities and is required to be supported by photographs
• Less: Under insurance
of the damage.
• Less: Excess
LOSSES REPORTED UNDER THE RSDMD & TERRORISM. • Net Loss Payable.

•In case of isolated losses under the above endorsements, copy of the FIR Under single loss, if Buildings, Machinery and Stocks are affected, only ONE
lodged with the police is required to be furnished. excess will be applicable. In other words, excess is applicable “per event per
•Disposal of claims where all records are destroyed in fire &/or allied Insured.
perils like flood.
•Settlement in these circumstances would generally be a negotiated one DISPOSAL OF SALVAGE:
because of non-availability of accounting records and other evidences.
Therefore, the surveyor should be advised to assess such losses on a •Salvage is deteriorated faster. Therefore, disposal of salvage should be
realistic and reasonable basis after discussions with the undertaken on priority basis for and on behalf of the concerned parties
insured/Bank/Financial Institution (if involved), and if required with without waiting for the liability to be established with the help & under
suppliers/customers/statutory bodies like tax authorities, excise supervision of the surveyor. This disposal of salvage guidelines should
authorities etc. always be followed.
•At present post-loss inspection by LPA is not required. Instead Company
Engineer/Officers may carry out such inspection. •Insured officials also need to visit the site of loss and hasten disposal of
salvage. It will also give moral support to the clients at the time of need.
CLAIMS ASSESSMENT:
•When the surveyor is required to undertake reconditioning and sale of
A. Market Value Basis: salvage on behalf of the Account/interest concerned, he may be paid fees
• Gross Loss and actual expenses maximum up to 5% of value realized.
• Less: Depreciation
• Less: Salvage SETTLEMENT OF CLAIM WHERE ALL RECORDS REQUIRED FOR
• Gross Assessed Loss THE ASSESSMENT OF THE CLAIMS ARE DESTROYED IN FIRE &/OR
ALLIED PERILS RISK:
• Less: Under Insurance
• Less: Excess. •In all such cases like what happened in Mumbai during July 2005 flood –
• Net Loss Payable. settlement was generally be a negotiated one because of non-availability
B. Reinstatement Value Basis: of accounting records and other evidences.
• Gross Loss •The surveyors should be advised to assess such losses on a realistic and
• Less: Salvage reasonable basis after the discussions with the insured (even with the

18 19
 Bank/ other Financial Institutions whenever involved).
•If required with suppliers/ customers/ statutory bodies like Tax
Authorities etc. and definitely with the Insurers.
LOSS OF PROFIT /CONSEQUENTIAL LOSS/ BUSINESS
INTERRUPTION LOSSES:
•Claims need to be monitored regularly by the insurer to ensure that the
insured is doing the needful to minimize the period of indemnity as much
as possible. If the insured has opted for more indemnity period more is
the likely chances of higher liability for the insurers.
• In case the surveyor for MD loss is different from the LOP policy, co-
ordination between both the surveyors is definitely needed and effective
control is to be maintained by the insurer.
SURVEYOR APPOINTMENT:
•Points to be noted
•The surveyor must be holding a valid license
•Selection of surveyor should be restricted depending on the type of loss
and the nature of the subject matter involved
•When for assessment of some losses specific technical expertise is
required - consultants having such technical expertise normally are
associated with the usual surveyors. The consultants' remuneration needs
to be negotiated in advance bearing the expertise in mind and the same
will be in addition to the survey fee payable to the surveyor.
•Category of Surveyors (i.e. A,B,C) will be checked and appointment of
surveyor must commensurate with this category & quantum of loss
•Appointment of joint surveyor may be done on the merits of the claim.
•No second surveyor may be deputed.
•Wherever the Loss of Profit losses are involved, the surveyors for the
material damage and the business interruption losses, if several, should
be competent to complement one another. One surveyor can be utilized
for both the material damage
Guidelines on the financial authority for appointment of surveyor ( i.e. H.O. /
R.O./ D.O./ B.O.) will be as per scale followed by each insurer.
DOCUMENTS REQUIRED FOR PROCESSING OF CLAIMS:
•Policy copy complete with terms, conditions and warranties.
•Claim form duly completed by the insured
20
• Survey report indicating-
• Cause of loss;
• Establishment of liability
• Assessment of loss
• Confirmation of compliance of policy terms& conditions, warranties and
endorsements.
• Admissibility of the claim
• Photographs/ Bills & vouchers/ Police report/ Fire brigade report may be
submitted along with the survey report
Since under Fire Insurance variety of buildings, machineries, equipments and
stocks are involved, in addition to a competent surveyor it is recommended that the
insurer should visit site of losses reported as far as possible.
FOR CLAIMS ARISING OUT OF AOG PERILS:
•In addition to the documents specified earlier, other documents like
newspaper cuttings, photographs of the devastating damage and
meteorological reports are normally required in substantiating such
losses. When the incident is localized, not reported in the media or not
recorded by any Meteorological Department, the surveyor should
enquire about the incident from local Government / statutory authorities
and support the description of the occurrence and the loss by taking the
photographs of the damage.
•The surveyor should cover in his report the vivid details of the loss,
confirm the incident clearly & unambiguously - then only the documents
of Meteorological Report may be waived. Attention must be paid for
concurrent policies & Agreed Bank (Financial Institute) Clause
LOSSES REPORTED UNDER THE RSMTD PERILS:
•In case of isolated losses under the RSMD Perils, copy of the first
information lodged with the police and their Final Investigation Report
of police must be furnished.
•The surveyor needs to give detailed report on the occurrence and confirm
that the loss/damage is admissible under the policy.
•Loss / damage, if any, arising out of omission or commission not
involving physical damage must be segregated.
FOR “ON ACCOUNT” PAYMENT TO BE MADE:
Pending final assessment of a claim an “On Account” payment may be considered
subject to confirmation of the following:
21
 •Loss due to occurrence of a peril covered by the policy .
•The establishment of liability leaves no doubt.
•The minimum liability based on assessment on market value basis (in
case of Building, P&M and accessories) that arises under the policy has
been specifically examined & stated by the surveyor.
PROCEDURES FOR FINAL PAYMENT:
•When the Final Survey Report is submitted by the surveyor the Claim
Processing Official / Authority will process and recommend the exact
claim amount for approval by the Competent Authority (as per the
Financial Settlement Authority of various claims laid down by each
insurer).
•The insured / claimant should be advised of the final amount of claim
approved, with details thereof.
•The full & final discharge by the insured (The bank/ financial institution's
discharge – where required) must be obtained before release of the
amount of claim.
•If the loss or any part thereof is recoverable from a Third Party, a letter of
subrogation and/or assignment and Special Power of Attorney, to suit
special cases, is to be sent to the insured for completion on requisite
stamp paper and return before settlement.
•In case of Close Proximity Cases detailed investigation should be
immediately instituted when a loss occurs in close proximity, i.e. within 5
days for all classes of insurance under Fire & Engg. Dept. of the date of
inception of risk. The close proximity mentioned here is in reference to
new insurance or where there has been a break in insurance. Close
proximity investigation should also be carried out in cases where it is
found that insurance has been taken out significantly later than it ought to
have been taken, i.e. the risk has remained un-insured or inadequately
insured prior to the insurance cover under reference.
PROCESS OF CLAIM SETTLEMENT IN CASE OF CO-INSURANCE:
•The leader will process the claim on behalf of all the co-insurers. A
decision by the leader regarding claim settlement, taken at the
appropriate level according to the existing tenets of delegation of
financial authority, shall be final and binding on all the co-insurers.
Claims decided at the appropriate level by the leader will not be
processed again by co-insurers, regardless of the amount. The leader will
intimate to the co-insurer details of a claim settled by him with copies of
all relevant reports and documents. The coinsurer will settle his share of
the claim within 15 days from the date of receipt of such intimation from
22
the leader without any delay.
•In case of a claim requiring Board decision the decision taken by the
Board of the leader shall be binding on the other co-insurers. There shall
be no separate need for the co-insurers to approach their respective
Boards for decision in respect of such claims. A suitable note may,
however, be placed by the co-insurers before their respective Boards for
information in such cases.
APPOINTMENT OF INVESTIGATOR:
•Depending on the circumstances it may be necessary to appoint an
investigator to verify the claimed version of a loss. A separate surveyor
appointment may be considered if any actual physical survey/
assessment are possible and called for. While referring such matter to
R.O. from DO/BO, specific terms of references must be mentioned
clearly to justify its necessity.
•The letter appointing the investigator should mention the terms of
reference and make it clear that the report should contain no references or
doubts unless these are well documented and substantiated and can stand
the scrutiny of a court, if so required.
•In the absence of any laid down schedule of fees for investigators, it is
advisable to negotiate and decide the fees to be paid in addition to
expenses actually incurred before formally appointing the investigator
and that decided fee to be recorded in the letter of appointment.
•Investigator's fees are required to be negotiated and are to be paid in
addition to the expenses actually incurred. The negotiated fees to be
recorded in the letter of appointment to avoid any dispute in future.
CLOSE PROXIMITY CLAIM:
Detailed investigation should be initiated immediately when a loss close
proximity i.e. within 5 days of the date of occurs in inception of the risk. Reference
is to be made to R.O. along with underwriting details to verify the close proximity
aspect. The Close Proximity aspect is applicable for new business or where there
has been a break in insurance.
RECTIFICATION OF POLICY AFTER A LOSS:
•When collection of additional premium is required, the same is to be
charged on the affected policy period only in which the claim has arisen.
23
 Rectification can be done by the authority competent for settlement of the
claim.
•Rectification of a policy after a loss is reported for reasons other than
breach of condition/ warranty should be carried out as under:
•Where rectification involves collection of additional premium, the
additional premium may be charged only on the affected policy period in
which the claim has arisen.
•Rectification can be done by the Authority Competent for settlement of
the claim.

REPUDIATION OF CLAIM:

If a claim warrants repudiation, the competent authority would be the authority

competent to settle the claim. Letter of repudiation must state the reasons and/or
the policy condition under which it is repudiated.

RE-OPENING OF CLAIM FILES:

Re-opening of the claim file can be done by the authority one step higher than
the appropriate claim settlement authority.

24 25
 LOSS OF PROFIT POLICY

Whereas, the insured may have to incur the loss of profit, constant expenses
irrespective of business interruption brought by the accidental fire and allied
perils. The standard fire policy does not offer such benefits. Therefore, there is
a need for a separate policy to take care of the consequential loss. This benefit
is offered by a separate policy which can be an extension of fire policy , or
engineering policy and or project insurance.
•The extension of LOP to Fire Insurance is known as FLOP (Fire Loss of
Profit).
•The extension of LOP to Engineering Policy is known as MLOP
(Machinery Loss of Profit).
•The extension of LOP to Project Insurance is knows as ALOP ( Advance
Loss of Profit).
•Loss of Profit Policy can also be termed as Consequential Loss Policy or
Business Interruption Policy.

LOSS OF PROFIT INSURANCE

NEED FOR BUSINESS INTERRUPTION COVER
Business Interruption [also known as consequential loss or loss of profits and
hereinafter known as BI) is of recent origin. It was only with the improvement in
the standard of accountancy practice that the possibility of covering financial loss
following fire could be met with a practical solution.
Fire destroys everything that men possess. Fire destroys buildings, Hotels, cinema
theatres, factories, and contents therein such as machinery and stock, shops and
warehouse leaving only crippled remains of man's labour. The only solution to this
ever-present threat is Fire Insurance
When a property is destroyed or damaged [whether by fire or any other insured
peril] the owner of the property is indemnified by the payment of a sum of money,
which will enable them to repair or replace it. This is not, however, the full extent
of their loss. If, for instance, they are a manufacturer then, as the owner of the
business, they will try to sell their products for more money than the sum spent on
buying materials and converting them to completed products. This is their reason
for being in business in the first place. If the facility to manufacture is diminished
because of the destruction of their property, their earnings will fall off or even
cease.
The insurers offer standard fire and special perils policy, which can only take care
of the victim of fire. As a result, only the damaged buildings can be reconstructed,
destroyed plant and machinery can be reinstated and lost stock can be restored
with the compensation paid by the insurer towards such material damages.

26 27
WHAT HAPPENS TO BUSINESS DURING THE PERIOD OF NO CONSEQUENTIAL INSURANCE COVERS FOR VARIABLE
RECONSTRUCTION? EXPENSES.

The destruction caused by fire does not end with the smoldering shell of buildings An illustration to demonstrate the impact of fire accident on the business activity
or the mangled skeleton of expensive machinery or worthless stocks. Destruction
goes on, business comes to a standstill. The factory cannot produce goods, in other BEFORE FIRE
words, money stops coming on. I Income From Sales Rs.1, 00,00,000
The earnings of the business dwindle, if not cease totally while business expenses II Production costs Rs. 60,00,000
have still to be met. Wages and salaries have to be paid. So also overheads, rent,
Raw materials, Unskilled Labor and
rates and insurance. The net result - "LOSS". In extreme cases the business may
have to be wound up. This is a very real risk. Other variable charges Rs. 20,00,000
However, just as the Material/Property damage policy comes to the rescue of the III Over heads
insured when he incurs material damage, the profit policy works to protect against Rent, rates printing and stationery,
the consequent disruption to the business itself. Wages and salaries etc. Rs. 20,00,000
If damages occur to the property owned by the insured causing his business to
suffer, the policy would pay the amount of loss resulting from that interruption. AFTER FIRE
50% cut in production
SCOPE OF POLICY: Income from sales Rs. 50,00,000
• Loss of earning (Net Profit) Less: Production costs Rs. 30,00,000
•Standing Charges Overhead expenses Rs. 20,00,000
• Increased cost of working Net Result Rs. 50,00,000
Standing Charges include all fixed expenses such as rent, salary, electricity exp., Additional expenses Nil
audit expenses etc. which have to be incurred by the insured irrespective of Purchase of goods elsewhere
whether the business activities interrupted due to material damage or loss or Premises on hire Rs. 20,00,000
destruction brought by the operation of insured perils. Overtime
The indemnification under this policy is admissible only when the insurer admits NET RESULT - LOSS Rs. 20,00,000
the claim for material loss or damage or destruction.
THEREFORE, THERE IS A NEED FOR INSURANCE PROTECTION
WHAT NEEDS TO BE COVERED UNDER LOP POLICY FOR THE RESULTING CONSEQUENCE.
SUBJECT MATTER OF If the premises are destroyed the ` cost of maintenance also is affected. So the
BEFORE FIRE AFTER FIRE indemnity under the Policy has the following components:
INSURANCE
Capital Building, Machinery Fire insurance pays 1) Loss of Income – When the factory is unable to function
and stock for these 2) Loss of Income – after the repairs and repurchase until the
Variable expenses Cost of raw materials These expenses diminish in entire activity commences.
used. Unskilled Labor. proportion to the stoppage 3) Additional expense – to engage rented building until the damaged
Variable charges in production. building is reinstated
Fixed Expenses Continuing standing Consequential loss insurance 4) The machines are installed.
(Standing charges) charges such as salaries, is available for these expenses. 5) Indemnity period – must be long enough to cover the above [i]
interest, rent etc. and [ii]
Earning Net profit Consequential Loss Insurance 6) Saving – due to the damage are deducted from the
pays for this component settlement.

28 29
THE CONSEQUENTIAL LOSS POLICY COVERS :
NET PROFIT : This policy is designed to take care of loss of net profit, which is
differently meant by this policy unlike the net profit derived from trading and P &
L account. Such loss of profit should result from the cause of insured peril covered
under Standard Fire policy and that cause should have brought the interruption of
business.
STANDING CHARGES/ FIXED CHARGES : In spite of the stoppage of the
business, the fixed remuneration and other standardized fixed expenses have to be
incurred by the insured. Such expenses have to be incurred irrespective whether
the business is carried on or not due to the occurrence of the insured peril.
INCREASED ALTERNATE COST OF WORKING : To pay the additional
expenditure incurred by the Insured to maintain the normal business activity
during the period in which the business is affe
TURNOVER : Modern BI policies are based on the turnover of the business.
Profit comes out of turnover and is supported by it. Turnover can be conceived of
as representing the activity of the business, but is defined as the money paid or
payable to the insured for goods sold and delivered and for services rendered in the
course of the business at the premises. Turnover actually consists of Variable
charges, standing charges and net profit as we have already seen. If the ratio of
variable charges of a business to it is turnover is a constant [and this must be so,
because the definition of variable charges is simply those charges, which vary
directly to the turnover.] Then the remainder [the turnover less such variable
charges]. Is also constant to the turnover of the business. Thus, on the basis that
turnover does represent the activity of a business. we can measure this fall in
activity of a business. we can measure this fall in activity [which we do by
calculating the fall in turnover] and then, by applying the remainder constant to the
amount of this reduction, we can get at the true indemnity.
It is against the background of the definition of 'rate of gross profit ' annual
turnover' and standard turnover 'that financial loss will be calculated.
GROSS PROFIT : It may be defined that it is the amount by which the sum of the
turnover and the values of the closing stock shall exceed the value of the opening
stock and specified working expenses. DIFFERENCE BETWEEN
ACCOUNTANT'S AND INSURERS'GROSS PROFIT. The basic difference is
that accountants will take Turnover and deduct Purchases of raw materials to
produce gross profit.Insurers are, however, concerned with identifying that part of
gross profit which
• Relates to the business insured and
• Can be the subject of an indemnity from insurance
The insured pays only for insurance on those elements of gross profit which
continue to be payable after an interruption in the business [and on net profit] by
using the insurers definition and the premium relates only to the business insured.
Additionally, the insured's accountant will need to know on what basis to prepare
the declaration of gross profit for the insurance company.
THERE ARE TWO METHODS IN WHICH THE GROSS PROFIT CAN
BE ARRIVED AT:
ADDITIONAL METHOD : In this method, insured adds standing charges to the
net profit before taxation and excluding capital receipt as per the Profit and Loss
Account of the Company.
DIFFERENCE BASIS : Under this method, gross profit is arrived at as the
"Difference between turnover and variable charges " as detailed below.
Turnover 10,00,000
Less: Whatever trade discounts allowed 20% 2,00,000
8,00,000
Add: Closing Stock as on 31.03.2001 50,000
8,50,000
Less: Opening Stock as on 01.04.2001
Specified working expenses
Less: Purchases net of discounts 1,00,000
Bad debts 50,000 1,50,000
GROSS PROFIT 7 ,00,000
The original definition of gross profit was net profit plus insured standing charges.
The insured's accounts were the starting point. All 'non –business' items were
taken out [such as rent and upkeep of let-out portions, stock market gains and
losses etc].
Net trading profit was the surplus left after taking from the turnover of the business
insured All the costs of making it, from purchases of raw material to the cost of
delivery by the insured's vehicles or by post etc .
The 'Difference 'method starts with the accounts but uses them the other way
round. Basically, it lists 'specified working expenses' such as purchases these are
the previously mentioned variable charges which vary directly in proportion to the
turnover. Obviously, if your turnover is down you do not need to buy so much.
Once you have deleted the variable charges you are left with the standing charges
and net profit or [to put it another way ]the gross profit.
STEPS INVOLVED
1) Take out all income and expenditure extraneous to the business insured.
E.G rent of tenanted portions and costs of upkeep of that portion profit or
loss on share transactions [in other firms].
2) Identify the specified working expenses and take them off the total of the
turnover and the closing stock. The result is gross profit.

30 31
The term 'difference basis' describes the current definition of gross profit which
can be phrased as The difference between turnover plus closing stock and opening
stock plus specified working expenses.
STANDING CHARGES - ILLUSTRATIVE LIST
•Salaries to permanent staff
•Contribution to PF, FPF, Superannuation, Perquisites, ESI, etc.
•Rent, Rates, Taxes, Duties and License fees'
•Director's fees, remuneration
•Total audit fees and professional charges
•Conveyance, Travelling expenses and other office expenses
•Interest on loan, debentures, bank charges, guarantee, commission
•Dividend on preference shares
•Depreciation on various assets
•Miscellaneous standing charges
•Not exceeding 5% of the total listed insured standing charges.
INCREASED COST OF WORKING
HOW TO ARRIVE AT THE SUM INSURED
The Sum Insured is based on the gross profit of the business. The sum insured is
extracted from the previous year's account. If the indemnity period is 18 months,
the amount is increased by 50%. This is the basic sum insured. Assuming the
business would be interrupted for not more than 12 months, there are adjustments
to be made and this is where a little forecasting comes in.
Normally business does not standstill, year after year, it generally expands. Then
there is another factor to be taken into consideration i.e. Inflation.
Even if the business does not expand in terms of goods produced the expense and
income levels do expand in terms of money, roughly in conjunction with the
general inflation rate. Therefore, a sum to be insured needs to be drawn from the
previous years accounts and an upward adjustment is done in such a way that takes
care of any future influence of inflationary factors.
It is not sufficient if the sum insured is influenced by such factors pertaining to a
particular period of insurance as the indemnity period commences only in
succession to the date of occurrence of insured peril causing material damages.
Supposing, a loss takes place on the last date of a policy i.e. expiry date of the
policy, the indemnity period may be twelve months from that date or may be
twenty four months from that date or the period agreed between the parties to the
contract. This makes it clear that factors pertaining to the period of indemnity
chosen is very relevant while deciding the level of sum insured.

ADDITIONAL ITEMS THAT WHICH CAN BE INCORPORATED AS

•Rent for temporary premises PART OF SUM INSURED
•Payment of overtime
•Hire of machinery etc 1. WAGES:
Two methods in which wages can be included.
PERIOD OF INSURANCE: a) PRO-RATA BASIS:
It is possible to cover under a separate policy to claim wages for a Standard Period
Period of insurance of LOP policy is usually in consonance with material damage for an amount to represent the wages for the selected period. E g
policy. It runs and expires almost simultaneously. • Wages of all employees
•The wages of a specified category or categories of employees.
PERIOD OF INDEMNITY • The wages of all employees who are normally paid on weekly basis.
b) DUAL BASIS:
THE SELECTION OF INDEMNITY PERIOD 100% cover for a selected initial period and for the remainder of the indemnity
period, a selected percentage only. On Dual basis it is necessary to have a
The indemnity period commences with the date of damage and lasts till such time minimum indemnity period of 12 months. The sum insured must represent the full
as the business is restored to its pre-damaged level or the period stipulated in the annual payroll. If saving in payroll are made during 100% cover period, such
policy, whichever comes first. A consequential loss insurance policy insures saving can be carried over to boost the partial cover period during the indemnity
earnings of the business lost during the indemnity period. period.

32 33
The insured has the option of converting the combination to a straightforward
100% cover for a stipulated period longer than initial period.
DUAL BASIS PROVIDES A FLEXIBLE COVER : There are two main
advantages to the Dual Basis cover. They are
• Carry over of saving
•Option to Consolidate
•Insurance of lay off and/or retrenchment compensation
•Auditors fees
ASCERTAINMENT OF THE LIABILITY OF INSURANCE
What should be identified first before looking at the claim for business
interruption?
•Whether there is a standard fire policy and claim for material damage has been
admitted.
•What would be period of indemnity in case of reinstatement of property
damaged.
•Turnover earned by the insured after the damage but preferably at the different
premises of the insured.
•The insurance is limited to reduction in turnover.
•Limited to increase in cost of working.
•The amount payable as indemnity shall be additional cost of working with
some standing charges of the business insured.
•How the premium is adjustable with the gross profit earned by the business
differs from the sum insured during the year.
EVIDENCE FOR ADMITTED MATERIAL DAMAGE OR DESTRUCTION
Basically, it is a precondition that there should be a claim towards material
damages under the policy admissible as the terms and conditions of the standard
fire policy. The insured peril must have operated and the damages resulted.
Inotherwords, the resultant damages that has arisen out of the insured peril
should have been admitted by the insured. A point should always remains the
minds of the insurers that the policy is designed to cover the effect of a cause,
which is falling under the scope of the policy and does not fall under any of the
exception specified in policy.
This brings two situations
34
Insured peril The first one is the situation where the peril operates that is termed as
insured peril as per the policy. Admit both claims material damages and loss of
profit resulting the insured event.
Other unknown peril The second situation is where a peril operates but is not found
in the listed perils of the policy. Under the new circumstances, what do we do .
Reference is made to ensure that it is not found in the exceptions mentioned in the
policy and also verify whether this peril is an insured peril under any other product
of the insurer .
Where property suffers damage by a peril, which might not have been insured
under the policy, the course of the damage may lead to a fire starting. If the
proximate cause of the fire is not specifically excluded, the policy will respond to
the fire damage. However, damage caused by the original peril will not be
recoverable.
It being so, a suitable adjustment need to be made necessarily in the business
interruption period on the ' would have been basis' as if both unknown peril as well
as insured peril had happened separately. Of course, the onus is on the insured to
establish damages separately towards what is covered and what stands uncovered
due to the operation of an other peril unknown to the policy. [ an international
author of a book on practice of insurance says that the insured commits fatal to his
policy if he fails to establish the distinction between the losses].
It is our view the similar effect would happen in the Business interruption policy
too as it operates only on the admission of a claim towards material loss. It will be
explained more in the paragraphs to follow
WHAT IS TURNOVER?
It may be defined as consideration measurable in terms of money received or
receivable by the insured for goods sold and delivered and services rendered in the
course of the business carried out within his premises.
What does not fall under Turnover?
o Any sum receivable for the sale of redundant plant and machinery.
o Income from any source not insured under the policy. Example rental
income from the tenants.
o Any other business carried out within the insured's premises or goods
sold or services rendered but not insured under the policy.
STANDARD TURNOVER
The Turnover during that period in the 12 months immediately before the date of
incident, which correspond, with the indemnity period. Example -Indemnity
period for the restoration of the business disturbed is 01.06.2001 to 30.10.2001
and this period is the period of interruption. The standard turnover for this purpose
means the turnover for a period from 1.6.2000 to 30.10.2000.
35
RATE OF GROSS PROFIT
The rate of gross profit earned on the turnover during the financial year
immediately before the incident. This can be expressed by a formula
Gross Profit/Turnover x 100
Turnover
However, the estimated gross profit for the period of insurance should be based on
the previous years audited accounts but not less than that of the nearest financial
year.
N.B. Standard turnover, annual turnover and rate of gross profit are subject to
adjustment to take care of trend of business and special circumstances affecting
the business. For example a workers' strike, a big event (like IPL for sports goods
manufacturers) providing extraordinary business opportunity.
INCREASE IN COST OF WORKING AND SAVING
The insured may have to incur any additional expenditure for the sole purpose of
averting or minimizing the reduction in Turnover which, but for that expenditure,
would have taken place during the indemnity period in consequence of the
incident. But such expenditure should not exceed the sum produced by applying
the Rate of Gross Profit to the amount of the reduction thereby avoided.
EXAMPLE:
Incurring expenditure for overtime or hiring alternate machinery or occupying the
alternate premises on rent.
Basis of Indemnity for IC
The insured should remember that his payment would not exceed the amount
arrived as under.
Rate of Gross Profit x Reduction in T/o avoided. But, if the insured agrees to pay
more, then this can be expressed in the policy. The limitations which are usually
imposed are largely common sense and are that the increase in cost of working
shall be
• Absolutely necessary and reasonable
•That increased cost, which is incurred with a purpose to avoid or
minimize a reduction in turnover and therefore a loss of gross profit.
•Such IC is only in consequence of the damage [or incident]
•Necessarily incurred during the indemnity period and
• Equitably limited in the amount payable by insurers
The effect of this equitable limit is to restrict the maximum recovery as increase in
cost in working to the amount that would otherwise have been payable as a loss of
gross profit if such expenditure had not been incurred . This is often referred to as
'the economic limit’
36
This limit is clearly equitable but there are occasions when expenditure is incurred
with the agreement of insurers, which proves later to have been uneconomic.
Insurers must then stand by their original agreement.
SAVINGS
Any sum saved during the indemnity period in respect of such of these charges
payable out of gross profit insured based on the past records, may be used to set off
against the standing charges that are constant in nature.
ANNUAL TURNOVER
It is the Turnover during the twelve months immediately preceding the incident. It
is not the Turnover taken from the Audited accounts, as the figures shown in the
Audited Final accounts must have become outdated. The rate of Gross Profit is
applied to the Annual T/o and the proportion of the loss to be borne by the insured
is
Sum Insured
————————————————— = Amount payable
Rate of Gross Profit x Annual T/o
Those cost which should continue wholly or in part or deducted from the Gross
Profit amount.
PROVISION FOR UNDERINSURANCE
The sum insured by this item is less than the sum produced by applying the Rate of
Gross Profit on Annual T/o, the amount payable shall be proportionally reduced.
EXCESS CLAUSE
Every claim under the Fire Loss of Profits policy is subject to compulsory
deduction as under:
Other than Petrochemical Risks: 7 days Gross Profit
Petrochemical Risks : 14 days Gross Profit
ACCUMULATED STOCKS CLAUSE.
If stocks of finished goods which is accumulated is used to maintain the turnover
when production is affected adversely, during indemnity period, account is to be
taken of this use and turnover figures are adjusted accordingly.
SUM TO BE INSURED
•The sum insured should be at least one year's gross profit, even if
indemnity period is less that 12 months.
•If indemnity period is more than 12 months, the sum insured will be a
multiple (i.e. proportionate) of the annual G.P.
37
 •Operating profit and insured costs need to be estimated with the help of •However some of the perils covered under M.D. policy may not be
data on the current and projected business performance. included in C.L. cover.
•Rating •It is not possible to issue a policy with an indemnity period commencing
•Average (weighted) rate of the contents of the process blocks as per fire at a date later than the date of the damage.
tariff. •It is not possible to change the indemnity period during policy period.
•+ 25% LOP loading.
•+25% loading if the plant is having continuous process. Minimum Deductibles:
Other than Petro Chemical Risks - 3 days of Standard Gross Profit
•For indemnity period of more than 12 months Sum insured is to be
increased proportionately. Petro chemical risks - 7 days of Standard Gross Profit
•Sum Insured: NP +SC= GP
RATING

WAGES INSURANCE
The basis rate for consequential loss resulting from destruction or of damage to the
• As standing charges property by the perils covered under the standard fire & special perils policy shall
•On separate item on annual basis not be less than 1.25 times the full average of the items covering the contents of the
process blocks of the premises occupied by the insured for the purpose of the
•Separate item on period basis (pro- rata). business to which the consequential loss insurance applies except where otherwise
•Separate item on Dual basis. provided.
•Lay off and retrenchment compensation (Add on ). 1) In calculating the basis rate the contents of any storage/ utility blocks
(even if they are communicating with the process blocks) should not be
taken into consideration.
ADD ON
2) For other business premises where no manufacturing process is carried
• Auditors' fees. on, the basis rate shall be 1.25 times the average rate of the contents of the
•Earthquake whole premises.
•Terrorism 3) The average fire rate(as basis rate) shall be the percentage which is the
aggregate net premium in respect of the whole annual rate of the standard
•Spontaneous combustion fire policy(m.d. policy- i.e. fire & special perils insurance)of contents of
•Spoilage cover. the process blocks and/or the whole premises as applicable under the
item 1 & 2 above bears to aggregate sum insured on such contents.
•Premises in the Insured's own occupation.
4) The basis rate should not be altered when the factory becomes silent
•Suppliers & customers' premises. during the policy period.
• Electricity station, gas works, and water works. 5) Pilot plant and all the laboratories shall be considered as “process blocks”
CLAIMS for rating.
o Claims under Lop policies payable only when there is admissible claim 6) Percntage of the basis rate is applicable on the sum to be insured( 100% of
under Material damage policy (i.e. as per Material Damage Proviso). annual gross profit or above depending on the indemnity period opted by
the insured ) for all the perils normally covered under the material
• If claim under MD policy is rejected, claim under LOP policy also not damage cover.
payable.
• An only exception is - when claim under MD policy is not paid because it FOR ADDITIONAL (EXTENSION) COVERS:
is within Excess.
• Perils covered under C.L. policy shall be those covered under the 1. Wages (other than those covered as part of gross profit)- on dual
material damage only. basis( whole wages for initial 4 weeks & for a lesser percentage for
the remaining period of not less than total 12 months).
38 39
2. Wages (prorata basis) – for a selected period as multiple of basis rate.
3. Lay-off compensation &/or retrenchment compensation (with
/without notice wages liability) - 50% loading on profit rate for each
item.
4. Auditors' fees (only for the coverage of the fees required to be paid
for preparation of papers relating any claim assessment) – separate
sum insured to be declared and premium to be charged at 100% of
basis rate.
• RATE FOR VARIOUS SEPARATE EXTENSIONS TO
BE COVERED UNDER F.L.O.P.
• SUPPLIER'S PREMISES.
•CUSTOMER'S PREMISES.
•INSURED'S PROPERTY STORED AT OTHER
LOCATION
•FAILURE OF PUBLIC ELECTRICITY, GAS, WATER
SUPPLY.

40 41
 SALIENT FEATURES OF INDUSTRIAL ALL RISK
INSURANCE.
Eligibility - All Industrial risks including petrochemicals risks irrespective of
Sum Insured are now eligible subject to compliance of file & use guidelines by
insurers.

POLICY CONSISTS OF 2 SECTIONS VIZ.,

•Section I – Material damage AND

•Section II Business Interruption (following Fire and allied perils (FLOP).
•MLOP cover is also available at option of the Insured under Sec II.

SECTION I – MATERIAL DAMAGE

INDUSTRIAL ALL RISK INSURANCE

SCOPE OF COVER :

•ALL RISK POLICY.

•ALL TYPES OF ACCIDENTAL LOSSES OTHER THAN THE

NAMED EXCLUSIONS.

SCOPE OF COVER INCLUDES THE FOLLOWING :

PERILS COVERED UNDER STANDARD FIRE AND SPECIAL PERILS

POLICY. Act of god perils namely STFI, EQ (Fire & Shock), landslide, rockslide
and subsidence.

OTHER SPECIAL PERILS VIZ., (offered free of cost)

•Spontaneous combustion.
•Sprinkler leakage.
•Spoilage material damage.
•Leakage and contamination.
•Missile testing operations.
•Forest fire.
•Subterranean fire.
•Bursting and over flowing of water apparatus and pipes.
•Theft/Burglary
•M.B.D.
•Boiler explosion.
•EEI.

EXCLUSIONS: in two parts 1. Excluded causes 2. Excluded properties

Excluded causes:

42 43
 •Interruption of the water supply gas electricity or fuel systems or failure •Policies having Sum Insured above Rs 2500 Cr per location for Property
of the effluent disposal systems Damage (PD) and Business Interruption (BI) : 5% of claim amount
•Collapse or cracking of buildings. subject to a minimum of Rs. 50 lacs
•Faulty or defective design of materials, inherent vice, wear and tear.
•Corrosion, rust, shrinkage loss of weight, contamination etc. •Mega Risks Policies having Sum Insured above Rs 2500 Cr per location
•Larceny. for Property Damage (PD) and Business Interruption (BI) : 5% of claim
•Dishonesty, inventory shortage. amount subject to a minimum of Rs. 50 lacs
•Coastal or river erosion, normal settlement or bedding down of new SCHEME FOR VOLUNTARY DEDUCTIBLES :
structures
•Wilful negligence, cessation of work, loss of market. Insured may opt for higher deductibles and based upon the various voluntary
•War and war group of perils. options, premium is suitably decided.
•Nuclear group of perils.
•Destruction of the property by order of public authority. CLAUSES :

EXCLUDED PROPERTY : •Agreed Bank clause.

•Architects, surveyors and consulting engineers fees clause3.
•Money, cheques, securities of any description, jewelry, works of art, •Designation of property clause.
goods held in trust or on commission, computer system records unless •Escalation clause.
specifically covered. •Omission to insure additions, alterations or extensions clause.
•Vehicle licensed for road use. •Temporary removal of stocks clause.
•Property in transit outside the premises.
•Property or structures in the course of construction, demolition or SUM INSURED :
erection.
•Land, Pavements, roads, runways, railways lines, etc. unless specifically For building, plant and machinery, furniture, fixtures and fittings on reinstatement
covered. value basis. For stock on market value basis.
•Livestock, growing crops or trees. FACTORS FOR RATING:
•Property damaged as a result of its undergoing any process
•Property removed to other location for a period exceeding 60 days. • The detailed risk assessment report of the company engineer.
•Loss payable to the property covered under marine policies. • Compulsory deductibles
•Property more specifically insured under any other policies. • Deductibles opted by the insured.
• Claims experience.
Compulsory or minimum deductibles : All material damage claims are subject SECTION II : BUSINESS INTERRUPTION
to compulsory deductibles as under:
1. Loss of Gross Profit arising out of interruption of insured's operation.
•Policies having Sum Insured upto Rs. 100 Cr per location for Property 2. Such an interruption arising out of a loss payable under Material damage
Damage (PD) and Business Interruption (BI) : 5% of claim amount section.
subject to a minimum of Rs. 5 lacs
•Policies having Sum Insured above Rs 100 Cr and upto Rs.1500 cr. per SCOPE OF COVER UNDER SECTION II :
location for Property Damage (PD) and Business Interruption (BI) : 5%
of claim amount subject to a minimum of Rs.10 lacs 1. Loss of Gross profits & Increase in cost of working.
2. Loss of Gross Profits arising out of failure of utility services.
•Policies having Sum Insured above Rs 1500 Cr and upto Rs.2500 cr. per
EXCLUSION APPLICABLE UNDER SECTION II :
location for Property Damage (PD) and Business Interruption (BI) : 5%
of claim amount subject to a minimum of Rs. 25 lacs 1. Insured's lack of sufficient capital.
2. Any restrictions imposed by any public authority.
44 45
 3. Loss of business due to causes such as cancellation of a lease license or
order etc.
4. Damage to boilers, economizers, machinery, electronic installations and
data processing equipment.

NB : Arising out of the above, MLOP may be included.

•SPECIFICATION : Difference form of specification used.

•SUM INSURED :
•Estimated gross profit.
•Extracted from the previous years profit and loss account.
•Facility of return of premium clause.

EXTENTION UNDER SECTION II :

•Special perils namely STFI and Earthquake.

•Business interruption extended to customers and suppliers premises.

RATING :

As per the procedure adopted in Fire/Engineering portfolio.

COMPULSORY DEDUCTIBLES: All loss of profits claims are subject to

minimum deductibles as under:

Policies having Sum Insured upto Rs. 100 cr and upto Rs. 2500 crs. per
location for PD & BI:
Business Interruption (FLOP)-
Other than Petro Chemical Risks - 7 days of Standard Gross Profit
Petro chemical risks - 14 days of Standard Gross Profit
Business Interruption (MLOP) - 14 days of Standard Gross Profit

Policies having Sum Insured above Rs. 2500 crs. per location for PD &
BI:
Business Interruption (FLOP) - 14 days of Standard Gross Profit
Business Interruption (MLOP) - 21 days of Standard Gross Profit

Mega Risks Policies having Sum Insured above Rs. 2500 crs. per location
for PD & BI:
Business Interruption (FLOP) - 14 days of Standard Gross Profit
Business Interruption (MLOP) - 21 days of Standard Gross Profit

Voluntary Deductibles: May be opted by Insured against which premium may

be suitably discounted.

46 47
 ENGINEERING POLICIES

TYPES OF POLICIES

PROJECT INSURANCE POLICIES

1.Marine-Cum-Erection(MCE),
2.Erection All Risk (EAR),
3.Contractor's All Risk(CAR),
4. Contractor's Plant & Machinery(CPM),
5. Advance Loss of Profit (ALOP).

INSTALLED MACHINERY POLICIES (ANNUAL POLICIES)

1.Machinery insurance (MI),

ENFINEERING INSURANCE
2.Boiler & pressure plant (BPP),
3.Electronic equipment ins.(EEI),
4.Deterioration of stock(Potatoes)-DOS(P),
5.Deterioration of stock(other than potatoes)-DOS(OTP),
6.Machinery loss of profit (MLOP).
7.Civil Engineering Completed Risks Insurance (CECR)

Other ways of grouping

All Risk policies : Nos. Of project polices as given below fall under the group -
• Marine-Cum-Erection(MCE),
• Erection All Risk (EAR),
• Contractor's All Risk(CAR),
• Contractor's Plant & Machinery(CPM),

No. Installed machinery policy is in this group -

• EEI Electronic equipment ins.(EEI),

LIMITED PERIL / NAMED PERIL POLICIES

•Boiler & pressure plant (BPP).

DEPENDENT POLICIES

•Machinery loss of profit (MLOP).

•Deterioration of stock(Potatoes)-DOS(P),
•Deterioration of stock(other than potatoes)-DOS(OTP
•Advance Loss of Profit (ALOP).
•Sec.3(Increased Cost of Working i.e. ICOW) of EEI

48 49
 •Machinery insurance for M/Cs • Supplier
•BPP for boilers • Purchaser
• Contractor
COMPOSITE COVER(MARINE CUM ERECTION ALL RISK POLICY) • Joint names
Scope of cover - All Risks
•Marine/inland transit & erection both are combined in one pool. Location risks
•All risk policy- exclusions specified - Fire
•Insures both the Marine and EAR coverage. - Lightning
•Transportation risk of materials from manufacturer's/suppliers' premises - Theft
to the erection site comes under Marine coverage. - Burglary
•Comprehensive cover from the time of arrival of the first lot of
Handling risks
materials(Machinery and equipments etc.) at project site /storage at - Impact from falling objects
site/completion of erection/testing/commissioning or taking over, comes - Collision
under EAR coverage. - Unloading/ loading
•MCE(Marine and EAR) provides virtually a comprehensive cover from
the time of dispatch of the first lot of materials meant for project from Operational risks
manufacturer's/suppliers' premises to the erection site/entire period of • Failure of safety devices
transit/storage at site/completion of erection/testing/commissioning or • Leakage of electricity
taking over
• Insulation failure
•MCE = M/T + EAR OR CAR
• Short circuit
•Marine cum erection cover (MCE)
• Tearing apart
•Marine transit & storage-cum-erection (SCE) cover
• Centrifugal forces
−Coverage as per ICC (A)
• Explosion/ implosion
− Insurance extended to cover
• War & SRCC risks Risk of Human Element:
Storage at discharge port • Carelessness
• Loading & unloading • Negligence
• Incidental transhipment • Faults in erection
• Sabotage
In case of Marine Inland Transit
- Coverage as per Inland Transit(Rail or Road) clause 'A; • Riots , strikes, terrorism & malicious damage
- Insurance extended to cover Strikes, Riots and Civil
Commotions risk when inland transit is not in conjunction with Acts of god perils
ocean voyage • Earthquake(fire & shock)
What can be insured ? • Landslide/ Rockslide/ Subsidence
• Plant & machinery (to be erected) • Water damage
• Entire factory • Flood
• Expansions • Inundation
• Additions • Storm
• Civil engineering works • Tempest
Who Can Insure? • Hurricane
• Manufacturer • Tornado
50 51
 •Typhoon •Surrounding property
•Cyclone •Escalation(Limited Maxi.50% of the SI)
•Air freight
What is not covered •Maintenance cover
Exclusions .Applied internationally - limited contract
• Faulty design - extended visits
• Defective material/ castings
• Bad workmanship •Third party liability
• Rectification of defects - Cross liability
• Manufacturer's guarantee •Temporary work/structure
• Wilful act
• Wilful negligence ERECTION ALL RISK (EAR)
• Consequential loss
•Covers perils/risks/materials involved in installation of plant & M/cs.
• Penalties
•Various stages coveredstorage/erection/cold & hot testing of all kinds of
• Delay
machinery/maintenance
• Lack of performance
•All risk policy-exclusions specified
• Loss of contract
•Indemnifies almost any form of accidental/unforeseen loss occurring to
property on erection site during the period of insurance
Premium rating-basis
•Erection all risk
Premium rates, terms, policy wordings would depend on •Insures the projects where the erection of plant & machinery and
• Project size equipments & structures are the major part of the project & project have
insignificant civil works.
• Special characteristics
•Erection all Risk
• Comprehensive details of the project
•Risks covered: all risks insurance policy and mainly covers the following
• Assessment of exposures
named risks:
• Period of project
•Location risk: fire, lightning, theft and burglary.
• Sum insured (i) Marine: CIF value plus 10% plus Customs Duty Amount;
•Operation risks: leakage of electricity, insulation failures, short circuit,
(ii) EAR: Estimated value of Contract Works(Materials,
explosion, etc.
wages, construction costs, freight, customs duties ) and
items supplied by the Principal •Human risks like carelessness, negligence, faults in erection,
riot/strike/malicious damage (RSMD).
• Marine (imports)
•Natural calamities like storm, cyclone, landslide, subsidence, etc.
• Marine (indigenous)
•Accidental external means like accidental falling of objects, impact and
• Erection cost
thereby the resultant damage of property.
• Permanent civil engineering works
•Extension of ear policy
Additional covers:
•To cover extra risks at extra premium (along with the basic cover at basic
• Construction plant & machinery
premium).
• Additional customs duty
•The policy can be extended to cover the following
• Express freight (repairs)
•Third party liability risks
• Overtime (repairs)
•Surrounding property damage
• Clearance & removal of debris
52 53
 • Earthquake risks & terrorism risks. • Adjustment of sum insured
• Construction plant and machinery like cranes, dumpers, earth excavators - for variable charges like freight, custom duties, cost of
etc. erection etc. Are adjustable.
• Extra charges for overtime, express freight etc. • Prime cost of plant & equipment is not adjustable and no refund of
• Increased replacement value ( escalation benefit) premium is considered for this. Exclusions under EAR cover
following perils are excluded :
PREMIUM COST IN EAR POLICY
EXCLUSIONS UNDER EAR COVER
• Depends on the term & period of project and nature of project depending
• Faulty design
on the hazards associated with it. The rates are in per mille
• Defective material/ castings
• It is a tariff policy & in the tariff all project names are given in
alphabetical order • Bad workmanship
• Rectification of defects
Details of EAR underwriting • Manufacturer's guarantee
• Sum insured is equal to replacement cost of project. Sum insured is the • Wilful act
landed cost of items at project site plus freight, cost of erection, etc. • Wilful negligence
• Premium installment facility is given in all project policy with period of
• Consequential loss
insurance more than 12 months
• Penalties
• Frequency of installment is either quarterly of half-yearly but client
always prefers qtly. as outgo is less. • Delay
• the first installment premium must be paid, on or before the • Lack of performance
commencement of cover and this first installment premium will be • Loss of contract
calculated & collected at being 5 %(of total premium) higher than the all • Excess:
other equal installments .
• Last installment premium should be paid at-least 6 months prior to the (i)Erection All Risk Insurance (other than combined cycle power plants/ gas
expiry of policy period. based power plants)-

Erection All Risk Period of cover
• Insurance cover under EAR commences after unloading of first
consignment at site.
• The policy period continues the entire period of storage, erection, testing
(until testing operations have completed and the project is declared as
successfully commissioned) and maintenance(either limited
maintenance or extended maintenance)
For Sum Insured up to INR 1500 cr. - All deductible amounts appearing in TAC
Tariff would be increased to 5 times of the minimum amount.
For Sum Insured above INR 1500 cr. and up to INR 2500 cr - All deductible
amounts appearing in TAC Tariff would be increased to 10 times of the minimum
amount.
For Sum Insured above INR 2500 cr. - All deductible amounts appearing in TAC
Tariff would be increased to 15 times of the minimum amount.

Erection all risk- extra benefits (extensions)
• By payment of additional premium, following can be covered
• Increase in policy period.
• Removal of debris, contractors plant and machinery, third party liability,
owners surrounding property, escalation(Limited to a Maxi. of 50% of
SI) etc.
• Risks of earthquake and terrorism.
• Dismantling cover for second hand machinery.
54
(ii) Erection All Risk :Combined cycle power plants/ gas based power plants-
50 MW to 200 MW- 5% of claim amount subject to a minimum of 60 lakhs for
testing & 20 lakhs for normal loss.
200 MW to 300 MW- 5% of claim amount subject to a minimum 100 lakhs for
testing & 50 lakhs for normal loss.
300 MW and above- 5% of claim amount subject to a minimum 125 lakhs for
testing & 75 lakhs for normal loss.
55
CONTRACTORS ALL RISKS POLICY (CAR)
•This is an all-risks project policy, always issued for civil engineering
projects like construction of residential complexes, bridges, etc. The
following items can be covered in this policy
•Civil works as per contract
•Contractors plant and equipments
•Cost of clearance &removal of debris
•Third party liability arising out of third party's injury, property damage or
any fatal damage in relation to the project activities.
•Insured's own surrounding property.
•Escalation Benefit will be limited to a maximum of 50% of the Sum
Insured.
PROJECTS COVERED
•Civil works for residences, factories, warehouses, bridges, roads, canals,
dams, hospitals, schools etc.
•Risks covered: all risks namely fire, lightning, riot, strike, malicious, bad
workmanship, burglary/theft accidental external means etc.
EXCLUSIONS
Nothing is payable for the losses arising out of the following reasons:-
•Loss or damage due to faulty design.
•due to wear and tear, deterioration due to atmospheric conditions.
•inventory losses.
•War, SRCC and allied risks.
•due to nuclear reaction, nuclear radiation etc.
•willful act or willful negligence of the insured.
•Excess:
(i) Contractors All Risk Insurance (other than combined cycle power
plants/ gas based power plants)-
For Sum Insured up to INR 1500 cr. - All deductible amounts appearing in TAC
Tariff would be increased to 5 times of the minimum amount.
56
For Sum Insured above INR 1500 cr. and up to INR 2500 cr - All deductible
amounts appearing in TAC Tariff would be increased to 10 times of the minimum
amount.
For Sum Insured above INR 2500 cr. - All deductible amounts appearing in TAC
Tariff would be increased to 15 times of the minimum amount.
(ii) Contractors All Risk Insurance: Specialized risks ( The following risks would
be termed as specialized risks - All works in water, dams, canals, hydro power
projects, tunnels, irrigation systems, caverns.)
Deductible for Material damage: 5 % of claim amount subject to a
minimum of Rs 50 lakhs for normal loss and Rs1.5 Crs for AOG
/Testing/Fire/Explosion/ Collapse/ Major Perils.
CONTRACTORS PLANT AND MACHINERY POLICY
(CPM)
•Items covered: cranes, bumpers, excavators , tunnel boring machines etc.
Which are used for the erection/construction of projects.
•This CPM policy is issued as an extension of the mother project
policy(i.e. MCE/EAR or SCE/CAR policy) if S.I. of CPM items is less
than 5% of the S.I. of the mother project policy or up to the value of Rs. 25
lacs for these machines . But if value exceeds limit of 5% of project pol.
or Rs 25 lacs in a particular project site then a separate CPM policy has to
be issued.
•This policy is given to contractors who may be using plant and machinery
at different projects during the policy period on a separate annual policy
with appropriate earthquake loading considering the sites falling in the
earthquake zones.
•This is an all risks policy with specified exclusions printed on the policy.
•The cover is operative for machines when they are at work or being
dismantled or cleaning or overhauling or reassembling thereafter.
•Rating. Equipments are classified into 5 groups and rates are prescribed
for each group as per internal guidelines.
•Equipment covered under the CPM policy at a location are dismantled
and shifted to new/other site and re-erected there at, can be covered on
payment of additional premium at the rate of Rs. 0.20 % for that
equipment.
SUM INSURED
• On new ( current ) replacement value basis including transportation cost
tosite, customs dues and all installation costs..
• Escalation maximum to the tune of 25% can be opted by the insured.
57
 A few important Exclusions MACHINERY INSURANCE POLICY
Loss or damage due to
• electrical or mechanical breakdown for internal explosions •Property covered: all electrical and non electrical (mechanical &
• Loss or damage whilst in transit from one project to another chemical) items like electric motors, transformers, diesel generator
• exchangeable parts & tools such as knives, ropes, belts, chains, blades sets, air compressors, boilers, blowers, etc.
etc. •Scope of cover : against sudden, accidental loss due to vibration,
• wear and tear maladjustments, falling, impact, collision and the like, obstruction or
• Loss of or damage to plant and/or machinery working underground entry of foreign bodies, etc.
popularly known as exclusion 'K'. Not applicable to machineries used in
tunneling work. SCOPE OF COVER
• Loss or damage whilst in transit Losses from unforeseen and sudden damage to machinery from following causes:
• War and Nuclear perils • Faulty material, design, construction, erection;
• Vibration, malalignment, maladjustment;
Compulsory Excess: • Defective lubrication, loosening of parts, stress, explosion due to
centrifugal force, or internal pressure;
For all Machinery under Group I,II,III,IV, including cranes above 10 • Failure of insulation and electrical breakdown.
tonne capacity under Group III
• Human failures like lack of skill, lack of knowledge & mere negligence.
EXCESSES • The cover applies within the insured's premises specified in the policy
Value of equipments For claims arising out For claims arisingout while the insured plant is covered under the following situations:
of AOG perils of perils other than AOG • When it is at work or at rest.
• While being dismantled for cleaning or overhauling.
Individual value upto 10 % of S.I. Subject to a 2 % of S.I. subject to
Rs.1 lakh. minimum of Rs. 5,000/- minimum of Rs. 1,500/- • During cleaning and overhauling operation.
• When being shifted within the premises.
Individual value over Rs. 5 % of S.I. Subject to a 1.5 % of S.I. subject to
1 lakh and upto Rs. 5 lakhs minimum of Rs.10, 000/- minimum of Rs.2, 000/- • During subsequent erection.
• Machinery insurance
Individual value over Rs. 3 % of S.I. subject to a 1.25 % of S.I. subject to
5 lakh and upto Rs.10 lakhs minimum of Rs. 25, 000/- minimum of Rs. 7,500/-
PREMIUM:
Individual value over Rs. 2 % of S.I. subject to a 1.00 % of S.I. subject to • Premium cost is high due to unfavorable claim experience .rates are in
10 lakhs upto Rs. 25 lakhs minimum of Rs. 30, 000/- minimum of Rs. 12, 500/- per hundred of sum insured. 4 different sets of rates for M.I. policy:
Individual value over Rs. 1 % of S.I. Subject to a 1 % of S.I. Subject to a • Mechanical items;
25 lakhs upto Rs. 50 lakhs minimum of Rs. 50, 000/- minimum of Rs. 50, 000/- • Electrical items;
Individual value over 1 % of S.I. Subject to a 1 % of S.I. Subject to a • Machinery in cold storages and ice plants;
Rs. 50 lakhs minimum of Rs. 50, 000/- minimum of Rs. 50, 000/- • Fertilizer plants / petrochemical plants/ refineries.

Boom Section- 20 % of claim amount subject to minimum of Rs. 25, 000/- POLICY EXCESS
For Machinery under Group V - Rs.2,500/- Flat. Excess.
1% of sum insured for each machine subject to a minimum of Rs 2,500/-.

58 59
 Equipment Excess against each claim •Exchangeable parts, non metallic parts (except electrical insulation),
operating media, coating of metal parts
Excess applicable for Glass Lined 10 % of Sum Insured for each claim
Vessels, Glass & Graphite equipments subject to minimum of Rs. 2500/-.
SUM INSURED/ AVERAGE
a) For other items -
i) Furnace Transformers 2% of Sum Insured subject to • Sum insured
minimum of Rs. 2500/- • The S.I. of each individual item must represent its new replacement value
(current replacement value ) including transportation cost to site, custom
ii) Photo Copiers 5% of Sum Insured subject to duty, insurance premium, other erection & installation cost i.e. Sum
minimum of Rs. 2500/-.
insured = new value + freight + customs duties + other erection &
installation costs.
RISKS COVERED
Optional items:
• Cost of civil foundation & oil in transformer & for
• Mechanical failures like mal-alignment, nom-adjustment of parts,
impact of foreign elements, faulty operation, failure of safety • Swichgear
system/failure lubrication system,etc. • Condition of average is applicable for underinsurance
• Human failures like lack of knowledge, lack of skill, mare negligence. • Minimum premium
• Electrical equipments suffer electrical failures or breakdown losses due • Rs. 100/-
to "short circuit, excess/surge voltage, voltage fluctuations, defective • Provision for special rating
insulations, ….. " etc. • Short period rates
• As per short period rates for motor insurance.
EXCLUSIONS -1
• Escalation to the tune of 25% may be obtained by the insured
Fire and allied perils
INDEMNIFICATION
Internal fire due to electrical faults in electrical equipment is covered.
Explosion due to centrifugal force & internal pressure is covered.
Repair basis
• War & warlike perils
• No deduction for depreciation for parts with unlimited life.
• Nuclear risks
• Necessary bills and documents for repairs be submitted.
• Experiments or overload or similar tests
• The value of salvage, under-insurance and excess is deducted from loss.
• Gradually developing flaws, defects, cracks
• Normal wear and tear Total loss basis
• Wilful negligence • Actual value of item after applying depreciation from the replacement
value of item.
EXCLUSIONS-2
BOILER AND PRESSURE PLANT INSURANCE(BPP)
• Consequential loss
• Defect in existence before insurance •Items covered: boilers and other pressure vessels (which generate
Special exclusions pressure during their normal operations)
• Excess •Scope of cover:
• Damage due to faults/defects for which manufacturer is responsible •Explosion and collapse damage , other than by fire ,to the boiler &/or

60 61
 other pressure plant and to surrounding property of the insured.
•Legal liability for death, bodily injuries or property of third party.
Sum insured
• Current replacement value of these items( to avoid under
insurance)which is inclusive of freight and customs duties, if any and
erection cost.
• No Escalation benefit shall be allowed.
EXTENSIONS OF BPP POLICY:-
•By payment of additional premium ,following risks be covered:
(i) Surrounding property damage
(ii) Damage to third party property, death/bodily injuries.
(iii) Express freight(Air freight excluded), holiday and overtime rates of
wages
(iv) Air freight only
(v) Customs duty
WARRANTIES:
Boiler and pressure plant comes in statutory regulations.
Following conditions specifically apply to BPP:
• The insured boiler should be certified by boiler inspector for use.
Otherwise the premium rates to be loaded by 25%.
• Boilers being operated by persons holding valid certificates of
competency.
• Unqualified permission to operate the boiler from the authority(by the
boiler inspector).
• Rating:-basic rate is as per guidelines. additional premium be charged for
extensions like surrounding property damages, third party
liability/property damage, etc.
EXCLUSIONS:- LOSS OR DAMAGE DUE TO -
•Fire and allied risks of standard fire policy,
•Damage by chemical explosion except in recovery boilers and waste heat
boiler.
•Wear and tear, wasting of boiler materials.
•failure of individual tubes
62
COMPULSORY EXCESS:
•5% of claim amount subject to a minimum of Rs 10,000/-.
•All the extensions of BPP policy will have similar excess as per the basic
policy.
MACHINERY LOSS OF PROFITS POLICY( MLOP)
•This policy covers loss of gross profits (consequential losses) following
breakdown of machine/s due to accidental.
•This may so happen that after breakdown of a critical machine the entire
manufacturing process comes to a halt .the actual cost for replacing the
damaged part may not be very huge but following losses may follow:
•No profits as no production.
•Standing expenses like salary, interest, rent, etc. Are to be paid (even after
the loss & stoppage of production).
•Extra money may be required to start production from an alternate place
or with some alternative machines on hire [which is known as increased
cost of working (ICOW) ].
•All above losses are covered under machinery loss of profit insurance
policy.
•For claim to be paid in this policy, firstly the claim should be admitted in
the concurrent machinery insurance policy for breakdown (as per the
material damage proviso of MLOP policy) .
SUM INSURED:-
Sum insured is being fixed keeping in view the expected gross profit for year
which is equal to net profit plus all insured standing charges calculated on last
year's annual a/c figures' basis (i.e. This can be determined from gross profit
of the previous year and including the trend for increase or decrease expected
in current year of underwriting).
PREMIUM RATE
This depends on-
Relative importance
(normally expressed in %) of the insured machines in relation to the final
product & in comparison to other machines. Stand-by machinery will reduce
the relative importance, the interruption period and the loss amount.
63
INDEMNITY PERIOD
(defined as the maximum period of interruption following breakdown of
insured machines for which insurer is liable. This can be equal or less than the
policy period) i.e. The liability for payment of loss due to reduction in
turnover/output during this period only, is accepted by the insurer. Higher
indemnity period means higher liability for the insurers, hence higher
premium. Repair facility( in-house/local) will reduce quantum of loss in
policy.
TIME EXCESS
Machinery Breakdown Loss of Profits (Standalone policy with MBD cover)- 14
days of Standard Gross profit
EXCLUSIONS
•Time excess( for all loss of profit policies the stipulated deductible
franchise are always expressed in terms of number of days (i.e. The initial
stipulated number of days' period, during which period the loss due to
reduction in turnover/output has always to be borne by the insureds).
•Intangible losses such as loss of market/goodwill which are not insurable
risks .
•Alterations, improvements or overhauling made while repairing the
insured machines.
•Willful or gross negligence of insured(s).
DETERIORATION OF STOCKS INSURANCE
•This is also known as stock spoilage insurance policy.
•This policy is a consequential loss policy and covers the risk of
deterioration/contamination following breakdown of refrigeration plant
and machinery.
•Precondition for this DOS insurance is , first there should be machinery
insurance cover for refrigeration plant and machinery of the cold storage.
•There are two kinds of deterioration insurances:-
•Insures stocks of fish, meat ,prawn ,frog-legs, various fruits (like apples/
oranges etc.), cheese, dairy products, pharmaceutical drugs. this is
known as DOS(otp) Insures stocks of potatoes in cold storage. This is
also called DOS(p) policy. pre-acceptance inspection is a must.
64
SUBJECT MATTER OF INSURANCE
•Contents of cold storages e.g.- potatoes and other than potatoes (fish, sea
foods, cheese, dairy products, fruits, etc.)
•Risks covered contamination, putrefaction and/or deterioration
following a breakdown of refrigerating unit.
SCOPE OF COVER OF DOS POLICY
•Loss to contents of cold storages caused by:-
•Damage to any cold storage machinery by accidental means subject to
admissibility of the claim under M.I. policy covering the cold storage
machines.
•Rise or fall in temperature at the cold storage chamber resulting from
breakdown of refrigerating machinery.
Minimum rate of D.O.S.(p)
• The minimum period for which the policy shall be issued is 7 months.
• For any period less than 7 months, the minimum rate to be charged will
be as under : (a) in respect of cold storages which have opted
for FOES extension Rs. 0.84% ( i.e. Rate with foes is Rs.0.12% per
month).
• in respect of cold storage which have not opted for FOES -Rs.. 0.70%
(i.e. Rate w/o foes is Rs. 0.10% per month).
SUM INSURED :
•Maximum value of stocks in the cold storage at any one time.
EXTENTION
•Failure of electrical supply -
•At terminal end due to machinery breakdown -
•At local supply place.
•(excluding rationing, fuel shortage etc.)
EXCLUSION:- FOLLOWING LOSSES ARE NOT COVERED-
•Shrinkage, inherent defects or disease
•Improper storage, damage to packing material,
65
 •Insufficient circulation of air,
•Willful act on part of insured or his representative.
•Excess or deductible franchise as stipulated in the policy
INDEMNITY:-
•Market value of the stocks at the time of loss.
•Rates of dos ( potato)
•Rates for deterioration of stocks insurance for cold storage plants
•for cold storages which have opted for foes extension the rate will be
0.12% per month or part thereof.
• for cold storages which have not opted for foes extension the
rate will be 0.10% per month or part thereof.
• note : these rates are to be charged on the sum insured i.e. The
value of the goods obtained by multiplying the actual storage
capacity
SPECIAL CONDITIONS-1
•Compulsory excess in two slabs-
•Without F.O.E.S. extension &
•With F.O.E.S. extention
• Special conditions:-
•Pre acceptance inspection for the concurrent machinery insurance policy
as well as for D.O.S. insurance.
•Careful underwriting in view of huge loss potential
SPECIAL CONDITION-2
•Pre acceptance inspection is a must.
•Detailed inspection report by co. Engineer.
•Mid- term inspection if dos claim occurs.
•Owner of cold storage to maintain log book for critical machines at least
for compressors with records of temperature & humidity in different
floors in prescribed form.
•Stock register- declaration of stocks levels periodically.
EXCESSES APPLICABLE
In respect of those cold storages which have not opted for FOES extension -
66
10% of the claim amount subject to a minimum of Rs.20,000/-.
• In respect of those cold storages which have opted for FOES
extension - 20% of the claim amount subject to a minimum of
Rs.20,000/-.
• The following deductible franchises are in addition to franchise for lack
of spare parts as follows :
• Compressors:- Rs. 1000/-
• Diffusers:- Rs. 750/-
• Diffusermotors:- Rs. 750/-
• Expansion valves:- Rs. 500/-
ELECTRONIC EQUIPMENT INSURANCE
OBJECTS COVERED:
• computers, bio-medical equipments, x-ray equipments, audio / video
equipments, all movable/portable electronic equipments, various
medical / equipments like scanners, E.C.G. etc.
This is an All Risks Policy and covers namely the following risks:-
• Damage due to carelessness, negligence of employees
• Fire, lightning, explosion, flood , storm ,earthquake etc
• damage due to moisture and humidity.
• Riot, strike, malicious damage
• Burglary, housebreaking or theft.
• Electrical, mechanical breakdown.
THIS POLICY COMPRISE OF THREE SECTIONS:-
Section-1
Cover material damage to equipments only i.e. Physical/tangible part of
machines with auxiliaries like CPU,VDU(monitors), printers, key-
board, speakers, external modems even the items which provide the
computer environment like room air-conditioners, UPS, voltage
stabilizers all such items are insured against above risks.
Section-2
Cover material damage to external data media. The sum insured shall be
the amount required for replacing lost or damaged data media by new
material and for reproducing lost information only for back-up data but
not for master data.
67
Section-3
Covers increased cost of working following breakdown of equipments as
covered under section-1. The additional cost may be for using substitute
edp equipment, for personal expenses and cost of transportation of
materials.
•Premium rate is Rs. 1.00 % with annual maintenance contract.
•Otherwise in the absence of Annual Maintenance Contract(AMC) the
premium will be loaded by:- 25% loading for equipments with individual
sum insured upto Rs..1 lac & 50% loading for equipments with sum
insured above Rs.1 Lac.
•For personal computers with sum insured upto Rs.1lakh, maintenance
agreement warranty is waived.
•Excess deductible under E.E.I. policy for m/c S.I.<Rs.1 lac:
•For sum insured of individual machine value upto Rs. 1 lac:-5% of the
claim amount subject to minimum of Rs.2,500/- for normal claims.
•10% of the claim amount subject to minimum of Rs.2,500/- for
winchester drive & hard disk claims.
•Excess deductible under E.E.I. policy for m/c > Rs. 1 lac:
•For sum insured of individual machine value above Rs. 1 lac:- 5% of the
claim amount subject to minimum of Rs 2,500/- for normal claims.
•25% of the claim amount subject to minimum of Rs 10,000/- for
winchester drive & hard disk claims.
•Technical survey : is conducted of all electronic equipments and
computer installations. This insurance cover is given only fort those
equipments which have completed at least 3 months trouble free
operations.
•Escalation maximum to the tune of 20% can be opted by the insured.
EXCLUSIONS
•Loss /damage due to
•Wear and tear,
•Defects for which manufacturer is responsible.
•Due to willful act of insured.
•War, invasion and allied risks
•Loss or damage to bulbs, valves, tubes etc.
•Consequential loss of any kind in section ii of policy. Any cost arising
from false programming, punching or inadvertent canceling of
68
information etc
•For claims under E.E.I. policy:-
MATERIAL DAMAGE
•Repairs:-indemnity is cost of repairs plus the cost of dismantling and re-
erection. no deduction for depreciation for parts with unlimited life in
case of repairs (i.e. For partial loss ). The cost of any alterations,
improvements or overhauls shall not be recoverable under the policy.
•For claims under E.E.I. policy:-
•External data media for floppies, discs etc.
•Indemnity is for all expenses within a period of 12 months from the date
of loss. expenses incurred will be for restoring the insured external data
media to a pre loss condition. as from the date of loss , the sum insured
shall be reduced for balance policy period unless the sum insured is
reinstated.
•Increased cost of working
•Indemnify the additional expenditure following admissible loss in
policy. This may be in terms of hiring additional machines or for using
new premises to carry out the work at higher cost.
RATING
•Rate : section i and section ii @ 1.00%
•If annual maintenance agreement is not executed the premium will be
loaded by 100%. If annual maintenance agreement is not executed but
the insured has got sufficient in-house facilities for proper maintenance
of the equipments of the equipments, the premium will be loaded by 50%
only. For p.c. no loading.
DISCOUNT FOR FIRE INSURANCE:
•for equipments covered under E.E.I. policy as also under fire policy with
all extensions : a discount of 10% of the applicable E.E.I. rate (for Sec.-I
only);
•without any extension or with some extensions only under fire policy:
5% discount on fire rate (for Sec.-I only) .
ADVANCE LOSS OF PROFITS POLICY (ALOP)
•Advance consequential loss insurance or loss of profit policy are issued
69
 only to the principals/owner of the project, in advance of the actual •interest on retention money.
commencement of business for delay in commencement of the project . •salary & wages of employees for maintenance of
•This ALOP policy covers financial loss due to delay in start of project •site facilities for extended period.
(because of loss/damage to the project arising out of the insured peril of
• additional higher charges for construction, plant
the project policy during transit /storage/erection/ commissioning phase
of the project). •& machinery.
• extension premium for project policy.
WARRANTY •loss of revenue (for B.O.T.) projects).

•It is warranted that the maintenance agreement in force at the inception of DSU TERMINOLOGY
this policy is maintained during the currency of this policy and no
variation in the terms of the agreement shall be made without the written •Indemnity period and time excess.
consent of the company being obtained. •Standing charges.
•For the purpose of this warranty the word 'maintenance' shall mean the •Turnover.
following
•Gross profit.
•Safety checks,
•Rate of gross profit (gross profit : turnover).
•Preventive maintenance
•Rating- ALOP(M.D.- EAR/ CAR) _
•Rectification of loss or faults arising from normal operation as well as
ageing. •(100% R.I. Dependent)
•Claims in this policy are paid when material damage losses are
Depends upon
admissible in terms of project insurance policies like SCE / MCE or
CAR. • Indemnity period & time excess
•Other name of this policy is "Delay in Start Up policy". • Project/ plant capacity
•This cover shall indemnify the insured in respect of Loss of standing • Specification of major equipments
charges (debt service + fixed cost) & net profit actually sustained due to • Implementation schedule and buffer time in-built
the actual turnover falling short of the targeted turnover which would • Reliability of technology used - prototype or time tested ?
have been achieved had the delay in project commissioning not occurred • Inventory of spare parts
subject to Material Damage proviso.
• Imported or indigenous equipments
SCOPE OF COVER PRINCIPAL/OWNER • Maximum expected project down time period

•Loss of gross profit RATING - MARINE (ALOP)

•(also covers any loss minimizing expenses up to the costs thereby
avoided) •(RI dependent)
•Due to delay in project commissioning •Depends upon :
•Increase in cost of working •Indemnity period & time excess.
•(subject to limit of savings in profit) •Specification of major equipments.
•Imported or indigenous origin.
SCOPE OF COVER CONTRACTOR •Maximum expected replacement time of major equipment.
•Project equipment delivery schedule.
•In built/operate/transfer ( B.O.T.) contract

70 71
TIME EXCESS ALOP •Exclusions
•Deductible stated in the schedule.
•(RI dependent) •Any interference in the work directly or indirectly due to the following :-
•Advance Loss of Profits Time excess for Contractors All Risk Insurance/ •Loss or damage covered under material damage policy unless
Erection All Risk Insurance (other than combined cycle power plants/ specifically agreed,
gas based power plants)- - 30 days for first year+ 1 day for each erection
• Loss or damage to surrounding properties,
month in addition to 12 months not exceeding 60 days
• Loss or damage due to e.g. , volcanic eruption, falling of meteor,
•Advance Loss of Profits Time excess Specialized risks ( The following
etc,
risks would be termed as specialized risks - All works in water, dams,
canals, hydro power projects, tunnels, irrigation systems, caverns.) - 45 • Loss or damage to the prototype nature of work
days for first year+ 1 day for each erection month in addition to 12 •Loss or damage due to operating media such as fuels, chemicals,
months not exceeding 75 days catalysts, filter substances, heat transfer media and lubricants etc.
•Advance Loss of Profits Time excess-for Combined cycle power plants/
gas based power plants: 45 days for first year+ 1 day for each erection EXCLUSIONS
month in addition to 12 months not exceeding 75 days for Combined
cycle power plants/ gas based power plants- •Consequential loss of any kind such as penalties, lack of performance,
loss of contract, fines for breach of contract etc.
DSU EXTENSION •Shortage, deterioration or damage to any materials.
•Any restriction or reconstruction or operations imposed by public
•Supplier's premises. authority.
•Accidental failure of public electricity supply. •Alterations, additions, improvements, rectifications to eliminate the
deficiencies
Special points to be remembered : •Non-availability of funds for repair or replacement of damaged items.
•Basis of premium rating
INSURED & UN-INSURED DELAY :
•Amount of sum insured
Reasons for all delay would be ascertained and only the delay caused by an •Excess and indemnity period limit
indemnifiable event & indemnifiable in material damage erection policy is •The type of project
covered.
General and special risk involved
EXTENSION OF PERIOD : • The loss prevention measures and fire fighting facilities provided during
construction.
Any extension of the period of insurance under the EAR section the policy shall • Relative importance.
not automatically lead to an extension of the period of insurance of the ALOP • The reserve capacities.
policy.
• The repair facilities.
•Basis of loss settlement : • Major spare parts availability
•Reduction in turnover
What we require from insured
•Rate of gross profit
• Details of contractors when selected
•Increased cost of working
• Detailed sequence of works
•Advance lop

72 73
 •of erection/ construction •Notify company immediately (within 14 days)
•Bar chart • Initiate action to minimise the extent of loss
• Preserve damaged parts for inspection
Geological reports • Furnish following information/ documents
• Ground conditions • Completed claim form
• Soil investigations • Repair bill, photographs
• Seismology reports • Replacement invoice, bills
• Nature of piling activities/ foundations • Police/fire brigade/met. Report
• Site protection to avoid flooding • Fir, final/ internal investigation report
• Nearby seas, rivers, lakes
• History of flooding COVER
• Preventive measures • Max. SI/SI per day=
• Drainage etc. • Rate of standing charges to shortfall in production and
• Wet works • Increase in cost of working due to insured perils.
Perils covered
WHAT WE REQUIRE FROM INSURED • Physical loss/ damage to cargo
• Fire fighting facilities provided • Loss of mechanical breakdown or damage to the hull & machinery.( as if
• Full technical details insured under hull clauses- voyage or aircraft all risks policy)
• Confirmation that no unproven / prototypical equipment is involved • Loss of, mechanical breakdown of , or damage to other conveyance on
• Detailed site location plot plan showing proximity to existing units/ which property is conveyed.
habitations • G.A., salvage or life saving operations.

Premium rating Duration

• Tariffed- upto sum insured of Rs. 1500 cr. • Ware house to ware house
• Beyond Rs.1500 Cr.- it is re-insurance driven. • Including ordinary course of transit, &
• Instalment facility available for premium payment. • Incidental storages if agreed

ALOP (underwriting suggestions) EXCLUSIONS

To include following add-on covers: • Material damage.
• -third party legal liability including cross liability • Un satisfactory repairs, from clients' viewpoint causing delays and
• -extended maintenance cover consequential losses. provided such repairs are proper as per the
• -design defect cover surveyors./ classification societies.
• -escalation clause
CLAIMS
Policy suggested with voluntary deductibles • Supporting papers and evidences to be given by the insured.
• In case of loss/ damage notice also to be given to lop underwriters.
CLAIM PROCEDURE • If “start up” date is delayed due to un insured peril, the next claim(insured
• In the event of loss peril) will start from the delayed date and not the original date.

74 75
SPECIAL CONDITIONS •If all the conditions are satisfactory the company will issue the
• Compulsory insurance of cargo under customary marine insurance endorsement extending the policy after receipt of the premium.
policy.(including war and strikes)
• The despatch to be made by vessel confirming to the institute TRADE QUESTIONS
classification clause, otherwise insurers consent required. 1. Which one of the following is a mega risk?
• Definitions of terms on 'expected' basis against the actual- expected net a) A petroleum refinery with sum insured Rs 3000 cr
profit etc. b) An organization having 25 different location with overall SI of Rs
2500 cr
There are two other policies c) A power plant with sum insured Rs 2000 cr
• Some part of the compulsory portion & the only optional portion of the d) A fertilizer plant with SI of Rs 600 cr
policy involves some cover from various engineering insurance 2. Silent risk under fire policy in manufacturing premises are treated as silent
policies and the policy is known as Industrial all Risk Policy. risk when?
a) The factory is closed for 1 week continuously
• The second policy covers the civil engineering subject matter but the
b) The factory is closed for 15 days continuously
policy is nothing but the wider form of cover of standard fire policy and c) The factory is closed for 30 days or more continuously
the policy is known as civil engineering completed risks insurance d) None of the above
3. Please indicate which of the following statements is true.
a) Tsunami is a peril covered in standard fire policy
QUESTIONS b) Fire policies are agreed value policies
c) Stocks can be covered with replacement value clauses
BULLET QUESTIONS 4. Which one of the considerations are not taken into account for processing
Steps to be taken while extending an expired Project Insurance Policy. fire claims:
• To ascertain reasons why the policy was not extended although the a) Condition of average
project is not completed. b) Breach of warranty
• To find out whether there was any loss after the expiry of the policy. c) Confirmation of Surveyor about verification of books of accounts
• If there is no loss and the reasons explained by the Insured for not d) Distance from fire station
extending the expired policy is satisfactory; the proposal may be 5. Which will be treated as Hazardous goods under Fire and special perils
considered. policy?
a) Methylated spirits
• The Insurance Company will arrange a pre-acceptance inspection by
b) Common salt
a qualified engineer to evaluate the project in terms of percentage
c) Sodium carbonate
completion as well as the quality of project work.
d) Sugar
• The sum insured in that case will be reckoned as of incomplete 6. Long term Fire Policy can be issued for dwellings
percentage on 100% project cost. a) For minimum period of 2 years
• If the report of the inspecting engineer is not a qualifying report, the b) For minimum period of 3 years
extension of Insurance may be considered. c) For minimum period of 5 years
• Accordingly, the Insurance premium bill will be raised at the initial d) None of the above
project premium rate but the premium amount will have to be paid 7. Following Add on covers are not available in standard fire Special Perils
on the sum insured stated above from the date of expiry of the policy. Policy
• If there is a loss, the Insurance Company will impose additional a) Spontaneous combustion
deductible with a specific condition that for the earlier loss the b) Loss of rent clause
company will have no liability. c) Start up expenses
d) None of the above
76 77
8. Which of the following losses is not covered under fire insurance policy? 16. What is meant by spontaneous combustion?
a) Process losses a) Charring due to self heating
b) Impact Damage b) Spread of fire
c) Missile testing operations c) Change of color or deterioration in quality due to self heat
d) Aircraft damage d) Loss or damage due to fire caused by own fermentation or natural
9. In consequential Loss(Fire) Insurance policy, the sum insured is arrived at heating
by 17. Reinstatement value policy can be issued for
a) All standing charges plus net profit a) Stock in process
b) Specified standing charges plus net profit b) Building
c) Only net profit c) Stock in go down
d) None of the above d) None of the above
10. Subsidence and landslide loss covers 18. Standard Fire policy covers
a) Coastal and River Erosion a) Loss due to explosion of boiler
b) Visible physical damage to property b) Loss due to explosion of domestic boiler
c) Defective design c) And (b)
d) Demolition by government authority d) None of the above
11. Standard Fire Policy contains the following number of conditions 19. Terrorism cover under fire policy can be granted on First loss limit up to
a) 13 a) Rs. 200 crore
b) 14 b) Rs. 300 crore
c) 15 c) Rs. 500 crore
d) 16 d) Rs. 600 crore
12. As per AIFT how many earthquake zones are available? 20. Declaration Policy has minimum SI of
a) 3 a) Rs. 5 Crores
b) 4 b) Rs. 10 Crores
c) Rs. 1 crore
c) 5
d) Rs. 0.50 crore
d) 6
21. Declaration policy can be issued
13. Loss or damage to property caused by sprinkler leakage is covered under
a) For short period
Fire Policy if leakage is caused by
b) Stocks undergoing process
a) Heat due to fire
c) Stocks in Rly Slidings
b) Leakage due to repair or alteration to the building or premises
d) Fluctuation in stock
c) Loss or damage to property caused by sprinkler installation
22. Minimum SI for floater declaration policy
d) Sprinkler installation by either repaired or extended
a) Rs. 5 Crores
14. Stock is divided into how many categories for spontaneous combustion
b) Rs. 10 Crores
cover c) Rs. 15 Crores
a) 3 d) Rs. 2 Crores
b) 4 23. Co-Insurance in Fire Policies pertain to
c) 5 a) SI distributed over no. of locations
d) 6 b) Policy shared amongst various insurers
15. Which of the following risks is not considered as add on cover? c) Double insurance
a) Spontaneous combustion d) Insured opting for an higher excess
b) Lightning 24. Reinstatement value policy can be given to
c) Earthquake a) Stocks
d) Startup expenses b) Building, Plant & machinery
78 79
 c) Stock in process 33. DSU stands for
d) All the above a) Delay in start up insurance
25. Which of the following statements is incorrect under fire policy subject to b) Derivatives stock units
agreed bank clause? c) Dead stock under insurance
a) Material change in risk does not affect the interest of the Banker d) Diluted stock undertaking
b) Valued policies can be issued whose mkt. value cannot be ascertained 34. A machine worth Rs. 40,000/- insured for Rs. 30,000/- under Fire Policy. It
c) In multiple occupancy building per se ratings is permitted was damaged due to fire and the amount assessed in Rs. 16,000/- . The claim
d) Insurable interest does not automatically pass onto the legal heir payable is:
26. Ex-gratia settlement in fire policies are a) Rs. 30,000/-
a) Under Insurance b) Rs. 12,000/-
b) Loss outside the ambit of the policy c) Rs. 16,000/-
c) Contribution d) Rs. 40,000/-
d) Subrogation 35. Material damage proviso under the consequential loss (Fire Insurance)
27. Policy wording after 01/01/2007 cannot be altered earlier than means:
a) 30.06.2007 a) Claims admissible under standard Fire and Special Perils Policy
b) 30.09.2007 b) Occurrence of the loss
c) 01.04.2008 c) Loss discovered during stock taking
d) 31.12.2007 d) Loss of goodwill
28. Project Policies are 36. In an LOP policy, Auditor fees is
a) All Risk a) An Extension
b) Named Perils b) A built in cover
c) Consequential Loss c) A part of standing charges
d) Agreed value d) Not to be covered
29. Fire Business is U/W on the basis of 37. Fire at supplier's premises can be a part of
a) Long tail liability a) a Material Damage Fire policy
b) Loss Reserve b) An LOP policy
c) Is a stand alone policy
c) Profit Margin
d) Has no relevance
d) Probable Maximum Loss
38. Common utilities outside the premises can be
30. Percentage of obligatory cession to GIC is
a) Rated per se
a) 30
b) Rated as per the main risk
b) 20
c) Highest rate to apply
c) 15
d) Insured separately
d) 10
39. Storage of Hazardous chemical upto 5% of value at risk
31. CPM is
a) Does not affect a claim
a) Coverage all risk policy with inclusion of breakdown
b) Renders a claim non-standard
b) All risk policy with exclusion of breakdown c) Renders a claim as no claim
c) Self propelled machineries on public/Private Road d) Can be covered after collection of extra premium
d) None of the above 40. Cracks appearing in a building on account of subsidence of land below
32. FOES is an extension under: a) Fire Policy will cover the loss without any extension
a) CPM b) Claim is payable on repair basis
b) CAR c) Claim is not payable
c) DOS d) Fire policy would have covered the claim had an extension been
d) MBO taken.
80 81
41. A dish antenna(Covered under fire policy) breaks as a monkey jumps on it 49. Basis of settlement in Fire policy can be
a) The claim is payable a) Market value basis only
b) The claim is not payable b) Reinstatement value basis only
c) The claim is payable as non standard c) Market value or reinstatement value basis
d) Some other insurance should have been taken d) None of the above
42. The adjustment of sum insured in EAR policy is not done in respect of 50. For a RIV Policy the insured has to give his concurrence for settlement at
a) Freight and Handling charges market value basis
b) Custom duties a) On day of loss
c) Cost of erection b) Within 12 months from date of loss
d) Increase or decrease in cost of contractors' plant and machinery c) Within 180 days from date of loss
43. Standby machinery in MBD is d) Not at all
a) Not covered 51. Sum Insured on Reinstatement value policy should show
b) Covered at a discount of 50% in rate' a) Cost or rebuilding the subject matter on date of loss
c) Discount of 75% b) Cost of reinstatement of subject matter at time of taking policy
d) Only covered when it is put to use c) Cost of rebuilding subject matter less depreciation on age on date of
44. Preliminary investigation of loss under Fire Policy includes loss
d) None of the above
a) Whether the loss caused by an insured peril
52. Indemnification for stocks in Fire policy is based on
b) Whether the damaged is covered under the policy
a) Invoice value
c) Whether adjacent property is damaged
b) Market value or cost whichever is less
d) All of the above
c) Reinstatement value
45. It is not the duty of the insured in the event of a claim under a fire policy to
d) Book value
a) Save as much as possible of the insured property
53. The material damage proviso under FLOP policy states that
b) Take all reasonable steps to extinguish the fire a) Loss under LOP is admitted only after there is a loss under the fire
c) Shift the operations immediately material damage policy
d) Diminish their loss b) The loss of profit policy is independent from the fire material damage
46. If the insured proposes to get add on cover for STFI during the middle of policy
the policy c) The loss under Fire and LOP policies cannot exceed the S.I. under
a) The same cannot be covered fire policy
b) The same can be covered d) None of the above
c) Covered with a waiting period of 15 days 54. The basis rate under Fire LOP policy is based on
d) Covered with a waiting period of 30 days a) The average rate of the process blocks under the Fire policy
47. Ultra sound machines can be covered under b) The average rate of all blocks under Fire policy
a) Machinery Breakdown Policy c) A separate rate for selected block as per FLOP tariff
b) Electronic Equipment Policy d) None of the above
c) Any of (a) & (b) 55. The FLOP policy covers
d) None of (a) & (b) a) Loss of profit due to reduction in turnover during indemnity period
48. Fire policy covers b) Loss of profit during the financial year
a) 12 named perils c) Loss of turnover due to fire
b) Unnamed peril policy d) None of the above
c) All risk policy 56. The gross profit insured under FLOP policy would cover
d) None of the above a) Net Profit
b) Standing Charges
82 83
 c) Both the above 64. Fire policies can be issued for a period of more than 12 months in the
d) None of the above following case
57. For covering marine portion under an MCE policy you would require a) Shops
information b) Factory
a) S.I. for Inland transit c) Dwelling
b) S.I. for overseas transit d) Godown
c) Both the above 65. Issue of Fire declaration policy is not possible for
d) None of the above a) Raw material
58. Industrial All Risk policy allows under insurance up to b) Finished goods
a) 15% of Sum Insured c) Process stock
b) 20% of Sum Insured d) None of the above
c) No allowance for under insurance 66. The maximum possible refund under a fire declaration policy is
d) Underinsurance to be computed as per fire tariff a) 60%
b) 50%
59. The advanced loss of profit policy covers c) 40%
a) Loss of projected profit due to interruption of project by an insured d) 30%
peril 67. Under Std. Fire & special perils policy debris removal upto 1% of the SI
b) Loss of turnover after the commencement of project can be covered at an additional premium of
c) Loss of projected profit due to non-completion of project a) 15%
d) Due to insolvency b) 10%
60. Rating under Petrochemical tariff is based on c) 5%
a) Material factor of the raw materials and hold up capacity d) Nil
b) Pressure and temperatures 68. In a fire floater policy the minimum sum insured at one location should
c) None of the above not be less than
d) Both 1 & 2 above a) 50%
61. Facility of installment premium is available for project policies if the b) 25%
project periods exceeds c) 10%
a) 12 months d) None of the above
b) 15 months 69. In which of the following is not applicable in a RIV policy
c) 18 months a) Designation of property
d) 24 months b) Under insurance
62. Which one of the following could not be the basis of valuation of Fire c) Depreciation
insurance d) Salvage value
a) Market value basis 70. In Fire LOP policies, indemnity period means
b) RIV basis a) Specified policy period
c) Contract price basis b) Specified interruption period opted
d) Original cost basis c) Specified reinstatement period
63. Standard Fire Policy doesn't cover d) None of the above
a) Fire 71. Unless specified, Fire insurance policy covers works of Art up to a limit of
b) Spontaneous combustion a) Rs. 10,000
c) Lighting b) Rs. 15,000
d) Aircraft damage c) Rs. 5000
d) None
84 85
72. Loss due to flood on account of Tsunami is covered only when c) GIC
a) STF I cover is not deleted d) IRDA
b) Add on cover EQ is opted 81. In which of the following testing is an inbuilt cover
c) RSMD is not deleted a) CAR
d) a & b above b) CECR
73. A fire policy on residence attracts an excess of c) EAR
a) Rs. 10,000 d) MBD
b) Rs. 20,000 82. Maximum permissible escalation under an EAR policy is
c) Rs. 5,000 a) 25%
d) Nil b) 50%
74. A CAR policy can be issued where civil work in a project is more than c) 75%
a) 60% d) None
b) 50% 83. Which of the following is not a standing charge for LOP/ ALOP
c) 40% a) Insurance premium
d) 25% b) Advertisement & publicity
75. Which one of the following is not underwritten in Engg. Dept. c) Rent and Tenants
a) CAR d) Raw material cost
b) EAR 84. Time Excess under MLOP policy is
c) IAR a) Three days
d) CECR b) Fourteen days
76. Which policy is not issued for a period of more than 12 months c) Ten days
a) CAR d) None
b) MCE 85. How many classified group of machineries available under CPM policy?
c) SCE a) Seven
d) CPM b) Five
77. Which equipment cannot be covered under EEI policy c) Ten
a) Personal Computer d) Three
b) Laptop 86. Mobile construction equipments can be covered under
c) Sonography a) Motor Policy
d) MRI Scanner Equipments b) CAR Policy
78. Excess is not applicable is case of c) CPM Policy
a) EAR policy d) Both a & c
b) EEI policy 87. Fire Material damage policy does not cover
c) Boiler & Pressure plant policy a) Furniture & Fixtures
d) MBD policy b) Stock
79. Which of the following is not an add on cover under a project policy c) Standing Charges
a) Surrounding property d) Stock in process
b) Third party liability 88. The word CONDITION OF AVERAGE is associated with
c) Off site storage and fabrication a) SUBROGATION
d) Debris of uninsured property b) CONTRIBUTION
80. Terrorism pool is managed by c) UNDER INSURANCE
a) Head office of companies d) REINSURANCE
b) Reinsurance committee
86 87
89. PML means c) Horsepower
a) Probable Maximum Loss d) None of the above
b) Probable Minimum Loss 98. Certain discount may be given in electric equipment policy if the same
c) Possible Minimum Loss property covered under Fire Policy
d) Probable Maximum Loss a) 5%
90. F.E.A. means b) 10%
a) Fire Eliminating Application c) 25%
b) Fire Extinguishing Appliances d) 50%
c) Fire Electrical Appliance 99. Selection of sum insured under Fire policy
d) Fire Equipments Allowance a) Can be allowed
91. AOG peril does not include b) Can be allowed only after charging short period premium rate
a) Terrorism c) Cannot be allowed
b) Earthquake d) None of the above
c) Flood 100. Local Authorities clause under Fire policy is applicable under
d) Inundation a) Declaration policy
92. Fire Policy does not cover b) Standard Fire policy
a) RSDMD c) Reinstatement value policy
b) Electrical/ Mechanical Breakdown d) Floater Declaration policy
c) Terrorism 101. Peril is
d) AOG peril a) A cause of loss
93. In the event of a claim under FIRE Policy b) A degree of loss
a) Sum Insured is reduced by the amount of claim c) System to reduce the loss
b) Sum Insured is reduced by amount intimated d) None of the above
c) Sum Insured is not reduced at all 102. “Without prejudice” mean
d) None a) Proof of admission of liability
94. Under EAR policy “Cold Testing” means b) Proof of non-admission of liability
a) Plant is situated at cold place c) Both a & b above
b) Checking of parts under cold condition d) None of the above
c) Testing of parts under “No Load” condition 103. “Ejusdem generics” rule means
d) Testing of parts under full load conditions a) Of different kind
95. “HOT Testing” under EAR policy means b) Of same kind
a) Plant is situated at hot place c) None of the above
b) Checking of parts under hot condition d) Both of the above
c) Testing of parts under full or partial load 104. Which of the following is operational phase policy and not construction
d) Testing of parts under full load conditions phase policy under engineering insurance
96. Annual Gross profit means a) Contractors All Risk
a) Net profits plus standing charges b) Electronic Equipment
b) Turnover minus variable cost c) Erection All Risk
c) None of the above d) Marine-cum-Erection
d) Both of 'a' and 'b' 105. Machinery Loss of Profits Policy (MLOP) does not provide indemnity
97. The force which causes the current to flow through circuit is known as against which one of the following
a) Electro-magnetic Force (EMF) a) Loss of net profit
b) Watt b) Insured standing charges
88 89
 c) Increased cost of working c) Raw materials
d) Civil engineering works d) Finished goods
106. Which of the following perils form part of the basic package of standard 114. FEA discount can be granted by one of the following methods. Choose the
fire and special perils policy correct one
a) Earthquake a) Mere installation of FEA
b) STFI b) Inspection of company engineers/accredited engineers/ agencies by
c) Spontaneous combustion IRDA
d) Leakage & Contamination c) Insurer can grant at their wishes
107. STFI peril can be deleted from Standard Fire Policy d) None of the above
a) At inception only 115. The sum insured at any one location for issuing Mega risk policy is:
b) After 3 months from the issuance of policy a) Rs. 5000 crores
c) Can be deleted any time during the currency of policy b) Rs. 10000 crores
d) Cannot be deleted at all c) Rs. 12000 crores
108. If a policy is cancelled at the option of insured d) None of the above amount
a) Premium adjustment is made on pro-rata basis 116. The Fire Policy covers the following perils except one on payment of
b) Premium cannot be refunded additional premium
c) Premium adjustment is made on short period basis a) Landslide
d) Policy cannot be cancelled by the insured b) Architects etc. feels
109. Which of the following peril is not wind related c) Debris removal
a) Storm d) Forest fire
b) Inundation 117. The one of the peril not covered under the basic fire policy
c) Cyclone a) Damage by smoke and heat of the fire
d) Hurricane b) Damage caused deliberately or accidentally by fire-brigades in the
110. Rates for 5 months short period insurance discharge of their duties
a) 40% c) Damage to property removed from a burning building caused by
b) 50% exposure to weather
c) 60% d) Destruction or damage to property insured by its own fermentation or
d) 70% spontaneous combustion
111. Cancellation at the option of insured the premium retained by one of the 118. Exgratia settlements are made by
following method a) Claim settlement authority
a) Short period scale b) One step above
b) Pro-rata basis c) Regional claims committee
c) 50% of premium should be retained d) Board of Directors
d) No refund of premium 119. Compulsory excess and A.O.G. excess are not applicable to fire policy
112. Silent rates allowed for the one of the Fire Tariff Section issued to following properties
a) Section I a) Power Plant
b) Section II b) Cloth Shop
c) Section IV c) Textile Factor
d) Section VIII d) Dwellings
113. Fire declaration policy cannot be issued for the one of the following items 120. Excess in Fire policy is
a) Stock a) Same amount of excess for fire peril & AOG peril
b) Stock in process b) Different amount of excess for fire perils & AOG peril

90 91
 c) Different percentage of excess for the peril & AOG peril c) 5% of claim amount, minimum Rs. 10,000
d) None of the above d) No deductible is applicable
121. Which of the following policy normally cover lift cranes, Material 129. IAR Policy is subject to maximum deductible of:
handling plant and equipment in the construction and project sites a) Rs. 50,00,000
a) Contractor Plant & Machinery b) Rs. 25,00,000
b) Contractor All Risk c) No upper limit
c) Marine cum erection policy d) None of above
d) Erection All Risk 130. CECR (policy) stands for:
122. Long term Fire policy can be issued for dwellings for a maximum period a) Civil Engineering contractors' risk insurance
of: b) Civil Engineering completed risks insurance
a) 5 years c) Civil Engineering construction risks insurance
b) 2 years d) None of the above
c) 4 years 131. IRDA has not permitted General Insurers to effect:
d) None of above a) Variations in deductibles
123. Standard fire policy covers which one of the following perils: b) Issuance of IAR policy for S.I. less than Rs.100 crs.
a) Forest fire c) Changes in basic Policy wordings of erstwhile Fire Tariff
b) Earthquake d) Issuance of IAR policy for petrochemical risks
c) Hailstorm 132. Complete pricing decontrol was made effective from:
d) Tsunami a) 01st Sept. 2007
124. Standard fire and special perils policy does not cover: b) 01st Nov. 2007
a) Lightning c) 01st Jan. 2008
b) Forest fire d) 01st Apr. 2008
c) Impact damage 133. Insurers are permitted to delete Impact damage cover from SFSP Policy:
d) Subsidence and landslide a) By allowing additional discount in premium
125. An IAR Policy can be issued to an Industrial Risk: b) Without allowing a discount in premium
a) With sum insured > Rs. 100 crs. c) Even without the consent of the Insured
b) With sum insured < Rs. 75 crs. d) None of the above
c) Housing petrochemical risks 134. Machinery Breakdown loss of profits (MLOP) policy has compulsory
d) All of the above time excess of:
126. Compulsory excess for a Standard Fire Policy having sum insured Rs. 15 a) 14 days
crs. under a non- AOG peril claim is: b) 21 days
a) 5% of claim amount, minimum Rs. 25,000 c) 7 days
b) 5% of claim amount, minimum Rs. 10,000 d) No time excess is applicable
c) 10% of claim amount, minimum Rs. 10,000 135. Material damage section of IAR Policy having S.I. more than Rs.100 cr.
d) None of above but up to Rs. 1500 cr. is subject to deductible of:
127. An Engineering Policy can be issued to cover: a) 5% of claim amount minimum Rs. 10 lacs
a) Moveable equipment b) 5% of claim amount maximum Rs. 10 lacs
b) Portable equipment c) 5% of claim amount minimum Rs. 10 lacs, maximum Rs. 50 lacs
c) a) & b) d) 5% of claim amount minimum Rs. 5 lacs, maximum Rs. 50 lacs
d) None of above 136. Designation of property clause relates to:
128. Boiler and Pressure Plant (BPP) policy has minimum deductible: a) Machinery Insurance
a) Rs. 10,000 b) Fire Insurance
b) 5% of claim amount
92 93
 c) CPM Insurance 144. A claim is reported under an IAR Policy. It is found that the property was
d) BPP Insurance under insured to the extent of 17.5%. Payable amount will be:
137. IAR Policy does not cover: a) Assessed loss less 2.5%
a) Plant and Machinery in open b) Assessed loss less 17.5%
b) Vehicles registered for general road use c) Assessed loss less 15%
c) Stocks in open d) Assessed loss
d) Movement of materials within the premises 145. Which one of the following statement is incorrect?
138. Name of the policy under which operation of several occurrences will a) IAR policy is an All risks policy with named exclusions
also constitute a single claim: b) IAR policy provides for compulsory FLOP cover
a) FLOP c) IAR policy provides for compulsory MLOP cover
b) ALOP d) IAR policy provides for compulsory MI cover
c) ELOP 146. Which one of the following statement is incorrect?
d) MLOP a) Fire declaration policy is not permissible on short period basis
139. A D.G. set covered under SFSP Policy removed to repairer's workshop b) Earthquake is a peril not covered in Standard fire policy
for repairs caught fire on 73rd day of such removal. The loss under the said c) Fire policies are not agreed value policies
SFSP policy will be: d) Stocks can be covered with replacement value clause
a) Payable 147. Midterm cover against Terrorism can be granted:
b) Payable as a 'non-standard' claim a) At short period scale of rates effective from date of request
c) Not payable b) At pro-rata premium from date of request
d) Either of a) & b) c) At short period scale of rates with 15 days waiting period
140. The term 'Time Excess' is applicable to: d) Can not be granted at all
148. Add on covers under SFSP policy can be included midterm:
a) LOP
a) At applicable annual premium
b) MBD
b) At pro-rata premium
c) EEI
c) At short period scale of rates
d) CPM
d) Can not be included midterm
141. While assessing a LOP claim, Annual Turnover is used to determine:
149. An Engineering policy which is not an annual policy:
a) Reduction in Turnover
a) Contractors' Plant & Machinery policy
b) Increase in cost of working
b) Contractors' All Risks Policy
c) Adequacy of Sum Insured
c) Civil Engineering Completed Risks Policy
d) Saving in insured standing charges
d) BPP Insurance Policy
142. A claim towards Architects, Surveyors and Consulting Engineers Fees as 150. Machinery Insurance does not cover:
an Add on cover under SFSP policy can be paid up to maximum of: a) Internal fires
a) 5% of adjusted loss b) Breakage of parts due to entry of foreign object
b) 5% of Sum Insured c) Gross negligence
c) 10% of Sum Insured d) All of the above
d) 7.5% of adjusted loss 151. Exclusion K of CPM policy relates to:
143. Sum Insured under Escalation clause in Fire policies is automatically a) Machinery working under ground
increased: b) War Perils
a) Instantly c) Nuclear perils
b) On daily basis d) Transit risks between sites
c) Monthly 152. Machinery Breakdown Insurance policy can now be issued to cover
d) Quarterly a) moveable/portable equipments like portable DG sets, etc. cannot be
covered under MI policy
94 95
 b) moveable/portable equipments like portable DG sets, etc. can be KEY MODEL QUESTIONS
covered under MI policy without any loading on the basic policy rate (ii) Copies of contracts giving insurance requirements
c) moveable/portable equipments like portable DG sets, etc. can be (iii)Detailed description of the project including any civil works.
covered under MI policy with 20% loading on the basic policy rate a) only (i) is only
d) moveable/portable equipments like portable DG sets, etc. can be b) (i) &(ii) only
covered under MI policy with 10% loading on the basic policy None c) (i) & (iii) only
of the above d) All the above
153. Which of the following policy normally cover lift cranes, Material 159. In EAR policy
handling plant and equipment in the construction and project sites a) Prime Cost of materials is subject to premium adjustment
e) Contractor Plant & Machinery b) Freight and handling charges, customs dues and construction cost is
f) Contractor All Risk not subject to premium adjustment
g) Marine cum erection policy c) Prime Cost of materials is not subject to premium adjustment
h) Erection All Risk
d) None of the above is correct
154. Explosion though a general exception under the policy, but certain
occurrences 'which fall within the term “explosion” are covered under 1. A 33. A 65. C 97. A 129.C
a) Marine cum erection policy 2. C 34. B 66. B 98. A 130.B
b) Contractor Plant & Machinery 3. A 35. A 67. D 99. C 131.C
c) Contractor All Risk 4. D 36. A 68. C 100.C 132.C
d) Machinery Insurance Policy 5. A 37. B 69. C 101.A 133.D
155. In MI policy, basis of indemnification for total loss/constructive total loss 6. B 38. A 70. B 102.D 134.A
7. D 39. A 71. A 103.B 135.A
is
8. A 40. C 72. B 104.B 136.B
a) New replacement value plus cost of removing the damaged
9. B 41. A 73. D 105.D 137.B
machinery less value of salvage 10. B 42. D 74. B 106.B 138.B
b) New replacement value 11. D 43. B 75. C 107.A 139.C
c) Market value plus cost of removing the damaged machinery less 12. B 44. D 76. D 108.C 140.A
value of salvage 13. C 45. C 77. B 109.B 141.C
d) Market value 14. B 46. C 78. C 110.C 142.D
156. In MI policy, Sum Insured represents 15. B 47. B 79. D 111.A 143.B
a) Current market value 16. D 48. A 80. C 112.C 144.B
b) New Replacement value 17. B 49. C 81. C 113.B 145.C
c) Current market value including transportation cost to site, customs 18. B 50. B 82. B 114.B 146.D
dues and all installation costs. 19. C 51. A 83. D 115.B 147.C
d) New Replacement value including transportation cost to site, 20. C 52. B 84. B 116.D 148.A
21. D 53. A 85. B 117.D 149.B
customs dues and all installation costs.
22. D 54. A 86. D 118.D 150.C
157. All movable/portable electronic equipments can now be covered under 23. B 55. A 87. C 119.D 151.A
standard EEI policy 24. B 56. C 88. C 120.A 152.C
a) with 30% loading 25. A 57. C 89. A 121.A 153.A
b) with 20% loading 26. B 58. A 90. B 122.D 154.D
c) without loading 27. C 59. A 91. A 123.C 155.C
d) with 10% loading 28. A 60. D 92. B 124.B 156.D
158. General Information required for framing construction phase insurance 29. D 61. A 93. A 125.D 157.D
for a project 30. C 62. D 94. C 126.A 158.D
(i) Wind, flood and rainfall statistics at site as well as geological, 31. B 63. B 95. D 127.C 159.C
hydrological& meteorological reports 32. C 64. C 96. A 128.C

96 97
CASE STUDY (1):
A fire claim was settled by the Competent Authority for Rs.80.00 lacs under
Agreed Bank Clause and loss voucher was ready but not issued. In the meantime a
third party who supplied some materials to the insured, was not paid their dues,
filed a suit in the High Court against the insured with a prayer that their dues may
be please be paid to them direct from the amount of insurance claim and balance to
be paid to the insured. The Hon'ble High court issued an injunction served to the
insured baring the taking of claim amount from insurance company before the
dues paid to the supplier. This copy of injunction under such case came to the
Insurance Co. as well as concerned Bank for their necessary action.
What would be your stand point?
CASE STUDY (2) :
A fire policy was issued to M/s. ABC & Co. covering stock for Rs. 10.00 lacs
which was gutted by fire. While assessing the loss, it was found that value at risk
was Rs.14.00 lacs and no salvage was realized. Claim was settled accordingly.
Surveyor charged his professional fees on Rs.14.00 lacs.
Survey fees would be paid on what amount ?
CASE STUDY (3):
A fire policy and fire LOP policy was issued to a Fertilizer Factory with add-on
cover of 'Start up' expenses. This add-on cover was taken by the insured with a
view to be indemnified for the expenses incurred by them in consequent upon a
loss/damage to resume their normal production at the earliest.
While studying the fire LOP policy, the insured thought that this additional
expenses may be automatically covered under the head of the 'Increase in cost of
working' under LOP which covers the additional expenditure which is necessarily
and reasonably incurred for the sole purpose of avoiding or diminishing the
reduction in output during the indemnity period in consequence of damage.
Therefore, 'Start-up' cover is not required to be taken separately under both the
policy & premium outgo would be less.
Insured invited underwriter to discuss in the matter.
What would be your reply?
98
CASE STUDY(4):
A fire policy was issued to Textiles Mills for Rs.50.00 Crs. on R.V. Basis. On
intimation of a fire claim, the surveyor initially assessed the loss on R.V. basis for
Rs.40.00 lacs and recommended for 'on a/c' payment of Rs.25.00 lacs based on
indemnity basis and paid accordingly. In the meantime the insured informed to the
underwriter that one of the machinery would not be available (as per supplier's
letter) and they would not wait for indefinite period and request to settle the claim
on Indemnity basis and claim was settled accordingly & loss voucher for balance
amount was forwarded to the insured.
Without discharging the voucher, the same was sent back to the underwriter with a
request to treat the earlier letter as cancelled and claim may please be settled on
R.V. basis as the machinery would be available as informed by the supplier.
Is there any scope to settle this claim again on R.V. basis?
CASE STUDY (5):
Floater Declaration Policy of various specified jute godowns of JCI (150
locations). Period: 01.04.2005/31.03.2006. S.I.- Rs.110/- Crs. From time to time
S.I. is increased when jute is purchased from the farmers and stored in the godowns
at remote village. Purchase and storing of jute is informed to JCI's Town Office by
the village centre and from town office, Registered Letter is issued to Insurance
Co. with a copy to their City Office.
Jute purchased on 10.05.2005 and informed to Town Office on 11.05.2005. Town
Office issued regd. letter to Insc. Co. on same date which was received by them on
20.05.2005 and premium was booked on the same date from their C.D. A/c. with
them.
There was a fire on 15.05.2005 & estimated loss was Rs.30.00 lacs.
Whether the claim is tenable or not?
CASE STUDY (6):
Fire BMC Policy with Sum Insured of Rs. 80.00 Crs. and voluntary deductible was
5% of Claim amount subject to minimum Rs. 20.00 lacs. under AOG perils and
Rs.10.00 lacs under other perils. A flood loss was reported for amount of Rs.24.00
lacs and surveyor was appointed and based on the claim form submitted by the
insured, the loss was assessed at Rs.18.00 lacs and as per norms of excess, claim
was not paid. Surveyor submitted his bill charging the professional fees on Rs.
18.00 lacs.
99
Whether survey fees would be paid on Rs.18.00 lacs or not? 6) Please indicate which of the following statements is true.
a) Fire declaration policy is not permissible on short period basis
TRADE QUESTIONS- b) Tsunami is a peril covered in Standard fire policy
c) Fire policies are agreed value policies
FIRE AND ENGINEERING d) Stocks can be covered with replacement value clause
1) A factory is covered under Standard Fire and Allied Perils Policy covering
Fire, Explosion, flood group of perils & earthquake as add-on with deletion of 7) Which one of the considerations are not taken into account for processing fire
RSMD. The insured proposes to take Fire Loss of Profits Policy to the same claims
factory. What perils do you cover under Fire LOP Policy? a) Condition of average
a) Fire, Explosion, RSMD Perils. b) Breach of warranty
b) Fire, Explosion, RSMD, Terrorism perils. c) Confirmation of surveyor about verification of books of accounts
c) Fire, Explosion, RSMD, Terrorism and Flood group of perils. d) Distance from fire station
d) Fire, Explosion, Flood group of perils & Earthquake as add-on.
8) Which will be treated as Hazardous goods under Fire and special perils policy
2) An Insured proposed to take Fire LOP Policy for his manufacturing unit for an a) Methylated spirits
indemnity period of 24 months. As insurer you should - b) Common salt
a) Offer installment facility by offering 8 quarterly installments. c) Sodium carbonate
b) Collect the full premium in advance before risk commencement along d) Sugar
with Fire MD Premium.
c) Offer 7 quarterly installments with first installment being 5% more than 9) Long term Fire policy can be issued for dwellings
other installments. a) For minimum period of 2 years
d) None of the above. b) For minimum period of 3 years
c) For minimum period of 5 years
3) “Mega Risk' means a risk having d) None of the above
e) PML of Rs.1,024/- crore and above.
f) PML of Rs.1,054/- crore and above. 10) Following add on covers are not available in standard Fire Special Perils
g) PML of Rs.1,084/- crore and above. Policy:
h) PML of Rs.1,094/- crore and above. a) Spontaneous combustion
b) Loss of rent clause
4). Which one of the following is a mega risk. c) Start up expenses
a) A petroleum refinery with sum insured Rs 3000 crs d) None of the above
b) An organisation having 25 different location with overall SI of Rs 2500
crs 11) Which of the following losses is not covered under fire insurance policy?
c) A power plant with sum insured Rs 2000 crs a) Process losses
d) A fertilizer plant with SI of Rs 600 crs b) Impact Damage
c) Missile testing operations
5) Silent risk under fire policy in manufacturing premises are treated as silent d) Aircraft damage
risk when -
a) The factory is closed for 1 week continuously 12) In Consequential Loss (Fire) Insurance Policy, the sum insured is arrived at
b) The factory is closed for 15 days continuously by
c) The factory is closed for 30 days or more continuously a) All standing charges plus net profit
d) None of the above
100 101
 b) Specified standing charges plus net profit 19) Material Damage proviso of the Business Interruption policy states
c) Only net profit a) There should be in existence a material damage policy covering the
d) None of the above physical damage to the property for issuance of a business interruption
policy
13) Automatic reinstatement clause deals with - b) The basic policy should cover loss or damage to raw materials
a) Insurance of stocks c) The policy can be issued only for industrial and manufacturing risks
b) Insurance of plant and machinery d) A claim for loss or damage to the property should be admissible under the
c) Insurance of hazardous goods material damage policy for a claim to be admissible under a business
d) Claim under fire policy interruption policy.
1) Statements a and b are correct
14) Which of the following is NOT an Add on cover under Standard Fire & 2) Statements a and c are correct
Special Perils Policy: 3) Statements band d are correct
a) Earthquake. 4) Statements a and d are correct
b) Loss of rent.
c) Spontaneous combustion. 20) The excess under Standard Fire and Special perils policy is -
d) STFI Group of perils. a) 5% of the Claim amount for perils other than Act of God perils
15) The basis of fixing Sum-insured under a Fire Policy for building, Plant & b) 5% of the claim amount subject to a minimum of Rs.10000/- for claims
Machinery and Furniture, Fixtures & Fittings is: of Act of God Perils
a) Reinstatement value or Book value. c) 5% of the claim amount subject to a maximum of Rs.10000/-for claims
b) Book value or Market value. other than Act Of God Perils.
c) Market value or Reinstatement value. d) Rs.10000/- in respect of Act of God Perils
d) Reinstatement value or Written Down Value.
21) An insured takes a fire insurance for building and contents and a machinery
16) Under a Fire Floater Declaration Policy minimum premium to be retained breakdown insurance policy for machineries. A short circuit in one of the
after expiry of the policy is: switch boards results in a spark in the air conditioner which results in a fire
a) 35% of the Provisional Premium Charged. damaging furniture in the room apart from the air conditioner. There is a valid
b) 50% of the Provisional Premium Charged. claim under -
c) 80% of the Provisional Premium Charged. a) Fire policy only
d) None of the above. b) Machinery breakdown policy only
c) Both the policies
17) Cold Storage Stock Damage cover due to Failure of Public Electricity d) None of the policies
Supply
a) Is an add-on cover under fire Policy 22) Which of the following is not required to be followed while canceling a fire
b) Is not an add-on cover under Fire policy policy by the insurer -
c) Both are incorrect a) Notice Period to be given
d) Both are correct b) Pro rata premium to be refunded
c) Reason of canceling the policy
18) Who can take the extension cover of Loss of Rent under Fire Policy d) Formal communication to be sent to the insured
a) Tenant
b) b Owner of the Building 23) Breach of condition precedent to insurance and the claim occurs. It is -
c) Both a) Payable
d) Cover not available to anyone
102 103
 b) Not Payable 29) The duty of disclosure of material facts arises
c) Partially payable a) Only during the proposal stage
d) Non of the above b) Only during the policy period if there is a change of risk
c) Only at the time of renewal
24) Breach of condition subsequent to insurance, Policy from 19.12.06 to d) All of the above
18.12.07. Breach of condition on 6.05.07, claim on 16.06.07. Claim is -
a) Payable 30) Loss or Damage due to Tsunami is
b) Not-payable a) Under Flood, Storm, Tempest and Hurricane Perils
c) Only a is correct b) Payable only under Earthquake Extension
d) Only b is correct c) Payable even without Flood
d) None of the above.
25) Property belonging to the company is insured by one of its director in his
name. In case of a claim will it be - 31) Risk covered under IAR policy is -
a) Payable a) Fire material damage, Business interruption
b) Partially payable depending on the number of directors b) Business interruption for Fire MD & MI/BPP/EEI items, Burglary
c) Not Payable c) Machinery breakdown & MLOP
d) None of the above d) All the above

26) 'A' has purchased a house but the possession and payment is deferred for some 32) Sum Insured under C L (Fire) Policy is -
time. Will you insure this house under fire policy ? a) Turnover basis
a) No b) Average of earlier 3 years T.O.
b) Yes c) Gross Profit
c) Can be in the name of original owner d) Current Financial year's Turnover
d) None of the above
33) Gross Profit means-
27) The principle of indemnity is applied in practice through - i) Net profit plus variable expenses
a) Extra premium ii) Net Profit plus Standing Charges
b) Excess clause deduction iii) Sales less variable cost
c) Franchise clause deduction iv) Sales plus standing expenses
d) Deduction for depreciation a) (i)
b) (iv)
28) Which of the following statements is true? c) (i) and ( ii)
a) Statement A: d) (ii) and (iii)
b) As per IRDA Regulations, there is a legal obligation on the part of
insurers to issue a renewal notice to the insured 34) Annual turnover under Fire (C L) policy is
c) Statement B: Last financial year's turnover
d) Issue of a renewal notice means that the policy is automatically renewed, Average three years T.O.
if the premium is paid. T.O. from the date of interruption to twelve months of the preceding year
i) Neither of the statements Current year's T.O.
ii) Only Statement A
iii) Only Statement B 35) Which of the following is taken into consideration for arriving at the adequacy
iv) Both Statements
104 105
 of sum insured under Fire Consequential loss insurance policy : c) Assessed loss less depreciation, salvage, pro-rata average and excess
a) Gross profit of the current policy d) Assessed loss less pro-rate average, depreciation and excess
b) Previous financial year Turnover
c) Standard Turnover 40) An Insured has taken Standard Fire and Special Perils Policy covering his
d) Annual Turnover fixed assets and stocks. He has opted for Rs.5,00,000 as voluntary deductible
for other than AOG perils. His property got damaged due to Fire. While
36) Which of the following statement(s) is/are not relevant to Industrial all risk settling this fire claim the excess applicable is --
Policy a) Rs. 10,000/- as compulsory Excess
b) 5% of claim amount or subject to minimum of Rs 10,000/-
I IAR policy can be issued for a petrochemical risk having sum insured more than c) Rs.5,00,000/- only
Rs.100 crores d) Both compulsory excess of Rs.10,000/- and Voluntary excess of Rs
II No depreciation applied on partial and total losses arising out of Machinery 10,00,000/-.
Breakdown claims
III Selection of machinery is permitted under Machinery breakdown sum Insured 41) An insured has taken fire policy covering plant and machinery under Standard
IV Fire Loss of profit cover is compulsory and Machinery Loss of profit cover is Fire and special peril policy. Due to direct impact of Lightning strike on out
Optional door Transformer No.1 and got exploded and got fire. Due to this the out door
(i) and (iii) transformer No 2 and other surrounding properties are also got damaged. The
only (ii) liability under the fire policy is --
(ii) and (iv) a) Entire claim is payable
only (i). b) Entire claim is not payable
c) Only Transformer No. 1 is payable
37) Which of the following statement is incorrect in case of Reinstatement value d) Other than transformer No.1 is payable
policies.
a) Reinstatement of the affected property should be completed with in 12 42) The identification. Analysis and Economic control which can threaten the
month from the date of loss assets and earning capacity of an enterprise is a definition for
b) In case reinstatement not effected, then the claim can be settled on a) Risk Management
Market value policy basis b) Cost Control Management
c) Value at the risk at the time loss will be taken to arrive the adequacy of c) Financial Crisis management
sum insured d) Public Relation Management
d) It permits to settle the Claim on market value basis.
43) The three ways in which an insured can control exposure to risk
38) Under Standard Fire consequential loss insurance the Time Excess applicable a) Eliminate, maximize or retention
is b) Eliminate, minimize or transfer
a) 5% of the claim amount or first 3 days of gross profit which ever is higher c) Eliminate, minimize or investment
b) 5% of the claim amount or first 7 days of gross profit which ever is less d) None of the above
c) As applicable Material Damage policy
d) Nil 44) Negligence, nuisance and defamation are the subject matter under
a) Public Liability
39) The sequence to be followed in the fire claim settlement is- b) Tort Liability
a) Assessed loss less Depreciation, pro-rata average, salvage and Excess c) Employers Liability
b) Assessed loss less salvage, depreciation, pro-rata average and excess d) All the above

106 107
45) Which of the following is not so important in Property insurance ? a) By applying the rate of gross profit to the annual turnover
a) Risk Inspection b) By applying the rate of gross profit to the standard turnover
b) Cover Note c) By applying the rate of gross profit to 1.5 times the standard turnover.
c) Consideration d) By applying the rate of gross profit to 1.5 times the annual turnover
d) Insurance Policy
51) M/s. John & Co. takes Business Interruption Insurance (Fire)) policy with an
46) Statement A: An aggrieved claimant whose petition is pending before The Indemnity period of 9 months. The S.I. of the policy will be:
State Consumer redressal Commission can also approach The Insurance a) A.G.P.
Ombudsman for speedy redressal of his grievance. b) 50% of A.G.P.
Statement B: A citizen of India whose claim for Rs.15 Lacs was denied by a c) 2 times of A.G.P.
Insurer can approach either Insurance Ombudsman or State Consumer d) 75% of A.G.P.
Grievance Redressal Commission for remedy.
a) Only statement A is correct 52) In dealing with any major fire claim in respect of machineries one of the
b) Only statement B is correct following is not unimportant.
c) Both A and B are correct a) Fire brigade report. .
d) Both A and B are incorrect b) Attendance register of the worker.
c) Metrological report.
47) Following is not true of an Arbitrator appointed under Arbitration Act 1996: d) Acknowledged copy of the audited financial statement filed before IT
a) Quantum disputes are referred to him department.
b) Admissibility disputes are referred to him
c) Act provides for appointment of sole Arbitrator 53) What is the difference between 1 & 4 in the Richter scale?
d) None of the above a) 3;
b) 100;
48) In dealing with any major fire claim in respect of machineries one of the c) 9990;
following is not unimportant. d) 9900
a) Fire brigade report. .
b) Attendance register of the worker. 54) What is the maximum value per location may be covered under Terrorism
c) Metrological report. Cover under Fire Policy?
d) Acknowledged copy of the audited financial statement filed before IT a) 200 crores;
department. b) 500 crores;
c) 600 crores;
49) In Consequential Loss (Fire) insurance “Gross profit” is defined as: d) 750 crores.
a) A stated percentage of sales/turnover
b) Net profit plus insured standing charges 55) The rate for terrorism cover for non-industrial risk when the value is within
c) Gross trading profit minus all standing charges Rs.500 Crores
d) Trading profit exclusive of all capital receipts a) Re. 0.13 %o
b) Re. 0.22%o
50) M/s. Khaitan Machine Mfg Co. has taken Consequential Loss fire policy for a c) Re. 0.25%o
period of 12 months with an indemnity period of 18 months. The “average d) Re. O.23%o
clause” with standard turnover wording of the fire (CL) policy will read as
“provided that if the S.I. by this item is less than the sum produced”- 56) Rate for terrorism cover for the balance portion over Rs. 500 Crores up to

108 109
 Rs.2000Crores for Industrial risk is c) Covered with a waiting period of 15 days
a) Re. 0.17 %o d) Covered with a waiting period of 30 days
b) Re. 0.22%o
c) Re. 0.13%o 63) If computers are covered under a fire policy and in case breakdown of the
d) Re. O.7%o computers due to short circuit
a) The claim is payable in full
57) Rate for terrorism cover for dwelling for any value is b) The claim is payable as not standard
a) Re. 0.08 %o c) The claim is not payable
b) Re. 0.23%o d) The claim is payable at value of the computers at 40% depreciation p.a.
c) Re. 0.25%o
d) Re. O.17%o 64) If a building is occupied in the ground floor as an Engineering workshop and
first floor as a dwelling by different owners
58) Preliminary investigation of loss under Fire Policy includes a) First floor are rated at the higher rate for the two
a) whether the loss caused by an insured peril b) Rated at lower rate for the two
b) whether the damage property is in fact covered under the policy c) rated per se
c) whether adjacent property is damaged d) Engineering Workshop is rated at the rate of dwindling
d) All of the above
65) Which of the following is true under a Reinstalment value policies
59) It is not the duty of the insured in the event of a claim under a fire policy to a) The replacement / Reinstalment need not be carried out
a) Save as much as possible of the insured property b) The replacement / Reinstalment shall be completed within 12 months
b) Take all reasonable steps to extinguish the fire c) The insured need not intimate his intension to do the replacement /
c) shift the operations immediately Reinstalment
d) diminish their loss d) All the above

60) A fire policy taken for one year is extended for one month by charging
a) Short period note for one month
b) Pro rata premium for one month
c) 50% of the short period note
d) 50% of the pro rata taken for one month
61) If the insured proposes to cover his building for fire and earthquake from
division 1 of the insurance company and his machinery for fire from division
2 of the same insurance company he will be
a) Permitted to insure as per his request
b) Will not be permitted
c) Permitted by owing him to have both the policy in division 1
d) Permitted by owing him to have both the policy in division 2
62) If the insured proposes to get add on are cover for STFI during the middle of
the policy
a) The same can not be covered
b) The same can be covered
66) Can fire policies be issued for more than 12 months
a) Yes can be issued to all types of premiums
b) Can be issued only for dwellings
c) Can be issued for godown covering non-hazardous goods
d) Can be issued only for godown covering hazardous goods
67) Valued policies can be issued for
a) Properties of a VIP
b) Properties exceeding value of 5 years
c) Properties whose market value can not be ascertained
d) None of the above
68) Which of the following is not applicable for Mid-term cover?
a) Insurers must receive specific advice from the insured accompanied by
payment of the required additional prem. in cash or draft. This additional
premium can not be adjusted against existing case deposit or debited
bank guarantee

110 111
b) Mid-term cover shall be granted for the entire property at one complex / 74) Fire at Supplier's Premises can be a part of
compound / location covering the entire interest of the insured under one or a) A Material Damage Fire Policy
more policies insured. Shall not have any option for selection b) An LOP policy
c) Cover shall commence 15 days after receipt of the premium c) Is a stand alone policy
d) The premium shall be charged on pro-rata basis d) Has no relevance

69) A silent risk denotes 75) Common utilities outside the premises can be
a) Factories where no manufacturing / storage activities are carried out a) Rated per se
continuously for 30 days or more b) Rated as per the main risk
b) Factories in which machine do not make a noise c) Highest rate to apply
c) Factories where trade unions does not exist d) insured separately
d) None of the above
76) Storage of hazardous chemical upto 5% of value at risk
a) does not affect a claim
70) Average clause becomes applicable when
b) renders a claim non-standard
a) Sum insured is lower than the value of risk at the time of loss
c) renders a claim as no claim
b) Properties insured situated at more than one location
d) can be covered after collection of extra premium
c) Insured is a partnership firm and they prefer to accept claim in the
proportion of value of amount invested by each one of them
77) Cracks appearing in a building on account of subsidence of land below
d) None of the above a) Fire policy will cover the loss without any extension
b) Claim is payable on repair basis
71) Flood claim on account of operation of an earthquake c) Claim is not payable
a) is payable under a SFSPI policy where the flood perils are deleted. d) Fire policy would have covered the claim had an extension been taken.
b) is payable under a SFSPI policy having flood perils covered
c) is payable under a SFSPI policy without the special perils discount and an 78) A dish antenna (covered under fire policy) breaks as a monkey jumps on it
extension for EQ a) The claim is payable
d) is not payable at all b) The claim is not payable
c) The claim is payable as non standard
72) Value of foundation and plinth if not included in Sum Insured will render a d) Some other insurance should have been taken
building claim due to fire
a) payable in full 79) The adjustment of sum insured in EAR policy is not done in respect of
b) payable after application of average a) freight and handling charges
c) payable in full after collection of extra premium b) custom duties
d) payable as non-standard c) cost of erection
d) increase or decrease in cost of plant and machinery
73) In an LOP policy, Auditor fees is
a) an extension 80) Standby machinery or Spare Parts of any machine under MI is -
b) a built-in cover a) not covered
c) a part of Standing charges b) covered at a discount of 50% in rate
d) not to be covered c) discount of 75%
d) only covered when it is put to use

112 113
Trade Test Questions Engg. mechanical & electrical breakdown and also human errors & negligence
a) Electrical & Electrical Machines while at work
1. Following Peril is not covered under Machinery Breakdown Insurance policy b) All machines & tools except electronic machines while at work
a) Loss or Damage due to Electrical Short Circuit c) All machines except electrical machines while not at work
b) Loss or Damage due to Defective Lubricant or Coolant d) All rotating and static equipment while at work or at rest including
c) Loss or Damage due to Terrorism Act human error and negligence
d) Loss or Damage due to Human Error
6. Insurance period for Storage cum Erection policy is
2. Under Engineering Project Insurance, the maximum percentage of escalation a) 1 Year
that can be chosen by the insured is b) 6 months prior to the final erection
a) 25% of the Sum insured c) 1 month prior to the final erection
b) 25% of the reinstatement value d) Period of contract
c) 50% of the replacement value
d) 50% of the sum insured 7. Which of the following is excluded under Electronic Equipment policy?
a) Theft
3. Material Damage proviso of the Business Interruption policy states b) Consequential Loss
c) Riots
a) There should be in existence a material damage policy covering the d) Fire
physical damage to the property for issuance of a business interruption
policy 8. Sum insured of Contractors All Risk policy is complete estimated erected value
b) The basic policy should cover loss or damage to raw materials inclusive of
c) The policy can be issued only for industrial and manufacturing risks a) Custom duties
d) A claim for loss or damage to the property should be admissible under b) Wages
the material damage policy for a claim to be admissible under a business c) Freight
interruption policy. d) All of the above
1) Statements a and b are correct
2) Statements a and c are correct 9. Which insurance policy protects contractors, projects, bridges etc
3) Statements band d are correct a) Engineering
4) Statements a and d are correct b) Fire
c) Liability
4. An insured takes a fire insurance for building and contents and a machinery d) Marine
breakdown insurance policy for machineries. A short circuit in one of the
switch boards results in a spark in the air conditioner which results in a fire 10. Machinery used for handling materials or constructions are covered under
damaging furniture in the room apart from the air conditioner. There is a valid a) Fire Policy
claim under b) Contractors all Risk Policy
a) Fire policy only c) CPM Policy
b) Machinery breakdown policy only d) Machinery Breakdown Policy
c) Both the policies
d) None of the policies 11. Under Electronic equipment policy there is no coverage available for
a) System software
5. Machinery Insurance Policy provides insurance protection of against b) Application software

114 115
 c) Punched tapes
d) Increased cost of working
12. An Advanced Loss of Profit policy indemnifies the Principal or the project
owner for
a) The loss of revenue arising out of delay in the completion of the project
due to other contractor's delay which is not in the scope of the policy
holder.
b) The loss of revenue arising out of delay in receipt of project consignment
due to accident during transit period
c) The loss of revenue arising out of delay in completion of project due to
operation of an insured peril covered under SCE/CAR policies
d) The loss of revenue arising out of delay in completion of project due to
Speculative or trade risks which relates to political, social or economic
reasons or shortcomings in the management
13. Mark the most unlikely answer below.
a) In Contractor All Risk Policy fragile items are not covered automatically
b) Contractor All Risk Policies are issued where the scope of project is only
Civil construction
c) Storage Cum erection policies are issued for erection and commissioning
of Electro Mechanical machineries.
d) Storage Cum erection policies are issued where the scope of project
involves civil construction, testing and commissioning of Electro-
Mechanical machineries.
14. Which of the statement given below is most relevant in case of engineering
operational policies and Business Interruption policies.
a) In case mid term increase in sum insured, the premium chargeable is on
pro-rata basis for the un expired policy period.
b) In case mid term increase in sum insured, the premium chargeable is on
short period basis for the un expired policy period
c) In case mid term increase in sum insured and renewed with the same or
enhanced sum insured with same insured then refund on premium arising
out of difference between short period and pro-rata premium is made.
d) In case mid term increase in sum insured and renewed with the same
insurer then refund on premium arising out of difference between short
period and pro-rata premium is made
15. In Erection All Risk insurance liability of the insurers commence from
a) The time of loading the machinery at the port of loading
116
b) The time of unloading the machinery at the port of discharge
c) The time after unloading the machinery at the site of erection
d) The time of machinery leaves the warehouse of the supplier
16. Sum Insured under Erection All risk policy can adjusted on completion of
project either by collection or refund of premium except
a) Freight & handling Charges of plant and Machinery
b) Prime cost of Machinery
c) Cost of erection of plant & machinery
d) Customs dues
17. M/s. John & Co. takes Business Interruption Insurance (Fire)) policy with an
Indemnity period of 24 months. Normally premium is collected
a) In 6 equal installments
b) In installments, first installment should be more than 5%, next of the
installments and last installment to be paid six months prior to 24 months
period.
c) In full at the inception of the policy
d) In 12 equal instalments
18. In a EAR policy an indigenous made compressor covered under the policy got
damaged while being shifted from storage yard to site of erection within the
campus. New value of the compressor is Rs.1crore. Repair/replacement cost of
parts Rs 50 Lacs. Salvage value of damaged parts Rs 2 lacs. Policy excess Rs 1
lac during storage erection. Rs 5 lacs during testing. Rs 10 lacs for act of god
perils. No under insurance. Insurance company will settle the loss for
a) Rs 48 Lacs
b) Rs 47 Lacs
c) Rs 45 lacs
d) Rs 43 Lacs
19. Which of the following is not an exclusion under Contractors All Risk
Insurance Policy
a) The first amount of the loss arising out of each and every occurrence
shown as Excess the Schedule;
b) Loss/damage during erection of plant and machinery;
c) Normal wear and tear, gradual deterioration due to atmospheric
conditions or lack of use or obsolescence or otherwise, rust, scratching of
painted or polished surfaces or breakage of glass;
d) Loss or damage due to faulty design;
117
20. M/s. Rahul & Co has taken EAR policy and Advance Loss of Profits policy.
EAR policy period is from 1/8/2006 to 30/6/2007. ALOP indemnity period is
for 12 months. Erection and testing could not be completed on 30/6/2007
because late arrival of machinery. Insurer will be liable for ALOP claim on
account any accident on 1/7/2007
a) If EAR policy alone is extended for further period beyond 30/6/2007
b) If ALOP policy alone is extended for further period beyond 30/6/2007
c) If both EAR & ALOP are extended for further period beyond 30/6/2007
d) As the EAR policy is for 11 months and ALOP indemnity is for 12
months no need to extend any policy as ALOP indemnity commences
from 1/7/2007 which is on 12th month from commencement of EAR
policy

21. ALOP can be issued in the name of

a) Principal, contractors, subcontractors and third parties
b) Principal, contractors and subcontractors
c) Principal & contractors
d) Principal only

22. Which of the policies cannot be issued for a project under construction
a) Contractors' all risk policy
b) Marine -cum-erection policy
c) Machinery breakdown policy
d) Election all risk policy

118 119
 A. ALL RISK INSURANCE
All risks policies are issued on Named exclusion basis.

SUBJECT MATTER FOR INSURANCE:

•Gold and silver ornaments, cameras, watches, cell phones, laptops,

calculators and such other valuables.

COVERAGE:

1. The policy covers loss or damage to subject matter insured by whatever cause
except those specifically excluded.
2. It covers any locations within the geographical limit specified in the policy
(normally within India and it can be worldwide also in exceptional cases)
3. The policy is subject to the usual condition of average.
4. Unless specified indemnity for individual items is limited to 5% of sum
insured.
5. Pair and set clause is applicable.

EXCLUSIONS:
• Ware and nuclear perils

MISCELLANEOUS INSURANCE •

•
Cracking, scratching or breakage of glasses unless caused by carrying
vehicles.
Depreciation, wear and tear, moth, vermin etc.
• Loss occasioned while cleaning, dying, repairing or restoration process.
• Electrical short circuit to electrical machines.
• Derangement or over winding of watches.
• Loss of money, securities, manuscripts or books of accounts and articles of
consumable nature.
• Theft from unattended vehicles
• Articles carried under contract of afrieghtment
• Consequential losses are legal liabilities.

UNDERWRITING CONSIDERATIONS:
• Proposal from known and reputed clients with sound tract record can only be
entertained.
• Care of property custody in safe deposit lockers and other safety features.
• Items covered and their susceptibility to loss.
• Trade of proposer proposals from dealers, money lenders and pawn brokers

120 121
 may attract special conditions and higher rate of premium. Therefore prior EXTENTIONS AVIALABLE AT ADDITIONAL PREMIUM:
approval is required. •Infidelity of employees carrying cash.
•Availability of list of articles and their approved valuation.
•Strike and riot.
•Moral hazard of the proposer
•Over night keeping of cash
•Geographical extensions.
•Occasional large carrying.
•Past claims history.

UNDERWRITING CONSIDERATION:
B. MONEY INSURANCE •Single carrying limit
SUBJECT MATTER FOR INSURANCE: •Total estimated annual carrying
•Character of the locality, neighborhood etc.
Cash, Demand draft, cheques, postal orders, money orders and current postal •Distances and routes
stamps. •Mode of transit
•Claims history
COVERAGE:
•All other as applicable to burglary policy.
SECTION I: TRANSIT RISK
C. BURGLARY INSURANCE
a. Money drawn for payment wages, salary petty cash etc. from bank to premises
until the same are paid out. SUBJECT MATTER FOR INSURANCE :
b. Money describe above under custody from premises to bank or post office.
c. Money collected and in the custody whilst in transit to premises, bank or post
Cash, Stock, FFF, Machinery and other contents of a business or residential
office for a period upto to 48 hours from the time of collection.
premises
SECTION II: AT THE PREMISES.
COVERAGE:
Money not described in Sec. I whilst in the locked safe or strong room in premises
against burglary house breaking and hold up. 1. Loss or damage by burglary or attempted burglary.
2. Damage caused to the premises by burglar is also covered.
Risk covered: Sec I Accident and misfortune 3. Can be extended to cover theft at an additional premium with approval of
Sec II Burglary and house breaking RO/HO.

EXCLUSIONS: DEFINITION OF BURGLARY:

•Shortage due to error or mission • A theft following a house breaking or a theft followed by a house breaking.
•Loss of money entrusted to any other person other than the insured or his • House breaking means a criminal house trespass effected by forcible means to
authorized employee gain entry to into or exit from the premises section 442 & 445 IPC may be
•Infidelity of employees carrying cash. referred.
•Over night keeping unless in a locked safe or strong room.
•Loss occasioned by RSMTD. TYPES OF BURGLARY POLICIES:
•Money carried under contract of afrieghtment •Specific policy
•All exclusions applicable to burglary policy. •Declaration policy

122 123
•Floater declaration policy VARIANT FORM OF FG INSURANCE:
•First loss policy. •Court bonds :
a) Administrative Bond
EXCLUSIONS: b) Receivership Bond
•War perils & nuclear perils c) Liquidators Bond
•By using authorized keys unless obtained by threat or assault. •Customs Bond
•Caused or aggravated or assisted by the insured, his family, and his •Excise Bond.
employees.
•Consequential loss EXCLUSIONS:
•Goods held in trust unless specifically declared. •Arising anywhere outside India.
•Recoverable under other policies. •Arising after change of employment conditions without consent of insurers.
•Loss after material alterations. •Repeat losses involving same person
•Deviations from accepted internal check system.
UNDERWRITING CONSIDERATIONS:
•Security measures
•Moral hazard
UNDERWRITING CONSIDERATIONS:
•The relationship between annual emoluments and amount of guarantee
•Attractiveness, susceptibility and criticality and exposure
sought.
•Previous claims history
•Financial status of the insured
•Accounting system
•Place of storage. •Method of accounting and well established internal check and control system.
•Terms of cover. •Recruitment policy references obtained while offering employment.
•Amount of counter guarantee available.
D. FIDELITY GUARANTEE INSURANCE
E. LIABILITY INSURANCE (GENERAL)
COVERAGE:
MEANING OF THE TERM “LIABILITY”:
•Intended to provide indemnity against pecuniary loss caused by infidelity of
the employees. Legal Obligation of the wrong doer to pay damages to the aggrieved person.
•The fraud and dishonesty should have been in course of discharging specified
duties and also in respect of money or goods of the employers. HOW LIABILITY ARISES?
•Policy ceases the moment the claim is settled for individual policies. • Common Law passed legal decisions and legally recognized customs,
•The name of the employee stands deleted the moment any claim involving his conventions and usages.
infidelity is reported and settled. • Law of Tort :
part of common law
TYPES OF POLICIES: Tort is a civil wrong
1. Individual policy Tort arises out of a breach of a duty
2. Collective policy. Such a breach can be the basis of a civil cause of action.
3. Floating Policy • Statute law Those enacted by legislature e.g., M.V. Act, PLI Act, WC Act etc.
4. Positions policy • Law of contracts.
5. Blanket Policy.

124 125
Law relating to Liability: MEANING OF “NEGLIGENCE”
• Evolution of law • Unintended wrong involving breach of legal duty of care.
• Survival of the fittest and the strongest • Blyth V. Birmingham waters company. (1856)
• Code of conduct evolved by the civil society Principle of Equity. • Breach of duty may occur due to either.
• Individual has the right to : • 1. Act of commission (negligent act) : Doing something a reasonably
• Liberty prudent man would not do under given circumstances or
• 2. Act of omission (Negligent omission): Failure to do something a
• Enjoy and be secure in his property and reputation
reasonably prudent man would do under given circumstances.
• Privacy
• He also has a duty to •Breach of duty of care means failure to exercise reasonable degree of care.
• Respect others right and •Court should decide whether the standard of care required under the
• Refrain from harming others by invading their rights. circumstances was observed.
• If, by his wrongful act, he causes harm to others, he is held responsible •The complainant has to prove that such duty of care was owed by the other.
(compensation or punishment).
INSTANCES OF TORT:
TORT: • Libel
• Slander
Civil Wrong • Assault
Arises out of a breach of legal duty • Negligence
Leads to a civil cause of action • Nuisance
Entails payment of damages or compensation Liability Insurance deals with only two of the instances of tort viz., Negligence and
Nuisance.
TORT vs. CRIME
WHEN LIABILITY EMERGES UNDER LAW OF TORT?
TORT CRIME • It emerges when it is established that :
Breach of private rights of individual Breach of public rights which affects 1. The defendant owed a legal duty of care.
as individual. the entire society as a society. 2. The defendant breached that duty of care.
Action initiated by aggrieved party. State prosecutes the culprit. 3. The plaintiff suffered injury or damage and.
Remedy is in the form compensation. Punishment in the form of 4. There was a causal connection between (2) & (3).
imprisonment or fine. • Mere carelessness where there is no duty to take care existed is not
Adjudicated by civil court. Conviction by criminal court. negligence.
• Party complaining has to establish the facts from (1) to (4) to sustain an action
Civil Liability is insurable Criminal liability is not insurable
as it is against public policy – civil for negligence.
consequences of a criminal act can • Sometimes negligence may be presumed as per rule “res ipsa loquitur”.
be covered.
Privity between parties not needed Require privities between parties. DEGREE OF CARE:
• Degree of care or skill may vary according to particular circumstances
Duty imposed by law applicable to Duty arises out of agreement.
the entire society. • Owner of a property to use it in such a way as not to cause injury or damage to
other persons or their property.
Opposing parties may not be Opposing parties are parties to the • Persons using dangerous things such as explosives, gases etc. are to exercise
connected. contract.
more than ordinary care in the control over such properties.

126 127
•Towards children. (a) cost of repair/replacement of damaged property
•Much higher degree of care and skill to be exercised by the professionals in (b) loss of use of damaged property
their professional work •The onus of proving the amount of damages rests on the claimant.
•A professional need not possess the highest expert skill, it is sufficient to
DEFENCES TO NEGLIGENCE ACTION:
exercise the ordinary skill of an ordinary competent professional.
1. Volenti Non fit injuria (to him who is willing there can be no injury)
2. Inevitable accident.
STRICT AND ABSOLUTE LIABILITY: 3. Act of god or Vis. Major
•Shriram foods & fertilizers (1986) Escape of Oleum Gas. 4. Emergency
•An enterprise engaged in hazardous and inherently dangerous activity should 5. contributory negligence
ensure highest standard of safety. 6. limitation
•If any harm results on account of such activity, the enterprise must be strictly 7. Accord and satisfaction.
and absolutely liable to compensate all those who are affected by the accident.
TYPES OF LIABILITY POLICIES:
•Exercise of reasonable care or absence of negligence no excuse.
• Public liability (Industrial risk) Insurance.
•Rylands V. Fletcher exceptions too would not be available. • Public Liability (Non Industrial Risk) Insurance.
•The larger and more prosperous the enterprise, the greater must be the amount • Product liability insurance.
of the compensation payable.
• Professional indemnity insurance.
•The MD and Chairman of the company are personally responsible for what
• Public liability insurance act policy (Government by PLI Act, 1991)
goes wrong in the company.
• Workmen's Compensation Policy.
DEFENCES TO ACTION UNDER THE RULE OF STRICT LIABILITY: • Directors & Officers Liability Insurance (No. market agreement)
• Comprehensive General Liability/Contingent liability & various other
•Act of god reinsurance driven cover (no market agreement)
•Consent/default of the plaintiff
NEED FOR LIABILITY INSURANCE:
•Act of stranger
• Growing awareness among people about their rights
•Statutory authority.
• Consumer protection law
• Evolution of strict & absolute liability
DAMAGES:
• Enactment of special laws.
•Damages means pecuniary compensation recoverable by action for; breach of • Huge cost of defense and large amounts of award.
contract & tort. • Inclination of judiciary to promote public cause.
•Damages for personal injury claims • Public interest suits and class action.
(a) Special damages :
(i) actual loss of earning due to injury LIABILITY INSURANCE POLICIES:
(j) medical, nursing or other expenses • Cover liability under law of tort and Statute law
(k) Funeral expenses. • Cover legal liability of the insured.
(b) General Damages : • Pay to third party damages & legal costs and expenses.
(a) pain & suffering • Provide compensation for
(b) Loss of enjoyment of life and loss of amenities. • Death, bodily injury, illness or disease
(c) Loss of recreational ability and/or
• Actual physical damage to tangible property
(d) Loss of expectation of life.
• Negligence is to be proved in court of law
•Damages for property damage claims

128 129
•Claims made within jurisdiction of India as per Indian law except for liability F. PUBLIC LIABILITY (INDUSTRIAL RISK)
arising out of exports in Product Liability.
•Claims first made in writing against insured during period of insurance are COVERAGE:
considered for payment.
•Cover for industrial and manufacturing risks.
COMMON FEATURES OF LIABILITY POLICIES: •Cover depots, warehouses, go downs or any premises connected with insured
• Indemnity Limits Any one Accident AND Any One Year. business, addl. Premium depending on no. of premises covered.
• AOA: AOY Ratios 1:1, 1:2, 1:3 and maximum upto 1:4 (No unlimited •Claims arising out of accidents occurring in insured premises.
liability) •Excludes claims arising out of Pollution (unless specifically covered) and
• Notification Extension clause Product Liability.
• Extended claims reporting clause •Risk inspection to be done for new policy and at every fourth renewal where
• Indemnity to others (except professional indemnity) AOY exceeds Rs. 2.5 crores for Risk Group 1 and 2 and Rs. 1 crore and above
• Cross liability for Risk Group 3 and 4.
• Claims series clause (No coverage for claim from the same cause which are
made later than 3 years after first claim of the series. EXCLUSIONS:
• Compulsory and voluntary excess (applicable to both injury and damage). •Contractual liability.
•Act of God perils (can be covered as extension)
CONDITIONS:
•Deliberate/willful/intentional non compliance of statutory requirements.
• Notice of claim.
•Loss of pure financial nature like loss of goodwill/market etc.
• No admission, offer, promise, payment without consent of insurer.
•Personal injuries like libel, slander etc.
• Right to defend.
•Infringement of plans, copy right etc.
• Give information and assistance
•Fines, penalties, punitive and exemplary damages.
• Notification of material alteration in risk.
•War and nuclear perils
• Payment upto limit of indemnity
•Ownership, possession, use of Motor vehicles.
• Interpretation condition.
•Liability arising out of transportation of hazardous substance (can be covered
• Keeping accurate records and declaration of turnover at the time of renewal
as extension)
• Contribution
•Use of aircraft, watercraft or hovercraft
• Cancellation
•Damage to property owned, leased or hired or in custody of insured.
• Reduction of Limit of Indemnity (AOY) on payment of claim.
•Injury or damage prior to retroactive date.
• Excluding losses in case of Fraud
•Deliberate, conscious or intentional disregard of insured's technical or
• Policy disputes clause.
administrative management to take reasonable steps to prevent claims
COMMON RATING FACTORS: •Liability which may be specifically covered elsewhere e.g. PLI Act or No
• Risk group Fault Liability (Non IR only).
• Limit of Indemnity (Ratio)
• Limit of Indemnity (AOA) opted EXTENTION POLLUTION:
• Output or Turnover •Cover legal liability towards injury and damage to property due to accidental
(occurred at specific time and place) seepage, pollution or contamination.
• Receipts
•Also covers cost for removing, nullifying or cleaning up, seeping, polluting
• Attendance/seating capacity (e.g. : no. of visitors to the premises)
and contaminating substance.
• Wages.

130 131
•Excludes fines, penalties, punitive and exemplary damage.
•Subject to additional questionnaire certificate/consent letter from Pollution
Control Board and additional premium.
•Extension of Act of god perils (AOG) with additional premium as per
Earthquake zones stated in AIFT.
EXTENSION TECHNICAL COLLABORATORS
• Covers legal liability of collaborator (named in schedule) in respect of
technical collaboration agreement between insured and collaborator.
• No claim payable unless cause of action arises in India and liability to pay
claim is established against the insured in an Indian contract.
• Only Indian Law shall be applicable to actions brought in India.
• Subject o additional premium
• Need to scrutinize collaboration agreement and any other information
depending on need of each case.
EXTENSIONS: TRANSPORTATION COVER
• Covers legal liability towards injury and damage to property due to accident
caused by material/hazardous or dangerous substance whilst in transit by
rail/road or pipelines (Pollution control Board Certificate).
• Pollution risk excluded unless specifically covered.
• Subject to compliance of statutory provisions
• Separate limit of indemnity i.e. AOA/AOY.
• Additional premium on indemnity, turnover, pollution and AOG perils
(Pollution and AOG perils if requested).
• 50% premium charged if taken with premises cover.
• Separate policy may be issued with 100% premium and joint name of insured
and transporter (if AOG perils taken, zone should be 1).
EXTENTION - CARRIAGE OF TREATED EFFLUENTS:
• Covers legal liability towards injury and damage to property due to accident
whilst treated effluents are carried by pipelines outside insured premises to
discharge point.
• Pollution risk excluded unless specifically covered.
• Excludes fines, penalties, punitive and exemplary damages
• Subject to compliance of statutory provisions
• Additional premium (on indemnity premium) if distance exceeds 1 km. If
distance exceeds 20 KM to be referred to Market Agreement commit.
132
PUBLIC LIABILITY INSURANCE ACT, 1991
COVERAGE:
•Applicable for those handling hazardous goods and defined in the act.
•Limit of indemnity to be not less than paid up capital but within a maximum of
Rs. 15 crore AOY and Rs. 5 Crore AOA
BASIS OF RATING :
• Limit of Indemnity and turnover
• Equal amount of premium to be collected towards environment relief fund (no
discount in lieu of commission & no service tax on ERF).
CLAIMS
(Deciding authority Dist. Collector)
• Reimbursement of medical expenses upto maximum Rs. 12,500
• Fatal accident: Rs. 25,000 per person.
• PTD;/PPD medical expenses upto Rs. 12,500 plus disablement compensation
upto Rs. 25,000
• Loss of wages due to TTD: Fixed monthly relief not exceeding Rs. 1,000 per
month upto maximum of three months for hospitalization exceeding 3 days &
age > 16.
• Private property : Upto Rs. 6,000
G. PRODUCT LIABILITY
COVERAGE:
•Legal Liability for injury, damage or pollution arising out of use of the product
except any liability under PLI Act or no fault liability.
•For claims arising out of accidents due to defects in products specified in
schedule.
•Except for any liability arising out of awards, judgments made under laws of
USA or Canada or any orders for enforcing such awards/judgments (unless
policy includes North American jurisdiction clause).
•Risk Assessment at every fourth renewal. For all policies covering exports to
USA & Canada; for policies involving exports to other than USA & Canada
with AOY over Rs. 50 lacs and for policies not involving exports with AOY
over Rs. 2.5 crores.
133
• Excess of ½ % of AOA with minimum of Rs. 2,000 but for USA & Canada 1% H. DIRECTORS & OFFICERS LIABILITY INSURANCE
of AOA subject to minimum of Rs. 4,000
• Policy to be issued in Indian Currency and claim settled in Indian currency. If COVERAGE :
exports are involved and insured requests, policy can be expressed or claim
can be settled in foreign currency, as per blanket approval by RBI. Indemnifies Directors & officers in respect of their legal liability to third party
• Claim series means claims arising out of one specific common cause eg. claimants for a wrongful act whilst managing the business
Same fault in design, manufacture, instructions for use or labeling of products or
supply of same products and/or services or products and/or service showing same DEFINITIONS :
defect. Insured: Directors and Officers

PRODUCT LIABILITY COVER - EXCLUSIONS: INSURED EVENT :

Legal Liability to Third party claimants for a wrongful act.
•Contractual Liability
•Deliberate non compliance of any statutory provision. DIRECTOR :
•Pure financial loss i.e. loss of market. Member of the Board of directors.
•Fines, penalties etc.
•War and Nuclear perils OFFICER :
Not defined usually but typically a person with authority to commit the company.
•Injury/damage occurred before retroactive date.
•Deliberate disregard of insured's technical and administrative management to WRONGFUL ACT :
take reasonable steps to prevent claims. •Breach of duty.
•Injury to employees. •Breach of trust.
•Costs incurred for repair, reconditioning, modification replacement of any •Neglect, Error.
part or product alleged to be defective. •Misstatement, misleading statement.
•Cost of recall of product or part thereof. •Omission.
•Arising out of products which with insured's knowledge in intended for •Other similar acts.
incorporation into structure, machinery or control of any aircraft.
•Damage to property belonging to insured or held in trust or in custody or LEGAL LIABILITY TO THIRD PARTIES :
control of insured or a person in service of insured. •Employees.
•Products failure to fulfill purpose for which they are intended. •Former employees (DIRECTORS).
•Arising out of products that left the custody or control of insured prior to •Shareholders.
retroactive date stated in schedule. •Competitors.
•Government Bodies.
EXTENTIONS :
POLICY:
Vendor's Clause (1) Is on claims made basis (2) continuity if important.
• For products not manufactured by insured but by contractors, sub-contractors A. TWO INSURING CLAUSES:
etc. In their brand name may be covered subject to additional information on
contract between insured and such manufacturers. CLAUSE A: Covers D& O where they cannot be reimbursed.
• TECHNICAL COLLABORATORS INCLUSION CLAUSE. CLAUSE B: Covers D & O where their company can reimburse.

134 135
B. OUTSIDE DIRECTORSHIP •List of holding/subsidiary companies.
Associated companies •Copies of circulars sent to members/debenture holders.
Not for profit trusts.
Non related companies
Nominee companies, trusts etc.
I. JEWELLERS BLOCK INSURANCE

OUTSIDE DIRECTORSHIPS - TWO CATEGORIES:

Section Property cover Perils covered
1. Appointed by the company.
2. Elected not at the request of the company. I– 1. Stock in trade and cash in the •
Fire, lightning,
Premises premises in safe •
Explosion.
THREE DIFFERENT STRUCTURES - Single excess, Double excess & Treble risk 2. Stock displayed on premises. •
Burglary/Housing Breaking/
excess. 3. Property in bank lockers. Holdup/theft.
i. Single Excess cover •
Riot and strike
Applies after any D & O II – 1. Stock in trade whilst in On all risk basis whilst carried
Liability insurance arranged. Custody custody of director’s partners or conveyed outside the
By the outside company risk /employees of the insured. specified premise with named
ii. Doubled excess cover applies after. outside 2. Stock whilst in custody of exclusions.
Any D & O liability insurance premises person not in regular
Arranged by the outside company employment.
And any indemnification provided by the outside company.
III – Stock in trade whilst being only All risk basis within India with
iii. TREBLE EXCESS cover applies after any D & O liability insurance arranged Transit carried by : named exclusion.
by the outside company and any indemnification provided by the outside risks 1.Insured Post Parcel
company and any indemnification provided by the employing company. 2.Air Freight
3.Angadia
PRINCIPAL EXCLUSIONS: IV – FFF and Safes •
Fire, lightning,
•Dishonesty, fraud, criminal or malicious acts. •
Explosion
•Personal guarantees or warranties (unless specifically covered). •
Burglary/House Breaking
•Libel, slander and damage to property. /holdup/theft
•Seepage & Pollution (unless specifically covered). •
Riot & Strike.
•Liability of D & O on remuneration to which they are not entitled.
•Insured Vs. Insured.
LIMIT OF SUM INSURED AND SPECIAL CONDITIONS
• Stock under custody in excess of Rs. 2 lac should be secured in locked safe
REQUIREMENT FROM INSUREDS:
after business hours Section II.
•Completed proposal form.
• Sum insured for Sec II should not exceed Sec I sum insured.
•Copies of memorandum & articles.
• Valuation for Sec. I, II, III shall be cost plus 10%.
•Copies of last three years audited accounts.
•Coy latest half yearly audited/UN audited accounts adopted by board. • Pair set clause is applicable.
•Pattern of shareholdings. • Condition of average is applicable for Sec I & IV
•List of shareholders with more than 5% of total paid capital. • Reinstatement facility is available for Sec. I
•Name & addresses of directors with % of shares held. • Loss should be reported within 60 days from the occurrence date.

136 137
EXCLUSIONS:
• Inventory losses, losses occurring cleaning and repairing process.
• Articles under use by the insured, his employees and family members
• Articles whilst on public exhibition.
• Theft from unattended vehicles
• Infidelity of all persons involved in the trade.
• Loss occurred outside specified locations
• Theft by use of authorized keys
• Window display after business hours.
• AOG perils
• Transit risk for export/import.
• Loss after passage ownership unless by operation of law
• Confiscation by local authority.
UNDERWRITING CONSIDERATIONS:
• Extend watch and ward facility, round the clock armed guard closes circuit
TV.
• Special security built vaults, strong room
• Moral Hazards
• Past claims.
BULLET QUESTIONS
1. Relevance of Micro Insurance in today's, scenario.
• The MI comes from the need for inclusive economic growth i.e. the poor
also getting a fair deal when the Indian Economy grows rapidly
• The Micro Finance in increasing in Rural India through Banks NGOs and
SHGs.
• The vast credit off-take can be protected by micro insurance only in rural
India.
• The large population of the rural India rural finance and technology can
be seamlessly integrated for viable business and distribution models for
MI
• MI is widely popular in other developing countries all over the world due
to inability of large insurers to tackle the small needs of rural poor.
• Public sector Insurance can fit existing policies for filing newer ones
without damaging their existing financial well being
• Understanding the exact needs of various states/ regions by market
research can help us evolve the correct MI product
138
•In India, the MI product should have simplicity affordability and
proximity of services.
•Our option in PSUs is to link our Bancassurance partners and the like and
gather experience and data to evolve the best product.
•The Ideal package product should be savings oriented (No Claim Bonus),
protective of credit, life, disability and properties including livestock.
2. Role of intermediaries in procuring general insurance business.
• Fast developing distribution channel.
• Corporate agents, bancassurance and brokers are Strong intermediaries
• Intermediaries are bound by the code of conduct as per IRDA
• They have to adhere to the functions stated by IRDA
• Link between the insured and insurer
• Have to be fair to the interest of insured and insurer
• Provides services to the policy holder
• Should be updated with the latest covers available in the market and
happenings in the international market
• Should have sound knowledge regarding the underwriting philosophy,
risk retention capacity and solvency margin of various insurers
• Should play a role in claims administration and management of insured
3. Concept of input cost in Rural Insurance
• It is used in those classes of insurance where the value of the subject
matter is increasing frequently due to change of status/growth.
• In plantation insurance the Sum Insured shall be based on the cost of
cultivation i.e. input cost or cost of raising /development of the insured
plant.
• Where the insurers do not have up to date information / expertise in
change of value of the subject matter.
• Insurers collect the relevant information from the experts in that field like
State/Central Agricultural Department, NABARD, and Agricultural
Universities.
• For input cost the items generally they consider
1) Cost of Land Preparation including Pit making.
2) Cost of Seeds/Seedlings.
3) Cost of manures/fertilizers.
4) Cost of pesticides etc.
• For subsequent years of operation for plantation crops additional costs
such as cost of fertilisers, manures, irrigation, cost of pesticide,
139
 insecticide, other plant protection chemicals, labour charges will be •Political risk refers to the payment related to the country of the buyer
added to the first year cost and thus the sum insured for subsequent years •Political risk refers also to transfer difficulties due to economic events
will be the applied. like export license cancellation and war
•Stage wise valuation table of the plantation is to be prepared for future •Policy excludes Inter company sales
assessment of loss. •Policy excludes also transactions with Government Institutions
•The Input cost may be derived for each proposal by the experts as stated •Excludes private individuals
herein above/from any reputed experts OF the relevant field. •If the defaulter is a subsidiary or other department of the same company,
•Feasibility Report from the State/Central Government Agricultural these are excluded from the scope of the policy
Institutions/Universities to be obtained.
•The premium charging as well as claim payment both made purely based 6. S.I. under the EAR policy
on the concept of input cost. • Cost of erected value of property including freight, custom duty, erection
cost
4. Steps for minimization of losses in Health Sector? • Adj. clause in respect of material damage section towards freight and
• There is robust growth of business in Health Sector and this trend is handling charges, custom duty, cost of erection but not towards increase/
expected to continue in future also. Unfortunately, ratio of loss in this decrease in the cost of plant & equipment
sector has increased with the business growth. Hence, there exists • Extensions like civil works
urgency of minimizing losses.
• Debris removal
• Aggressive marketing of Health Policies to the people of younger age by
• CPM
introducing new products, training to the agents and greater incentives
for procuring this business. • Surrounding property
• Loading of premium on group policies based on their past claim • Expediting cost/ overtime, express rates
experiences. • Air freight for equipment
• Careful selection TPAs having professionals favorable past records. • Additional custom duty
• Monitoring the working of TPAs on regular basis as the loss ratio in the • Escalation in cost upto 50%
health sector increases considerable after introduction of TPA.
• The benefits under various heads like Room rent, Doctors fees and MULTIPLE CHOICE QUESTIONS ON HEALTH INSURANCE
Diagnostic materials etc should have individual limits instead of overall
SI without any sub limits. 1. Mediclaim policy is basically a:
• Maximum limits of compensation may be fixed for treatment of common • Benefit policy
diseases like cataract, kidney stone, and heart ailments etc. • Indemnity policy
• While empanelling Hospitals for cashless service, we may negotiate for • Neither benefit nor indemnity policy
discounts. • Both indemnity and benefit policy
• Prompt investigation of doubtful cases to detect fraud.
• Blacklisting of Hospitals and TPA found resorting to fraudulent means. 2. Group mediclaim policies are of:
• High volume & high margin
5. Scope of cover in Credit Risk Insurance • Low volume & high margin
• Two types of risks are covered Commercial and Political • Low volume & low margin
• Commercial risk refers to the payment risk related to the buyer including • High volume & low margin
nonpayment due to insolvency default etc.

140 141
3. The penetration of health insurance in India is around: 9. Critical Illness policy is a:
• 5% of the total population • Indemnity policy
• 2% of the total population • Benefit policy
• 4 % of the total population • Both indemnity and benefit policy
• 10% of the total population • Neither of the two

4. The coverage of pre-existing diseases was a major bone of contention in case 10. Insurers, TPAs and Broking Companies cannot raise capital except through:
of mediclaim policies over the years. Who has defined the pre-existing • Preference Shares
diseases recently for use by all Indian non-life Insurance Companies? • Equity capital
• Insurance Regulatory & Development Authority • Hybrid Instruments
• General Insurance Council • Transfer of shares
• Health Insurance Council
• GIPSA 11. IRDA grievance redressal department deals with only:
• Cases of delay & non response
5. Mediclaim policy was introduced by PSU Insurers in the year: • Claims dispute
• 1986 • Policy contract dispute
• 1973 • Complaints written on behalf of policy holders by Advocates, agents or
• 1976 any third party
• 1996
12. A takes a mediclaim policy with coverage of Rs 5 lacs for a year from 1.1.09.
6. Medical underwriting is practiced in case of: In May 2009, he prefers a claim for Rs 1.5 lacs. The coverage available to A
for the balance period is:
• Group health policies
• Rs 1.5 lacs
• Community based health policies
• Rs 3.5 lacs
• Individual mediclaim policies
• NIL
• All the above
• Rs 5 lacs.
7. The new definition of pre existing disease is being implemented by Insurers
with effect from: 13. All factors other than one stated below does not determine the premium
payable under a health policy:
• 1.4.08
• Age
• 1.6.08
• Occupation
• 1.4.07
• Sum insured
• 1.6.07
• TPA option
8. The TAC collects health Insurance data from TPAs and Insurers in respect of:
14. Mediclaim policy generally has a post and pre hospitalization benefits for:
• Policy, members and claims
• 30 days and 60 days
• Policy and claims only
• 60 days and 30 days
• Policies and members only
• 30 days and 15 days
• Claims only
• 15 days and 30 days

142 143
15. Under the Rashtriya Swasthya Bima Scheme the Central and State 21. What is common to Jana Arogya Policy and group mediclaim policy?
Government share the premium in the ratio of: • Cumulative and health check up are not payable under both.
• 50:50 • Maternity benefit extension is available
• 75:25 • Renewal is subject to Bonus/ Malus clause
• 25:75 • Both are group policies
• 80:20
22. Group Discount is generally not offered under a Group Mediclaim Policy if
16. Under the UHIS policy, a portion of the premium is borne by: the group size is:
• State Government • < than 51
• Central Government • < than 101
• Both Central & State Government • > than 101
• Neither the Central and State Government • > than 51

17. World Health Day is celebrated on: 23. The underwriting practices of a health insurance company provides for
• April 7 loading of a tailor-made group policy if loss ratio is > than 70 % to keep it at
70% as if basis. In a particular tailor-made group policy, the loss ratio is 150%.
• August 15
What would be the loading on renewal to maintain the loss ratio at 70%?
• December 7 • 120%
• December 15 • 114%
• 70%
18. A health insurance policy may be cancelled for all reasons except one. Which
one: • 100%
• Misrepresentation
24. Group Discount under a group mediclaim policy is allowed on the group size:
• Fraud
• At the end of the policy period
• Non-disclosure or non co-operation
• On anticipated group size
• Claims history • Actual size at the commencement of policy
• To be adjusted on average group size
19. The World Health Organization is headquartered at:
• Geneva 25. The basic premium under a group mediclaim policy is:
• Berne • The total premium computed before applying Group Discount, High
• New York Claims Ratio Loading/ Low Claims Discount and Special Discount, if
• Tokyo any
• The total premium computed after applying Group Discount
20. All but one statement is not correct in respect of Jana Arogya policy: • The total premium computed after applying all discounts
• The coverage is for poorer sections of the society between the age of 5 to • None of the above
70 years.
• The sum insured per person is restricted to Rs 5000/- 26. All except one statement is correct in respect of Cancer Medical Expenses
• Tax benefit under Section 80 D is available for premium paid Policy of the Indian Cancer Society. Which one is incorrect?
• The policy can be taken for parents as well. • The policy is available for members of the society maximum upto the age
of 70 years.
144 145
 •The policy is available to individual ordinary, Well Wisher Ordinary, 32. There could be many ways to reduce health insurance premium. Which one of
Well Wisher Corporate and Well Wisher Life Member the below listed does not help in reducing premium:
•The policy covers the member and spouse for Rs 50,000/- and in case of • Reduction of benefit
claim by one the partner is not entitled for any benefit under the policy. • Curtailment of coverage by imposing co-payment
•The sum insured of Rs 50,000/- is paid as a benefit in case of detection of • By getting subsidy
cancer. • TPA option

27. Mr A has enrolled himself along with his spouse as members of Cancer 33. A Company needs to have a license from IRDA to act as TPA. The amount of
Society from 1.1.09. The insurance will commence from: non-refundable processing fees and license fees payable are:
• 1.1.09 • Rs 20,000/- and Rs 30,000/-
• 1.2.09
• Rs 30,000/- and Rs 20,000/-
• 15.1.09
• Rs 25,000/- and Rs 50,000/-
• None of the above.
• No fees payable
28. Which statement is correct in case of Overseas Mediclaim policy?
34. A TPA whose application for license has been rejected may apply afresh after:
• Premium is payable in foreign currency and claim is payable in foreign
• 2 years
currency.
• Premium is payable in rupees and claim is payable in foreign currency. • 1 year
• Premium and claim is paid only in US dollars • 5 years
• None of the above. • 3 years

29. The premium under OM policy depends on all except: 35. The license issued to a TPA is valid for a period of:
• Age band • 3 years
• Trip band and country of visit • 2 years
• Coverage • 5 years
• Income • 1 year

30. Which is not a government supported health policy? 36. What is the threshold limit of transfer of shares of a TPA to be informed to
• UHIS (BPL) IRDA?
• Varishtha/ Sr Citizens policy • 5%
• RSBY • 1%
• Rajiv Arogyashree • 10%
• 26%
31. ABC Company has a tailor-made group mediclaim policy with an Insurer.
The Insurer has 4 TPAs in panel and the policy will be serviced by a TPA. 37. One of the conditions is not relevant to act as TPA in India. Which one:
What is the best way to select the TPA?
• A company with share capital and registered under the Companies Act
• Any TPA
1956
• Leave it to the option of Insurer • The minimum paid up capital shall be in equity shares of Rs one crore and
• Arrange for a presentation from TPAs and then select should have working capital not less than Rs one crore any time of its
• Accept as it comes functioning

146 147
 •The TPA to carry on only health services •48 hours
•Aggregate holding of equity shares by a foreign company may be upto •No time limit
50%. •12 hours

38. The look back period for pre-existing disease from first commencement date 44. According to recent regulation of IRDA all health insurance policies should
of mediclaim policy is: have a mechanism to condone delay up to a specified time for continuity of
• 48 months benefit in respect of waiting period and pre-existing disease. What is that
• 36 months period?
• No limits • 15 days
• 7 days
• 12 months
• 1 month
• 3 months
39. The look back period for pre-existing disease from the policy commencement
date under Overseas Mediclaim policy:
45. Any change in the premium structure and terms of health insurance policy can
• One year
be implemented only after the approval of IRDA. However Insurer has to
• Six months intimate the changes/ revisions to all policyholders at least:
• No limits • 3 months prior to the date of renewal of policy
• 48 months • 1 month prior to renewal
• Not necessary to inform before renewal
40. The any one-trip limit and total duration of stay under CFT are restricted to:
• 6 months prior to renewal
• 60 days and 180 days
• 30 days and 60 days 46. The fees payable to TPA for rendering health services in the eastern and
• 14 days and 180 days western India is:
• 15 days and 30 days • 6% of premium
• 5.4% of premium
41. The mediclaim policy if claim free earns a cumulative bonus. However in case • 5.5% of premium
of a claim the earned benefit is reduced by:
• None of the above
• 5% of the accrued benefit
47. The Sr citizens are entitled for tax benefit under Section 80 D of the Income
• 10% of the accrued benefit Tax Act up to:
• 10% of the sum insured • Rs 20,000/-
• 10% of the claim amount • Rs 15,000/-
• Rs 50,000/-
42. A disease is said to be acute when:
• Rs 25,000/-
• It has an abrupt beginning and quick ending
• Gradual beginning and long persistence 48. The co-branded health insurance policy with Banks has become very popular
• Left alone can be fatal in India. It is an example of:
• Disease without complication • B2B business model
43. The minimum hospitalization period for accrual of benefit under mediclaim • B2B2C business model
policy is: • B2C business model
• 24 hours • None of the above
148 149
49. Which one of the following policy is a deferred mediclaim policy? 54. Under Rashtriya Swasthya Bima a fixed transport allowance per visit is
• Jana Arogya allowed subject to an annual limit of Rs 1000/-, what amount?
• Arogyashri • Rs 100/-
• Bhavishya Arogya • Rs 50/-
• Sampoorna Arogya • Rs 60/-
• Rs 30/-
50. The beneficiary under CGHS and Central Services (Medical Attendance)
Rules 1944 can opt for mediclaim policy. State which statement is incorrect? 55. The Rashtriya Swasthya Bima entails only:
• They can claim reimbursement from both the sources subject to the total • Cashless hospitalization
reimbursement not exceeding the total expenditure incurred for • Re-imbursement
treatment • Both cashless and re-imbursement
• The beneficiaries first have to claim on original documents with Insurer • Pre-paid system
and secondly claim with CGHS on photocopy and certification from
Insurer 56. The age for calculation of premium under mediclaim policy is:
• The reimbursement from CGHS or other department source will be • Completed age
restricted to admissible amount as per approved package subject to the • Running age
amount not exceeding total expenditure on treatment. • Either of the two
• The amount of treatment will be shared under contribution clause.
57. The riders in a health insurance policy give additional benefits to a policy
51. The Rashtriya Swasthya Bima is a smart card based health scheme for BPL holder but it does not have any investment or saving element. As per IRDA
families in states across the country. What is the sum insured under the policy? regulation the benefit arising out of an individual rider cannot exceed the basic
• Rs 30,000/- sum insured and the premium paid for the rider is capped at :
• Rs 25,000/- • 30 % of the basic policy cost
• Rs 50,000/- • 40% of the basic policy cost
• Rs 20,000/- • 20% of the basic policy cost
• 10% of the basic policy cost
52. The Rashtriya Swasthya Bima Scheme provides for pre and post
hospitalization beneft up to: 58. The DTC will be implemented in the country from effect from 01.04.2012.
• 1 day and 5 days The premium paid for health policies for an individual assessee will be
eligible for tax benefit under Income Tax Act for :
• 7 days and 15 days
• ` 50,000 /-
• Does not provide for it at all
• ` 1,00,000/-
• Total 10 days
• ` 35,000/-
53. The BPL families can enroll themselves under Rashtriya Swasthya Bima
• ` 15,000/-
Scheme by payment of registration fees of:
• Rs 10/-
59. The health insurance portability in Indian health insurance market will be
• Rs 30/- implemented with effect from :
• Rs 50/- • 1.7.2011
• Free of cost • 1.1. 2012

150 151
 •1.4.2011 65. The Insurance Rules provide that the group Health Premium may be accepted
•1.9.2011 in installments covering a particular period:
• Before the due date
60. As per IRDA guidelines on portability on health insurance policies ,which • Before the policy commencement date
one of the following is not correct : • Within 15 days of commencement of the period
• Provide credit for the period of cover for PED in terms of waiting period
• Within 7 days of the date of commencement of the period
with previous insurer.
• Provide credit of the sum insured under previous insurer including
66. The standardization of billing procedures in hospitals, contents of discharge
bonus. summary & standardization of TPA/insurer & TPA/hospital contract have
• Provide credit to the sum insured only & not bonus. been done by:
• Provide credit to both PED & existing sum insured including bonus. • FICCI Health Insurance Group
• IRDA Health Self
61. As per portability rules, the existing insurer has to share the entire data base
including the claim details of the policies with their counterparts in: • General Insurance Council
• 7 days • Health Insurance Council
• 10 days
• 3 days 67. When a Insurer knows more about consumers expected costs than the
• 15 days consumer themselves and uses marketing or plan design to enroll healthier
people than usual population, it is called:
62. The application for portability has to be acknowledged by insurer within : • Cream skimming
• 3 working days • Adverse Selection
• 7 working days • Lemon dropping
• 15 working days • Information Asymmetry
• 10 working days
68. It is estimated that health insurers' loss due to fraud is around 10% of the claim
63. For online filing of health insurance products the IRDA has provided for outgo. When normally honest people pad legitimate claims to get higher
submission for : amount of claim or to cover excluded items under policy, it is known as :
• Data base sheet • Soft fraud
• Self administered checklist • Hard fraud
• Customer information sheet • Application fraud
• Hospital & TPA list • Eligibility fraud

64. As per Section 64 VB of the Insurance Act, 1938 no risk to be assumed by an

69. The PSGICs shortlisted providers with package rates for identified
Insurer unless premium is received in advance. Rule 58 & 59 of Insurance
procedures in four cities of Mumbai, Delhi, Chennai & Bengaluru for
Rules 1939 provide relaxation in the payment of premium in all policies
implementation from 1.7.2010. This exercise by PSGICs is called the:
except:
• PPN
• Group Hospitalization Insurance Scheme & Sickness Insurance
• Medical Benefit Insurance • PPP
• Group Personal Accident Policies • Select Networking
• Individual health policies • Neworking

152 153
70. Health insurance market has many imperfections and informational c) PA policy
asymmetry is common. Health insurance underwriting is successful when: d) Burglary Insurance
• If both insured and insurer are informed
• If both the insured and insurer are under-informed 6. Floating cover is not allowed in
a) PA insurance
• If insured is un-informed and insurer is informed
b) Fidelity Guarantee insurance
• If insured keeps insurer uninformed c) Burglary insurance
d) Health insurance
71. The number of standalone health insurance companies in the country is:
• Three 7. Standard Burglary Insurance (business premises) covers
• Two a) Loss occurring without any forcible entry
• Four b) Loss detected while taking inventory
• One c) Loss arising out of snatching of goods
d) Loss occurring as a result of forcible violent entry
HEALTH & LIABILITY INSURANCE 8. Householder's insurance policy does not cover
a) WC of servants
1. First loss cover is available under b) Money in transit
a) House Holders Insurance c) All risk of valuables
b) Shopkeepers insurance d) PA insurance
c) Bankers Indemnity
d) Burglary Insurance 9. Which one is not an insurance policy of indemnity?
a) Health
2. Bankers Indemnity Insurance Policy covers b) Personal accident
a) Burglary from vault c) Burglary insurance
b) Wrongful and dishonest acts on the part of employees d) Cash in transit
c) Fire of Bank Building
d) Cash in transit 10. Which of the following rules is not applicable to air travel insurance?
a) Duration of coverage is limited to period from embarking to
3. Which insurance policy has worldwide geographical scope? disembarking of the passenger
a) Overseas health insurance b) Flight coupons are normally purchased by the policy holder at the airport
b) Cash in transit c) Maximum limit of compensation in case of Death / PTD is Rs. 12 lacs if
c) Personal accident insurance Individual is of 12 years of age and above
d) Fidelity guarantee insurance cover d) Maximum limit of compensation in case of Death / PTD is Rs. 7.50 lacs if
Individual is of 12 years of age and above
4. PA insurance Policy doesn't cover
a) Death
11. “Retroactive period clause” is relevant to
b) Permanent total disability
a) Personal accident policy
c) Permanent partial disability
b) Bankers indemnity insurance
d) Temporary partial disability
c) Workmen compensation insurance
d) Health insurance
5. Contribution clause is not applicable for
a) All risk insurance for valuables
12. “Pair and Set” clause is not a special condition under
b) Fidelity Guarantee Insurance
a) Fire Insurance

154 155
 b) Burglary insurance c) Lessor of the aircraft
c) All Risk Insurance d) All the above
d) Baggage insurance
20. Age group of girl child in Bhagyashree policy is revised to
13. Agreed value condition is applicable to a) Upto 10 years
a) Valuable and curios under fire insurance b) 10 to 25 years
b) Marine cargo insurance c) Upto 18 years
c) Vintage car motor insurance policy d) Upto 21 years
d) All of the above
21. Workmen's compensation policy is not guided by
14. Under Sec.I of shopkeeper policy which risk is not covered a) WC Act
a) Lightning b) Fatal Accident Act
b) Flood c) Indian Contract Act
c) Aircraft falling d) Trade Union Act
d) Loss of money 22. Under which policy insured's residence and its contents are covered
a) Transit insurance
15. “Environmental Relief Fund” is compulsory along with premium of b) Mobile insurance
insurance of c) Aviation insurance
a)Public liability (Act) insurance d) Householder's insurance
b) Workmen's compensation insurance policy
c) Erection insurance policy 23. What is the regulatory requirement of capital for setting up a stand alone
d) Cancer insurance policy health insurance company in India?
a) 100 crores
16. Which of the following policies has compensation fixed exactly as per b) 50 crores
statute? c) 35 crores
a) Workmen's compensation insurance d) 200 crores
b) Public liability Act insurance
c) Motor third party insurance 24. Meaning of 'legally liable' in a liability policy is
d) (a) and (b) above a) Breach of legal duty to take care
b) Contractual liability
17. Service tax is not chargeable along with premium under c) Statutory liability
a) Burglary insurance d) (a) and (c)
b) Personal accident insurance
c) Health insurance 25. The Policy and the Schedule shall be read together as one contract and any
d) Janata Personal Accident Insurance wording or expression to which a specific meaning has been attached in any
part of this Policy or Schedule, shall bear specific meaning wherever it may
18. Stamp duty is to be paid by insured under
appear.
a) W.C. Policy
a) This applies to Public Liability policy
b) Marine cargo transit policy
b) This applies to Professional Indemnity policy
c) Short period insurance policy
c) This applies to Workmen's Compensation policy
d) Personal accident insurance
d) Only (a) and (b)
19. Aviation Hull Insurance policy can be purchased by
a) Manufacturer of aircraft 26. Which of the following is exclusion under the Workmen's Compensation
b) Operator of aircraft policy?
a) Insured's liability to employees of contractors
156 157
 b) Liability in respect of employees of insured 34. Which of the following is covered under mediclaim insurance policy
c) Liability in respect of workmen contracting any disease whilst a) Dental treatment
discharging duties b) Cost of Spectacles
d) (b) and (c) c) Cost of Pacemaker
d) Cosmetic Surgery
27. Reinsurance of Public Liability is generally done on which basis
a) Facultative 35. Claim Series Clause in Liability insurance means
b) Excess of loss treaty a) Single Accident may result in only one claim
c) Quota Share b) Single Accident may result in several claims
d) Stop loss c) Single Accident may result in a series of claims which has to be clubbed
d) (a) and (b)
28. Under Bhavishya Arogya Policy, premium is not based on
a) Age at entry 36. In liability insurance premium is based on AOA and AOY ratio. Under which
b) Retirement age chosen ratio limit of liability may get exhausted after one accident.
c) Sum assured opted a) 1 : 1
d) Sex of the insured b) 1 : 2
c) 1 : 3
29. Which of the following is not a health insurance product
d) 1 : 4
a) Kisan Package policy
b) Cancer Insurance policy
37. Under which mediclaim policy , the benefit is paid in cash but not
c) Critical Illness policy
d) Bhavishya Arogya policy reimbursed
a) Universal Health Insurance
30. Which of the following diseases is not covered in the first year after inception b) Jan Arogya
of a health policy c) Critical Illness
a) Cataract, Piles and Hernia d) None of the above
b) Diabetes, Jaundice and Stroke
c) Kidney Failure, Cataract and Piles 38. Products Liability policies are normally issued on which of the following
d) Hypertension, Stroke and Piles basis
a) Risk Attaching basis
31. Reinsurance of a health portfolio is normally done on b) Losses occurring basis
a) Facultative basis c) Turnover basis
b) Excess of loss basis d) None of the above
c) Quota Share basis
d) Stop loss basis 39. Find the correct answer: The premium under Mediclaim policy is based on
a) Age
32. Income tax benefit under Section 80(D) of IT Act is admissible b) Job
a) If premium is paid in cash c) History of previous surgery
b) If premium is paid by cheque d) Sex
c) (a) and (b)
d) None of the above 40. Under which of the following liability policies, compulsory excess does not
apply?
33. The tax relief for annual premium for a health policy for senior citizens is a) Industrial risks
a) Rs. 10,000/- b) Non-Industrial risks
b) Rs. 15,000/- c) Products
c) Rs. 20,000/- d) Compulsory Public liability policy.
d) Rs 25,000/-
158 159
41. Which of the following risks fall under Industrial Risks Liability policy? 47. Under Standard group Mediclaim policy, which of the discounts are not
a) Exhibitions granted?
b) Permanent Amusement Parks a) Long term discount
c) Film Studios b) Group discount
d) None of the above c) Low claims discount
d) None of the above
42. In the limits of indemnity under Industrial Risks Public Liability, which
combination of any one Accident and Any one year cannot be generally 48. Which of the following expenses are 'not' payable under Maternity Benefit*?
allowed under the Market Agreement?* a) Cesarean
a) Rs.10 lakh and Rs.40 lakh b) Abdominal operation for extra-uterine pregnancy
b) Rs.10 lakh and Rs.50 lakh c) Miscarriages due to accident
c) Rs.10 lakh and Rs.20 lakh d) Pre-natal expenses prior to hospitalization
d) Rs.10 lakh and Rs.30 lakh
49. Under Public Liability Insurance Act, a company has to insure for an amount
43. Which of the following statements is true in relation to Standard group not less than the amount of the insured's.
Mediclaim policy? a) Good will
Statement A: Cumulative Bonus is not available. b) Paid up capital
Statement B: Health checkup expenses are not payable. c) Turnover
a) Neither of the Statements d) Value of assets
b) Statement a only
c) Statement B only 50. The maximum amount of premium paid by other than Senior Citizens under
d) Both statements Mediclaim policy that qualifies for income tax benefit is*:
a) Rs. 10,000
44. Under Public Liability Insurance Act 1991 the owner is not liable to pay relief b) Rs. 20,000
in the event of: c) Rs. 7,500
a) Damage of property of any person d) Rs. 15,000
b) Death of workman as defined in the Workmen's Compensation Act
c) Death of any person 51. Which of the following factor does not affect premium for Overseas
d) Injury of any person Mediclaim Policy?
a) Age
45. Under Hospitalization claim in Standard Mediclaim policy, relevant medical b) Country/Countries to Visit
expenses incurred during the period of how many days after hospitalization c) Nationality of the Insured.
are treated as part of the claim: d) Duration of cover.
a) 15 52. Daily compensation benefit is available under which of the following:
b) 45 a) Individual mediclaim
c) 30 b) Group mediclaim
d) 60 c) Cancer insurance
46. The Standard Mediclaim policy excludes any disease (other than diseases d) Universal Health insurance
excluded during the first year of operation) for how many days from
commencement of policy. 53. Accidental death is covered only under:
a) 30 a) Group mediclaim
b) 45 b) Ind. mediclaim
c) 15 c) Cancer insurance
d) 60 d) Universal Health Insurance.

160 161
54. Pricing of Mediclaim policy is made based on c) 1987
a) The pure risk cost method d) 1990
b) Experience rating cost
A) a only 61. What is the minimum number of persons to be covered for the eligibility of
B) b only Family Discount under the Mediclaim Policy?
C) Both a & b a) 1
D) None of the above b) 2
c) 4
55. No fault liability concept is applicable to which of the following: d) 5
a) Public liability (industrial risk)
b) Public liability (non industrial) 62. Post Hospitalization and Pre Hospitalization expenses are covered for the
c) Compulsory public liability under PLI act 1991 following number of days under the Mediclaim policy
d) Product liability a) 45/45
b) 60/30
56. Family discount of 10% in the total premium cannot be allowed to a family c) 30/30
comprising the insured and any or more of the following: d) 75/15
a) Spouse
b) Dependent Children 63. Which of the following statement is TRUE in respect of a claim under a new
c) Dependent Parents. mediclaim policy?
d) Dependent Sisters/Brothers. a) The coverage starts after 15 days from inception of the policy
b) There is a waiting period of 30 days except for accidents
57. What is the maximum Cumulative Bonus, which can be earned in a Group c) There is a waiting period of 60 days
Mediclaim Policy? d) None of the above
a) 10%
b) 15% 64. Which of the following is excluded in the Standard Mediclaim Policy?
c) 50% a) Simple Tooth Extraction
d) None of the above. b) Cataract Operations
c) Hysterectomy
58. Under which of the following situations, one month waiting period under d) All the above
Mediclaim Policy claim is not required:
a) Sudden Heart Attack. 65. In respect of Mediclaim Policy, TPA denote
b) Child birth. a) Third Party Availability for claims
c) Accidental injuries. b) Third Party Administrator
d) Tooth ache. c) To Pay Afterwards
d) None of the above
59. TPAs are not involved in which of the following policies
a) Group Mediclaim policies 66. Which of the following is / are exclusion/s in the Overseas Mediclaim policy
b) Individual Mediclaim policies a) All pre existing disease
c) Universal Health policies b) Travel against Medical Advice
d) Bhavishya Arogya policies c) First USD 100 on every claim
d) All of the above.
60. The Mediclaim policy was first introduced in India in
a) 1986 67. Following is not an ADD ON COVER under OMP
b) 1985 a) Personal Accident

162 163
 b) Loss of Check in Baggage d) Admission into a Government hospital
c) Delay of checked in Baggage 75. Limit of liability in respect of Death under an ACT only public liability policy
d) Loss of Spectacles a) Rs.25000/-
b) Rs.50000/-
68. Premium rate under the Overseas Mediclaim policy does not depend on c) Rs.12500/-
a) Country of Visit d) Rs100000/-
b) Trip band
c) Age band of the insured 76. Environment Relief Fund is collected by
d) Family status of the proposer a) A Public Sector Banker
b) State Treasury
69. Universal Health Insurance Policy for BPL families is issued by
c) Wild Life Society
a) Private and PSU Insurers
d) Insurance Company
b) PSU Insurers only
c) Central Government
d) State Government 77. Rate of Commission Payable under “Act only” Public Liability Policy
a) Nil
70. UHIS will not cover b) 5 %
a) Earning Member c) 10%
b) Earning Member spouse and 3 Dependent Children d) 12.5%
c) Earning Member Spouse, 3 Dependent Children and Parents
d) Only dependent children 78. In group health insurance covers, the least important underwriting aspect is
a) Financial resources of the client firm
71. Medical Benefit under UHIS is restricted to b) Male to female ratio among employees
a) Rs. 30000/- per family c) Age group profile of employees
b) Rs. 30000/- per member d) Past claims experience
c) Rs.50000/- per family 79. In individual health insurance, normally which contingency is not
d) Rs.12500/- per member automatically covered?
72. Claim are settled under the Overseas Mediclaim Policy a) Cancer
a) By the Policy Issuing Office
b) Maternity
b) Overseas Claim Settlement Agent
c) Minor surgery
c) Insured pays to the Hospital and seek reimbursement
d) Accidental fall
d) Lloyds of London

73. Under the Mediclaim Policy a Hospital in an urban area is one which has 80. In underwriting group health insurance, the underwriting factors that we do
facility at least not consider are
a) 20 Beds a) Occupation of employees
b) 15 Beds b) Age of employees
c) 10 Beds c) Previous claims experience
d) 25 beds d) Longevity of life of average Indian

74. Which of the following conditions is not necessary to be fulfilled to consider a
claim under Domiciliary Hospitalization of Mediclaim Policy?
a) There is no availability of beds in the Hospital
b) The condition of the patient is such that he cannot be taken to Hospital
c) The disease is such that necessitates hospitalization
164
81. Cost of health check-up is available to the insured after an interval of:
a) ONCE IN THREE CLAIM FREE YEARS OF POLICY
b) ONCE IN FOUR CLAIM FREE YEARS OF POLICY
c) ONCE IN TWO CLAIM FREE YEARS OF POLICY
d) Once in every five years
165
 d) APENDICITIS
82. What is the cost of Health check-up under Individual Mediclaim? 89. Contribution to Environmental Relief Fund is under the PLI Act
a) 1% OF Average SI a) Rs.50000/-
b) 2% OF SI b) Rs.100000/-
c) 5% OF SI c) AN EQUIVALENT AMOUNT OF PREMIUM
d) MAXIMUM Rs.2500. d) AN EQUIVALENT AMOUNT OF PREMIUM WITH SERVICE TAX

83. Domiciliary Hospitalization Benefit is available 90. Retroactive date means

a) MEDICAL TREATMENT EXCEEDING 7 DAYS a) INCEPTION DATE OF FIRST POLICY without break
b) MEDICAL TREATMENT EXCEEDING 3 DAYS
b) DATE OF RENEWAL PREMIUM without break
c) MEDICAL TREATMENT EXCEEDING 10 DAYS
c) EXPIRY DATE OF LAST POLICY
d) MEDICAL TREATMENT EXCEEDING 5 DAYS
d) EXPIRY DATE OF FIRST POLICY
84. Family discount is available under individual Mediclaim Policy if taken for
the family 91. Which is not a NON-INDUSTRIAL RISK under Public Liability Policy?
a) @ THE RATE 5% a) HOTEL
b) @ THE RATE 15% b) LIBRARY
c) @ THE RATE 10% c) PAINT FACTORY
d) @ THE RATE 33 1/2% d) SHOP

85. When Insured opts for Mediclaim cover with cashless facility the Premium 92. For claims made Basis Liability insurance policies
amount is loaded by a) Policy period and period of insurance are always different
a) 10% b) Policy period and period of insurance are always same
b) 6% c) Policy period and period of insurance may or may not be same
c) 5% d) There is no difference between the two
d) 7.5%
93. Which policy is mandatory if your client is in hazardous industry dealing in
86. When Maternity Benefit is extended to Group Mediclaim Policy the hazardous substance?
additional Premium is a) Product liability
a) 10% b) Professional liability
b) 12.5%
c) Public Liability (Non-Industrial)
c) 15%
d) Public Liability Act Policy
d) 17.5%

87. What is the waiting period in respect to Maternity Benefit extension under 94. For claiming compensation under W C policy, accident should
Group Medical Policy? a) Always be within factory premises
a) 10 MONTHS b) Always be outside factory premises
b) 12 MONTHS c) May be within or outside factory premises
c) 7 MONTHS d) Always be at workers residence only
d) 9 MONTHS
95. Bhagyashree Child Welfare Policy is applicable to:-
88. Which one of the following diseases do not form part of first year exclusion a) Girl Child in the age group of0 to 18 years.
a) CATARACT b) Whose Parents age does not exceed 60 years?
b) HYSTERECTOMY c) This Scheme is for one Girl Child in a family.
c) FISTULA d) All above.
166 167
 103.In relation to Standard Mediclaim Policy which of the following statement is
96. Generally Blood Stock Insurance relates to correct-
a) Blood Stock in Blood Bank. a) Condition with respect to number of beds must be observed in all the
b) Testing of Blood. cases
c) Indemnity in respect of death of a horse occurring from accident, illness b) Condition with respect to number of beds is applicable only if the
of disease etc. Hospital is not registered with local authority
d) No such Insurance cover is available. c) Condition with respect of number of beds has been waived by IRDA
d) None of the above is correct
97. Under Mediclaim Policy the term “Medical Practitioner means:-
a) A person who holds a degree/ diploma from recognized institution. 104.The benefit of section 80D of Income Tax Act in 2007 Budget has been-
b) Person who is registered by Medical Council of respective State of India. a) Scrapped
c) Both of above. b) Increased
d) None of above. c) Decreased
d) Kept unchanged
98. Under Liability Insurance the terms “AOA” relates to:-
a) Assessment of Assets. 105.Which of the following expenses are not covered under Standard Mediclaim
b) Against one Accident. Policy-?
c) Any one Accident. a) Expenses related to Psychological disorders
d) Any other Accident. b) Expenses related to Cancer
99. Under Legal background “Trespassers” means: - c) Expenses related to MTP
a) A man found guilty of cutting trees. d) Expenses incurred towards pace-maker in case of hear disease
b) A man who enters in forest and passes through.
c) A man who enter property without any right or permission. 106.Which one of the following expenses is not covered under Standard
d) All of above. Mediclaim Policy-?
a) Expenses towards HIV Test of patient before operation which is covered
100.The time limit for appeal for National Consumer Forum to Supreme Court is:- under this policy
a) 30 days from the Order of National Commission. b) Registration Charges of Hospital
b) 60 days from the Order of National Commission. c) Dialysis Charges in case of renal failure
c) 90 days from the Order of National Commission. d) Angioplasty expenses
d) No time limit.
107.As per the Public liability act policy the compensation in case of an accident is
101.In W.C. cases we can go for appeal only on the ground of: - a) Structured compensation
a) On guan m b) Unlimited liability
b) Finding of facts c) As per sum insured
c) Substantial Question of Law is involved. d) None of the above
d) None of above.
108.Equal amount of premium collected under the PLI Act Policy goes to
102.In Employers Liability Insurance one of the following not covered:- a) Prime Minister's Relief fund
a) Personal negligence of the Employer. b) Environment relief fund
b) Negligence of Employees in the performance of their employment c) Disaster management fund
duties. d) None of the above
c) The willful disobedience of the Workman.
d) Personnel negligence of fellow employee. 109.Claim settling authority incase of claims under PLI Act Policy is
a) Divisional Manager/ Sr. Divisional Manager
168 169
 b) Regional Manager/ Chief regional Manager 116.The retroactive clause under a liability policy defines that
c) General Manager a) Under a claims made policy the loss should occur within policy period in
d) District Magistrate/ Collector case of renewal without break
b) The date of inception of cover and the time within which the legal
110.Claims under Public Liability Policy are in the nature of proceedings should be completed
Legal liability c) The period of keeping provisions for claim made under the policy
a) Agreed liability d) None of the above
b) Vicarious liability
c) None of the above 117.Liability policies are called long tailed policies because
a) Actual liability may arise a long period after expiry of the policy for
111. Under Public Liability Industrial risks Policy pollution risk is claims arising during the policy period
a) automatically covered b) Provisions for claims have to be maintained on the insurers books for a
b) can be taken as an add on cover long period
c) cannot be covered c) Both of the above
d) any of the above d) None of the above
118.Which one of the following statement is not correct in respect of Liability
112.Premium rating for Public liability policy depends on Insurances-?
a) Turnover, Limit of indemnity, No. of Units covered, Risk group a) Implied principle of Good faith is not applicable.
b) Sum insured selected, location of the Risk, Surrounding Property, Past b) Claims are paid to persons other than the insured
claims experience c) The insurer provides indemnity to the insured in respect of his potential
c) Both of the above legal liability.
d) None of the above d) Legal costs of the insured incurred with the consent of the insurers are
reimbursed.
113.Which of the following parties can bring an action against a director of a
company giving rise to a claim under the D&O POLICY? 119.Which one of the following statements is not correct in respect of the liability
a) Customers Insurance covers ?
b) Employees a) It covers Civil Liability arising under Common Law
c) Regulator b) It covers Civil liability arising under Statutory Law
d) All above c) It covers both (a) and (b)
d) It cover neither of (a) and (b)
114.What costs cannot be usually covered under a Product Recall cover
a) Product Guarantee 120.In Liability insurance policies
b) Cost of recovering defectives products sent out in the market a) Policy period and period of insurance are always different
c) Cost of advertising to the public b) Policy period and period of insurance are always same
d) None of the above c) Policy period and period of insurance may or may not be same
d) There is no difference between the two
115.Claims under Product Liability policy can be paid in
a) Foreign currency 121.If your client is in hazardous industry dealing in hazardous substance, which
b) Indian rupees only policy would you suggest
c) In Foreign currency with RBI permission a) Public liability (Non industrial risk)
d) None of the above b) Product liability

176 177
 c) Professional liability b) Dependent children
d) Compulsory public liability act policy c) Dependent sister
d) Dependent parents
122.Under Personal Accident Policy Payment of Compensation in respect of
death, injury or disablement of the insured Directly or indirectly caused by 128.In which of the following aspects, Mediclaim and Jan Arogya differs
Venereal diseases or insanity is: - a) Definition of hospital
a) Cover. Subject to 2% pf capital Sum insured. b) Cumulative bonus
b) Cover subject to2% of Sum insured or 2,500/- whichever is less c) Tax benefit under sec 80D
c) Full amount is payable. d) None of the above
d) Not covered.
129.Which of the following is a deferred mediclaim policy?
123.Anatomy is a science, which deals with: - a) Bhavishya Arogya
a) Matter pertaining to TV Antenna. b) Jan Arogya
b) Matters pertaining to Aviation. c) Cancer medical policy
c) Deals with structure and position of body. d) Overseas mediclaim
d) None of above.
Key Multiple Choice Questions on Health Insurance
124.Under Pedal Cycle Policy Legal Liability for Bodily injury, property damage
is:-
a) Rs.5, 000/- 1. B 19. A 37. D 55. A
b) Rs. 10,000/- 2. D 20. D 38. A 56. A
c) Rs. 15,000/- 3. B 21. A 39. A 57. A
d) Rs. 20,000/- 4. B 22. B 40. A 58. A
5. A 23. B 41. C 59. A
125.Which of the following criteria may not be complied with in the definition of
hospital/nursing home, if it is not registered? 6. C 24. C 42. A 60. C
a) Fully equipped OT 7. B 25. A 43. A 61. A
b) At least 10/15 in-patients beds 8. A 26. D 44. A 62. A
c) Tie up with TPA
9. B 27. B 45. A 63. A
d) Fully qualified nursing staff
10. B 28. B 46. B 64. D
126.For admissibility of expenses on hospitalization, the period of hospitalization 11. A 29. D 47. A 65. C
should be 12. B 30. B 48. B 66. A
a) Minimum 24 hours in all the cases
13. B 31. C 49. C 67. A
b) Minimum 24 hours except in some cases of specific treatment
c) Minimum 3 days 14. B 32. D 50. D 68. A
d) No such condition 15. B 33. A 51. A 69. A
16. D 34. A 52. A 70. A
127.Which of the following does not fall under the definition of Family under the
17. A 35. A 53. B 71. A
Mediclaim policy for family discount?
a) Spouse 18. D 36. A 54. A

170 171
 Key –Health & Liability
1. D 33. C 65. B 97. C
2. B 34. C 66. D 98. C
3. C 35. C 67. D 99. C
4. D 36. A 68. D 100. A
5. C 37. C 69. B 101. C
6. A 38. B 70. D 102. C
7. D 39. A 71. A 103. B
8. B 40. D 72. B 104. B
9. B 41. D 73. B 105. C
10. D 42. B 74. D 106. B
11. B 43. D 75. A 107. A
108. B
12. A 44. B 76. D
109. D
13. D 45. D 77. A
110. A
14. D 46. A 78. A
111. B
15. A 47. A 79. B
112. A
16. D 48. D 80. D
113. D
17. D 49. B 81. B
114. A
18. B 50. D 82. A
115. C
19. D 51. C 83. B
116. A
20. C 52. D 84. C
117. C
21. D 53. D 85. B 118. A
22. D 54. C 86. A 119. C
23. A 55. C 87. D 120. C
24. D 56. D 88. D 121. D
25. D 57. D 89. C 122. D
26. A 58. C 90. A 123. C
27. B 59. D 91. C 124. B
28. D 60. A 92. A 125. C
29. A 61. B 93. D 126. B
30. A 62. B 94. C 127. C
31. D 63. B 95. D 128. B
32. B 64. A 96. C 129. A

172 173
 MOTOR INSURANCE
The Automobile Industry in India occupied a backseat in the overall economic
setup for almost 40 years of independence. The production of all types of
Vehicles was limited, unlike today. After 1980 the government started allowing
foreign collaboration and importing latest technology to produce more efficient
vehicles. The easing of capacity constraints and the broad banding of
production licenses greatly accelerated the expansion and modernization of the
Automobile Industry. As a result of the policy changes the stagnant Automobile
Industry got transformed.
With new liberalization policies encouraging FII (Foreign Institutional
Investment), Automobile giants all over the world started establishing their base
in the Indian Market with companies like Hyundai, Ford etc. flooding the market
with technologically advanced new models of vehicles. This boom in the
automobile industry and the growing consumerism saw a fourfold increase in
the premium income from the motor insurance for all the insurers in India.

MOTOR INSURANCE Though, motor insurance business contributes almost 40% of the aggregate
premium income all the types of insurance, the claim ratio both for accidental
damages and third party liability prove to be disastrous while comparing with
that of premium. The recent statistics shows that accidental damage of vehicles
is ranging between 115% to 125% and that for liability to third parties in ranging
up to and alarming 300%.
With the flourishing of Automobile Industry, Motor Insurance has become a
lucrative business but requires careful underwriting as the number of accidents
has increased due to explosion of vehicle population, bad roads, rash, negligent
driving and poor maintenance of vehicles.

ROLE OF UNDERWRITER
The underwriter is one who accepts Insurance Business by giving a promise that
he would indemnify the insured in the event of a claim for a property for which
the insurance is being sought on the payment of sum called – premium. He has a
significant role to play in order to offer a suitable product to the customers,
vehicle dealers, and financiers and even for the manufacturers. He enters into a
binding contract to honor his commitments to the prospective policy holder.
Unless the underwriters properly price their product and offer the best cover to
the customer keeping in view the changing scenario, other environmental
factors and changed legislations etc. the commitment of underwriter to the
customer may become difficult.
A prudent underwriter should offer the best product mix and ensure that he
remains stable, viable and solvent so that he attains his sustenance under
any situation. The judicious combination of the following factors only
would ensure this:

172 173
1. Identification of the risk relating to the type of vehicle for which Insurance is •Manufacturing cost
sought. •Profit margin of the manufacturer
2. Recording of all relevant data of past experience with regard to type of
•Transportation charges
vehicles and gathering information from the market.
3. Analysis the data and designing the suitable product •Tax and Duties
4. Educating the customer with regard to the design of the product and seeking •Cost of Insurance
suggestions from the customer to offer the product that would aptly suit them. •Intermediary Commission
5. Assisting the customer to choose the correct value for Insurances and revise •Suitable loading with regard to increase in value due to market
the market value of Insurance appropriately at the time of renewal fluctuations
6. Keeping track of claim records •Cost of accessories and other value addition
7. Identifying the perils causing accidents very often and also extent of losses
•Any other extra cost, which may be material for valuation of property,
produced by each peril.
offered for Insurance.
8. Advising the customer the risk prevention measures.
9. Conducting frequent customer seminars and educational programs with
The selection of value is usually the option of the insured and such value so fixed
regard to changed traffic rules and regulations, change of legislation and other
will be the maximum limit of liability in the event of loss. It is also on the basis on
code of conduct.
which premium is collected. This value is called sum insured which can increase
10. Periodical interactions with other insurers so that aggregate exposure in the
or reduced during the currency of the policy.
market, their claim experience in respect of each category of vehicle, cause of
accident, etc. can be discussed and known.
Sum insured is name of Insured Estimated Value (I.E.V) in Motor Insurance,
11. The insurers should pre-inspect the vehicle before accepting the risk where
which is now being proposed to be called as “Insured's Declared Value”
there is no continuity of Insurance in case of used vehicles.
12. Enforcing underwriting controls like fair and reasonable excess provisions,
Cover Note:
pre risk acceptance and other safeguards
A cover note is an unstamped document issued based on the details given in the
13. Maximizing the resources and minimising the cost to remain solvent
proposal form confirming the acceptance of the risk from the date and time of
14. Faster claims settlement to achieve maximum customer service.
receiving the consideration (premium).
This document is issued immediately only under circumstances where the
Besides, underwriter's personnel are given periodical training and keep them
issuance of the policy is not feasible. This cover note is a replica of the policy to be
abreast of the updated environment changes.
issued.
The validity of the cover note is 60 days, which can be further extended at the
The focus should be on IT development to cope up with the demanding
option of the insurer, if necessary.
expectations of the customers.
Policy Form:
Motor Vehicle Insurance
After a contract has been concluded between the proposer and the insurer, it is
Type of cover required – Comprehensive, Third party, Fire only, Theft only,
recorded in a document called a policy.
Fire/Theft and Third party only.
The policy is not the contract but only the evidence of it. In the event of a dispute,
i. Type of use of vehicle
it is the policy to which the attention of the court will be drawn unless the insured
ii. Details of the vehicle
brings the evidence to prove that there is a discrepancy between the policy and the
iii. Age, experience, past claims experience, previous insurance, if any
fact.
iv. Value of the vehicle including accessories fitted thereon.
Endorsement:
Sum Insured – Insurable value
From time to time, it is necessary to make alterations in the wordings of a policy to
The value of the property being insured is determined based on various factors
take note of changes in the material facts submitted earlier in substitution for one
such as
174 175
item to another. It would be costly and time consuming to issue a new policy for
every alteration. Therefore, any changes to the original policy are noted by way of
issuing an Endorsement.
Period of Insurance
Usually, the insurance is offered only for 12 months, as most of the insurance
contracts including accident and liability insurance are annual policies.
When the liability of the insurer commences under the contract of the policy, the
policy is said to attach or in other words the risk is said to attach or it begins to run
from that time.
DUTIES OF THE INSRUED AT THE TIME OF TAKING INSURANCE
1. The Insured should declare all the materials facts relevant to the risk for which
insurance is sought such a type of vehicle, purpose of usage, model of the
vehicle, age of the vehicle etc.,
2. History of past claims
3. Name of the previous insurers if any who have declined accepting the risk
offered for Insurance or cancelled the policy.
4. Maintenance of the vehicle in the most efficient manner as though he is
uninsured
5. The Insured should bring to the notice of the Insurer about any alterations
subsequent to the issuance of the policy, e.g.; accessories insured should
remain in the vehicle during the entire period of insurance.
6. It is obligation on the part of the insured to declare any accidents that have
taken place whether material or not to this Insurance.
TYPES OF VEHICLE
There are different categories of vehicles plying on the road in accordance with the
provisions of the Motor Vehicle Act.
Motor vehicles : Any mechanically propelled vehicle used upon roads and
includes a chassis to which body is not attached and trailer but does not include
vehicle run or fixed rails or specially adopted for use within the factory premises.
Private car : Private car is a type of a vehicle used for social, domestic, pleasure and
professional purpose and not for carriage of goods (other than samples) excluding
178
use of vehicle for hire or reward, pace making reliability trial and speed testing and
used for any purpose in connection with motor trade.
Two Wheeler : Motorcycle is a mechanically self-propelled two-wheeler with gear
or without gear but a kick starter vehicle is treated as Geared vehicle for Insurance
Rating.
Scooter: It is a mechanically propelled two-wheeler with variable gears.
Auto cycles: Pedal cycle mechanically assisted by a motor engine upto 75 cc.
Capacity.
COMMERCIAL VEHICLES
Good carrying vehicle (private carriers) : The owner of the transport vehicle who
uses the vehicles only for carriage of goods, which are his properties, or carriage of
goods, which are necessary for the purpose of his business.
Good carrying vehicle (public carriers) : The owner of the transport vehicle who
uses the vehicles only for carriage of goods, which are not his properties, or
carriage of goods, which are necessary for the purpose of his business.
Public service vehicle : A motor vehicle used for carrying passenger and includes
motor cab, contract carriage and stage carriage.
1. Motor cab: Motor vehicle used to carry not more than 6 persons excluding
driver for hire or reward.
2. Contract carriage: Motor vehicle which carry passengers for hire or reward
under a contract and the vehicle used as whole for an agreed sum either on
time basis or point to point basis.
3. Stage carriage: A motor vehicle which can carry more than 6 passengers
excluding driver for hire or reward with fares paid by individual passenger for
the whole journey or for stages of the journey.
MISCELLANEOUS TYPE OF VEHICLE – All other vehicles, which do not fall
under any of the categories enlisted above, are classified under this category.
Examples are: Ambulance, Tractor and Trailer, Road Rollers, Excavators etc.
TYPES OF INSURANCE
1. Act Only Policy (Third party liability towards death and/or bodily injury
and/or property damage)
2. Comprehensive Policy (Accidental damages to the vehicle insured or loss of
the vehicle and liabilities to third party towards death and/or bodily injury
and/or property damage)
179
3. Act only with Fire and/or Theft to another. Usually the vehicles involved are un-registered and uninsured under
4. Fire and/or theft only Normal Motor policy.
5. Motor Trade Policies
6. Internal Road Risk Policy SCOPE OF MOTOR INSURANCE

TYPES OF INSURANCE POLICIES Underwriters and insured mutually agree to the scope of the contract and other
terms and conditions such as
ACT ONLY POLICY: It is the minimum cover required under the motor vehicles A. Insured perils
act and provides compensation for death and/or bodily injury and/or property B. Conditions to the contract to be observed by the insured and the insurer during
damage to third parties out of use of motor vehicle in the public place for which the the currency of the policy.
Insured is liable to pay. The extent of liability is as per the Motor vehicle Act. C. The value for which insurance is done.
D. Period of the contract of Insurance.
COMPREHENSIVE POLICY: An Insurance policy which covers Accidental E. Period of the contract of insurance
Damage to the vehicle involved in an accident along with or in addition to the third F. Procedure to be followed in case of material alterations.
party liability. G. Rate of premium compatible with the risk covered.
H. Right of the insurers
ACT ONLY AND FIRE AND/OR THEFT: A restricted cover under I. Duties of the insured
comprehensive policy by which the insurer accepts to insure the risk of Fire and/or J. General exclusions (These exclusions cannot be deleted the breach of which
theft only of the vehicle to be insured in addition to third party liability. This will render the contract void ab-initio)
decision is taken by the underwriter after considering the various factors such as K. Specific exceptions, which are outside the scope of the contract
make, model of the vehicle, declinature of Insurance by previous insurers, past L. Procedures to be followed in the event of claim
claims experience etc. M. Termination of Contract.

FIRE AND/OR THEFT RISK: This cover is given if the vehicle to be insured is INSURED PERILS
laid up in the garage of if it remains unused.
a) Fire/Explosion/Self Ignition or Lightning
Laid up Vehicles: b) Burglary, housebreaking or theft
Laid up vehicle is one, which is laid up in the garage and not in use for a period of 2 c) Riot and Strike
consecutive months or more and not left for repairs due to an accident. d) Malicious Act and terrorism
Concession is provided for such vehicles provided the period of suspension should e) Earthquake (Fire and shock damage)
not extend beyond 12 months from the original expiry date of the policy. The lay f) Flood
up period will be counted from the date of surrender of Certificate of Insurance. g) Accidental external means
h) Whilst in transit by rail/road/inland water way/Lift or elevator or air
MOTOR TRADE POLICIES: Motor Trade policies are designed to extend the i) and slide/Rock slide
facility of Insurance to Motor vehicle Manufacturer, dealer and repairer who deal
with Motor vehicles that remain in their custody as part of their trade. Trade The expression whilst thereon means like the accessories insured must have been
policies are given to those who are authorized to have own trade plates by on the vehicle at the time of Insurance as well as at the time of claim.
Registered Transport Authority. This policy takes care of damage to the vehicle, Accidental external means the happening of something unexpected or unforeseen
bodily injury to Third Party and third party death. This insurance is unlike to the and it excludes loss arising from natural causes within. The word external refers to
normal motor insurance policy given to the registered owner of the vehicle. outwardly visible. It means that what is not internal

TRANSIT RISK INSURANCE: This policy is issued to manufacturer or dealers. Example: Loss or damage to the car due to overheating is not covered.
This policy takes care of transport risk during the period of transit from one place
180 181
Self-Ignition: It appears to include the damage or loss caused by the internal
defect of the care, which is the direct cause for fire.
The term malicious damage is intended to include loss arising to the malicious act
of a third party and not the act of he insured. If it results from the insured, the act
becomes willful.
Accessories
Accessories are those items, which are not necessary for running of the vehicle,
but which the vehicle is required to carry with it under motor vehicles Act. This
will depend upon the class of vehicle and its use.
Example: Rear view mirror, crash guard
Electrical/Electronic Items
Electrical/Electronic Items refers for insurance purpose items that are fitted to the
vehicle in addition to those that is provided by the manufacturer of the vehicle
including accessories.
With regard to the details of perils for different type of vehicles, the student may
refer to the annexure and comparative charts.
Cancellation of policy
A. At the option of the insurer 7 days notice by registered letter to the insured at his
last mentioned address. The insured is entitled to refund of premium for
unexpired period and the insurer retains the premium for expired period
proportionately.
B. At the option of the insured 7 days notice and the insured is entitled or refund of
premium on the number of days unexpired and the insurer will retain the premium
for the period in which the risk was in force more than proportionately on short
period basis provided no claim has been preferred by the insured.
No cancellation is allowed if the ownership of the vehicle is transferred to the new
owner unless the evidence of from policy for the vehicle is produced.
Transfer of policy in the event of the death of the Insured
The policy will lapse after 3 months from the date of death of the insured or until
the expiry of the policy whichever is earlier.
a. Otherwise, the legal heirs can get the policy transferred subject to their
application with
i. Death certificate of the insured and legal heir ship certificate
ii. Proof of title to the motor vehicle
iii. Copy of the policy
182
c. Insurance company reserves its rights to abide by any order of the court, with
regard to declaration about the legal heirs and ownership of the vehicle and the
nominee will not have any right to the order of the court.
Transfer of Policy in case of change of Ownership
The policy benefits stand to accrue to the buyer of the vehicle once sale
consideration is paid and suitable endorsements made in the certificate or
registration provided the transfer of insurance from the original owner to the new
owner ought to be done within 15 days of sale, as per Motor Vehicle Act, if not
done the accidental benefit to the damage or loss of the vehicle is forfeited on the
16th day itself but the Act is generous towards third party liability.
Premium : The contract of insurance comes into force only when the consideration
is paid by the insured to insurer who promises to indemnify the insured in the event
of claim.
It is a precondition that premium ought to be collected prior to the commencement
of risk upon which the promise of the insurer rests. The insurers can turn down the
liability if consideration is not paid prior to the occurrence of loss. The
consideration so paid by the insured is known as premium. The insurance act is
very specific and emphatic the collection of premium in advance to the
commencement of insurance contract is an absolute necessity and any breach in
this regard will be termed as violation of act provision under section 64 VB, in
turn, the insurers can reject the claim if loss arises.
FACTORS THAT DETERMINE THE QUANTUM OF PREMIUM
The amount of premium to be paid by the insured is depending upon various
factors.
a. Value of the vehicle
b. Additional accessories
c. Extra fittings like electronic and non electronic item
d. Type of vehicle
e. Age of vehicle/model of vehicle
f. Zone where the vehicle is plying
g. Cubic capacity/seating capacity/gross vehicle weight
h. Perils covered
i. Combination of risks like comprehensive cover, third party and fire or theft or
fire and theft.
j. Past claims experience
The premium must be calculated in accordance with the premium computation
tables appearing in the tariff separately for different types of vehicles.
183
Rate of premium is different for accidental damages to the insured's own vehicle
and liability risk to third party.
The insured cannot choose to pay premium only for accidental damages and he has
to necessarily take third party liability with accidental damage to vehicle; whereas,
the risk of third party liability can be separately taken and premium paid.
Premium payable on a policy is based on the value for which insurance is sought
and must be calculated in accordance with premium computation tables appearing
in the tariff.
ANNUAL PREMIUM : As motor policies are annual policies, the premium
consideration is collected for 365 days. It is not permissible to insure for more
than one year under motor insurance.
PRO RATA PREMIUM : Under some circumstances, depending on provisions
made available in the tariff, premium is charged in proportion to the number of
days for which the risk has been in fore. Such premium is known as Pro rata
Premium.
Situations where pro rata premium is charged
i. Due to the change of ownership of the vehicle, the insurance gets transferred
to the new owner. This may happen during the currency of the policy period
and the new owner may like to have the extension of policy period so that he
gets an insurance policy for note more than complete 12 months. The insured
can get such extension of policy with a suitable premium for additional period
of insurance without letting the insured to have a revised policy for a period
more than 12 months.
ii. Some insured desire to revise their policy period to coincide with the financial
year or assessment year
iii. When the insured desires to enhance the value of vehicle during the currency
of the policy in order to cope with the market value.
iv. Any additional extra items like electronic or non electronic items
subsequently fitted in the vehicle can be added to the value of the vehicle
insured during the currency of the policy with suitable additional premium
v. Sometimes insured may desire to reopt the extraneous perils like earthquake,
flood, riot & strike during the currency of the policy which he had originally
opted out by enjoying reduced premium.
SHORT PERIOD PREMIUM : There are occasions where the insured needs
insurance for a period less than 365 days. Such facility is allowed but the insured
has to pay the premium on short period basis. The premium for short period is
slightly higher than the regular premium-rating factor. It means policy for short
period is more expensive than normal annual policies.
184
Situations under which short period premium is collected
i. When the policy is issued for a period less than 12 months
ii. When the policy is cancelled at the request of the insured.
PREMIUM REBATES : The insurer recognizes the merit of claim free clients and
the premium for renewal period is reduced by way of bonus. The bonus is
rewarded on premium for the value of the vehicle and not on premium for third
party liability.
Tables of no claim bonus are provided in the tariff for different category of
vehicles.
This discount goes with the insured and not with the vehicle i.e., if the vehicle is
sold, the new owner is not eligible for the no-claim bonus. However, the previous
owner can substitute the discount for any new vehicle, which he may purchase
during three years from the date of transfer. In case if the vehicle is sold to spouse
or children or parents, the discount passes on to such persons. Similarly, if a
vehicle is used or operated by an employee for an institution and the same is
transferred to him at a later date, he can avail and no claim discount.
For persons coming abroad, discount can be allowed provided he produces a letter
to that effect that he is eligible for the discount, within three years from the expiry
of the overseas policy.
In case of renewals, the no-claim discount can be granted to the insured only if he
renews his policy within 90 days.
VEHICLES USED IN OWN PREMISES AND CONFINED SITES :A reduction
in premium is allowed if the vehicle is not licensed for road use and used in own
premises where public have no access to. Similar discount is allowed for goods
carrying vehicle, which need not be registered, and which are used in confined
sites where public has no access.
VEHICLES SPECIALLY DESIGNED FOR HANDICAPPED PERSONS : A
Discount in premium for vehicles, which are specially designed for and used, by
handicapped persons and institutions engaged exclusively in the service for
handicapped and mentally retarded, of course, as per the provision of the MV act.
AUTOMOBILE ASSOCIATON MEMBERSHIP : If the insured is member of a
recognized automobile association, a discount of 5% shall be granted subject to a
maximum of Rs.50/- for Two-wheelers and Rs.100/- for Private cars.
VOLUNTARY EXCESS DISCOUNT : Some insured desire to avoid preferring
insurance claims to the extent, which can be borne by them within their financial
limits. This is called Insured bearing first portion of each and every claim arising
out of accident. The premium is reduced based on the quantum chosen by the
insured as per tariff.
185
Personal Accident Insurance : Insured choose to take personal accident policies for
the occupants of the vehicle including owner and driver. The additional premium
is being charged based on PA table selection. It can be given for unnamed
occupants too. Premium for Increased liability against third party property or
unlimited insurance for legal liability.
COMMENCEMENT OF RISK : The risk commences immediately on the
issuance of insurance policy. The details of policy and what it contains are given
as under.
Policy: Policy is a stamped document, which forms the evidence of contract of
Insurance. In the event of dispute, the terms and conditions embodied in the policy
are referred to in the court of law.
Policy issued by Insurance companies has the following sections:
The Preamble clause: This clause introduces the parties to the contract namely the
Insurer and the Insured.
The Recital clause: Recital clause expresses what is agreed between both parties
and narrates the period of Insurance and about the consideration.
The Operative clause: The operative clause speaks about the perils covered,
exclusions and General exceptions.
The Schedule: This clause talks about the subject matter of Insurance covered
along with terms and conditions applicable to the policy.
The Attestation clause: This specifies the duly constituted authority to issue
policies, namely the authorized signatory.
The above are the various sections that are common to Insurance Policies.
In line with the above, Motor Insurance policy deals with the following sections:
• The parties to the contract namely the Insurer and the Insured.
• The perils covered under the policy
• Specific exclusions
• General Exceptions
• Conditions
The perils covered, exclusions, exceptions and conditions for different type of
vehicles of a Motor Insurance policy is shown below in the form of comparative
chart and the policy forms are available in the form of Annexure for ready
reference.
Termination of contract
A contract of insurance can be terminated on the following circumstances
a. At the option of the insurer
b. At the option of the insured
c. Double insurance
If it comes to the knowledge of the insurer or the insured finds that there are two co
existing policies for the same vehicle for the same period, the one which was taken
186
first remains and the next policy gets cancelled and the premium is refunded by
retaining a nominal amount towards administrative and document expenses.
Retention of minimum premium is necessary in the event of cancellation to take
care of administrative expenses.
CONCESSION FOR VEHICLES LAID UP
If a vehicle is laid up in garage and is not put to use for a continuous period of more
than 2 months, the liability of the insurers under the liability risk section of the
policy is suspended for such period and a concession is given to the insured. The
concession is given in two forms and the insured can chose whichever he wants.
a. Prorate refund of premium for such period. This refund is granted in the form
of credit and not as cash i.e., such refund can be adjusted against the premium
for subsequent renewal.
b. The policy period can be extended after the expiry of the policy for a period
equal to the period of such lay up.
Under Accidental Damage section – The cover is suspended for the period during
which the vehicle is laid up in garage and not in use and
a. Restricted cover for fire and/or theft is granted for the period of lay up and a
refund of premium on pro rata basis is made after charging a premium for the
restricted cover. Again the refund is on credit basis and not cash.
b. As an alternative, the insured can extend the policy period after the expiry of
the policy for a period equal to the period of lay up.
A notice in writing must be given to the insurers regarding the lay up and the
certificate of insurance must be surrendered.
Such lay up of vehicle must not be meant for repairing the vehicle.
The period of suspension of cover shall not extend beyond 12 months from the
expiry date of the policy.
FORMS OF LOSSES
• Direct loss and/or damage to the Insured vehicle resulting from
accidental means caused by insured peril proximately.
• Indirect loss and/or damage (Third party Liability) Indirect loss and/or
damage to the insured by legal liability.
1. Direct Losses and or Damage: It refers to physical loss of the property i.e.
vehicle by way of theft or visible physical damage to the vehicle due to
accident.
2. Indirect Loss and or Damage: As a result of accident, the owner of the vehicle
may be made legally liable to compensate the third parties for their death
and/or bodily injury and/or property damage. Such compensation is called
“Liability” arising out of use of vehicle in public place. It means the insurers
meet the legal liability payable by the insured to a third party due to accident.
187
Third party means any person other than the Insured and the Insurer:
Liability means “The amount of financial compensation legally payable by the
insured to the third party”.
Public place means “According to Section 2(24) of MV Act, it is a road, street, way
or other place, whether thoroughfare or not, to which the public have a right of
access and includes any place or stand at which passengers are picked up or set
down by a stage carriage”
Example:
A. Motor car sustains damages by hitting against a compound wall of another
person and in the process resulted in the death of a pedestrian. Before arrival
of police on the scene, the stereo was also stolen.
In the above case:
a. Direct loss and/or damage : (i) Damage to vehicle
(ii) Loss of stereo
b. Indirect loss and/or damage of Third Party liability :
(i) Death of the pedestrian
(ii) Damage to compound wall
From the past experience, a few instances of proximate causes are given as under
A. Damages to vehicle whilst attempting to save a cyclist or pedestrian
B. Damages resulting from bursting of tyres
C. Damages resulting from mechanical breakdown
D. Damages to vehicle due to skidding in the heavy rain
E. Small vehicles hit by over speeding heavy vehicles
F. Vehicles damaged whilst in the parking place
G. Accidents due to animals
H. Damages due to poor visibility due to fog and bad roads.
I. Overturning by hitting trees or parapet or road dividers and other stationery
objects
J. Accident to vehicles due to pits on sides of the road by public Authorities.
DUTIES OF THE INSURED
i. Duty of the assured to do his best to avert/avoid or minimize loss.
This duty arises from the duty of good faith he owes to the insurers and more
usually from the express conditions of the policy.
ii. If accident caused by fire or collision or any external means, he must take such
measures as are reasonable to extinguish fire or to prevent further loss by
removing the vehicle to nearby safer place.
iii. He is not to interfere with the efforts of other persons engaging in helping to
reduce or minimize loss.
iv. For that purpose he should take steps to remove the vehicle insured to a place
of safety unless he finds that all hope to save it useless.
If his failure to perform these duties is willful, it may be an evidence of fraud
disentitling him to recover anything on the policy.
188
It has become an absolute necessity that the insured complies with the
conditions imposed by the insurer, which are embodied in the policy form.
The Duties of the Insured prior to the occurrence of loss
a. He should take reasonable steps to safeguard the vehicle from any loss or
damage and act as if uninsured
b. The Insured should maintain the vehicle in the most efficient and roadworthy
condition.
c. The company as at all times, shall be at liberty to inspect and examine the
vehicle or any part of the vehicle and also any driver or employee of the
insured.
After the occurrence of accident
a. It is the duty of the Insured to exercise care and concern in the event of
accident and also at the time of break down of the motor vehicle.
b. The Insured should exercise due diligence and precautions to ensure that the
damaged vehicle is immediately attended to so that the aggravation of further
loss and deterioration to the damaged vehicle is prevented and avoided.
c. Any aggravation of damages due to non-attendance, non repairing the
damaged vehicle or driving the vehicle without repairing the damages
amounts to failing from the duties of the insured. The insured is solely
responsible for such lapses and will be made to bear the loss or damage.
d. Notice of loss to be given immediately to the insurance company.
e. The insured should extend all the assistance and necessary information with
regard to the claim
f. All legal documents such as letters, writs or claims, summons received should
be immediately forwarded to the insurance company
g. Notice shall be given with regard to any prosecution, inquest or fatal inquiry
to the insurance company
h. Insured should lodge FIR with police authorities with regard to theft or
criminal acts, which may lead to claim.
i. Insured should also co-operate with the insurance company in securing the
conviction of the offender.
Legal Proceedings
a. In case there is any contributory negligence with regard to third party claims,
insured should not make any admission, offer or promise for payment of
indemnify to any third party without the consent of the insurance company.
b. If necessary, the insurance company will conduct the defense in settlement of
claim/legal proceedings/prosecution on behalf of the insured. The insured
should extend all assistance and co operation to the insurance company.
Settlement of the claim at the option of the insurer
a. Insurance has the option to either allow the insured to repair the damaged
189
 vehicle or reinstate the damaged parts or replace the motor vehicle or its
accessories. The payment may be made by cash.
b. The insurance company will pay for the loss or damages and also the
reasonable cost of fitting such damaged parts (labour charges)
c. Such payments shall not exceed the sum insured (which is estimated value of
the vehicle chosen by the insured at the time of taking policy or renewal
provided the market value of the vehicle including accessories is not less than
the estimated value of the Insured.
Application of principle of contribution due to Double Insurance in the event of
claim
In case of double insurance, the insurance company will only pay its ratable
proportion of the loss or damage or any compensation or cost or expenses.
In case the insured is having more than one policy for the same vehicle with
two different insurers each insurer will pay only in proportion to their Sum
Insured.
Reference to Arbitration in respect of Dispute admissible claims with regard to
quantum difference
In case of dispute regarding quantum of loss or damage where the insurers
admit liability, such disputes shall be referred to Arbitration. Arbitration
proceedings are discussed in details in the next chapter.
Time Limit for filing Suit in the Court of Law
If the Insured fails to prefer any claim within twelve calendar months from
rejection of liability in the Court of Law, the insured loses the rights of
remedy.
Observance and fulfillment of terms and conditions of the terms and conditions of
the policy
a. Since the policy terms and conditions are given in the policy based on the true
information and details given by the insured to the best of their knowledge the
insured is bound to comply with the same; and such compliance shall be the
condition precedent to any admissible liability under the policy. The contract
of insurance of insurance is subject to implied and express conditions, which
expects the insured to observe the conditions precedent and conditions
subsequent.
Common Exclusions that are applicable to all types of vehicle in the event of claim
a. Geographical Area: If the vehicle sustains damages or the vehicle is lost and
if any liability is incurred, that should have been only due to an accident that
takes place within India.
b. Contractual liability is excluded
c. No insurance claim is payable if
i. The insured violates the condition of limitations as to use
190
ii. If the vehicle is driven by any person other than the driver whose name if
any is specified in the policy
d. The insurers will pay only for the resultant damages or less in consequent to
the accident and not for consequential loss that may arise due to the non usage
of the vehicle, like
i. Rent for alternate care
ii. Loss of earning whilst the vehicle is in the garage for accidental repairs.
e. No liability arising directly and indirectly or contributed by ionizing
radiations, or contamination by radioactivity from any nuclear fuel or nuclear
waste from the combustion of nuclear fuel.
f. Damage caused by nuclear weapons material is not admissible
g. No claim due to war, warlike operations
h. The act of terrorism is excluded.
Role of a Surveyor
Surveyors are being authorized and placed in different categories depending on
their professional qualifications and their special competence gained by
experience. Once they are empanelled, their services are being utilized by
insurance companies operating in India in different fields of working. They play a
very vital role in the insurance field not only prior to the acceptance of risk but also
after the occurrence of loss. Insurance companies are utilizing the services of
surveyors for pre inspection of major risks and on the assessment of insurance
liabilities. The remuneration depends on the quantum of assessed admissible
liabilities of insurers.
Any Association or group or a firm or an individual can become surveyors
provided they have competence in the field like Chemical Engineering,
Automobile Engineering and Chartered Accountancy etc.
What is expected of surveyors?
1. They should develop their product knowledge or insurance based on their
specialization and keep on updating the changes.
2. They should be highly competent in handling the assignments given by
insurers and be helpful both to their insurer and the insured.
3. They should be neutral, unbiased and free from prejudice in their approach
towards the customers while handling the claims
4. Their attitude should be polite and the decision should be firm in respect of the
assessments and should avoid the style of rudeness towards the customers.
5. He should exercise due diligence, care while assessing the Quantum of
liability and in the process the concern towards the interest of the policy
holders should not be lost.
6. THE DUTIES OF THE SURVEYOR SHOULD BE DISCHARGED
SCRUPLOUSLY and the honesty and integrity should be maintained at the
highest degree.
7. THE SURVEYOR SHOULD REMEMBER THAT HE IS INDEPENDENT
191
 and his role is indispensable to ensure that the promises of both parties are
fulfilled.
FUNCTIONS OF SURVEYORS IN MOTOR INSURANCE
1. The job of the surveyor begins as soon as the allotment of survey is done by
Insurance companies. He should collect the necessary work allotment for
each job along with claim papers such as claim intimation letter of the insured,
Estimate of the repairers submitted by the insured and relevant policy copy.
2. The surveyors should immediately reach the spot of accident and advise the
insured to remove the damaged vehicle to the safe place or reputed repairers
workshop.
3. He should assist the insured, if necessary to lodge the FIR and produce the
vehicle to the RTO authorities.
4. He should take necessary photographs of the damaged vehicle
5. He should ascertain the actual cause of accident and the extent to which parts
are damaged.
6. His primary duty is to estimate on his own the likely expenditure towards the
cost of Labour (Removing the dent, painting etc.) and cost of parts to be
replaced, if required.
7. The surveyor should negotiate with the repairers and accurately decide the
quantum of liability without letting the repairers to manipulate the cost of
repairs by inflating the bills and also estimating the parts for replacement,
which are repairable at a minimum cost.
8. The surveyors should justify that the cause of the loss is due to insured peril
and the extent of damage is in conformity with the nature of accident that took
place.
9. The Surveyor should conduct the survey at the repairers' workshop
immediately and permit the repairers to dismantle the vehicle in the presence
very carefully to find out the external and internal damages, if any.
10. There should not be any communication gap between the surveyor and the
repairer as well as surveyor and the insurer.
11. The surveyor should keep the insurers informed about the developments of
the claim periodically and keep the insured posted about what he has
discussed with the repairers with regard the accidental repair works to be
carried out.
12. He may have to verify the bills of the parts to ensure the avoidance of inflated
bills by the repairers.
13. The surveyor should finalize his report with regard to the admissible liability
in respect of cost of repairs, Labour charges, replacement of parts and the
value of salvage. He should ensure that the report is concluded after re
inspecting the repaired vehicle so as to confirm that the repairers have actually
carried out replacement of new parts and other repair works as agreed by
repairers.
192
14. The report should be submitted with his due recommendations confirming the
genuineness of the claim, the authenticity of proximate cause (cause of loss),
and verification of vehicular records.
15. His report should be submitted at the earliest so that the insured does not suffer
under any circumstances for want of financial assistance.
DUTIES OF THE INSURER
Verification and Recording of claim: It is the foremost duty of the insurer
immediately when a claim is reported to verify
a. Whether the vehicle is insured or not
b. Whether the premium is paid in advance before date and time of accident
Whether the policy is in force or not
c. This is to ensure that the loss falls within the policy period.
d. Whether the loss and/or damage is caused by an Internal Peril as described in
the policy.
Once he is satisfied on the above aspects, the insurer will proceed to register the
claim and issue a claim form to be insured.
Appointment of Surveyor
On obtaining the completed claim form from the insured along with the “Estimate
of repairs” the insurer appoints the surveyor to assess the nature, cause and extent
of loss and/or damage. The surveyor is appointed based on competence, expertise
and experience in the field in which he is to undertake the survey preferably an
Automobile Engineer.
Collection of Documents
The insurer then collects vehicular records depending upon the type of vehicle lost
and/or damaged due to an accident. It is mandatory on the part of the insurers to
fill the “Supplementary to the claim form” statement the particulars extracted after
verifying the original vehicular records such as Registration Certificate, Driving
License, Permit, Trip sheet etc. depending upon the type of vehicle for which claim
is lodged. He collects reports from external agencies such First Information
Report and Fire Brigade Report depending upon the circumstances of the accident
and/or loss
Liaison
The insurer should liaison with the insured informing him to cooperate with the
surveyor to submit the documents required by the surveyor in order to release his
survey report and at the same time keep in touch with the surveyor to submit his
report after satisfying himself with all aspects of the claim. The position of the
claim their requirements and developments are clearly communicated to both the
insured and the surveyor.
193
Compliance
The insurer will ensure that the insured has complied with all the conditions under
the policy and fulfilled his duties prudently as if he is uninsured.
Valuation
The insurer obtains the survey report and evaluates his liability taking into account
the survey report and bills submitted by the insured. He will see all aspects of the
claim with regard to depreciation applied by the surveyor, excess and more
importantly the Salvage value of the damaged parts/vehicle. After fully satisfying
himself about the genuiness reasonableness and compliance with terms and
conditions of the policy the claim is processed and recommended for settlement.
Updating of Records
Once the claim is approved for payment by the competent authority, the claim is
settled and proper entries are made in appropriate registers.
Methods of claim settlement
Types of losses
a. Partial loss
b. Total loss
Partial loss
i. Accidental damage to the vehicle
ii. Theft/loss of accessories or parts of the vehicle
iii. Additional expenses like towing and spot repairs.
When vehicle sustains damages in an accident and the insured incurs the
expenditure in order to repair the damaged parts of the vehicle in addition to the
towing charges to the repairer shop which is less than the insured value of the
vehicle under the policy, the loss or damages fall under the partial loss.
Example: Cost of repairs
a. cost of parts replaced
b. Labour charges towards painting and replacing the damaged parts
c. Cost of removal from the Accident spot to the repairers workshop
Total Loss
There is a total loss when the insured vehicle is stolen by somebody or the vehicle
is so damaged that it cannot be repaired without incurring expenditure more than
the sum insured or the vehicle is so damaged that the damaged value of the vehicle
be as of no value, such losses fall under Total loss.
The insurance company practices different modes of claims settlement depending
upon the nature of claim, extent of repairs and the market value of the vehicle on
the date of accident.
194
MODES OF SETTLEMENT
a. Repair basis
b. Total loss basis
c. Cash loss/salvage less loss basis
A. Repair basis
The surveyor ascertains the total internal and external physical damages to the
vehicle and identifies the nature of damages, cause of accident and then
determines the extent of damages.
Once the surveyor is satisfied with the geniuness of the claim taking into
account the cause of accident, the perils insured, he arrives at the cost of
repairs, cost of replacement of parts and the salvage value. He then discusses
and negotiates with the repairer to arrive at a consensus and authorizes the
repairers to carry out the repair work relevant to the accident.
Under this repair basis, the insured should bear a portion of the repair cost for
depreciation which is based on the age of the vehicle finding place in the
policy. The surveyor suggests the settlement of claim on repair basis only
when he is satisfied that the quantum involved in economical in comparison
with that of market value and sum insured whichever is less.
The insured is required to submit the relevant bills for cost of labour, the cost
of parts and the cost of removal from the spot of accident to the repairer's
workshop. On submission of bills and surrendering of salvages to the insurer
the claim will be processed and settled.
The settlement of claim under repair basis fall under partial loss as the repair
liability of the insurer less than the value insured.
Total loss basis
Under many circumstances, the insurance company may opt to make over the
damaged vehicle if the claim on repair liability found to be on the higher side,
uneconomical as compared to the market value under this basis.
The insurer may have to incur additional expenditure like garage charges; cost
of disposal in the form of advertisement, auction charges and/or sales charges
and total insured value may be paid, if it is less than the market value just prior
to the loss.
In case the vehicle is lost by theft, the market value of similar vehicle, same
type and model or sum insured, whichever is less.
195
Cash loss or salvage less loss basis the damaged vehicle for disposal, the resale value of the damaged vehicle may not
This is a kind of settlement when the insured chooses to retain the damaged be the same as on date of damage to that of resale value on the date of settlement,
vehicle and insists for immediate payment based on the cost of repairs. The because the damaged vehicle may further deteriorate in kind and value.
insurance company ascertains the resale value of the damaged vehicle (on as It is noteworthy to mention that there is a special clause known as “Excess” clause,
in where in condition) and pays the difference between the market value of it means that the amount that will be specified in the policy and any claim in excess
similar undamaged vehicle as on date of accident and the market value of the of that amount will be the liability of the insurers, which may be voluntarily chosen
damaged vehicle. Such repair cost is restricted to 75% of the admissible by the insured or imposed by the insurers compulsorily. In respected of the above
claim on repair basis in respect of cash loss basis. referred claim, if the excess is Rs. 10,000/- net liability will be reduced to the
extent as though Rs. 10,000/- is the insured's first bearing portion.
The insurance company chooses one of the above three modes of settlement
VEHICULAR RECORDS
which ever is more economical
Requirements of documents in the event of claim
Two Wheeler (motor cycle/scooter/mopeds)/private cars
Example Registration certificate: It is a certificate issued by the computer authority
Maruti Esteem model 2002 met with an accident confirming ownership of the vehicle in whose name the vehicle stands registered.
Sum insured of the vehicle is Rs. 5, 00,000/- The ownership of the vehicle lies with the person whose name has been mentioned
The market value on the date of accident is Rs. 4, 50,000/- in the RC book. The vehicle should bear the registration number in both front and
back and the Regional Transport Authority is the competent body to issue the
The cost of repairs Registration certificate. The Registration certificate will carry in it the name of the
Rs. 4, 00,000/- Registered owner and vehicle particulars such as Registration Number, Engine
a. Cost of labour is - Rs. 50,000/- Number, Chassis Number, Make, Model, Color of the vehicle, Cubic Capacity,
b. Replacement of parts Rs. 375,000/- carrying capacity etc. Any financial interest in the form of Hire purchase or
Less salvage: Rs. 25,000/- Hypothecation will be included in the R C book.

The resale value of the damage vehicle is Rs. 2, 00,000/- Driving license: Driving License means License issued by the Competent
SETTLEMENT OF CLAIM ON REPAIR BASIS Authority namely Regional Transport Authority authorizing the person specified
1. Repair basis: Rs. 3, 75,000/- therein otherwise than as a learner to drive a specified class of motor vehicle. The
2. Total loss basis: Market value Rs. 4, 50,000/- Drivers License contain particulars such as Name of the Driver and his address,
Less Resale value of the age, validity period of license and the class of vehicle he is entitled to drive.
Damaged vehicle Rs. 2, 00,000/-
AddAdvertisement expenses Rs. 5, 000/- A Driver should hold a valid Driving License at the time of accident. A valid
Add Garage expenses Rs. 10,000/- license means “Any person holding a permanent Driving License Other than
Learners License) in force and is not disqualified from holding such license.
Net Liability Rs. 2, 65,000/-
3. Cash Loss basis
Driving License is required in all claims involved in accident except for the
Market value Rs. 4, 50,000/- following circumstances,
Less: Resale value of
The damaged vehicle Rs. 2, 00,000/- 1. For parked vehicles
Net Liability Rs. 2, 50,000/- 2. Theft or Burglary of the vehicle

Cash loss settlement is more essential than the other two modes of settlement
which is Rs.3, 75,000/- and Rs. 2, 65,000/-. Whereas under cash loss settlement
the amount is Rs. 2,50,000/- which is almost less than 75% of the repair liability
(i.e. 75% of 3,75,000/- = Rs. 2,81,250/-)
In case if the insurance company settles the claim on total loss basis and takes over
196
Taxation book: It is mandatory for all vehicles plying on the public place to pay
the prescribed Road tax to State Government. The Road tax can be paid on
quarterly, half years or Annual of life time which is entered in the RC book of the
respective motor vehicle. A claim is admissible only if Road tax is paid in full as
on the date of accident. Certificate of Insurance in force is a must for RTO
197
authorities to accept tax. In case of stolen vehicle the payment of road tax may be
waived.
Documents required in the event of claim for Commercial vehicles
1. Registration Certificate
2. Driving license
3. Taxation book
4. Fitness certificate
5. Permit
6. Trip sheet
7. Weigh slip/load challan
8. First information report (FIR)
Fitness certificate: Fitness certificate is a certificate issued by Regional Transport
Authority confirming that the Vehicle is in Road worthy condition to ply on the
public place.
CFX form – cancellation of fitness:
When a commercial vehicle meets with an accident, the Motor Vehicle Inspector
inspects the vehicle on the spot and issues a CFX (Cancellation of Fitness) report
which means the fitness of the vehicle is suspended temporarily till the repairs to
the vehicle is carried out by the owner of the vehicle. Once the vehicle is repaired
the vehicle is to be shown to the RTO Authorities and Fitness Certificate will be
revalidated.
Permit: Permit is a document issued by a Competent Authority specifying the
boundaries or limits upto which the vehicle is authorized to ply in a public place
and also the nature of goods it can carry. The permit contains details such as Name
and address of the holder of the permit, Area of operation, goods permitted to be
carried, and validity period of permit.
Example : The area of operation can be limited by the type of permit whether
National permit or State permit, public carrier permit or private carrier permit, or
stage carrier permit or contact carriage etc.
Separate permit is issued for vehicle carrying inflammable materials.
Trip sheet: It is a document to be prepared for every trip undertaken by the vehicle
whether it is Goods Carrying or Passenger Carrying Vehicle.
It is a Log book stating the particulars of goods carried or passengers travelled
according to the type of vehicle. Trip sheet has to be closed on daily basis and also
on trip to trip basis.
Claim form: Claim form is issued by the insurer to the Insured immediately when
a claim is reported. Issuance of claim form does not mean acceptance of Liability.
The claim form should be duly filled in by the insured in all respects. The claim
form contains details such as Insured particulars, vehicle particulars, Details of the
driver', Place, time, cause, nature and extent of damages, Details of third parties
198
involved in the accident, witness and also whether the accident was reported to
Police.
The details required in the claim form are vital in deciding whether there is liability
for the insurers and hence it has to be filled in, clear legible and descriptive manner
to the extent possible
Estimate: The insured should provide a detailed quotation as to the number of
parts to be replaced or repaired, along with the cost and Labour charges from the
repairer to whom the vehicle is to be entrusted for repair. This forms the basis for
arranging survey.
Documents required for theft claim
1. First Information Report: First Information Report is report given by the
Police Authorities based on the statement given by the Insured or his
representative immediately after the occurrence of the theft. The case is
registered in CR Diary under Indian Penal code and the report given is the FIR
which is one of the proofs of the occurrence of the theft.
2. Non-Traceable Certificate: When the vehicle is not traced after a reasonable
period of reporting the theft, the Police Authorities issue Non-Traceable
certificate in their prescribed format stating that the vehicle is undetectable.
3. Final Investigation Report : The police authorities will finally prepare a
Final Investigation Report stating that the vehicle is un-detectable obtaining a
certified copy of the order passed by the Court accepting the report. The
Insured should produce a copy of the Final Investigation Report to the insurer
during the settlement of the claim.
4. Letter of Subrogation: The insurer established his right by getting the rights
of the insured transferred to him by executing a bond in non-judicial stamp
paper called Letter of Subrogation. The letter has to be executed by the
insured immediately on acceptance of liability by the insurer. This Letter of
Subrogation is normally executed for theft claims after payment of the claim
to the Insured where the Insurer has right over the vehicle stolen when
recovered at a later date.
Though for accidental damage claims the insurer has a Subrogation Right to sue
and get reimbursement from the negligent party it is not enforced due to the
presence of Knock for Knock Agreement.
Original Vehicular documents along with all the keys pertaining to the vehicle
have to be surrendered.
ARBITRATION : Arbitration shall be conducted under and in accordance with
the provision of the Amended Arbitration Conciliation Act, 1996.
199
Only when a claim is admitted : In case any dispute or difference of opinion
between the insured and the insurers as to the quantum of claim to be paid under
the policy, the matter can be referred to Arbitration. Such facility is available only
in case of admissible liability.
Rejected claim cannot be referred to Arbitration :In case insurance company has
disputed or not admitted the liability in respect of any policy issued due to
technical reasons, the matter of dispute shall not be referable to arbitration.
Arbitration Proceedings :The difference as to the quantum of admissible claim
shall be referred to the sole arbitrator who will be appointed in writing by both the
parties.
If they cannot agree upon a single arbitrator within 30 days, any party invoking
arbitration, the matter will be referred to a panel of three arbitrators comprising of
two arbitrators, one appointed by each party to the dispute or difference.
The third arbitrator has to be appointed by such two arbitrators and arbitration
shall be conducted under the Act.
Award by Arbitrators : The right of action or suit upon the Insurance policy can be
taken only when the award by such arbitrators with regard to the quantum of loss or
damage is obtained, it means it is a condition precedent that the award should be
obtained first and then only right of action or suit upon the Insurance policy shall
lie.
IN CASE OF REPUDIATED CLAIM :When a suit in the court of law is not filed
within twelve calendar months from date of insurance company disclaiming the
liability to the insured, It is considered for all purposes that the claim is deemed to
have been abandoned or given up by the Insured, In which case no amount is
recoverable by the insured from the Insurance company there after.
RELEVANCE OF MATERIAL FACTS IN THE EVENT OF CLAIMS :It has
become an absolute necessity that the insured declare all information that is
needed by the insurer in the proposal form and that only influence the admissibility
of claim.
We have already seen the relevance of material facts. It is open to the Insurance
Company to allege and prove that the policy give rise to a claim which was
obtained by non-disclosure of relevant material facts or by representation of a fact
which was false in some material and contract of Insurance becomes consequently
void ab-initio.
The policy was obtained by fraud; the policy becomes void from the inception. A
plea under this clause cannot be disallowed on the ground that in spite of the
alleged misrepresentation, the policy was not cancelled by the insurers.
The following are considered to be material facts which warrant special attention:
200
•Avoid the misstatement of age of the vehicle
•Warranty that the vehicle would be driven by a person who has been
convicted of motoring offences.
•Previous refusals of other insurers to insure the vehicle
•Allegation that the policy was obtained after the accident in collusion
with other persons.
KNOCK FOR KNOCK AGREEMENT : The Knock-for Knock agreement is in
agreement entered into among the Insurers writing motor insurance. The
agreement provides that in the event of damages caused by collision or attempt to
avoid collision between two vehicles, the Insurer of each vehicle will bear his own
loss within the limits of his policy, irrespective of legal liability and will not
enforce his subrogation rights, if any against the other insurer.
Points for Mental revision
Accident – Legal liability to third parties
Third party claims
KNOCK FOR KNOCK AGREEMENT
We have seen how “Tort” gives rise to Liability towards Third parties.
Tort modified in India in the form of
• Workmen's Compensation Act: According to the Act, if any Employee
dies or is injured during the Course of Employment, the Employer is
liable to pay compensation.
• Employees liability Act
• Fatal Accidents Act
• Motor Vehicles Act
What is Third party liability?
The insured becomes legally liable to any third party for bodily injured or death
that has arisen due to the use of his motor vehicle in the public place. What is that,
that can be claimed from the Insurance Company is the financial liability payable
to a third person other than the insured and the Insurer.
MACT : Third Party claims are usually adjudicated by the Motor Accident Claims
Tribunal (MACT). The MACT is a statutory body set up under SECTION 110 of
the Motor vehicles Act, The claimant has to move the Tribunal within a period of 6
months from the accident. Summons received from the Tribunal should be
accepted and defense has to be entered on time.
It is not necessary that the Third Party claim should be settled only after the MACT
gives its award. A compromise may be a solution for settlement. As a matter of
fact, many claims of litigation expenses of the Insured.
201
To defend a claim in MACT or to negotiate a claim for a compromise settlement
we have to collect a large number of facts. In getting information in the actual
negotiation the Investigator can play a very useful role as a part of his duties.
MACT Tribunals are not conferred any extraordinary power than what is vested
with the courts under law of torts. The job of the MACT is only to expedite speedy
settlement of third party claims. Of course, the settlement of claim under MACT
is subject to the terms and conditions of the Insurance contract and M.V. Act
Provisions.
LOK ADALAT: Lok means “People” and Adalat means “Court”. So Lok Adalat
is formed for quick justice and speedy disposal of claims for Road accident victims
whose cases are pending in MACT and other property and civil suit.
With relevance to Motor Insurance Lok adalat plays a significant role in dealing
with cases pertaining victims of road accidents before Motor Accidents Claims
tribunal.
Cases are taken up at Lok Adalat only if at least one hearings is over in MACT are
Court. The Insurance Company before taking up the cases before LOK ADALAT
will ensure negligence of the Motorist is evident and all documents in support of
the claim are in order because the claim placed before the Lok Adalat cannot be
withdrawn.
The decision of the Lok Adalat does no have a legal binding on both the parties and
need not be accepted by either of the parties. But in principle it is accepted as
effective system to negotiate and arrive at a Amicable settlement acceptable to
both the parties.
Once the settlement is effected it is binding on both the parties and is generally
acceptable by the Tribunal. Thus Lok Adalat has helped in clearing a lot of cases
pending before MACT thereby helping the petitioner in getting a reasonable
compensation and also helps Insurance Company to uphold their image as a
provider of social security.
LIABILITY TO THIRD PARTIES
1. The Liability should arise, due to an accident caused by the use of Insured
vehicle anywhere in India.
2. The Insurance company will indemnify the Insured for all sums including
claimants cost and expenses for which the Insured should become legally
liable to pay
a. In respect of death of a person or bodily injury to any person and
b. Damage to any property of only third party
3. When the Insured incurs any cost and expenses with the consent of the
Insurers the same will be paid by them.
4. The Insurance Company will indemnify any liability that may arise due to the
driver, provided the driver observes and fulfils the terms and condition of the
policy and also the exception as though he is uninsured.
202
5. The company may at its option.
a. Arrange for representation any inquest or take inquiry in respect of any
death for which the insurance company will indemnify the insured.
b. Insurance company will take any proceeding to any court of law for any
alleged offence relating to any event that falls under the subject of
indemnity under the policy.
Types of Compensation
1. General Damages
2. Special Damages
General Damages:
General Damages are damages awarded by the court of Tribunal for pain, suffering
reduced earning capacity, inconvenience and loss of life.
The General damages will depend upon the state of injury, the Medical
examination, the X-ray test Medical evidence, pain in leg, leg gets swollen when
the injured walks, unable to do heavy work, slight deformity in the legs for the
whole life.
SPECIAL DAMAGES : Special Damages is awarded to the Insured who is
hospitalized and medical expenses that are incurred and for financial loss of
income because of absence of someone to replace the injured to carry on business
or loss of income due to absence from duty this kind of damages will not prevent
much difficulty in assessing damages. Remaining without salary amount to
special damages, Loss of maintenance expenses if injured, earning at the time of
accident will also fall under the head special damages.
In the case of death:
In order to ascertain the quantum of damages in case of death the following criteria
should be considered by the Tribunal
a. Age and the health of the deceased when the accident was caused
b. The status of the deceased, his earning capacity and his contribution to the
family
c. The loss caused to the family by his death
d. The damage he suffers from pain and suffering and duration of the same of the
same,
e. Whether he died immediately or after the expiry of some days
f. Loss of expectancy of life
COMPONENTS OF AN AWARD
1. The award contains the just compensation made by the tribunal
2. Specifies the person to whom the compensation to be paid
3. It specifies the amount, which shall be paid by the driver of the vehicle or
owner, insurer, involved in the accident or by all or any of them as the case
may be.
203
OMBUDSMAN
The hardships and expensive legal recourse available to individuals in the event of
delay in or dispute of quantum of settlement of a claim prompted IRDA to establish
an Independent Arbitrator – known as OMBUDSMAN
Ombudsman was established in November 1999 by IRDA to arbitrate insurance
related disputes for quick, low cost and prompt settlement of claims at the cost of
Insurance companies. Earlier to this the only options available to people were to
go to the Consumer Forum or Civil Court to settle their differences. The
Ombudsman now has representation in 12 different notified jurisdictions
throughout the country.
Here the process is very simple. Any Insurance related complaint can be filed in
the notified jurisdiction. Ombudsman entertain complaints only on individual life
or non life policies, as long it is non commercial in nature up to an extent of Rs. 20
lacs. As an arbitrator, the Ombudsman has to take unbiased and independent
decision to ensure that the common man receives fair and just compensation from
the insurance company.
How to file a compliant with Ombudsman:
1. A letter in writing stating the facts of the case along with documentary proof.
2. Complaint to Ombudsman should be filed within 1 year from the date of
repudiation of claim by the insurer
3. Ombudsman will not interfere if the insured has already approached the
consumer forum or filed suit in Court of Law
4. Complaint should be filed with in the jurisdiction of the insured.
Role of Ombudsman:
1. On receiving the complaint, if Ombudsman finds a prima facie case, response
is sought from the insurer within 14 days.
2. If on receiving the petitioner's claim, the circumstances of the case,
documentary evidence and cross examination reveal that the claim of the
petitioner is fraudulent in nature, the claim is immediately dismissed.
3. Settlement is done in 3 ways.
a. Settlement on reference
b. Settlement following mediation
c. Settlement through mediation and award
Settlement through mediation, when the insurer contests the complainant's claim
Ombudsman investigate the complaint and gives suitable guidelines for
settlement within a month
After acceptance a copy is sent to both the parties. The parties must confirm
acceptance within 15 days. The Ombudsman directs the insurer to settle the claim
within 15 days. If the directive is not accepted by the insurer, Ombudsmen can
declare an award.
204
If company has credible alternative arbitration mechanism the IRDA can exempt
the insurance companies from the authority of Ombudsman, so far no insurance
has sought for such exemption.
Motor Third Party Insurance Pools
Public sector general insurance companies arbitrarily loading premium for
commercial vehicle act Insurance due to heavy incurred loss ratio
• Even most of the companies denied the act insurance for commercial
vehicle.
• Private insurance companies showed total avoidance towards
underwriting commercial vehicles act only policies.
• The federation of transport operators represented the matter to IRDA to
intervene and regulate the pricing structure. Also, to issue direction to
companies not to deny act only policies.
• Therefore IRDA has come out with an idea of Third Party Insurance
Premium pool.
• Whereby all TP Premium of Commercial Vehicle (Both Act and Package
policies) pooled together and the management of pool vested with
General Insurance Corporation
• GIC after retaining its statuary cession of 20% cedes the balance to all the
companies in the ratio of their gross direct premium.
• Claims also shared on the same pattern.
• The underwriting offices also get 10% procurement cost.
• This pool arrangement encouraged all the companies including public
and private sector to accept commercial vehicles act only policies.
Indian Motor Third Party Insurance Pool [IMTPIP] which came into effect from
01.04.2007
• GIC (Re) is the Pool Administrator
• All registered General Insurance Companies in India dealing in Motor
will be members of the pool.
• They shall collectively, mandatory and automatically participate in
pooling arrangement.
• All operating offices of the pool members will underwrite pool business
and they receive 10% reinsurance commission on premium booked.
• The pool U/w liability policy only & liability portion of package policy
of all commercial vehicle segment. Business u/w by members w.e.f.
01.04.2007.
• Pooling mechanism is multi lateral reinsurance mechanism between u/w
insurer and all registered General Insurance Companies.
• 20% ceded to GIC-Re as statutory session
• Balance 80% shall be shared by all members in the same proportion of
205
 TGDP bears to Total Market GDP in respect of all classes of business for for commercial vehicle act Insurance due to heavy incurred loss ratio
that financial year. • Even most of the companies denied the act insurance for commercial
•Underwriting business and claims settlement will be as per General vehicle.
Insurance Council directives. • Private insurance companies showed total avoidance towards
•All Insurers as leaders meet claims and other expenses, make underwriting commercial vehicles act only policies.
provisioning for claims, share the same with Co-insurers in pre agreed • The federation of transport operators represented the matter to IRDA to
ratio. intervene and regulate the pricing structure. Also, to issue direction to
companies not to deny act only policies.
Conciliation process in Motor TP Claims • Therefore IRDA has come out with an idea of Third Party Insurance
• Identify cases suitable Premium pool.
• Admissions of liability sec 64 VB/DL/Permit/FIR/Investigation • Whereby all TP Premium of Commercial Vehicle (Both Act and Package
confirming accident/ Income/ Dependency / Factor PM Report policies) pooled together and the management of pool vested with
• Medical Certificate for disability General Insurance Corporation
• Age Proof • GIC after retaining its statuary cession of 20% cedes the balance to all the
• Advocate's recommendation companies in the ratio of their gross direct premium.
• Moving court for conciliation • Claims also shared on the same pattern.
• Offer to the claimant • The underwriting offices also get 10% procurement cost.
• Jaldh Rawat only in injury cases • This pool arrangement encouraged all the companies including public
and private sector to accept commercial vehicles act only policies.
Underwriting considerations for u/w passenger carrying commercial vehicles 2. Describe briefly Indian Motor Third Party Insurance Pool [IMTPIP] which
• Model came into effect from 01.04.2007.
· GIC (Re) is the Pool Administrator
• Carrying capacity
• All registered General Insurance Companies in India dealing in Motor
• Permit route
will be members of the pool.
• Fleet
• They shall collectively, mandatory and automatically participate in
• Past claim experience pooling arrangement.
• Terrain(Geographical area) where plying • All operating offices of the pool members will underwrite pool business
• Age/ experience of drivers/ conductors and they receive 10% reinsurance commission on premium booked.
• Private/ Public • The pool U/w liability policy only & liability portion of package policy
• Road worthiness of vehicle/ Inspection of all commercial vehicle segment. Business u/w by members w.e.f.
• PA for passengers 01.04.2007.
• Other Insurance from the same insured • Pooling mechanism is multi lateral reinsurance mechanism between u/w
• Voluntary excess insurer and all registered General Insurance Companies.
• Own workshops/ access to quality workshops • 20% ceded to GIC-Re as statutory session
• Member of association/ safety equipments. • Balance 80% shall be shared by all members in the same proportion of
TGDP bears to Total Market GDP in respect of all classes of business for
• Owner & driver same.
that financial year.
• Underwriting business and claims settlement will be as per General
Motor – Bullet Questions Insurance Council directives.
• All Insurers as leaders meet claims and other expenses, make
1. Discuss Motor Third Party Insurance Pools.
provisioning for claims, share the same with Co-insurers in pre agreed
• Public sector general insurance companies arbitrarily loading premium

206 207
 ratio. 2. TP pool is formed to share the profit or loss of Motor TP business of all general
Insurers in the following classes of business.
3. Describe the conciliation process in Motor TP Claims. a. Motor TP Claims and premium of Private Cars.
• Identify cases suitable b. Motor TP Claims and premium of 2 wheelers.
• Admissions of liability sec 64 VB/DL/Permit/FIR/Investigation c. Motor TP Claims and premium of Commercial Vehicles.
confirming accident/ Income/ Dependency / Factor PM Report d. Motor TP Claims and Premium of All Class Motor Business.
• Medical Certificate for disability
• Age Proof 3. In Motor TP claims even if we did not take place under sec 170 of Motor
Vehicle act in lower courts, we can go on appeal on quantum.
• Advocate's recommendation a. True
• Moving court for conciliation b. False
• Offer to the claimant c. Joint appeal with insured
• Jaldh Rawat only in injury cases d. We can appeal directly to Supreme Court.

4. What are the underwriting considerations for u/w passenger carrying 4. The risk of overturning as a tool trade is covered in respect of a dumpers under
commercial vehicles? a. A standard commercial Goods carrying vehicle B policy.
• Model b. A standard miscellaneous type of vehicles B policy.
• Carrying capacity c. A standard miscellaneous type of vehicles A policy at an additional
• Permit route premium.
• Fleet d. None of the above.
• Past claim experience
5. The concept of No fault liability as envisaged in MV Act 1939 is reflected in
• Terrain(Geographical area) where plying a. Section 163 of MV Act
• Age/ experience of drivers/ conductors b. Section 149 of MV Act
• Private/ Public c. Section 140 of MV Act
• Road worthiness of vehicle/ Inspection d. None of the above.
• PA for passengers
• Other Insurance from the same insured 6. Constitution of Motor Vehicle Claims tribunal falls in the jurisdiction of
• Voluntary excess a. Central Government
b. State Government
• Own workshops/ access to quality workshops
c. Supreme Court
• Member of association/ safety equipments. d. District Courts
• Owner & driver same.
7. Compensation payable in case of death under the relevant section of 'No Fault
Liability' is
QUESTIONS a. Rs. 25,000
b. Rs. 12,500
c. Rs. 30,000
1. Under the Motor Vehicles Act, a public place is d. None of the above
a. A place owned by a public limited company.
b. A place where public meetings are held. 8. Solatium Fund established under M.V. Act 1939, deals with
c. A place where any member of public has a general right of access. a. Accident cases
d. A place where the public grievances are heard. b. Death cases

208 209
 c. Injury option available is
d. Hit and run cases a. Go on appeal on normal course
b. File a writ I high court
9. As per M.V. Act, following injuries are treated as simple injuries c. File a SLP in the Supreme Court
a. Fracture of wrists d. Company has to satisfy the award
b. Dislocation of bone
c. Scar on the face 16. Owner resides at Kanpur had taken a Motor TP Policy from Delhi. The
d. Loss of vision vehicle meets with an accident at Kolkata injuring a person, who had retired
from services and resides at Guahati. He had very simple injuries. Find out
10. Which of the following about multimodal transporter is not true from the list the places where he can file MACT case.
a. MTO is to be registered a. Anywhere in India
b. He is responsible for the transportation of the consignment b. Kolkata/Gauhati
c. Liability of MTO is unlimited c. Gauhati/Kanpur/Kolkata
d. He is not responsible for arranging insurance of the consignment
d. Gauhati/Kanpur/Kolkata/Delhi
11. The concept of Lok Adalat was mooted by
17. A married person dies in road a accident. His wife files a case in MACT Pune,
a. Dr. S.N. Bhagwati
whereas his parents file the case at Mumbai. What is the correct step to be
b. Mr. P.N. Bhagwati
taken to handle the situation from the list of option below?
c. Mr. Lok Naik
a. Wait till the Court decides in one case and then go for appeal.
d. Mr. P.N. Adlakha
b. Go the high court for stay in both the cases in the initial stages itself.
12. Which of the following documents is not relevant to bodily injury claims for c. Wait till one case is decided and bring this fact to another court for
processing third party claims under motor policies? dismissal of the pending case.
a. Coroner's report d. Take affective steps in both the courts by filling certified petition copies
b. Driving Licence FIR sets to transfer the case to either of the courts for clubbing together.
c. Police Report
d. Medical Certificate 18. Sec 163A of MV Act 1988 related to
a. No fault Liability
13. Application for compensation under Solatium scheme has to be made to: b. Hit and run case
a. Corporate office of an insurance company c. Structured Compensation
b. Claims enquiry officer nominated by State Government d. Insurer's defense
c. Nominated divisional office of the insurance company
d. Claims settlement commissioner nominated by the State Government. 19. Insurers' defense available under following sections under MV Act
a. Sec 140 and 147
14. A MACT award for Rs. 40000/- for a petitioner for simple injuries. Insurance b. Sec 149(2) and 170
Company wants to go on appeal to High Court. The minimum deposit under c. Sec 165 and 166
Sec 173 is to be made at the MACT for appealing in this case is
d. None of the above.
a. Rs 10000/-
b. Rs 25000/-
c. Rs 20000/- 20. Motor Vehicle's Act 1939 was amended in
d. Rs 40000/- a. 1960 and 1999
b. 1988 and 1994
15. A MACT awards Rs 9000 for a pedestrian who meets with an accident. c. 1995 and 2002
Insurance Company wants to go on appeal as the injury was very minor. The d. None of the above

210 211
21. Motor Vehicle's Act 1994 was promulgated mainly for the purpose of b. Petition filed before the lower court
a. Doing away with the provisions of previous acts c. Lower court order obtained under Section 170 of MV Act
b. Protecting the loss arising out of the use/carrying of hazardous goods d. Insurer's Vakalat
c. Improving upon the provisions of previous acts.
d. All of the above 28. Under which section of MV Act 1988, no person shall allow any other person
to use a vehicle in a public place unless the vehicle is covered by an insurance
22. For registration of vehicles, the RTO's requirement as per the provisions of policy complying with the requirements of the ACT
MV Act is submission of a. 146
a. Policy schedule b. 147
b. Policy schedule and certificate of insurance c. 148
c. Original certificate of insurance d. 149
d. Proof of sale 29. Section 161 (3) of MV Act pertains to
a. Structured compensation
23. Grace period for filing of an appeal before High Court in MACT cases is b. No fault liability
a. 180 days c. Hit and run compensation
b. 90 days d. None of the above
c. 120 days 30. Of the following exclusions under the Motor Policy, which one does not
d. No grace period at all appear under general exclusions of the policy?
a. Driving without a valid driving license
24. Under which section of MV Act, an insurer can defend the liability before b. Driving under the influence of intoxication
MACT c. Geographical area
a. Section 163 d. Breach of limitations as to use clause
b. Section 170
c. Section 149 (2) 31. Under the motor comprehensive policy, towing charges in respect of a
d. Section 166 damaged vehicle include the cost of –
a. Protecting the vehicle
25. A brand new vehicle meets with an accident on the first day of insurance cover b. Removing it to the nearest repairers
and what percentage of depreciation the vehicle's fibre part attracts c. Re-delivery to the insured
a. 50% d. All of the above
b. As per percentage table 32. A motorcar with manufacturing date as 12/04/1939 is
c. 30% a. An obsolete car
d. Nil b. Is a vehicle not insurable
c. Is a car classified as classic
26. Can CNG/LPG fuel attachment to a vehicle be insured provided the insured d. None of the above
submits:
a. Invoice copy 33. A vehicle not road worthy can be ideally offered the following covers
b. Proof of endorsement in the RC a. Burglary policy
c. Declaration in proposal form b. Motor policy covering fire
d. Physical verification of unit c. Motor policy covering theft
d. Motor policy covering fire/theft as per GR 45
27. The most essential document required for filing of an appeal before high court
in MACT cases 34. One passenger bus was covered under Motor package policy while parked in
a. Award deposit receipt the garage at night extra horn, tyres and decorative fittings were stolen. The

212 213
 claim is payable: b. Rs. 10000
a. In full c. Rs. 25000
b. Only 50% is payable d. Unlimited
c. Payable on Non-standard basis
d. Not payable MOTOR MODEL QUESTIONS

35. Premium from the following classes of vehicles goes to the Motor insurance 1. In which year MV Act was first enacted
pool: a. 1929
a. Total premium collected on private car & 2 wheelers b. 1939
b. OD premium and liability premium collected on commercial vehicles. c. 1959
c. Liability and PA premium collected on Commercial vehicles. d. 1988
d. Total premium collected from Goods carrying vehicles.
2. What is meant by the term IDV
36. Important documents required to process the Motor Third Party claim a. Insenes Declared Value
include: b. Insured's Depreciated Value
a. Copy of FIR charge sheet c. Insured Declared Value
b. Name and address of the person injured and killed in accident. d. Insurance determining value
c. Certified copies of injury/post mortem report.
3. Motor cover note is generally issued for
d. All of the above
a. In all cases
b. For renewal only
37. What is the trump card for the success of the TP Pool
c. For new vehicles
a. 10% commission on the Premium d. Only for third party & theft
b. Distribution of Premium and liabilities amongst insurer.
c. Commitment of insurers to serve insuring public 4. The maximum validity period of a motor cover note is
d. All of the above a. 15 days
b. 30 days
38. In a MACT Claim, in case of a death of a married male with dependent Father c. 60 days
and Brother, the applicable multiplier is as per the Schedule of M.V. Act, will d. 365 days
be
a. Multiplier applicable to the deceased as per his age 5. Motor insurance is statutory in respect of
b. Multiplier applicable to the father of the deceased as per his age a. Comprehensive risks
c. Multiplier applicable to the brother of the deceased as per his age. b. Act only cover
d. None of the above. c. Act only fire and theft extension
d. Trade Risk
39. Under the motor tariff, “Miscellaneous Vehicles” do not include
a. Motorised rickshaws 6. In case of break in insurance
b. Mobile dispensaries a. Pre-inspection of vehicle is mandatory
c. Ambulance b. Insurance is not available at all
d. Hearses – vehicles to carry coffins to funeral c. Mere declaration from insured only will suffice
d. None is required
40. The liability of the owner of the motor vehicle to pay compensation for death
claims on no fault of him under the Motor Vehicles Act, 1988 is 7. Which is the single largest portfolio in PSU non life insurance companies
a. Rs. 50000 a. Fire
b. Health
214 215
 c. Motor 15. Which document is not required in settling motor TP injury claim
d. Marine a. Policy copy
b. Coroner's Report
8. Under what circumstances the concept of total loss settlement is considered c. Road challan
a. Repairing cost exceeds more than 75% of IDV d. Driving License
b. Insured's refuses to get it repaired
c. Repairing cost exceeds more than 50% 16. Mr. A sold his vehicle to B who was enjoying 50% NCB what % of NCB
d. None would be enjoyed by 'B'
a. 50%
9. Articulated vehicle means b. 25%
a. Two wheeler attached with the side car c. 15%
b. Ambulance with oxygen cylinder d. Nil
c. A motor vehicle to which a semi trailer is attached
d. None 17. Maximum liability under TPPD without payment of premium under 2
10. Third party means employees wheeler is
a. Insured and its employees a. Rs. 2000
b. Insurer b. Rs. 3000
c. Any other person other than a & b c. Rs. 5000
d. None d. Rs. 6000

11. Motor Insurance Amendment Act 1989 came into effect 18. Vehicle enjoying 50% NCB lodged an OD claim. What would be NCB
a. 1st April 1989 allowable in its next renewal?
b. 1st June 1989 a. 15%
b. 25%
c. 1st July 1989
c. Nil
d. 1st Sept. 1989
d. 30%
12. Which section of the Motor Vehicle Act deals with Act liability cases?
19. Maximum amount of discount available under Motor OD premium in case
a. Section 140 & 166
where owner is having Automobile Association membership
b. 140 & 161
a. 10%
c. 140
b. 20%
d. 166
c. Rs. 200
d. Rs. 500
13. What is the maximum NCB allowed under Motor OD Premium
a. 30%
20. Under hit and run case what amount is payable in case of death?
b. 50%
a. Rs. 20,000
c. 45%
b. Rs. 30,000
d. 65%
c. Rs. 25,000
d. Rs. 40,000
14. Which of the following vehicles is recognized as Vintage Car
a. Vehicle manufactured before 31.12.1960
21. In case of partial loss settlement, % depreciation applicable to rubber items is
b. Vehicle manufactured before 1940
a. 30%
c. Vehicle manufactured before 1959
b. 40%
d. Vehicle manufactured before 1939
216 217
 c. 50% 28. Motor Trade Policy can be given to
d. 60% a. Motor Dealers
b. Motor vehicle financiers
22. Which of the following type of the vehicles do not generally carry overturning c. Individuals
risk as a tool of trade? d. Motor vehicle inspector
a. Auto rickshaw
b. Dumper 29. Lok Adalat settlement for MACT cases are
c. Mobile drilling rigs a. Compromise settlement
d. Both b & c b. Award given by court
c. Award given by a special tribunal
23. IDV of a vehicle is 2.5 Lakhs, assessed loss is 2.05 lakhs. What would be d. None of the above
insurer's liability?
a. Rs. 2.05 Lakhs 30. Sec 140 of MV Act deals with following
b. Rs. 2.05 Lakhs less excess a. Appeal to High Court
c. Rs. 2.50 lakhs b. Structural Compensation
c. No fault liability
d. None of the above
d. Defenses available to insurer
24. While underwriting a commercial vehicle which of the following is not
31. Depreciation is applicable on the basis of the following
considered?
a. Age of the party
a. Past OD claim history
b. Driving license
b. Break in insurance c. Age of the vehicle
c. Vehicle type d. Route permit
d. Past TP claim history
32. Which one of the following loss is not payable under Motor Package Policy?
25. For an investigator's report in a TP claim, following is not true: a. Cost of motor parts
a. Investigator's report brings out the location/time of accident b. Cost of Glass pats
b. Report should provide number of passengers being carried at time c. Labour charges
accident d. Consequential loss
c. The report is an accepted legal document in court
d. The report should verify the authenticity of the RC book 33. In case of Total loss which one is considered for settlement of claim
a. Market value of the vehicle
26. Motor Policy does not cover b. Depreciated value of the vehicle
a. Property damage c. Cost of parts and labour charges
b. Liability d. Insured declared value
c. Health
d. Personal Accident 34. Which type of cases are placed before Lok Adalat
a. Hit and run cases
27. The IDV is based on b. Workmen's compensation cases
a. The market value c. Consumer forum cases
b. Invoice value d. Cases pending before motor acct. claims
c. Book value
d. Commercial value 35. The amount of compensation payable in case of death u/s 140 of MV Act is
a. Rs. 15000
b. Rs. 7500
218 219
 c. Rs. 25000 42. Rating of goods commercial vehicle is based on
d. Rs. 50,000 a. Carrying capacity of vehicle
b. Unloaded weight of the vehicle
36. The amount of compensation payable in case of Grievous injury in Hit and c. Gross vehicle weight of vehicle
Run case is d. Age of the vehicle
a. Rs. 40000
b. Rs. 15000 43. Which of the following does not have policy excess?
c. Rs. 2500 a. 2 wheeler
d. Rs. 25000 b. Commercial vehicle
c. Private car vehicle
37. Long term Motor Insurance Policy is now available for the following classes d. None of the above
of vehicles
a. Private Car 44. Which of the following statements is true for NCB?
b. Two wheeler a. Policy is renewed after 12 months of expiry
c. Commercial vehicle b. NCB earned can be substituted
d. None of the above c. Vehicle stands transferred to spouse following death of insured
d. All the above
38. Agreed value policy in Motor Insurance can be issued for
a. Classic cases 45. Which section of the MV Act deals with the defense available to the insurers
b. Commercial vehicle under Motor Policy in respect of MACT Claims?
c. Vintage car a. Section 140
d. Private cars b. Section 143
c. Section 170
39. Maximum towing & spot repair charges payable in event of claims under d. Section 163 (A)
commercial vehicle
a. Rs. 1500 46. A motor accident claim victim can file a case in MACT for compensation
b. Rs. 1000 a. At the place of accident
c. Rs. 500 b. At the place where he resides
d. Rs. 2500 c. At the place of issuance of policy
d. All of the above
40. Maximum towing & spot repair charges payable under Pvt. Cars vehicle
a. Rs. 1000 47. 'Dealer' means a person who is engaged in
b. Rs. 1500 a. Building bodies for attachment to chassis
c. Rs. 1200 b. In repair of motor vehicle
d. Rs. 2000 c. In the business of hypothecation, leaving etc.
d. Authorized entity for sales and service of new vehicles
41. Which of the following statement is correct?
a. Motor policy issued for a short period can be extended 48. Which of the following statement is correct?
b. Motor policy can be extended by collecting difference of premium on a. Transfer of ownership shall not affect admissibility of liability in respect
short period basis. of Act only policy
c. Motor policy can be extended by collecting difference of premium on b. Transfer shall apply within 10 days to the insurer
pro-rata basis. c. Fresh proposal form is required for transfer
d. Motor policy issued on short period rating cannot be extended. d. Transfer of own damage portion is automatic

220 221
49. Which of the following is not relevant in Motor Vehicle Insurance? 56. Which one of the following is relevant for calculating repair liability under
a. Sec 146 of the Motor Vehicle Act 1988 Motor OD?
b. WC covers for workmen in charge of operation & maintenance of a. New for old
vehicle. b. Depreciation
c. IDV c. Survey fees
d. Reinstatement d. Garage rent
57. Compulsory Excess for two wheelers is
50. By which section of Motor Vehicle Act Motor Vehicle Insurance is made a. Nil
obligatory for plying in public places b. Rs. 50
a. See 146 c. Rs. 100
b. See 170 d. Rs. 150
c. See 176
d. See 420 58. The Cover note issued for a motor vehicle does not contain
a. Name of insurer
51. Which of the following is not relevant for determination of TP compensation b. Engine and chases No. or registration no.
under motor policy? c. Name of the driver
a. Age
d. Validity Period
b. Income
c. Sex
59. Non disclosure of a material fact shall make the policy
d. Dependency
a. Valid
b. Void
52. No Fault liability means No fault on the part of
c. Voidable
a. Public
d. Enforceable
b. Insured Vehicle
c. Third Party
d. Insurers 60. Which is not a factor for rating a two wheeler policy?
a. Side car
53. Which of the following is relevant for hit and run cases? b. Membership Automobile Association
a. Prime Ministers relief fund c. Make
b. Environment relief fund d. Age of the owner
c. Solatium fund
d. Public Provident Fund 61. Geographical extension is not allowed to which one of the following
countries
54. The transferee is entitled for a OD claim only when a. Nepal
a. RC is transferred in his names b. Bhutan
b. Sale consideration is paid c. Afghanistan
c. Insurance policy is transferred in this name d. Maldives
d. He holds a valid driving license
62. Under Total loss claim settlement basis:
55. The categorization of surveyor is done by a. Wreck need not be surrendered to the insurer
a. Head office of the company b. Partial salvage – can be surrendered and partly can be retained by the
b. GIPSA insured.
c. IRDA c. Full wreck has to be surrendered before claim settlement
d. Institute of Surveyors d. Full salvage/wreck can be surrendered after settlement

222 223
63. In case of Motor accident involving TP injury as well as own damage: 69. In case of motor vehicle accident, report of motor vehicle inspector is called
a. FIR is a must for to know
b. Only police certificate is sufficient a. The quantum of loss
c. Intimation to the insurer alone is sufficient b. The model of the vehicle
d. Driver statement c. Whether the accident was caused due to any mechanical breakdown
d. Third party loss
64. In a goods carrying vehicle:
a. Six persons can be carried as passengers 70. IDV principle brought peace in motor claim settlement because:
b. Any number of persons as passenger can be carried a. It liability at minimum
c. Only six persons as coolies for the purpose of loading/unloading can be b. It guides total loss settlement
carried c. It reduces disputes over total loss valuation
d. Strictly neither coolies nor any other persons can be carried d. Both (b) and (c)

65. In a 2 wheeler motor cycle policy, where owner/rider, who died in a road 71. Breach of trust occurs when:
accident whilst on drunken driving. Identify the correct statement a. Theft takes place from guarded parking lot
a. As there is no prohibition in the State, 100% PA claim can be settled to his b. Theft takes place from owners' friend's house
wife who is the claimant. c. Theft takes place due to negligently forgotten of key with the vehicle
b. As it is a death due to drunken driving, considering contributory d. Theft takes place with disappearance of driver with the vehicle
negligence 75% can be settled on non-standard basis, on compassionate
ground. 72. Percentage of depreciation in airbag is:
c. Claim has to be totally rejected as it is a drunken driving a. Depending on the age of the vehicle
d. 25% of the SI can be settled not more than that. b. Like depreciation of plastic parts
c. Like fibre glass components
66. In case of sale of motor vehicle: d. None of the above
a. Transfer of motor insurance policy is automatic to the purchaser
b. Transfer of name in the motor policy can be effected at the time of next 73. Which feature is not a u/w consideration for Motor Dept?
renewal
a. Color of car
c. Transfer of insurance policy to the purchaser can be effected any time
b. Cubic capacity
between name transfer in the RC to the expiry date of the policy
c. Age of vehicle
d. The transferee should apply within 14 days from the date of transfer of
ownership of the vehicle d. Hire & reward

67. Which of the following is not an accessory in motor vehicle? 74. IDV of new vehicle represents
a. Fog light Assy a. Invoice price
b. Steering wheel cover b. Invoice price less 5%
c. Driver seat assy c. Ex factory price
d. Sun visor d. Cost on road less 5%

68. Cash less settlement can only be done when: 75. IMT 23 deals with
a. Total loss is not possible a. Compulsory excess
b. Salvage cannot be evaluated b. Exclusion of special perils like flood, storm, typhoon
c. When the vehicle/claimant owner had died in the accident c. Exclusion of riot, strike and terrorism
d. Repairing of vehicle is economically not viable d. Replacement of lamps, tyres etc.

224 225
76. Which of the following is Miscellaneous and special type of vehicle? 83. Motor third party insurance is not required for two wheelers only when the
a. Scooter cubic capacity is less than
b. Trailer a. 100 cc
c. Agricultural tractors b. 35 cc
d. Taxi c. 50 cc
d. None
77. IDV of a vehicle of 7 years old is 84. Section 173 of MV Act relates to
a. Current invoice price less 50% a. TP property damage
b. Market price of 7 years old vehicle b. Appeal cases
c. Invoice less 70% c. Fault liability
d. Not to insure at any value d. None of the above

78. Which of the following countries is not covered under extension of 85. No appeal lies in High Court if the MACT compensation amount is less than
geographical areas? a. Rs. 1 Lakhs
a. Bangladesh b. Rs. 50,000
b. Bhutan c. Rs. 10,000
c. China d. Rs. 25,000
d. Nepal
86. Non Motor Policy can be issued in the following case
79. Concession for laid up vehicle can be given in which of the following cases a. Mobile crane
a. Vehicle can not be used due to accident b. Private car
b. Vehicle laid up in garage and not in use for more than one month c. Commercial vehicle
c. Vehicle laid up in garage and not in use for more than 2 months d. Motor cycle with 50cc
d. Vehicle under police custody
87. Under section 170 of MV Act insurer can get the right to contest the TP claim
80. Motor pool takes care of the following business on all grounds as of the owner in which of the following cases
a. Obligatory cession a. Collusion between driver and conductor
b. Declined insurers b. Collusion between insured and claimant
c. Third party commercial vehicles c. Collusion between driver and claimant
d. Third party all vehicles d. Collusion between insurance co. and claimant

81. Motor reinsurance is normally done on the following basis 88. Which of the following losses are not excluded under OD section of package
a. Quota share policy?
b. Facultative a. Consequential loss
c. Surplus treaty b. Depreciation of wear and tear
d. Excess of loss c. Mechanical and electrical failure
d. Fire damage
82. Motor trade road risk policy can be underwritten on the basis of
a. Type of vehicle 89. The Insurer can cancel the policy by sending notice of
b. Trade certificate a. 10 days
c. Dealership b. 15 days
d. Vehicle in transit c. 7 days
d. 30 days

226 227
90. No claim discount can be allowed provided a fresh policy is obtained within 97. TP insurance was first made mandatory in:
a. 30 days a. India
b. 180 days b. England
c. 90 days c. USA
d. 15 days of the expiry of the previous policy d. Soviet Union
91. In case of a private car package policy, the insured may authorize repairs 98. An MACT case can be filed:
necessitated by damage caused under policy provided estimated cost of such a. In the area of accident
repairs does not exceed: b. Anywhere in India
a. Rs. 1000 c. Any place near to U/W office
b. Rs. 500 d. At the place where the victim belonged to
c. Rs. 250
d. Rs. 1200 99. Which of the following is incorrect?
a. Insurance of a Motor Vehicle is compulsory
92. As regards risk of 'explosion' to be covered, it means: b. Policy can be insured for TP cover only
a. Only internal c. Educational qualification of the proposer
b. Both internal and external d. Anti theft devices fitted in the vehicle
c. Only external explosion
d. Covered only by additional premium 100.Which of the following doesn't have a bearing while accepting a motor
proposal?
93. Sum insured of a vehicle is based on: a. Moral hazard of the insured
a. Insured Market value b. Roadworthiness of the vehicle
b. Insured Declared value c. Educational qualification of the proposer
c. Insured Draft value d. Anti theft devices fitted in the vehicle
d. Insured Estimated value
101.Owner of goods traveling along in a goods vehicle will be treated for the
94. TP premium on a private car purpose of claims as:
a. Ceded entirely of GIC a. Insured
b. Ceded entirely of India Motor Pool b. Third party
c. Retained by U/W Company c. Gratuitous passenger
d. Shared by all PSUs d. Employee

95. TP Provision in a claim is kept 102.“Claim Enq. Officer” and “Claim Settlement Commissions” are part of:
a. Present trend of local courts a. MACT
b. Age factor of deceased b. EST Act
c. Rate of interest prevalent c. Soratium Fund
d. All above factors d. WC Act

96. What is not required in a Theft Case? 103.OD Claim under Comml. Vehicle chemical tanker will be considered if the
a. DL driver has:
b. Subrogation Bond a. Valid DL to drive any vehicle
c. FIR b. Valid DL to drive a tanker
d. FR c. Valid DL endorsed with handling of hazardous chemicals
d. Valid DL with 5 years experience in driving a tanker

228 229
104.Application for compensation to be made at MV Act 111. By collecting additional premium Rs. 25 to cover the workmen in-charge of
a. Place of accident the vehicle, the policy provides an option for preferring a claim under:
b. Place of insurance a. MV Act only
c. Place of residence of the claimant b. WC Act only
d. Any of the above c. Either MV Act or WC Act
d. Common law
105.The time limit normally allowed for presenting claim petition u/s 166 is
a. 3 months 112. Refund of premium on account of double insurance of motor vehicles can be
b. 6 months allowed on pro-rata basis only for the period during which
c. 9 months a. The policy proposed for cancellation is in force
d. 1 year b. The policy not proposed for cancellation is in force
c. Both the policies are in force on the date of cancellation
106.In respect of TP Claims, the insurance company can repudiate liability d. Both the policies are concurrently in force
a. Only if it proves that the DL was not valid and the driver was disqualified
from having a license on the date of accident 113. WC Claims under Motor Policies can be appealed only after
b. If the driver was in possession of the learning license a. Conditional satisfaction of the order of the labor commissioner
c. If the DL had expired b. Compliance of notice period
d. None of the above c. Approval of competent authority
d. Satisfaction of the award
107.On the date of accident, the Insured had sold the vehicle and the policy was not
transferred under the circumstances 114. Which of the following statement is correct?
a. The Insured Co. can deny TP Liability a. Misc. type of vehicles warranting registration as per MC Act can not be
b. The Insured Co. cannot deny TP liability covered under CPM policy
c. The insured Co. can pay OD claim and deny TP claim b. Excess applicable to miscellaneous type of vehicle is 0.5% of IDV
d. None of the above subject to a minimum of Rs. 2500.
c. An ambulance can be insured as a private car
108.OD claims arising out of collision of vehicles are processed on the basis of: d. Claims arising out of accident due to overturning of vehicle whilst in
a. Normal claims handling procedure operation as a tool of trade is payable under a standard motor policy
b. Knock for knock agreement
c. Market agreement 115. Which document is not required for OD claim processing?
d. Memorandum of understanding a. Registration book of vehicle
b. Assessed loss statement
109.Red lining in Motor Insurance means c. Driving license of driver while accident
a. Scope of the policy d. Driving license of the insured
b. Compliance of notice period
c. Timing requirements 116. Following documents are not required for TP claim processing:
d. Geographical limits a) Summon from Court
b) Purchase receipt of vehicle
110. A third party liability is often awarded against more than one insurer in case of c) Police report
a. Dispute on admissibility of claim d) Insurance Policy
b. Absence of insurance policies
c. Unenforceable policies produced 117. For which type of vehicles India is divided into three zones:
d. Contributory negligence a) Private Car

230 231
 b) Commercial Vehicle – Passenger carriers 124.Insurance Agency Commission is not allowed under
c) Two Wheelers a) Commercial vehicles
d) Motor trade b) Two wheelers
c) All Third party insurances
118. What are the other countries, which cannot be covered under motor vehicle d) Only third party private car insurance
insurance issued in India?
a) Nepal 125.Insurer's liability towards third party ceases
b) Bangladesh a) When owner is not the insured
c) Myanmar b) When new owner shows another insurance policy
d) Pakistan c) After motor total loss claim is paid
d) On the death of the insured
119. Sunset clause refers to
a) Vintage vehicles 126.Motor vehicle insurance is not compulsory if:
b) Constructive total loss a) Engine is below 35 cc without gear
c) No claim bonus b) If it is registered as per MV Act
d) Expiry of the policy c) If it is being used within a premises all the time

120.Public place is defined under MV Act as: 127.What is not a factor for making provision for Motor TP claim?
a) Factory premises a) Applicant's amount claim
b) Public needs b) Legal expenses
c) All places where public can access c) Interest on delayed settlement
d) Public sector companies premises d) Interest already gained on incurred claim not yet paid

121.For constructive total loss under motor vehicle policy payable loss has to KEY – MOTOR INSURANCE TRADE QUESTION PAPER
constitute more than what percentage of IDV
a) 50%
1 C 11 B 21 B 31 D
b) 60%
c) 75% 2 C 12 A 22 C 32 D
d) 90%
3 B 13 D 23 B 33 D
122.Which one is an add-on cover under motor vehicle insurance?
4 D 14 C 24 C 34 D
a) Volcanic outburst
b) Mechanical Break Down 5 C 15 D 25 A 35 C
c) Meteorite strike
d) Personal Accident coverage to employees 6 C 16 C 26 B 36 D
7 D 17 D 27 C 37 A
123.Which is not a factor for structured compensation under Motor Third Party
liability? 8 D 18 C 28 A 38 A
a) Age of the deceased
b) Dependency of the complaint 9 C 19 B 29 C 39 A
c) Income of the deceased 10 D 20 B 30 A 40 A
d) Income of the insured

232 233
 KEY – MOTOR MODEL QUESTION PAPER 1. As per sec. 158 (6)
1. B 33. D 65. C 97. B a) It is mandatory for police to forward a copy of accident report within 30
days to insurance company
2. C 34. D 66. D 98. B
b) The owner of the vehicle has to produce within 30 days the certificate of
3. C 35. D 67. C 99. D
insurance to the police
4. C 36. C 68. D 100. C c) The owner of the involved vehicle is required to give any information as
5. B 37. B 69. C 101. B required by the police officer to determine whether the vehicle was or
6. A 38. C 70. D 102. C wasn't being driven in contravention of sec. 146
7. C 39. D 71. D 103. C d) It is mandatory for the officer in charge of the police station to forward a
8. A 40. B 72. B 104. D copy of accident report within 30 days to Claims tribunal as well as the
concerned insurance company.
9. C 41. D 73. A 105. B
10. C 42. C 74. B 106. A
2. The loaded truck was going from Chandigarh to Delhi. A vendor with the
11. C 43. D 75. D 107. B
permission of the driver undertook a journey in between in the cabin of a truck
12. A 44. D 76. C 108. A with a bag of vegetables meant for sale. He died in accident when the truck hit
13. B 45. C 77. A 109. B a road side tree. As per which section of the MV Act, the insurance company
14. B 46. D 78. C 110. D can say that the vendor with head load of goods is not covered?
15. B 47. D 79. C 111. C a) Sec. 147
16. D 48. A 80. C 112. D b) Sec. 149 (2)
17. D 49. D 81. D 113. D c) Sec. 170
d) No defence is available to the insurance company since owner of the
18. C 50. A 82. B 114. B
goods are covered under the amended act.
19. C 51. C 83. B 115. D
20. C 52. B 84. B 116. B
3. As per sec. 170
21. C 53. C 85. C 117. B a) Appeal on negligence issue in High Court cannot be filed unless petition
22. B 54. C 86. A 118. C u/s 170 has been filed in the trial court
23. B 55. C 87. B 119. C b) Appeal in High Court challenging the quantum can be filed only if the
24. D 56. B 88. D 120. C petition u/s 170 has been filed in the trial court.
25. C 57. B 89. C 121. C c) The defence by insurance company is available to establish the fraud case
26. C 58. C 90. C 122. D at the trial court
d) Insurance company can contest the case on breach of policy conditions.
27. B 59. B 91. B 123. D
28. A 60. D 92. B 124. C
4. The insured of a private car has lodged a claim under third party section of the
29. A 61. C 93. B 125. B
package policy claiming compensation of Rs. 30,000/- which he had given at
30. C 62. C 94. C 126. A the spot of the accident to the injured victim to get away from the furious mob.
31. C 63. A 95. D 127. A He has produced a valid stamped and notarized receipt from the injured.
32. D 64. C 96. A Which section allows payment of compensation to the insured under the said

234 235
 circumstances? 9. Who is competent witness to depose on behalf of company to deny negligence
a) Sec. 151 in an accident involving two vehicles insured by two different companies?
b) Sec. 157 a) Driver of our insured vehicle
c) Sec. 158 b) Driver of other vehicle
d) None of the above c) Our investigator
d) Police officer
5. An unskilled & bachelor labourer aged 23 years dies in an road accident.
Which of the following documents is vital for determining the compensation 10. As per the landmark judgment of Apex Court in Sarala Varma Vs. DTC case-
payable? a) Prospective income is to be taken into account while calculating
a) Age proof of the deceased compensation for the deceased person engaged in permanent job prior to
b) Income proof of the deceased his death.
c) Occupation of the father b) The loss of dependency for death cases is to be calculated on the basis of
d) Age of the mother of the deceased. number of dependents
c) Income tax and professional tax is to be deducted before calculating the
6. The Branch Manager of an Insurance company is travelling in the company loss of income
pool car and insured under a package policy with legal liability to driver. The d) All of the above.
accident resulted in the death of the Branch Manger and injury to the driver.
As per the terms and conditions of the package policy, compensation is
11. Compensation in motor accident cases on the principle of no fault liability is
payable to
payable under
a) Driver only
a) Sec. 166 of M V Act
b) Branch Manager only
b) Sec. 140 of M V Act
c) Both to the driver and Branch Manager
c) Sec. 163A & Sec. 140 of M V Act
d) None of the above
d) Sec. 163 A of MV Act

7. Which document is the most essential for settlement of injury claims before
12. The land mark judgment in NIC Vs. Challa Bharatramma relates to the
Lok Adalat?
following documents
a) income certificate of the injured
a) Permit
b) age proof
b) DL
c) injury certificate
c) Fitness certificate
d) medical bills
d) Cheque dishonour

8. What is the limitation period for filing appeal in the High Court?
13. What defence is available to insurer to deny liability in a claim of motor
a) 90 days from the date of the award
accident involving a bus against death/injury to the passengers?
b) 30 days from the date of the award
a) The drunkenness of driver
c) 90 days from the date of the award plus the time taken by court to supply
b) No Fitness of the bus
certified copy.
c) Overloading of passenger carrying capacity
d) 30 days from the date of receipt of certified copy of award from the
advocate
236 237
 d) All of the above
e) None of the above

14. What is the time limit for filing WS in MACT Case as per the CPC
ammendment?
a) 30 days
b) 60 days
c) 90 days
d) No time limit

ANSWER KEYS
Question No. Answer
1 D
2 A
3 B
4 D
5 D
6 A
7 C
8 C
9 A
10 D
11 C
12 A
13 B
14 A

238 239
 MARINE CARGO

PECULIARITIES OF MARINE INSURANCE

•Governed by a special Act called “Marine Insurance Act 1963”
•Cargo policies are freely assignable
•Insurable interest is a must at the time of loss-ppi makes all the difference
•“Inco Terms” is only an indication “who can insure”
•Utmost Good Faith is a statutory obligation on the insured as per the Act
•Indemnity – Under Marine Insurance
•In the manner and to the extent agreed
•Normally CIF plus 10% which is intended to include the general
overheads and perhaps a margin of profit
•Provides a commercial or modified form of indemnity
•Value agreed in case of total loss and a percentage depreciation in case of

MARINE INSURANCE
partial loss

STANDARD FORM OF MARINE POLICY

•The current policy form contains no insuring conditions
•The terms and conditions are setout in the appropriate Institute Cargo
Clauses and other Clauses.
•Policy is issued for covering individual consignment from named
starting point to final destination point.
•It should be stamped as required by the Indian Stamp Act.
•A contract of marine insurance shall not be admitted as evidence unless it
is embodied in a marine policy in accordance with the Marine Insurance
Act 1963 (Sec. 24)

SCHEDULE OF MARINE POLICY

BESIDES NAME OF THE INSURED AND ITS POLICY ISSUING OFFICE
DETAILS THE SCHEDULE
1. Policy Number
2. Name and address of the assured with bank interest if any
3. Name of the vessel carrying the cargo
4. Description of the voyage/transit
5. Subject matter insured with description of packing description of the
marks and numbers
6. B/L; R/R; L/R with dates

240 241
 7. The sum Insured – Basis of Valuation
8. The premium – Marine and War & SRCC
9. Name and address of the surveyor/claim settling agent to be approached
in case of claim.
10. Terms of Insurance cover granted – clauses, special conditions and
warranties.
CARGO POLICIES COVERAGES
•Policy form does not contain insuring clauses
•Terms of cover are specified by means of various Institute Cargo Clauses
and endorsements attached.
•The prominent clauses are :
a) Institute Cargo Clauses A, B & C
b) Institute Ware Clauses (Cargo)
c) Institute strikes Clause (Cargo)
d) Institute Ware Clauses (Air Cargo)
e) Institute strikes Clause (Air Cargo)
f) Institute Rail/Road Clause
g) Strike Riots and Civil Commitions clause
h) Institute Trade Clauses
INSTITUTE CARGO CLAUSES A, B & C COVERAGE
INSTITUTE CARGO CLAUSES 'C' COVER
1) Fire or explosion
2) Vessel/Craft being stranded, grounded, sunk or capsized
3) Overturning/derailment of land conveyance
4) Collision or contact of vessel, craft or conveyance with any external
object other than water
5) Discharge of cargo at a port of distress
6) General Average sacrifice
7) Jettison
8) General Average and Salvage charges incurred to avoid loss from any
clause(s) except those excluded.
9) Liability under “Both to blame collision” clause of the bill of lading.
10) Charges reasonable and properly incurred to avert/minimize an insured
loss and to preserve and pursue recovery rights.
11) In the event of termination of transit at a port or place other than
destination port or place resulting from a risk covered, EXTRA
CHARGES incurred in unloading, storing and forwarding insured cargo
to destination.
242
INSTITUTE CARGO CLAUSES 'B’ COVER
Besides all coverage under ICC 'C', the ICC 'B'
Covers the following addl. Perils.
• Earthquake, volcanic eruption or lightning
• Washing overboard
• Entry of sea, lake or river water into the vessel, craft, hold, conveyance,
container, lift van or place of storage
• Total loss of any package lost overboard or dropped whilst loading or
unloading from vessel or craft.
Extraneous Perils that can be covered ICC 'C' & 'B' at appropriate addl. premium
• Theft, pilferage and/or non-delivery
• Fresh water and rain water damage
• Damage by hooks, oils, mud, acid and other extraneous substances
• Heating and sweating
• Damage by other cargo
The above perils are automatically covered under ICC 'A'
GENERAL EXCLUSIONS UNDER INSTITUTE CARGO CLAUSES
1. Willful misconduct of the Assured
2. Ordinary leakage, ordinary loss in weight/volume, or ordinary wear and
tear of the subject matter insured
3. Insufficient and unsuitability of packing
4. Inherent wise or nature of the subject matter
5. Delay even though caused by insured perils
6. Insolvency or financial default of the ship owners
7. Nuclear perils
8. Unseaworthiness and unfitness of the vessel/conveyance (if the Assured
is not aware of)
9. War and warlike perils and strike perils.
War perils and strike perils can be covered concurrently by attaching Institute War
and Strike Clauses.
DURATION OF COVER UNDER INSTITUTE CARGO CLAUSES
1. The risk attaches from the time the goods leave the warehouse or place of
storage at the place named herein for the commencement of the transit,
continues during the ordinary course of transit and terminates either.
2. On delivery to the consignees or other final warehouse or place of storage
at the destination named herein.
243
 3. On delivery to any other warehouse of place of storage whether prior to • Delay
or at the destination named herein which the Assured elect to use either, • Inherent vice or nature of subject matter
a) For storage other than in the ordinary course o transit or
• War perils
b) For allocation or distribution
or • Strike perils
4. On the expiry of 60 days after completion of discharge over side of the (Strike perils can be covered at an additional premium by attaching SRCC clauses)
goods hereby insured from the oversea vessel at the final port of
discharge, whichever shall first occur. TIME LIMITS AS PER TRANSIT CLAUSES OF VARIOUS CARGO
CLAUSES
INSTITUTE TRADE CLAUSES • ICC A, B AND C 60 DAYS
1) Institute Commodity Trade Clause A, B & C • ICC AIR CARGO 30 DAYS
2) Institute Coal Clauses • INLAND TRANSIT 7 DAYS
3) Institute Jute Clauses • WAR CLAUSES (SEA) WATERBORNE
4) Institute Natural Rubber Clauses
• WAR CLAUSES (AIR) ON DISCHARGE
5) Institute Timber Trade Federation Clauses
6) Institute Bulk Oil Clauses • STRIKE CLUASE (SEA) 60 DAYS
7) Institute Frozen Food Clauses – Exclg. Meat • STRIKE CLAUSE (AIR) 30 DAYS
8) Institute Frozen Meat Clauses 'A' & 'C’ • SRCC 7 DAYS
• COMMODITY TRADE 60 DAYS
INLAND TRANSIT RAIL/ROAD CLAUSES 'C'
• COAL 60 DAYS
• JUTE 15 DAYS
RISK COVERED UNDER CLAUSE - ‘C’
1. Fire • NATURAL RUBBER 30 DAYS
1. Lightning • TIMBER 60 DAYS
• BULK OIL 60 DAYS
RISK COVERED UNDER CLAUSE - ‘B’
• Besides coverage under 'C' the clauses 'B' additionally covers : INCIDENTAL CLAUSES
1. Breakage of bridges • COMPREHENSIVE CLAUSE
2. Coalition with or by the carrying vehicle • INSTITUTE REPLACEMENT CLAUSE
3. Overturning of the carrying vehicle
• PAIR AND SET CLAUSE
4. Derailment of accident of like nature to the carrying rail
wagon/vehicle • CUTTING CLAUSE
• LABLE CLAUSE
RISK COVERED UNDER CLAUSE - ‘A’ • PICKING CLAUSE
All risks except those specifically excluded • CARBLING CLAUSE

INLAND TRANSIT RAIL/ROAD CLAUSES - EXCLUSIONS FACTORS INFLUENCING THE RATING

• Willful misconduct 1. VESSEL
• Ordinary/inevitable loss or damage • Overage
• Insufficient or unsuitable or preparation • Tonnage

244 245
 •Flag GA Expenditure
•Type • Cost of entering and leaving the port of refuge and the cost of loading and
reloading of cargo at a port of refuge and incidental storage charges
•Classification
• Hire charges for craft for lightening the vessel or hire charges for tugs
used to tow the vessel to a port of refuge
2. SUBJECT MATTER
• Wages and maintenance of crew members for the extra time
• Nature of packing
•Bulk or bagged cargo Sue and Labour Charges
• Inherent vise or Nature of cargo • Incurred in terms of duty of the assured clause
3. PROPOSER • Expenses reasonably incurred for averting or minimising the loss
• Status • Payable irrespective of percentage even in addition to total loss
•Moral Hazard • Incurred short of destination
• Reconditioning cost to prevent aggravation of damage-hides damaged
4. Terms of Cover by sea water –extra fader for live cattle on board
• Restricted • Incurred when loss is eminent/threatened not short of destination is
•All Risk Cover particular charge as well as sue and labour

5. VOYAGE Salvage Charges

• Route • Remuneration charged on “no-cure-no-pay” basis by the salvors who
voluntarily and independently of any contract render services to rescue or
•Distance and Destinations
save the property endangered at sea
• The charges are substantial. The admiralty Court and other courts
GENERAL AVERAGE
recognise and encourage such charges
• A loss caused by or directly consequential on a general average act. • The salvors are having the lean over the property saved till their charges
•The act include a GA sacrifice as well as a GA expenditure – Voluntarily are paid
and intentionally but reasonably made or incurred in time of peril for the
common safety of the property imperiled in a maritime adventure TYPE OF CARGO POLICIES
•Specific Policy
GA Sacrifices
•Open Policy
• Damages to ship's anchors and/or cables whilst attempting to refloat a
•Special Declaration Policy
stranded vessel
•Annual Policy
• Bulkhead broken to reach the seat of fire in the lower holds
•Open Cover
•Sails and spares lost while forcing the vessel off the ground
•Sellers' Contingency Policy
•Burning of ships materials as fuel to reach nearest port of refuge in time
•Duty and Increased Value Policy
of peril
•Jettisoning of cargo and freight lost on the same SPECIFIC POLICY
•Damage to other cargo by water used for fire fighting • Isolated shipments covered by issue of individual policies for a specific
voyage/transit

246 247
OPEN POLICY
• A type of floating policy and it is a stamped documents
• To take care of frequent transit with considerable turnover
• Issued for covering inland transit
• Sum insured normally representing annual turnover – can be enhanced
from time to time to suit the requirement
• Unstamped certificate can be issued for each dispatch/declaration – Sec
31 of the Act – declaration should be in the order of dispatch
• Sum insured stands reduced gradually to the extent of dispatches
declared
• Policy ceases on expiry date or on exhaustion of the total sum insured
whichever shall first occur
• Limit per bottom and limit per location clearly specified
• Basis of valuation specified
• Rate of premium and terms of cover agreed in advance and remained
unchanged throughout the policy period
• Provide for inspection of insured's records
• Subject to cancellation with 30 days notice
SPCIAL DECLARATION POLICY
• SDP is form of floating policy to clients having large turnover and
frequent inland dispatches – minimum turnover stipulated is Rs. 2 crores
– accepted on the basis of completed proposal
• Can not be assignable or transferable but claim can be settled in favour of
consignee with consent of the insured
• Sum insured shall be on the basis of previous year's turnover or estimated
annual turnover
• Entire premium charged on the total turnover/sum insured is collected in
advance – discount in premium up to a maximum of 50% is allowed on
slab system based on turnover
ANNUAL POLICY
• Issued for 12 months period
• Only to cover transport of goods belonging to or held in trust by the
insured amongst depots owned or hired by the insured within the country
• The sum insured should represent estimated annual turnover – premium
depends on distance and single carrying limit e.g. < 80 km twice SCL or
1% of T/o; > 8- km and < 500 km 4 times SC – or 2% of T/o >500 km 6
248
times SCL or 3% of T/o – the rate of premium is charged on these limits
only and not on the total turnover
•Policy is subject to condition of average
•Policy is not assignable or transferable – no contract of afrieghtment is
necessary
•Accepted on the basis of completed proposal
•Reinstatement of sum insured upon payment of claim is permitted
•Basis of valuation should be prime cost plus expenses incidental to transit
OPEN COVER
• To provide continuous, automatic and guaranteed coverage to a regular
importer or exporter issued for a period of 12 months with out specifying
the sum insured – only limit per bottom and limit per location are
specified
• Unstamped document – only an agreement in writing
• Individual stamped certificate/policy is issued on receipt of shipment
details
• Rate of premium terms and conditions are setout in the open cover and
remain unchanged throught the period
• Unintentional genuine omissions is held covered
• Subject matter is broadly defined
• Basis of valuation is specified
• Cancellation – 30 days for marine & 7/2 days for War & SRCC
SELLER'S INTEREST CONTIGENCY
• To cover physical loss or damage to consignment sold on FOB and C&F
contracts in case the buyer repudiates the sale or fall to honour the
shipping documents by reason of total loss of consignment during
voyage.
• Normally combined with the seller's cargo insurance covering the goods
from his warehouse until it is loaded onto the ship. When it is done so,
the cover attaches during transit from warehouse to ship and gets
suspended after loading on to the ship. The cover reattaches with
retrospective effect when the above contingencies takes place.
• Consequent expenses on storage and transshipment are not covered.
• Claim recoverable under ECGC of India is also not payable
• Existence of such policies should be made more secretive to avoid
possible misuse.
249
 •The insured's status and the moral hazard are the prime factors for the 1. Institute Time Clauses-Hulls-Total Loss, General Average and
acceptance of the proposal. three-fourths (3/4ths) Collision Liability (01.10.1983)
2. Institute Time Clauses-Hulls-Total Loss only (including Salvage,
DUTY & INCREASED VALUE POLICY Salvage charges and sue and Labour), 01.10.1983
• Insurance is on increased value of the cargo by reason of payment of
custom duty at destination. Institute Time Clauses-Hulls-Disbursements and Increased Value (Total Loss
only, including Excess Liabilities), 01.10.1983
• Insurance is on increased value by reason of market value of goods at
destination on the date of landing
ITC-HULLS, 01.10.1983
• Not on agreed value policy and pays for only pure indemnity. Indemnity provided for :
• Can be issued only when there is a basic CIF Insurance 1. Total loss of vessel including actual and constructive total loss.
• Issued in favour of persons holding import license or any other persons in 2. Cost of repairing damages – it includes particular Average and General
whose favour the import license is officially endorsed. Average sacrifices.
• The scope and duration are identical to the CIF Insurance. 3. Unrepaired damage – allowance for depreciation in the value on expiry
• In case of duty insurance a fraction of rate of premium of CIF insurance is provided the ship has not become a total loss during the policy period.
charged and in case of increased value 100% rate of premium is charged. 4. Sue and Labour expenses
5. Salvage charges
• Claim is admissible only when claims under CIF policies admitted.
6. General Average Contribution
• Cannot be issued after arrival of the vessel at destination. 7. 3/4th collision liability
PERILS COVERED
MARIN HULL Uncontrollable:-
•Intend to provide insurance cover to ship owners' for their various • Perils of the seas, rivers, lakes or other navigable waters;
insurable interest • Fire, explosion;
• Violent theft by persons outside the vessel;
SUBJECT MATTER FOR INSURANCE • Jettison;
1. Hull & Machinery • Piracy;
2. Freight at risk
• Breakdown of or accident to nuclear installations or reactors;
3. Disbursement and Increased value
4. Premium reducing • Contact with aircraft or similar object, or objects falling there from land
5. Return of Premium conveyance, dock or harbour equipment or installation;
6. Loss of hire • Earthquake, volcanic eruption or lightning.
7. Loss of Profit
8. Ship repairs Controllable:
9. Builder's Risk • Accidents in loading, discharging or shifting cargo or fuel;
10. Charter's Liability • Bursting or boilers, breakage of shafts or any latent defect in the
machinery or hull;
COVERAGE • Negligence of master, officers, crew or pilots;
•Terms of cover for the marine hull policies are set out in the form of • Negligence of repairers or charterers, provided such repairers or
Institute Time Clauses – Hulls charterers are not the assured under the policy;
•The variation limiting the hull cover is provided as follows :

250 251
 •Barratry of master, officers or crew – provided such loss/damage has not •Prevailing repair cost
resulted from want of due diligence by the assured, owners or managers. •Collision bulk head
•Propulsion
Other Perils:- •Engine particulars
• Pollution Hazards provides cover if the vessel is damaged by deliberate •Capacity of fuel tank
action by govt. authorities following casualty covered under the policy to •FEA
avoid pollution.
•Valuation
• 3/4th Collision liability
•Classification
•Registration
1. Loss/Damage to any other vessel or property on any other vessel;
2. Delay to or loss of use of any such other vessel or property thereon; •Pre Insurance Survey
3. General Average of, salvage of, or salvage under contract of, any such •Trading Warranty
other vessel or property thereon; •Claims experience
•Cover Required
TERMINATION CLAUSE •Moral Hazard
• On change of classification
• Change, suspension, discontinuance, withdrawal or expiry of class of the PROTECTION & INDEMNITY COVER
vessel. •Association of ship owners for mutual benefit with separate legal entity
• Change of ownership or flag managed by board of directors and full time employees.
• Transfer of management •Financed by initial premium paid by members. Additional requirements
• Change of charter on bareboat basis are paid by members on calls.
•Provide protection to its members towards
• Requisition for title or use of the vessel – 15 days cover provided for
1. Statutory obligation towards master and crew members as provided
regularisation
by mercantile shipping Act.
2. Contractual liabilities towards cargo owners as per provided in the
UNDERWRITING CONSIDERATIONS bill of lading.
•Type of vessel 3. 1/4th Collision liability
•Construction 4. Cost incurred towards removal of wreck from the harbour/port
•Name of the builder 5. Damage towards Jetties, wharves etc and other properties of the port
•Year of make authorities.
•Age of the vessel
TYPES OF LOSSES
•Tonnage (GRT & DWT)
•Single/Double bottom
1. TOTAL LOSS ACTUAL
•Single/Twin engine Where the subject matter is destroyed, or so damaged as to cease to be thing of the
•Flag kind insured, or when the assured is irretrievably deprived off.
•Trade
•Singleton/Fleet 2. CONSTRUCTIVE TOTAL LOSS
•Management of Vessel When the subject matter is reasonably abandoned because either the actual total
loss appears unavoidable or to prevent the actual total loss the required

252 253
expenditure is more than the saved value.
When the insured is deprived of the subject matter and it is unlikely that he can
recover it or the cost of recovery would exceed its value when recovered.

3. PARTICULAR AVERAGE
Partial loss of the subject matter which does not include a general average loss.

4. GENERAL AVERAGE
GA sacrifices as well as a GA expenditure voluntarily and intentionally but
reasonable made or incurred in time of peril for the common safety of the property
imperiled in a maritime adventure.

5. SUE & LABOUR CHARGES

These are incurred in terms of duty of the assured clause. These expenses
reasonably incurred for averting or minimising the loss. It is payable irrespective
of percentage even in addition to total loss. It should Incurred short of destination.
Reconditioning cost to prevent aggravation of damage – hides damaged by sea
water – extra fader for live cattle on board.

6. PARTICULAR CHARGES
Reconditioning cost incurred when loss is eminent/threatened not short of
destination is particular charge as well as sues & labour.

7. SALVAGE CHARGES
Remuneration charged on “no-cure-no-pay” basis by the salvers who voluntarily
and independently of any contract render services to rescue or save the property
endangered at sea.

8. EXTRA CHARGES
Survey fees and sale charges etc.

254 255
 AVIATION INSURANCE
HISTORY
•WRIGHT Brothers - The real pioneers 1903
•Initial Flight Records:
•1903 duration12 seconds height 120 ft
•1918/19 duration one hour speed 125 miles per hour for 33 hrs (non-
stop)
By Charles Lindborgh “Translantic Flight” – from America to Europe
•Highest recorded number of single type of aircraft ever manufactured DC
- 3 - DAKOTA by Douglas USA.
•1st commercial flight - London - Paris in 1919.
•British and French Industry produced 'CONCORDE' that used to fly
faster than the speed of sound.

AVAITION INSURANCE •
•

•
BOEING X AIRBUS Industries presently dominate the Market.
Research and development is proactive in prevention of accidents eg.
ANTI -COLLISION System, Smoke Detection System.
1910 – First Accident Damage Cover offered
•Only Passenger and Third Party Liability Covers issued initially.
•Post 1st World war First Policy under Aviation business was issued in
Marine Hull Section to cover the aircraft.
•Aviation Insurance – influenced by Marine and Accident Insurance
•1934 – British & European Underwriters formed International Union of
Aviation Insurers
•Post World War II British Aviation Insurance Group developed a
comprehensive policy with Hull and Liability Sections
•1960 LAD was set up
•1993 – AVN 67B
•09/11 incidents had given huge impact on Aviation Insurance.

AVIATION INSURANCE CUSTOMERS:

•Airlines
•Private Operators
•Pilots / Crew
•Aircraft Manufacturers / Repairers / Service Providers at the airport
•Airport Owners
•Re-fuellers

256 257
IMPORTANT AVIATION COVERS:
•Aircraft Policy covering Aircraft Hull and Liabilities
•Spares All Risks Cover
•Hull War Risks Cover
•Pilot / Crew Personal Accident
•Pilot Loss of License
•Airports Owners / Operators' Liability
•Aircraft Refueling Liability
•Hull Deductible Insurance
•Unearned Premium Insurance
DEFINITIONS
AIRCRAFT : The word aircraft would mean the aircraft described herein and in
addition to the airframe shall include power plants, propellers, rotors and
appliances forming part of the aircraft at the inception of coverage hereunder,
including parts detached and not replaced by other similar parts.
FLIGHT: Flight means from the time the Aircraft moves forward in taking off or
attempting to take off, whilst in the air, and until the Aircraft completes its landing
run. A rotor wing aircraft shall be deemed to be in Flight when the rotors are in
motion as a result of engine power, the momentum generated there from, or
autorotation.
GROUND: Ground means whilst the Aircraft is not in Flight or Taxiing or
Moored as defined above.
TAXIING: Taxiing means movement of the aircraft under its own power (other
than in flight as defined above). Taxiing shall not be deemed to cease merely by
reason of a temporary halting of the Aircraft.
MOORED: Moored means, in the case of aircraft designed to land on water,
whilst the aircraft is afloat and is not in Flight or Taxiing (as defined above), and it
includes the risks of launching and hauling up.
WAR, HI-JACKING AND OTHER PERILS EXCLUSION
CLAUSE (AVIATION) AVN48B
This Policy does not cover claims caused by
a) War, invasion, acts of foreign enemies, hostilities (whether war be
declared or not), civil war, rebellion, revolution, insurrection, martial
258
law, military or usurped power or attempts at usurpation of power.
b) Any hostile detonation of any weapon of war employing atomic or
nuclear fission and/or fusion or other like reaction or radioactive force or
matter.
c) Strikes, riots, civil commotions or labour disturbances.
d) Any act of one or more persons, whether or not agents of a sovereign
power, for political or terrorist purposes and whether the loss or damage
resulting there from is accidental or intentional.
e) Any malicious act or act of sabotage.
f) Confiscation, nationalisation, seizure, restraint, detention,
appropriation, requisition for title or use by or under the order of any
Government (whether civil military or de facto) or public or local
authority.
g) Hi-jacking or any unlawful seizure or wrongful exercise of control of the
Aircraft or crew in flight (including any attempt at such seizure or
control) made by any person or persons on board the Aircraft acting
without the consent of the Insured.
Furthermore this Policy does not cover claims arising whilst the Aircraft is outside
the control of the Insured by reason of any of the above perils. The Aircraft shall be
deemed to have been restored to the control of the Insured on the safe return of the
Aircraft to the Insured at an airfield not excluded by the geographical limits of this
Policy, and entirely suitable for the operation of the Aircraft (such safe return shall
require that the Aircraft be parked with engines shut down and under no duress).
EXTENDED COVERAGE ENDORSEMENT (AVIATION
LIABILITIES): AVN52D
1. WHEREAS the Policy of which this Endorsement forms part includes the
War, Hi-Jacking and Other Perils Exclusion Clause (Clause AVN48B), IN
CONSIDERATION of an Additional Premium of ....................., it is hereby
understood and agreed that with effect from ....................., all sub-paragraphs
other than ............ of Clause AVN48B forming part of this Policy are deleted
SUBJECT TO all terms and conditions of this Endorsement.
2. EXCLUSION applicable only to any cover extended in respect of the deletion
of sub-paragraph (a) of Clause AVN48B
259
 Cover shall not include liability for damage to any form of property on the b) Limited Cancellation (48 hours)
ground situated outside Canada and the United States of America unless Following a hostile detonation as specified in 4 (ii) above, Insurers may
caused by or arising out of the use of aircraft. give notice of cancellation of one or more parts of the cover provided by
paragraph 1. of this Endorsement by reference to sub-paragraphs (c), (d),
3. LIMITATION OF LIABILITY (e), (f) and/or (g) of Clause AVN48B - such notice to become effective on
The limit of Insurers' liability in respect of the coverage provided by this the expiry of forty-eight hours from 23.59 hours GMT on the day on
Endorsement shall be a sub-limit of US$ 50,000,000 or the applicable Policy which notice is given.
Limit whichever the less any one occurrence and in the annual aggregate
except with respect to passengers to whom the full Policy limit(s) shall apply. c) Cancellation (7 days)
This sub-limit shall apply within the full policy limit and not in addition The cover provided by this Endorsement may be cancelled by either
thereto. Insurers or the Insured giving notice to become effective on the expiry of
seven days from 23.59 hours GMT on the day on which such notice is
4. AUTOMATIC TERMINATION given.
To the extent provided below, cover extended by this Endorsement shall
TERMINATE AUTOMATICALLY in the following circumstances: d) Notices
All notices referred to herein shall be in writing.
(i) All cover
-upon the outbreak of war (whether there be a declaration of war or not) AIRCRAFT INSURANCE POLICY:
between any two or more of the following States, namely, France, the The Insurers will pay for:
People's Republic of China, the Russian Federation, the United (Agreed Value / Insured Value)
Kingdom, the United States of America
• Accidental loss of or damage to the Aircraft
Accident means any one accident or series of accidents arising out of one
(ii) Any cover extended in respect of the deletion of sub-paragraph (a) of
event.
Clause AVN48B
- upon the hostile detonation of any weapon of war employing atomic or • Disappearance - aircraft is unreported for sixty days after the
nuclear fission and/or fusion or other like reaction or radioactive force or commencement of Flight
matter whosesoever or whomsoever such detonation may occur and • Expenses necessarily incurred for the immediate safety of the aircraft
whether or not the Insured Aircraft may be involved consequent upon damage or forced landing.
(up to 10 % of the Amount Insured)
(iii) All cover in respect of any of the Insured Aircraft requisitioned for
either title or use Exclusions under this Section
-upon such requisition (Loss of or Damage to Aircraft):
• wear and tear, deterioration, breakdown, defect or failure
PROVIDED THAT if an Insured Aircraft is in the air when (i), (ii) or (iii) occurs, But Accidental loss of or damage to the Aircraft consequent upon wear
then the cover provided by this Endorsement (unless otherwise cancelled, and tear etc. is covered.
terminated or suspended) shall continue in respect of such an Aircraft until • Damage to any Unit by anything which has a progressive or cumulative
completion of its first landing thereafter and any passengers have disembarked. effect.

5. REVIEW AND CANCELLATION IMPORTANT DEFINITIONS:

• Flight means
a) Review of Premium and/or Geographical Limits (7 days)
Fixed Wing: from the time of the aircraft moves forward in taking off or
Insurers may give notice to review premium and/or geographical limits -
attempting to take off, whilst in the air and until the aircraft completes its
such notice to become effective on the expiry of seven days from 23.59
landing run.
hours GMT on the day on which notice is given.
260 261
 Rotor Wing: when the rotors are in motion as a result of engine power, •Number of passengers exceeds the declared maximum number of
the momentum generated there from. passengers.
•Taxiing means movement of the aircraft under its own power other than •Claims payable under any other policy or policies.
in flight. Taxiing shall not be deemed to cease merely by reason of a •Nuclear Risks Exclusion.
temporary halting of the aircraft.
•War, invasion, acts of foreign enemies, hostilities, civil war etc.
•Moored means in the case of aircraft designed to land on water, whilst the
•Hostile detonation of any weapon of war employing atomic or nuclear
aircraft is afloat and is not in flight or taxiing.
fission and/or fusion or radioactive force or matter
•Ground means whilst the aircraft is not in flight or taxiing or moored. •Strikes, riots, civil commotions or labour disturbances.
•Terrorist act
SECTION II LEGAL LIABILITY TO THIRD PARTIES:
•Malicious Act or Act of Sabotage
Sums which the Insured is legally liable to pay in respect of
• Accidental bodily injury •Confiscation, nationalization seizure, restraint, detention, appropriation,
requisition for title or use by or under the order of any Government
• Accidental damage to property caused by the Aircraft or by any person or
•Hi-jacking or any unlawful seizure or wrongful exercise of control of the
object falling there from.
aircraft.
What is not covered: CONDITIONS (APPLICABLE TO ALL SECTIONS):
- Injury or loss sustained by
• Due Diligence
• Director / Partner
• Compliance with air navigation and airworthiness orders and
• flight, cabin or other crew requirements issued by any competent authority.
• passenger • Immediate notice of any event likely to give rise to a claim.
- Loss or damage to any property belonging to or in the care, custody or • Right to Insurers to take control of all negotiations and proceedings to
control of the Insured. settle, defend or pursue any claim.
• Right of Subrogation.
SECTION III LEGAL LIABILITY TO PASSENGERS
• Notice of Variation in Risk.
Legal liability towards
• Notice of Cancellation.
• accidental bodily injury (fatal or otherwise) to passengers whilst
• Law and Jurisdiction
entering, on board, or alighting from the Aircraft and
• Loss of or damage to baggage and personal articles of passengers arising • The terms of the policy to apply separately of each aircraft covered under
the policy in the event of two or more aircraft being covered.
out of an Accident to the Aircraft.
• Limit of Indemnity not to exceed the Limits specified in the Policy.
GENERAL EXCLUSIONS (APPLICABLE TO ALL SECTIONS): • False and Fraudulent claims will result in Policy becoming void.

•Illegal Uses IMPORTANT CLAUSES:

• AVN 23A Unlicensed Landing Ground Suitability Clause
•Outside the Geographical Limits
• AVN 26A Aircraft Laying – up Returns Clause
•Piloted by any person other than the pilot
• AVN 34 Passenger Voluntary Settlement Endorsement
•Transportation by Other Conveyance
• AVN 38B Nuclear Risks Exclusion Clause
•Landing and Take-off from a place not complying with the
• AVN 46B Noise and Pollution and Other Perils Exclusion Clause
recommendations laid down by the manufacturer
•Contractual Liability • AVN 48B War, Hi-jacking and Other Perils Exclusion Clause
(Aviation)
262 263
 •AVN 52E Extended Coverage Endorsement (Aviation •Confiscation, nationalization, seizure, restraint, detention by any
Liabilities) Government
•AVN 62 Search and Rescue Extension Clause •Hi-jacking or any unlawful seizure or wrongful exercise of control of the
•AVN 67B Airline Finance / Lease Contract Endorsement Clause aircraft (made by any person or persons on board the aircraft).
•AVN 72 Contract (Rights of Third Parties) Act 1999 Exclusion
SECTION II EXTORTION AND HI-JACK EXPENSES
Clause
Indemnification up to 90% of the limit stated in the Schedule for:
•AVN 76 Supplementary Payments Clause
• threats against aircraft / its passengers / crew
• extra expenses necessarily incurred following confiscation
SPARES ALL RISKS COVER:
Physical Loss of or Damage to
EXCLUSIONS
• the Spares
The Policy will not cover Loss or damage caused by:
• Engines a) War between any of the following States:
• Equipment UK
-owned or operated by insured USA
-whilst on the ground or being carried as cargo in transit, or France
-whilst on the ground or other premises for storage. The Russian Federation
China
Information Required: b) Confiscation by any Government named in the schedule
• Value of the Spares • Use of any chemical, biological or biochemical materials unless
• Where the spares are stored used in the Hijack or for extortion purpose.
• Limit any one Location • This exclusion also does not apply to use of such materials on board
• Limit any one sending / transit the aircraft. If the material is outside the aircraft the policy would
provide coverage only when there is resultant physical damage to
the aircraft only when the wheels of the aircraft are not in contact
War and Allied Perils:
with the ground.
• Both Hull and Liability Sections of the Aircraft Policy exclude war perils • Any emission, discharge, release or escape originating external to
• War, Hijacking and Other Perils Exclusion Clause (Aviation) - AVN 48B the Aircraft that causes damage to the Aircraft as a result of
• Many of the risk Excluded under AVN 48B can be covered, but the contamination without other physical damage to the Aircraft
method of achieving the coverage varies. exterior is not covered by the Policy.
• Hull: Aviation Hull “War and Allied Perils” Policy-LSW 555C/D d) Any debt, failure to provide bond or security or any other financial cause
under court order
• Liability: Extended Coverage Endorsement (Aviation Liabilities)-
e) Repossession by Title Holder
AVN52D/E/F/G f) Delay, loss of use and consequential losses.
g) Any use of radioactive contamination or matter. This Exclusion not to
AVIATION HULL“WAR AND ALLIED PERILS” POLICY: apply to loss of or damage to an Aircraft if such use originates (i)on board
SECTION I LOSS OF OR DAMAGE TO AIRCRAFT the Aircraft or (ii)external to the Aircraft and causes physical damage to
• War, invasion the Aircraft whilst the Aircraft's wheels are not in contact with the ground
• Strikes, riots, civil commotions or labour disturbances h) Any use of an electromagnetic pulse. This exclusion not to apply to loss
of or damage to an Aircraft if such use originates on board such Aircraft,
• Any act for political or terrorist purposes
whether it is on the ground or in the air.
• Any malicious act or act of sabotage i) Atomic or nuclear fission and/or fusion or other like reaction. Any

264 265
 radioactive contamination and electromagnetic pulse resulting directly
from such detonation is also excluded.
POLICY – FEATURES:
The Hull War Risk Policy is subject to the same warranties, terms and conditions
as are contained in the Assureds Hull ''All Risks'' Policy except as regards:
i) The premium,
ii) The obligations to investigate and defend,
iii) The renewal agreement (if any),
iv) The amount of deductible
v) Aggregate Limit
Aggregate Limit
• First introduced after the events at Dawson's Field in Jordan in
September, 1970.
• This is a specified maximum sum that will be payable in respect of any or
all claims made in respect of events occurring during the Policy period.
• This limit will usually be around the sum of the top three valued aircraft.
Notice of Cancellation
7 Days notice for review of premium rates and geographical limits.
Notice of Cancellation: 7 days prior to the end of each quarter from inception.
Automatic Cancellation: Within 7 days from the time of any hostile detonation of
any weapon of war employing atomic or nuclear fission and / or fusion upon
outbreak of war between the five countries.
EXTENDED COVERAGE ENDORSEMENT (AIRCRAFT HULLS) -
AVN 51
• Provides Limited Hull “Write back” Cover
• When attached to the HAR Policy, the perils excluded under paragraphs
(c), (e) and (g) of the AVN 48B are written back.
WAR AND ALLIED PERILS” Cover for Spares
• If the spare parts and equipment are insured for “all risks” under the Hull
Policy, the war risks coverage will be afforded under the Hull “War and
Allied Perils” Policy.
• If there is a separate Policy for Spares, coverage against war perils will be
provided by that policy by addition of :
• Institute War Clauses CL 258 and
• Institute Strike Clauses CL 260.
266
LSW 555C
The exclusion relating to the use of chemical, biological or biochemical
materials does not apply when the material is used in
i) The Hijacking provided there is a loss of or damage to the aircraft
ii) Any threat against the Aircraft / passengers / crew only in respect of
payments toward extortion and hi-jack expenses.
The Policy also excludes loss of or damage to the aircraft due to the use of
radioactive contamination or matter
LSW 555D
• The exclusion relating to the use of chemical, biological or biochemical
materials not to apply to hijack and extortion as in LSW 555C.
• The exclusions if the use of such materials is on board such Aircraft OR if
use of such material is external to the Aircraft causing physical damage
whilst the Aircraft's wheels are not in contact with the ground. Damage
due to contamination without any external damage is not covered.
• The above conditions will also apply to the exclusion relating to use of
radioactive contamination or matter.
War write-back on Liability Cover:
• Prior to 9/11 war write-back on Liability cover was by way of attachment
of AVN 52C cover. The write-back was available to the full extent of the
liability limit.
• Post 9/11, underwriters began restricting their liability in respect of war
exposures by introducing AVN 52D/E.
EXTENDED COVERAGE ENDORSEMENT (AVIATION LIABILITIES)
AVN 52E:
Coverage
The perils excluded under AVN 48B are written back to the Liability Cover subject
to additional premium. In respect sub-para a of Clause AVN 48B (War, invasion,
acts of foreign enemies, hostilities, civil war, rebellion, revolution, insurrection,
martial law, military or usurped power or attempts at usurpation of power), the
policy does not cover liability for damage to property on the ground situated
outside Canada and USA unless caused by or arising out of the use of aircraft.
Limitation of Liability
The Limit of Insurers' Liability is limited to the extent specified. Unlike the
liability limit this limit is an aggregate limit.
Automatic Cancellation
• Upon outbreak of war between France, China, the Russian Federation,
UK and USA
267
 •Hostile detonation of any weapon employing atomic or nuclear fission AIRPORT OWNERS' AND OPERATORS' LIABILITY
and / or fission.
•Repossession of the aircraft for either title or use. SECTION 1
• Bodily injury or property damage:
Review and Cancellation a) In or about the premises specified in the Schedule, as a direct result
of the services granted by the Insured.
• 7 days notice to review premium and / or geographical limits.
b) Elsewhere in the course of any work or of the performance of any
•48 hours notice following a hostile detonation of atomic or nuclear duties carried out by the Insured or his employees in connection with
weapon the business or operations specified in the schedule.
•7 days notice for cancellation
SECTION 2
PILOT / CREW PERSONAL ACCIDENT INSURANCE: Loss of or damage to Aircraft or Aircraft Equipment:
Covers the Insured, their employees • not belonging to the Insured
• whilst on ground in the care, custody or control or
TYPES: • whilst being serviced, handled or maintained by the Insured
• Named Personnel on 24 hour basis
•Un-named personnel whilst they are boarding / alighting from / flying in SECTION 3
one of insured's aircraft. Bodily Injury or Property damage arising out of
• Products / goods
EXCLUSIONS: • Manufactured / repaired / serviced / supplied / distributed by the insured
Death and Disablement from • Provided the products / goods which form part of or are used in
• War, invasion etc. conjunction with aircraft and only after such goods / products have
•Radioactive contamination ceased to be in the possession or under the control of the insured.
•Dangerous activities
AIRPORT OWNERS' AND OPERATORS' LIABILITY – EXCLUSION
•Suicide or Attempted Suicide
• Liability arising out of the operation of an airfield control tower (unless
•AIDS previously agreed by the Insurers)
•Deliberate exposure to danger
•Pregnancy or childbirth AVIATION INSURANCE – RATING:
• Experience Rating – Premium reflects the loss experience of the
LOSS OF LICENSE INSURANCE: Individual Risk.
• Operating crew of the aircraft are required by law to have a valid • Class Rating – Risks are allocated by classification.
professional license from the Competent Authority for carrying out their Aviation Insurance is a mixture of Class Rating and Experience Rating.
professional duties.
• The issuance and renewal of the license is subject to certain terms and AVIATION INSURANCE - UNDERWRITING ASPECTS:
conditions. Aviation Business can be categorized into:
• The License is liable to be suspended either temporarily or permanently. • Airline Business - Operating with a fleet of large aircraft.
•This insurance covers consequential loss arising out of suspension of the • General Aviation Business - All other business will come under General
license on medical grounds. Aviation Business.

268 269
Underwriting Considerations:
Aviation Insurance Business
General Aviation Business
Fixed Wing Small Aircraft
For Hull All Risk Cover:
1. Type of Business (Airline / General Avn.)
2. Type of aircraft (FW / RW)
3. Model
4. Age of the aircraft
5. Size of the Aircraft
6. Value of the aircraft
7. Use
8. Maintenance of the Aircraft
9. Pilots
10. Area of Operations
11. Claims Experience
12. Fleet size
13. Aircraft Utilization
14. Market conditions
15. Client - Operator, Reputation, Capability
For Liability Cover:
•Aircraft Size
270
•Lease Agreements
•Government Regulations
•Geographical scope of operation including nature of terrain
•Concentration of Population
•Extent of Exposure vis-à-vis limit
•Law in the countries where aircraft operates
Airline Business
•Claims Experience
•For Passenger Liability – Number of Passenger seats, Type of
Passengers, Liability Limit on Admitted basis, Regulations applicable.
Fixed Wing Large Aircraft •For PA to Pilots and Crew – Whether 24 hours cover required or flight
only cover required, experience of the pilot, nature of aircraft operated,
Accident History, Limit required vis-à-vis earnings.
•For Loss of License Cover – Age of the Pilot, Limit required vis-à-vis
earnings.
Rotor Wing Aircraft
For Airport Owners' and Operators' Liability Cover:
•Aircraft Movement,
•Number of passengers,
•Revenue Earnings,
•Number of Airports to be covered.
Aviation Insurance – Airlines in India:
•National Carriers : Air India, Indian Airlines
•Established Private Carriers : Jet Airways, Air Sahara, Air Deccan,
Kingfisher, Spice Jet, Paramount Airways, Go Air, Indus
•Cargo/Courier Services: Blue Dart
Aviation Reinsurance
Retention is an amount an insurance company is willing to risk for its own account
from a single loss.
Factors Influencing Retention:
1. Capital & Free Reserves.
2. Estimated Premium Income.
3. Profitability of Portfolio.
271
 4. Type and Spread of Risks. •Size of the Portfolio may not be suitable for Treaty Protections.
5. Reinsurance Type and Cost. •Time Consuming.
6. Corporate Strategy.
•Higher Administrative Costs.
7. Market Conditions.
•Suitable for:
Factors Affecting Aviation Reinsurance Program: - HAR, HWR covers of GA Business.
- Standalone Liability covers like Refueling Liability, Airport Owners' &
•Large losses affecting individual risks
Operators' Liability etc.
•Territorial scope - Airline Fleet Policies.
•Aircraft Manufacturing, Repair and Maintenance Activities
•Liability Covers – long tailed Current Scenario:
Aviation Insurance constitutes a miniscule percentage of the Indian insurance
•Expertise of the Insured
market accounting for 1.7% of the premium underwritten by all the non life
insurance companies. Globally the premiums have been falling since 2001 due to
Proportional Treaties: reduction in the number of accidents. But major losses incurred by airlines
•Insurer can react more quickly globally in 2007, around $1.8 billion have been a setback to the aviation insurance
sector. The crash of a TAM Airbus A320 in Sao Paulo, Brazil in July and a Kenya
•Independence in Operation for the Insurers Airways B737 near 'Douala', in Cameroon in May, alone are expected to cost
•Lower Administrative Costs airline insurers almost $700million. With the cost of claims soaring, the capacity
reducing, the market becoming hard, the rates of premium are expected to rise.
•Are not very popular as:
- They do not produce Adequate Capacities The Indian aviation industry is moving at a fast pace growing at a rate of 18 per
- An Insurer does not get the advantage of the worldwide results and is cent annually and this growth is expected to continue. IATA reckons India to be a
insulated from worldwide trends. driving force behind the world's civil aviation business that is globally expected to
- International Expertise Unavailable grow from US$ 5.1 billion to US$ 5.6 billion this year. Government estimates are
that India's fleet will be around 500-550 aircrafts by the end of 2010, which was
•Suitable for: only 130 a few years ago. International budget carriers, especially low-cost
General Aviation Business carriers are making a beeline for India. India continues to grow steadily with a 7
per cent increase in the number of flights.
Excess of Loss: The number of air travelers increased by 38.5 per cent in 2006-07 and are
anticipated to double over the next decade. Handling of such traffic will require
•Specific Excess of Loss – Suitable for Liability Covers, AVN 52E covers, more airports, aircrafts, pilots, and ground handling person. To sustain this growth
Hull Deductible Covers. several improvements are envisaged, including government's airport
modernization plan involving investments of US$ 9 billion by 2010.
Facultative:
With the entry of low cost airlines along with fleet expansions and increasing
•Each risk needs to be negotiated on its own merits. corporate aircraft ownership, and projected growth in various spheres of aviation
•Re-insurers like to have more control over underwriting of the risk. industry there will be demand for various aviation insurance products and the
market is all set to expand in a major way.
•Better cash flow.
•Expertise of the facultative reinsurer is available. Aviation insurance is a specialized branch of insurance. The risks are evaluated
•World rates may differ from regional experience. based on information such as(i)name, address, age, business of the aircraft owner

272 273
(ii)aircraft make, model, year of manufacture and value (iii)purpose for which
aircraft will be used (iv)name, age, ratings and experience of the pilots,(v)type of
hull and liability coverage (vi) past loss experience. Aviation market is different
from other non life insurances and in terms of size is much smaller than that of
other non life branch of insurance .Though the limits of acceptance for offices are
low or nil, the marketing officials and underwriters of operating and Regional
Offices must have sufficient knowledge of aviation insurance products to
understand the requirement of the clients and explain the coverage, terms and
conditions to the customers. To equip the personnel dealing with aviation
insurance this Manual includes at length profiles of nine aviation policies catering
to different proposers of aviation Insurance.
Different Policies in Details:
Aircraft Hull/Liability
Class Type: TB.
Policy code: 71; Class code: Various; Dept. code: 43.
Rate of Commission (%): 5%
Acceptance Limit (Rs): BO- Nil, DO- Nil, RO- Nil, HO- All.
Minimum Premium (Rs): 100/-
1. Introduction
Section II
Provides cover for insured's legal liability to third party for compensation against
accidental bodily injury (fatal or non fatal) to persons and accidental damage to
property caused in direct connection with the aircraft.
Section III
Provides cover for insured's legal liability for compensation for accidental bodily
injury (fatal or non fatal) to passengers while entering into, being carried in or
alighting from the aircraft.
• Legal Expenses
The Company also pays (within the agreed limits of liability), legal expenses
incurred with its written consent in connection with claims for death or injury to
passengers or third parties, or loss of or damage to property of third parties.
Exclusions
• Illegal purpose or any purpose other than stated;
• Outside the Geographical limits stated;
• Piloted by any person other than stated;
• Total number of passengers carried exceeds the declared number stated;
• War, hijacking and allied perils;
• Nuclear risks.

Product Conditions
• Insured shall use due diligence to avoid accidents;
The Policy is a comprehensive cover comprising three sections. While section I • Compliance with all air navigation and air worthiness orders and
provides cover for accidental loss or damage to aircraft, section II indemnifies the
requirements;
insured against legal liability for compensation to third party. Under section III
insured is indemnified in respect of legal liability for compensation for accidental • Immediate notice of any event likely to give rise to a claim. Policy may be
death / bodily injury to passengers, damage to baggage and personal articles of cancelled by insurers or insured by giving 10 days notice. If cancelled by
passengers. the insurer they will return prorate portion of premium. If cancelled by
the Insured, return of premium shall be at the discretion of the Insurer.
Customer
Owners/ Operators of airlines, Extensions
Owner of aircraft, Helicopters • On the written request of the Insured and on payment of additional
Manufacturer of aircraft, helicopters premium, the Policy can be extended to cover passenger liability on an
Flying Club, Admitted Liability basis instead of Legal Liability (AVN 34A).
Training School, • The Policy can be extended to indemnify the Insured in respect of his
Agricultural application legal liability for compensation for damage to or loss of passengers'
Government Civil Aviation Department personal baggage while being loaded into, carried in or unloaded from
2. The Insurance Cover the aircraft but only when arising out of an accident to the Aircraft.

Section I 3. Underwriting Guidelines

Provides cover for accidental loss or damage to the aircraft against accidental loss
•Duly completed proposals forms are to be referred to HO, Technical for
or damage from whatsoever cause arising while in flight or taxiing or on the
ground or moored. approval of rates/ terms.

274 275
 •The proposal form should be duly completed and should be checked for Aviation Hull war and Allied Risks
the following:
- Make/Type of the Aircraft; Class Type: TB.
- Engine Number and Type; Policy code: 71, Class code: Various, Dept. code: 43.
- Year of Construction of Aircraft; Rate of Commission (%): 5%
- Maximum Take off weight; Acceptance Limit (Rs): BO- Nil, DO- Nil, RO-Nil, HO- All.
- Seating Capacity;
Minimum Premium (Rs): 100/-
- Use of Aircraft;
- Area of Operation;
- Details of Insurance required (viz, Hull All Risks, Hull War Risks, 1. Introduction
Third Party, Legal Liability, Passenger Legal Liability, PA to
Pilot/Crew, Baggage Liability); Product:
- Period of Insurance; The Policy covers loss of or damage to aircraft due to war, hijacking and allied
- Details of Pilot (Whether Named Pilots or any pilot with valid perils which is excluded from Hull all risk policy (by attaching clause AVN 48B).
license, Total Flying hour's experience); After the Israeli raid on Beirut airport of 28 December 1968, the London Market
- Maintenance; introduced a war and hijacking exclusion clause, (clause AVN 48B) which after
- Claims experience of client, craft, and pilot. undergoing certain amendments is forms part of every Hull and Liability policy.

Determination of sum insured/values to be insured: Customer:

Owners/ operators of airlines,
Section I - Sum insured is determined on Agreed Value basis Owner of aircraft,
Section II – Limit of Indemnity to be fixed for AOA/AOP Manufacturer of aircraft
Flying Club,
Section III- Separate limits of Indemnity for Passenger Legal Liability & Training School,
Baggage Liability Agricultural application
Government Civil Aviation Department
Rating: Owners of Helicopters
The factors determining the rate are the types of aircraft (Fixed Wing/Rotor Wing),
Year of manufacture, use, area of operation, take of weight, maintenance Pilots, 2. The Insurance Cover:
Annual utilization
Basic Coverage (loss or damage to Aircraft):
Claims experience, limits of Indemnity. Hull All risk rated as a percentage of War, invasion, civil war, rebellion, revolution, military coup;
aircraft value. Strikes, riots, civil commotion;
Acts for political or terrorist purpose;
Duly completed proposals forms are to be referred to HO, Technical for approval Malicious acts;
of rates / terms. Confiscation/requisition of aircraft by Government, etc;
Excess/Deductibles: Hi-jacking.
Mainly depends upon the value of the Aircraft.
Exclusion
4. Documents for Claims Settlement: War between UK, USA, France, Russian Federation, China
Confiscation by government of registration
Documents in respect of aircraft details, flight details, accident report, Certificate
Confiscation for financial default/repossession by title holder
of Airworthiness/registration, Crew details, Maintenance & engineering
Delay, loss of use, consequential loss
information, Passenger Manifest.

276 277
Use of chemical or biological materials Aviation Personal Accident (for crew members)
Hostile use of radioactive contamination
Hostile use of an electromagnetic pulse Class Type: TB.
Hostile detonation of nuclear weapons Policy code: 71, Class code: 42, Dept. code: 43.
Rate of Commission (%): 5%
Conditions: Acceptance Limit (Rs): BO- Nil, DO- Nil, RO-Nil, HO- All.
Insurers may issue seven days notice to review premium and/or geography limits Minimum Premium (Rs): 100/-
at any time;
Automatic review of premium and/or geographical limits on expiry of seven days 1. Introduction:
from hostile detonation of nuclear weapons; Product:
Insurers may cancel policy by giving seven days notice; A Policy designed to provide compensation to pilots and members of the crew
Automatic cancellation of policy in the event of war between UK, USA, France, against injury, disablement or death arising out of an accident caused by
Russian Federation, China; accidental, external, violent and visible means while entering into alighting from
Material change in operations provision. or being as pilot member of the crew or passenger in any licensed standard type of
aircraft anywhere in the world. Such risks are excluded under PA policy and hence
Extensions: a separate PA policy has been introduced to cover crew members.
Legal Liability of the Insured towards Passenger and Third Party due to war and
allied perils can be covered by charging additional premium written back into the Customer:
Hull/Liability Policy. Pilots, Co Pilots, members of crew, Engineers, Technicians, Navigators

3. Underwriting Guidelines: 2. The Insurance Cover:

• Duly completed proposals forms are to be referred to HO, Technical for
approval of rates / terms. Basic Coverage:
• Details of Pilots (whether named pilots or any pilot with valid license/
total flying hours experience). The Policy covers crew against injury, disablement or death arising out of an
accident caused by accidental, external and visible means while entering into
Determination of sum insured/values to be insured: alighting from or being as pilot member of the crew or passenger in any licensed
standard type of aircraft anywhere in the world. The compensation payable is as
Limits: per table below provided the injury sustained results in death / disablement within
Each aircraft covered for the same Agreed Value as under Hull all risk Policy twelve months of the occurrence of the accident
subject to a Policy aggregate sum insured per annum.
Sr. Cover (Within twelve Table - A Table - B Table - C
No. months of date of accident)
Rating:
Hull war risks rated as a percentage of aircraft value on similar basis to Hull All 1. Death. 100% of CSI 100% of CSI 100% of CSI
Risks. 2. Loss of sight of two eyes Nil 100% of CSI 100% of CSI
/two limbs/one eye,
Excess/Deductibles: one limb) .
Suitable excess is to be imposed. 3. Loss of one limb or sight Nil 50% of CSI 50% of CSI
of one eye, Loss of one limb
4. Documents for claim settlement: or loss of sight of one eye.
Documents in respect of aircraft details, flight details, accident report, Certificate 4. Temporary total disablement. Nil 1% of CSI 1% of CSI
of Airworthiness/registration, Crew details, Maintenance &engineering for maximum for maximum
information, Passenger Manifest. 52 weeks 52 weeks

278 279
 Sr. Cover (Within twelve Table - A Table - B Table - C Insanity, Insured being under the influence of drugs/intoxicating liquor;
No. months of date of accident) Test flights;
5. Permanent total disablement Nil 100% of CSI 100% of CSI Insured taking part in any military, naval or air force operations;
caused otherwise than by Insured engaged in Aerobatics, Experimental flying, racing, record attempt, speed
loss of limbs or sight. trial, abnormal flying.
6. Permanent partial As per the %
disablement of CSI below: Conditions:
i. Loss of toes all Nil Nil 20% Accidental death shall not be presumed by reason only of the disappearance of the
ii. Great Both phalanges Nil Nil 5% insured person.
iii. Great one phalanx Nil Nil 2% Policy may be cancelled on the following ground and accordingly Prorata
iv. Other than Great, if more Nil Nil 1% premium can be refunded:
than one toe lost. - Change of employer
v. Loss of Hearing: - Request for cancellation and subject to no claim reported under the policy
a. Both ears Nil Nil 50% - Absence of valid license.
b. One ear Nil Nil 25% Extension: Nil.
vi. Loss of four fingers and Nil Nil 40%
thumb of one hand. 3. Underwriting Guidelines:
vii. Loss of four fingers Nil Nil 35% All proposals should be referred to HO for approval or rates and terms.
viii. Loss of thumb:
a. Both phalanges Nil Nil 25% Determination of sum insured/values to be insured:
b. One phalange Nil Nil 19% Sum Insured is the Capital Sum Insured and is generally 3 to 5 times the annual
income of the Insured Person.
ix. Loss of middle finger
a. Three phalanges Nil Nil 6%
b. Two phalanges Nil Nil 4% Sr. Age of Pilot Table of Capital Sum Insured
c. One phalange Nil Nil 2% No. Benefits
x. Loss of ring finger 1. 18 to 55 yrs A 5 times of annual Income
a. Three phalanges Nil Nil 5%
b. Two phalanges Nil Nil 4% 2. 18 to 55 yrs B 4 times of annual Income
c. One phalange Nil Nil 2% 3. 18 to 55 yrs C 3 times of annual Income
xi. Loss of little finger 4. 56 to 60 yrs A 4 times of annual Income
a. Three phalanges Nil Nil 4% 5. 56 to 60 yrs B 3 times of annual Income
b. Two phalanges Nil Nil 3%
c. One phalange Nil Nil 2% 6. 56 to 60 yrs C 2.5 times of annual Income
xii. Loss of meta corpuses 7. 60 and above A 2 times of annual Income
First or Second Nil Nil 3% 8. 60 and above B 2 times of annual Income
Third, Fourth or Fifth Nil Nil 2% 9. 60 and above C 2 times of annual Income
xiii. Any other permanent Nil Nil As assessed
partial disablement by Doctors
•It is not desirable to increase the CSI mid-term of the Policy.
Exclusions: •In the case of substantial increase in salary the CSI can be increased subject to
Suicide, self injury; - Declaration by insured that he does not have any knowledge of illness
Any breach of law by Insured; - Enhanced CSI should not be more than 25% of the existing Policy
Any breach by the insured of any air navigation/air worthiness orders;

280 281
Rating: Exclusions:
Rate is to be charged on the Capital Sum Insured and ranges from 0.40% to 1.00% Loss of property of the insured other than aircraft of others while being fuelled or
and depends on the profession and the type of cover (on duty/off duty). re-fuelled by the insured.
Bodily injury, property damage caused by any mechanically propelled vehicle on
road traffic/any public highway and aircraft, used or operated by or on account of
Rate for 24 hours basis inclusive of on-duty cover: insured.
Liability for bodily injury to any person who at the time of sustaining such injury
Table of Benefits A B C
is engaged in the service of the insured or acting on his behalf.
Pilots 0.50% 0.75% 1.00% Liability assumed by the insured by agreement under any contract unless such
Engineers/Technicians 0.40% 0.60% 0.80% liability would have attached in absence of the agreement.

Excess: Nil. Condition:

• No liability shall be admitted without the consent of the insurer, who shall be
4. Documents for Claims Settlement: entitled to take over and conduct the defense of any claim.
Medical Report, Discharge Certificate from the Hospital/Nursing Home
Extension: None
Police Report, DGCA Report
Death Certificate, Post Mortem Report, Death Certificate 3. Underwriting Guidelines:
Certificate from Employer as to last use of License All proposals are to be referred to HO for approval of rates and terms along with
Medical Certificate/Doctors Certificate on PPD/PTD relevant details.
Any other document required to deal with PA Claim Determination of sum insured/values to be insured:
The Sum Insured is the limits of indemnity to be selected by insured for any one
occurrence and any one period limit separately for bodily injury and property
Aviation Fuelling & Re-fuelling Liability damage.
Class Type: TB.
Rating: Rates are reinsurance driven and hence reference has to be made to HO
Policy code: 71, Class code: 73, Dept. code: 43. Technical / RI Dept.
Rate of Commission (%): 5%
Acceptance Limit (Rs): BO- Nil, DO- Nil, RO-Nil, HO- All. Rates for cancellation:
Minimum Premium (Rs): 100/-
Policy period in force Refund % ( percentage)
1. Introduction: of annual premium
Product: Up to 1 month 80
The policy covers bodily injury including death to third party, or damage to More than 1 month & up to 2 months 70
property caused by accident arising out of insured's business as suppliers of More than 2 month & up to 3 months 60
aviation fuel including the fuelling and or re-fuelling of aircraft at the locations More than 3 month & up to 4 months 50
mentioned in the schedule.
More than 4 month & up to 5 months 40
2. The Insurance Cover More than 5 month & up to 6 months 30
Basic Coverage More than 6 month & up to 7 months 25
The Policy covers bodily injury including death, or damage to property caused by More than 7 month & up to 8 months 20
accident arising out of insured's business as suppliers of aviation fuel including the More than 8 month & up to 9 months 15
fuelling and or re-fuelling of aircraft at the locations mentioned in the schedule. More than 9 months No refund
282 283
Excess/Deductibles: Exclusions:
Amount of deductibles are based on limit of Indemnity and hovers in the region Loss of damage to turbine engine or accessory unless such damage is crossed by
of 2 % of Sum fire, explosion, ingestion, external forces.
Insured (SI), subject to minimum of USD 50,000. Use of the aircraft for any illegal purpose or any purpose other than stated
Aircraft is outside the Geographical limits stated
4. Documents for Claims Settlement Aircraft is being piloted by any person other than stated
Claim form Total number of passengers carried exceeds the declared number stated
Medical Report, Discharge Certificate from the Hospital/Nursing Home War, hijacking and allied perils
Police Report, DGCA Report
Death Certificate, Post Mortem Report, Death Certificate Conditions:
Medical Certificate/Doctors Certificate on PPD/PTD •It is a condition precedent to the liability of the insurer that the insured should
Court award affect an aircraft hull and space all risk insurance.
Legal opinion •Policy is subject to same warranties, terms and conditions provided the
Aircraft Hull and Spares all risks insurance prior to happening of the loss.
Aviation Hull Deductible
Extensions: None.
Class Type: TB.
Policy code: 71, Class code: 10, Dept. code: 43.
3. Underwriting Guidelines:
Rate of Commission (%): 5%
Duly completed proposals forms are to be referred to HO, Technical for approval
Acceptance Limit (Rs): BO-Nil, DO-Nil, RO-Nil, HO-All. of rates / terms.
Minimum Premium (Rs): 100/- The proposal form should be duly completed and should be checked for the
following:
1. Introduction: - Make/Type of the Aircraft;
Product: - Engine Number and Type;
Airlines at times have to bear a percentage of the loss in view of the deductibles - Year of Construction of Aircraft;
imposed in the - Maximum Take off weight;
Hull All risk Policy thus facing financial difficulty by purchasing this policy the - Seating Capacity;
airline operators/owners can get relief from bearing the deductibles which are - Use of Aircraft;
substantially high and cause financial constraints for the owner/operator.
- Area of Operation;
- Details of Insurance required ( Viz Hull All Risks, Hull War Risks, Third
Customer: Party
Airline owners/airline operators Legal Liability, Passenger Legal Liability, PA to Pilot/Crew, Baggage
Liability);
2. The Insurance Cover: - Period of Insurance;
- Details of Pilot (Whether Named Pilots or any pilot with valid license, Total
Basic Coverage: Flying hour's experience).
The Policy provides indemnity against the amount of deductible applied on the
Hull/ and spares all risk policy.

284 285
All proposals are to be referred to HO for approval of rates and terms along
with relevant details.
Determination of sum insured/values to be insured:
Sum insured is the difference between the HAR deductible and the insured
amount under the hull all risk policy.
Aggregate limit during the policy period applicable.
2. The Insurance Cover:
Basic Coverage:
In the event of the persons insured suffering bodily injury or illness resulting at any
time whether during or after the period of insurance (but not beyond a period of
five years after the expiry of this insurance) in their incapacity then the
compensation as detailed below is payable:

Item Type of Disablement Compensation

Rating: Number
A flat amount charged in respect of a specific Aircraft Incapacity causing Permanent After deduction of any payments
Profit Commission – After expiry of the policy and subject to renewal with the Total Disablement (otherwise made under other items 3 or 4 the
insurer, insurer may agree to return to the insured a profit commission Item 1 than due to psychosis or balance of one hundred per
psychoneurosis or epilepsy) centum of the Capital Sum
Excess: Nil. Insured
Incapacity causing Permanent After deduction of any payments
4. Documents for Claims Settlement: Total Disablement due to made under other items 3 or 4 the
Documents in respect of aircraft details, flight details, accident report, Certificate Item 2 psychosis or psychoneurosis or balance of eighteen per centum of
of epilepsy the Capital Sum Insured
Airworthiness/registration, Crew details, Maintenance &engineering Incapacity causing Temporary At the rate per calender month for
information, Passenger Total Disablement (otherwise not more than twelve months or
Manifest. than due to psychosis or up to the prior Death or
sychoneurosis or epilepsy) Permanent Total Disablement of
Aviation loss of License (Group) Item 3 the Insured Person . **In the case
of Total Disablement of the
Person Insured of two per centum
Class Type: TB. of the CSI
Policy code: 71; Class code: 35; Dept. code: 43.
Incapacity causing Temporary At the rate per calendar month for
Rate of Commission (%): 5% Total Disablement due to not more than twelve months or
Acceptance Limit (Rs): BO-Nil, DO-Nil, RO-Nil, HO-All. psychosis or psychoneurosis or up to the prior Death or
Minimum Premium (Rs): 100/- epilepsy Permanent Total Disablement of
Item 4 the Insured Person.**In case of
Total Disablement of the Person
1. Introduction: Insured of one and half per
Product: centum of the CSI
Operating pilots of aircraft are required to have valid license. In the event of the Legal and /or other costs incurred Up to Rs. 2000/- per life insured.
License being suspended on medical grounds such as illness, disease contracted or Item 5 with consent of the Company
injury sustained during the policy period, either temporarily or permanently, the
Loss of License policy provides for payment of compensation in case of disability. *Liability of the Company will not exceed 100 per centum of the CSI
The policy is not a general health insurance and does not cover expenses incurred *No compensation is payable in respect of the first 90 days of the incapacity
for medical treatment and loss of revenue. consecutively or in the aggregate in any one year of insurance
Customer: ** Company is entitled to withhold payment of the balance of the CSI for
Pilots Association, Airlines twelve calendar months after expiry of said 90 days but paying to the person
insured compensation at the rates mentioned above.

286 287
Definition: Associations if the same has been obtained through the offices of any such
Incapacity means any incapacity causing the permanent total disablement or association.
temporary total disablement of the life assured. •
This insurance shall apply while the insured is anywhere in the world.
Permanent Total disablement means any disablement due to bodily injury or to •
Insurer has the liberty to appeal against suspension, restriction or loss of license
illness, disease or disability including natural deterioration of the life assured in the name of the insured and the insured shall provide information and
which is of a permanent nature and prevents him/her from attending to the assistance for defense.
occupation.
Temporary Total disablement means any disablement due to personal injury or
illness, disease or disability including natural deterioration of the life assured Extensions: Nil.
which is a temporary nature and entirely prevents him from attending to the
occupation. 2. Underwriting Guidelines:
Exclusions: Proposals should be accepted only from in the age group of 18-65 years having
•
Death of the Insured Person valid license issued by DGCA and medically fit to hold the same. Types of License
issued to pilots are:
• Any personal injury, illness, disease or disability existing prior to the inception
of the ALTP: Airlines Transport Pilots License;
Policy CPL: Commercial Pilots License

•
Insured Person taking part in riots or civil commotion •
The Policy should not be issued as a Stand alone product and should be issued to
clients who place their aviation business i.e. Hull All Risk and Personal
•
Intentional self injury, suicide, provoked assault, dueling, fighting or venereal Accident (Aviation) insurance.
diseases
•
At the time of acceptance of proposal, proof of satisfactory electrocardiogram
•
Deliberate exposure of the Insured Person to exceptional danger within the past 24 months must be provided.
•
Any personal injury, illness, disease or disability giving rise to a claim under any •
All proposals should be referred to HO for approval of rates and terms.
previous Permanent Total Disability
•
Riding or driving in any kind of race Determination of sum insured/values to be insured:
•
Chronic alcoholism •
Sum Insured is linked to the income of the insured and age of the insured:

Conditions: Sr. No. Age of Pilot Capital Sum Insured

•
Disputes to be referred to Medical Referee 1 Up to 45 years 3.5 times of annual Income
•
Insured to authorize Company to seek opinion of the principal medical officer of 2 46 to 50 years 3 times of annual Income
the competent civil authority to ascertain whether or not an incapacity is 3 51 to 55 years 2.5 times of annual Income
presumed to prevent him to follow his occupation 4 56 to 57 years
•
Insured Person may, if required have to submit to an independent medical or 5 58 years and above 1 time of annual Income
surgical examination
•
Policy will cease automatically if the Insured Person loses or terminates his Mid term enhancement of Sum Insured:
membership of anyone of the Aircrew Association Extensions. It is not desirable to increase the CSI mid term of the policy. However in the case of
substantial increase in salary the CSI can be increased subject to submission of:
•
Insured if required shall submit to an independent medical or surgical
examination. - Medical Certificate issued by DGCA
- Medical assessment report of DGCA
•
Policy to cease if insured losses or terminates his membership of any aircrew

288 289
- TMT& Blood Sugar (PP) 2. The Insurance Cover:
- Declaration by insured that he does not have any knowledge of illness Basic Coverage:
- Enhanced CSI should not be more than 25% of the CSI in existing Policy In the event of the person insured suffering bodily injury or illness resulting at any
time whether during or after the period of insurance (but not beyond a period of
five years after the expiry of this insurance) in his incapacity then the
Rating: compensation as detailed below is payable:
The rate is charged on the Capital Sum Insured as per following details:
Item Type of Disablement Compensation
Number
Age 18 to 40 yrs 41 to 45 yrs 46 to 50 yrs 51 to 56 yrs 57 to 60 yrs
Incapacity causing Permanent After deduction of any payments
Pilots 1.00% 1.00% 1.50% 1.75% 2.00% Total Disablement (otherwise made under other items 3 or 4 the
Item 1 than due to psychosis or balance of one hundred per
All proposals should be referred to HO for approval of rates and terms. psychoneurosis or epilepsy) centum of the Capital Sum
Insured
Incapacity causing Permanent After deduction of any payments
Excess: First 90 day as time excess from the date of commencement of incapacity.
Total Disablement due to made under other items 3 or 4 the
Item 2 psychosis or psychoneurosis or balance of eighteen per centum of
4. Documents for Claims Settlement: epilepsy the Capital Sum Insured
Claim form, Medical Reports, Discharge Certificate, DGCA Certificate on Incapacity causing Temporary At the rate per calender month for
incapacity to hold Total Disablement (otherwise not more than twelve months or
License, certificate from the employer on the last use of the License. than due to psychosis or up to the prior Death or
sychoneurosis or epilepsy) Permanent Total Disablement of
Item 3 the Insured Person . **In the case
Aviation loss of License (Individual) of Total Disablement of the
Person Insured of two per centum
Class Type: TB. of the CSI
Policy code: 71; Class code: 38; Dept. code: 43. Incapacity causing Temporary At the rate per calendar month for
Rate of Commission (%): 5% Total Disablement due to not more than twelve months or
psychosis or psychoneurosis or up to the prior Death or
Acceptance Limit (Rs): BO-Nil, DO-Nil, RO-Nil, HO-All. epilepsy Permanent Total Disablement of
Minimum Premium (Rs): 100/- Item 4 the Insured Person.**In case of
Total Disablement of the Person
Insured of one and half per
1. Introduction:
centum of the CSI
Product:
Legal and /or other costs incurred Up to Rs. 2000/- per life insured.
Operating pilots of aircraft are required to have valid license. In the event of the Item 5 with consent of the Company
License being suspended on medical grounds such as illness, disease contracted or
injury sustained during the policy period, either temporarily or permanently, the *Liability of the Company will not exceed 100 per centum of the CSI
Loss of License provides for payment of compensation in case of disability. The
*No compensation is payable in respect of the first 90 days of the incapacity
policy is not a general health insurance and does not cover expenses incurred for
consecutively or in the aggregate in any one year of insurance
medical treatment and loss of revenue.
** Company is entitled to withhold payment of the balance of the CSI for
twelve calendar months after expiry of said 90 days but paying to the person
Customer: Pilots insured compensation at the rates mentioned above.

290 291
Types of License: Extensions: Nil.

ALTP: Airlines Transport Pilots License 2. Underwriting Guidelines:

•Proposals should be accepted only from pilots in the age group of 18-65 years
CPL: Commercial Pilots License having valid license issued by DGCA and medically fit to hold the license.
•The Policy should not be issued as a Stand alone product and should be issued
Exclusions: to clients who place their aviation business ie Hull All Risk and PA(Aviation)
insurance.
•Death of the Insured Person
•All proposals should be referred to HO for approval of rates and terms.
•Any personal injury, illness, disease or disability existing prior to the
inception of the
Determination of sum insured/values to be insured:
Policy
•Sum Insured is linked to the income of the insured and age of the insured:
•Insured Person taking part in riots or civil commotion
•Intentional self injury, suicide, provoked assault, dueling, fighting or venereal Sr. No. Age of Pilot Capital Sum Insured
diseases 1 Up to 45 years 3.5 times of annual Income
•Deliberate exposure of the Insured Person to exceptional danger 2 46 to 50 years 3 times of annual Income
•Any personal injury, illness, disease or disability giving rise to a claim under 3 51 to 55 years 2.5 times of annual Income
any previous 4 56 to 57 years 2 times of annual Income
Permanent Total Disability 5 58 years and above 1 time of annual Income
•Riding or driving in any kind of race
Mid term enhancement of Sum Insured:
•Chronic alcoholism
It is not desirable to increase the CSI mid term of the policy. However in the case of
substantial increase in salary the CSI can be increased subject to submission of:
Conditions: - Medical Certificate issued by DGCA
•Disputes to be referred to Medical Referee - Medical assessment report of DGCA
- TMT& Blood Sugar (PP)
•Insured to authorize Company to seek medical to ascertain whether or not
incapacity is presumed to prevent him to follow his occupation - Declaration by insured that he does not have any knowledge of illness
- Enhanced CSI should not be more than 25% of the CSI in existing Policy
•Insured Person may, if required have to submit to an independent medical or
surgical examination
Rating:
•Policy to cease if insured losses or terminates his membership of any aircrew
The rate is charged on the Capital Sum Insured
Associations if the same has been obtained through the offices of any such
association.
Age 18 to 40 yrs 41 to 45 yrs 46 to 50 yrs 51 to 56 yrs 57 to 60 yrs
•This insurance shall apply while the insured is anywhere in the world.
Pilots 1.00% 1.00% 1.50% 1.75% 2.00%
•Insurer has the liberty to appeal against suspension, restriction or loss of
Engineers/ 0.80% 0.80% 1.20% 1.40% 1.60%
license in the name of the insured and the insured shall provide information
Technicians
and assistance for defense.

292 293
All proposals should be referred to HO for approval of rates and terms. Table Type of Disablement Compensation
Death (Within twelve months of
Excess: First 90 day as time excess from the date of commencement of incapacity Table A date of accident) 100% of CSI

Table B Death (Within twelve months of

date of accident) 100% of CSI
4. Documents for Claims Settlement: 1
2 Loss of sight of two eyes/two
Claim form, Medical Reports, Discharge Certificate, DGCA Certificate on limbs/one eye, one limb/ (Within
100% of CSI
incapacity to hold License, Certificate from the employer on the last use of the twelve months of date of
License. accident)
3 Loss of sight of two eyes/two
limbs/one eye, one limb/ (Within
100% of CSI
twelve months of date of
Aviation Personal Accident (crew member) accident)
4 Loss of sight of two eyes/two
Class Type: TB. limbs/one eye, one limb/ (Within
100% of CSI
Policy code: 71; Class code: 38; Dept. code: 43. twelve months of date of
accident)
Rate of Commission (%): 5%
5 Loss of sight of two eyes/two
Acceptance Limit (Rs): BO-Nil, DO-Nil, RO-Nil, HO-All. limbs/one eye, one limb/ (Within
100% of CSI
Minimum Premium (Rs): 100/- twelve months of date of
accident)

1. Introduction: Table C Benefits as per Table B &

Permanent Partial Disablement % of the CSI
Product:
Additional E x p e n s e s i n c u r r e d f o r 2.5% of the CSI or Rs. 2500/-
A Policy designed to provide compensation to pilots and members of the crew Benefits transportation of insured’s dead whichever is lower
against injury, disablement or death arising out of an accident caused by body
accidental, external and visible means while entering into alighting from or being
as pilot member of the crew or passenger in any licensed standard type of aircraft Exclusions:
anywhere in the world. Such risks are excluded under PA Policies. Death/Bodily injury arising out of/traceable
Suicide, self injury;
Customer: Any breach of law by Insured;
Pilots, Co Pilots, members of crew Any breach by the insured of any air navigation/air worthiness orders;
Insanity, Insured being under the influence of drugs/intoxicating liquor;
Test flights;
2. The Insurance Cover:
Insured taking part in any military, naval or air force operations;
Basic Coverage:
Death /Bodily injury or any illness.
The Policy covers crew against injury, disablement or death arising out of an
accident caused by accidental, external and visible means while entering into
alighting from or being as pilot member of the crew or passenger in any licensed Conditions:
standard type of aircraft anywhere in the world. Accidental death shall not be presumed by reason only of the disappearance of the
Insured Person.

294 295
3. Underwriting Guidelines: Aviation Product &Grounding And other Aviation Liabilities Insurance
Duly completed proposals forms are to be referred to HO, Technical for approval
of rates / terms. Class Type: TB.
The proposal form should be duly completed and should be checked for the Policy code: 71; Class code: 72; Dept. code: 43.
following: Rate of Commission (%): 5%
- Make/Type of the Aircraft Acceptance Limit (Rs): BO-Nil, DO-Nil, RO-Nil, HO-All.
- Engine Number and Type Minimum Premium (Rs): 100/-
- Year of Construction of Aircraft
- Maximum Take off weight
1. Introduction:
- Seating Capacity
Product:
- Use of Aircraft
The policy provides cover for Insured's legal liability to pay compensation to third
- Area of Operation parties for bodily injury or property damages caused by an occurrence arising out
- Details of Insurance required ( Viz Hull All Risks, Hull War Risks, Third Party of the product hazard.
Legal Liability, Passenger Legal Liability, PA to Pilot/Crew, Baggage Liability) The insurer will indemnify the insured for their legal liability to pay as damages for
- Period of Insurance the loss of use of completed aircraft, occurring after delivery to and acceptance by
a purchaser or operator of such aircraft for flight operations and caused by a
- Details of Pilot (whether Named Pilots or any pilot with valid license, Total
grounding arising out of the product hazard.
Flying hour's experience).

Customers: Manufacturers, Distributors, Importers and Exporters of aviation

All proposals referred to HO for approval of rates and terms. products.
Determination of sum insured/values to be insured:
Sum Insured is the Capital Sum Insured and is generally 3 to 5 times the annual
2. The Insurance Cover:
income of the Insured Person.
Coverage A
Personal injury and property damage liability.
Rating:
The company will indemnify the insured for their legal liability to pay
Rate for 24 hours basis inclusive of on-duty cover: compensation including defense cost for death / bodily injury or damage to
property including use of loss of property caused by an occurrence arising out of
Table of Benefits A B C the product hazard
Pilots 0.50% 0.75% 1.00%
Coverage B:
6. Documents for Claims Settlement: Grounding Liability:
•Medical Report, Discharge Certificate from the Hospital/Nursing Home The company will indemnify the insured for their legal liability to pay as damages
•Police Report, DGCA Report including defense cost for the loss of use of completed aircraft, occurring after
delivery to and acceptance by a purchaser or operator of such aircraft for flight
•Death Certificate, Post Mortem Report, Death Certificate operations and caused by a grounding arising out of the product hazard.
•Certificate from Employer as to last use of License
•Medical Certificate/Doctors Certificate on PPD/PTD Definitions:
Product Hazard means the handling or use of or the existence of any condition in
•Any other document required to deal with PA Claim an aircraft product provided such aircraft product has ceased to be in the

296 297
possession or under the control of the insured. •Grounding liability limited to 20% of the above limits.
Grounding means a complete and continues withdrawal from all flight operations
or use of aircraft in the interest of safety by the authorities of the country where
aircraft products will be used or by mutual agreement of the insured and Rating:
manufacturer /operator of the aircraft. All proposals should be referred to HO for approval of rates and terms.
Aircraft product means completed aircraft, airship, missile, helicopters, launch
vehicles, gliders.
Excess: Suitable excess to be imposed

Coverage:
4. Documents for Claims Settlement:
Coverage A:
•Claim form
•Any liability for death, bodily injury/sickness of an employee of insured
•Police Report, DGCA Report
•Loss of use of any aircraft which has not been destroyed except with respect to
an aircraft which has made an emergency landing. •Death Certificate, Post Mortem Report, Death Certificate
•Legal liability arising from any restriction on or withdrawal from the use of •Court award
aircraft product not involved in an occurrence. •Legal opinion.

Coverage B: BULLET QUESTIONS

•Loss of use of aircraft during maintenance overall or alterations while being
used for purpose other than relating to ground.
1. How a marine cargo policy differs from other conventional policies like fire
or motor?
Exclusion: •It is enough that the insured is having insurable interest at the time of loss
•Noise and pollution and other perils – it is not required at the time of taking the policy.
•War, hijacking, strike, riot, civil commotion, hostile detonation of any •Either a consignor or consignee can take a policy and the same depends
weapon of war, employing atomic and nuclear fission. upon the terms and contract of sale viz., CIF, C & F or FOB.
•A marine cargo policy is an agreed policy whereas most other policies are
Conditions: strict indemnity policy. The SUM insured in Marine policy can be CIF +
10% for indigenous items or CIF + 15% for import/exports.
Notice of occurrence or grounding – When an occurrence or grounding takes
place, written notice shall be given by or on behalf of the insured to the policy •Subrogation rights are more used in marine cargo insurance than any
issuing office. other insurance policies in the form of recovery from carriers.
•Marine cargo policies in general are voyage policies whereas; most other
policies are time policies. In general there is no period of insurance other
Extensions: Nil. than for open policies, open covers or special declaration policies etc.
•There are three parties involved in marine cargo insurance viz., insured,
3. Underwriting Guidelines: insurer and carrier.
All proposals should be referred to HO for approval of rates and terms. •arine cargo policies are easily transferable and the benefits of the policies
Determination of sum insured/values to be insured: cans be transferred to the person who has insurable interest at the time of
loss.
•Limits of indemnity to be selected by proposer for any “one occurrence” and
“any one period”.
298 299
 •Marine cargo policy is one where the stamp duty is recoverable from the •Certificate number, place and date of issue.
insured.
•Open cover/Open policy number.
•Name and address of the insured.
Normal Terms and conditions forming part of Marine Open Cover.
•Description of goods, number of packages & nature of packing.
•Basis of valuation: CIF plus 10% or more.
•Voyage details along with Bill of Lading no. & date, transshipments, if
•Declaration: The assured is bound to declare each and every shipment any.
individually or in batches and obtain a certificate of insurance for
individual or group of shipments as per arrangement. •Consignment Value.
•Certificate of Insurance: The certificate issued against declarations will •Remaining value of sum insured in case of open policy.
bear stamp duty and show premium, both of which will be collected from •Premium and stamps duty.
the assured or be adjusted against the cash deposit.
•Certificate issued against open cover to be stamped.
•Loss prior to declaration: In the event of loss prior to declaration and/or
shipment on board the vessel, the basis of valuation shall be the prime •Terms and conditions of insurance as per the open cover or policy.
cost of the goods.
•Limit per bottom: Limit of aggregate value of shipments/consignments The changing Aviation policy in India, the basic considerations for granting
per vessel or other conveyance at any one time. Aviation Insurance are:
•Limit per location: The location clause seeks to limit the value of pre •
No of Air lines/ Operators have grown
shipment accumulation, which may take place due to some unexpected •
Consolidation and merger of various air carriers
causes such as strikes, labor disturbances in the sport. Such
accumulation of cargo in a particular location may create catastrophic •
Fleet size have grown up
exposures in the even of occurrence of some perils like storm, riot etc. •
New types of air crafts have come up
•Inspection of records: The insurer has the privilege at any time during
•
India has become a hub for corporate Jet / Helicopter travels
business hours to inspect the records of the assured in respect of the
shipments coming within the terms of the opens cover. •
Boeings / Air buses have established their maintenance hubs in India
•Under Deck: Subject to warranty as to under-deck or on-deck shipment. •
Modernization, expansion and development of new Green Field Airports are
Generally arrangement is made for shipment under deck while on deck taking place
shipment on special rates and terms to be separately agreed upon.
•
Safety norms have been adopted and due to excellent record of pilots, no. of
•Cancellation: either party giving 30 days notice in writing may cancel accidents have come down resulting into reduction in Reinsurance premium
open cover, provided the risk has not already attached. However War & as these policies are highly RI driven
SRCC risk for shipments other than to or from USA are subject to
•
The coverage given under this segment is for Hull All Risks [HAR], War
cancellation by 7 days notice and War & SRCC risk for shipments to USA
are subject to cancellation by 48 hours notice. Risks, Liability for passengers

•Insuring clauses: Subject to Institute Cargo Clause (A), Institute War •

Clauses (Cargo) and Institute Strikes Clauses (Cargo) attached with the
open cover.
1. Certificate of Insurance is issued against open covers or open policies, as
applicable and is subject to the terms and conditions of such open cover or
open policies. What are the major contents of certificate of insurance.
Crew insurance now even fog insurance, Delayed Baggage Liability,
Delayed Flight landing due to traffic congestion are in great demand
While rating a Flying Club Aircraft what are the under writing
considerations that to be looked into
•Type of Aircraft and the value
•The experience of regular pilot

300 301
•The number of members of the club d) None of the above
•The geographical area in which the club operates
6. The wages of individual masters and workers are insurable in
•The facilities at the airfield used regularly by the club a) W C Policy
•The frequency of usage of the aircraft b) Marine Cargo policy
•The experience of the chief flying instructor c) Marine Hull Policy
d) Aviation Policy
Whether there is any maintenance contract with outsider and their credibility
7. As per Marine Inland Transit Policy the Risk commences from the time
MARINE MODEL QUESTIONS a) The goods leave consignor's warehouse
b) The goods are being loaded on the vehicle
1. Time Charter hire is c) The goods reach the buyers warehouse
a) To charter a vehicle for a specified period d) All the above are correct
b) To take a loan on vessel for a specified period
c) To take a vessel on hire for a specified period 8. TPND is the common abbreviation used to denote
d) To hire a vessel and pay after a specified time a) Transit, piracy and non delivery
b) Theft, piracy and non delivery
2. Which of the following is not true for COGSA,1971 (Carriage of goods by c) Theft, pilferage and non delivery
sea Act) d) Transit, pilferage and non delivery
a) It brings uniformity in condition of carriage by sea
b) It is compulsory for ship owners to issue a B/L 9. Marine cargo insurance policies are
c) It is compulsory for shippers to mention particulars & conditions of the a) Strict indemnity policies
goods b) Pure indemnity policies
d) The liability of the carrier is limited to 666.7 SDRs per package per unit c) Commercial Indemnity policies
d) Benefit policies
3. A carrier under COGSA, 1971 is liable if
a) Open or uncovered vehicle is used 10. Sue and Labour clause is
b) There is defective packing a) The amount and labour incurred in filing a suit
c) Marks or numbers are used b) Payable even after total loss is paid
d) Livestock is carried c) GA losses can be recovered under this clause
d) The cost incurred in averting or minimizing any loss
4. What is a 'slip'
a) A mistake in the policy 11. Air transport operators do not have a legal liability towards
b) A kind of dress a) The general public (Third Parties)
c) A correction in the policy b) The passengers
d) Evidence of contract of marine insurance c) Consigners or Consignees
d) Crew and staff
5. In marine insurance, the insurable interest should be there
a) At the time of issuance of policy 12. In Aviation Insurance, what is not true of Warsaw Convention, 1929
b) At the time of payment of claim a) It was the 1st convention to deal with the problem of conflict between
c) At the time of occurrence of loss legal system of different countries
302 303
 b) It is in force in many of the countries b) The ship owner and the underwriters of the vessel respectively
c) It laid down the fundamental principles in so many legal aspects of c) The master of the vessel and the ship owner respectively
international travel by air d) The ship owner in consultation with the underwriters and the master of
d) None of the above the vessel

13. Which of the following is not true of the International Air Transport 19. In marine insurance a p.p.i. policy is
Association (IATA) a) An honor policy
a) It was founded in 1945 b) A no subrogation policy
b) It seeks to promote safe, regular air travel c) An illegal policy
c) It promotes economical air travel d) All the above
d) It is an association of governments
20. For an export marine consignment which one of the clauses will be
14. In Marine insurance, the term “Paint Brush Piracy” is used to denote applicable
a) A kind of piracy of the goods from the vessel a) ITC (A)
b) Piracy of paintings and brushes b) ITC (B)
c) Change of the color of the ship to conceal its identity and escaping with c) ITC (C)
the goods on board d) None of the above
d) Entry of pirates into the vessel with paints and brushes
21. Duty and increased value insurance can be granted for the following
15. Which of the following is not relevant for General Average consignments
a) Insured perils a) Export consignments
b) York Antwrep rules b) Road risks in India
c) General average Act c) Rail risks
d) None of the above d) None of the above

16. As per Marine Insurance Act 1963, which of the following is not an 22. As per ICC (C) following loss or damage is not covered
Implied Warranty a) Fire
a) Lawful adventure b) Earthquake
b) Seaworthiness of the vessel c) General average sacrifice
c) Seaworthiness of the cargo d) Washing overboard
d) Lost or not lost
23. Under marine insurance, cover may be granted for shipments which
17. “Subject to any express provision in the policy” is a standard phrase in have commenced transit but may have been actually lost under the
Marine Insurance Act 1963 to denote that following provisions /clauses
a) The Act is supreme a) Sue and Labour clause
b) The Assured is supreme b) Not to inure clause
c) The policy is supreme c) Lost or not lost clause
d) The underwriter is supreme d) Losses not known clause

18. Who can declare general average and who can appoint the average 24. INCOTERMS are internationally accepted commercial terms defining
adjusters? respective roles of buyer and seller which of the following is odd term out
a) The ship owner and the master of the vessel respectively a) CIF

304 305
 b) CFR b) ICC(B)
c) FAS c) ICC(C)
d) WTO d) None of the above

25. Which of the following is not an important document for a Marine Cargo 31. For which of the following extra premium is charged?
claim in respect of an export consignments a) Vessel's Overage
a) Invoice and pacing list b) Vessel's under tonnage
b) Duly filled claim form c) Non classification
c) Bill of lading/ airways bill d) All the above
d) Bankers certificate confirming export proceed
32. For which of the following term of sale, the buyer/ importer normally
26. Which of the following risk is/are covered under aircraft hull/ liability arranges the cargo insurance cover for the overseas transit
policy a) CIF basis
a) Accidental physical loss or damage to the aircraft b) FOB basis
b) Bodily injury / death to the passenger/s c) Both the above
c) Loss of passenger's baggage and bodily injury/ death and property d) None of the above
damage to the third parties
d) All the above 33. For Inland Transit, 'Duration Clause' limits the coverage to
a) 7 days of arrival of consignment at destination town
27. Which of the following is to be taken into account while underwriting b) 7 days of arrival of consignment to the warehouse of consignee
Marine Cargo Business c) 60 days of arrival of consignment at destination town
a) Nature of Cargo d) 60 days of arrival of consignment to the warehouse of consignee
b) Details of Convergence
c) Packing details 34. What is not true for a Marine Open Cover
d) All of the above a) Open cover is proof of an insurance cover
b) Open cover gives the term of cover during policy period
28. Which of the following insurance policies does not require a formal c) Open cover is a stamped document
proposal form d) All of the above
a) Marine Hull
b) Fire 35. After issuance of Marine Open cover which document gives the
c) Marine Cargo particulars of insurance for individual voyages?
d) Aviation a) Marine certificate
b) Marine Policy
29. Under the Institute Cargo Clauses, the risk commence c) Cover note
a) When invoice is received d) Any of the above
b) From the Time the Lorry receipt is issued
c) When the Cargo leaves the warehouse of the consignor 36. If a Marine consignment is being sent to an appreciating market, what
d) None of the above clause can be attached to ensure that the appreciation of value of
consignment is covered in case of loss?
30. Which of the following represents the widest form of coverage? a) Duty clause
a) ICC(A) b) Increased value clause

306 307
 c) Protection and Indemnity clause 43. Sue and labor charges are usually paid
d) None of the above a) In addition to damage to goods but limited by the sum insured
b) In addition to damage to goods and can exceed the sum insured
37. In case of various consigners are affected due to operation of a common c) As a fixed percentage of sum insured
peril, for saving a marine adventure; the loss would be apportioned by d) None of the above
declaration of
a) General average 44. Particular charges means
b) Particular average a) Loss or damage caused by a sea peril insured against
c) Average clause b) It is a general sacrifice to save the marine adventure
d) None of the above c) It is an expense in addition to sue and labour charges incurred for
preservation of a subject matter
38. In case additional expenses are incurred to complete the voyage the d) None of the above
charges incurred would be recovered under
a) General average clause 45. For covering various risks associated with port operation the following
b) Sue and labor clause cover is an internationally accepted cover
c) Increased value clause a) Property all risk policy
d) Limitation Clause b) Mega project policy
c) Port package policy
39. What is the full form of sale term 'FAS' d) Special contingency policy
a) Free Alongside Ship
b) Free Alongside Steamer 46. One of the purpose of Draft survey is to
c) Free Alongside Steerage a) Find out the weight of commodity on board the ship
d) None of the above b) Find out the extent of damage to commodity while being unloaded from
slip
40. A Marine cargo underwriter is expected to know c) Find out the weight of personnel on board the ship
a) Port facilities d) None of the above
b) Shipping practices
c) Labour disturbances at ports 47. What does the term “Phantom vessel” in maritime frauds denotes
d) All the above a) Nonexistent vessels said to be transporting goods
b) Poor quality vessels transporting high value cargo
41. Under a marine Hull cover a loss can be declared as a CTL if c) Vessel belonging to flags of convenience
a) The vessel is abandoned to discretion of the underwriters d) None of the above
b) If more than one interest is involved in the salvage
c) If there is excessive third party liability 48. In a marine cargo policy, the insurable interest should exist
d) None of the above a) At the time of commencement of transit
b) At the time of acceptance of proposal
42. In case of liquid cargo, the term “ullage” refers to c) At the time of loss
a) Quantity that cannot be discharged d) At the time of proposal
b) Quantity that were destroyed
c) Quantity that disappeared 49. Which of the following marine cargo policy is not assignable
d) Non standard packing a) Marine cargo specific policy

308 309
 b) Certificate issued under open cover c) Sue and labour charges
c) Certificate issued under open policy d) Port charges
d) Annual policy
56. Which one of the following differentiates the salvage charge from the sue
50. CIF Contract means and labour charge
a) Co-insurance form a) Food expenses for crew members
b) Cost input freight b) Incurred independent of any contract
c) Cost insurance freight c) Incurred short of destination to complete the voyage
d) Cost incidental freight d) Expenses for extra fodder for animals on board

51. The maximum indemnity available under a marine open policy in 57. Which of the following is not a Trade Clauses
respect of a consignment awaiting shipment at the port is a) Institute Replacement Clause
a) Total sum insured under open policy b) Institute Bulk Oil Clauses
b) Limit per bottom c) Institute natural rubber Clause
c) Total value of particular declaration d) Institute Coal Clauses
d) Limit per Location
58. Overseas Transit Policy Institute Cargo Clauses 'C' the duration of cover
52. Which of the following is not a stamped document comes to an end
a) Open cover a) 30 days after landing at the port
b) Open policy b) 45 days after landing at the port
c) Specific policy c) 60 days after landing at the port
d) Special declaration policy d) 90 days after landing at the port

53. Running down clause in a marine policy relates to 59. The Institute clauses have been drafted by
a) Age of the vessel a) TAC
b) Collision b) Institute of London Underwriters
c) Termination of insurance c) Lloyd's
d) Age of the consignment d) GIC

54. Liability under “Both to blame collision” clause of ICC (A) has a 60. In marine insurance parlance, 'average' means
reference to a) Premium
a) Shipping Bills b) Cost
b) Lloyd's firm c) Freight
c) Proforma Invoice d) Loss
d) Bill of Lading
61. “Shut out Cargo” means a cargo which is
55. Which one of the following is an extra charge under a marine cargo a) Not loaded onto the ship due to late arrival
policy b) Thrown out of the ship
a) Auction fee for disposal of salvages c) Shut in the bonded warehouse
b) Salvage charges d) Rejected by the buyer

310 311
62. PPI in marine cargo policy means d) Sue and Labour charges
a) Pre & Post Inspections
b) Policy Proof of Interest 69. Which one of the following is an exclusion under ¾ th collision clause of
c) Post parcel Identification ITC-Hulls
d) None of the above a) Loss of life in other vessel
b) Loss of life in insured vessel
63. Subrogation in marine insurance refers to transfer of c) Loss of property of other vessel
a) Right of recovery d) Both a & b above
b) Right of possession
c) Right of ownership 70. In Marine hull policy the subject matter for insurance shall be
d) None of the above a) Hull & Machinery
b) Freight and Disbursement
64. Proof of shipment is evidenced by c) Premium reducing
a) Bill of Lading d) All the above
b) Bill of Exchange
c) Bill of Treasury 71. 1/ 4 collision liability is covered by
d) None of the above a) P& I club
b) Hull Underwriters
65. Marine Policy offers c) Lloyd's
a) Pure indemnity d) Reinsurance
b) Strict Indemnity
c) Adequate indemnity 72. For issuing a marine cargo policy,
d) Modified form of Indemnity a) LR or R/R is a precondition
b) LR or R/R reference number above is sufficient
66. Survey fees reimbursable to the insured in a marine policy to the extent of c) LR or R/R is not at all necessary
a) 25% d) Undertaking from the consignor is sufficient
b) 50%
c) 75% 73. After settlement of a cargo claim
d) 100% a) Proceeding against the carrier by the insurer is simultaneous
b) Only the insured has to proceed against carrier and to recover and remit to
67. Find odd one out the insurer
a) Flag of convenience c) Anytime, at leisure recovery proceeding can be initiated
b) Polish Register of Shipping d) Recovery proceeding is not at all necessary
c) Lloyd's Register
d) Bureau veritas 74. After issue of marine cargo policy shipment could not be effected due to
expiry of the L.C. Insured seeks repayment of premium of Rs. 100000/-.
68. In which of the following the loss assessed is not ratably reduced in the In this case which of the following is appropriate
proportion of sum insured bears to the value at risk a) Insurer decline refund of premium, saying policy has been issued already
a) Particular Risk b) Retaining Min. Premium and effect refund for the balance amount is in
b) Partial Loss order
c) Total Loss c) Retain 50% of the premium and to refund the balance

312 313
 d) Substitute the premium for any subsequent transit the insured
a) Fire Insurance
75. In an export policy, goods are sold in mid sea and the buyer changed the b) Personal Accident Insurance
destination. Insured was getting refund from insurance company stating c) Marine Cargo Insurance
that the goods have not reached the destination stated in the policy. In d) Health Insurance
such case which of the following could be appropriate.
a) Refund is very well in order 81. Insurance cover note cannot be issued in case of
b) Refund should not be granted, as the shipment and transit had a) Marine Insurance
commenced b) Fire Insurance
c) As transit, as per policy deviated in the mid sea pro rata refund of c) Health Insurance
premium according to the distance covered can be effected
d) None of the above
d) None of the above
82. Which of the following information is not reflected on the schedule of
76. General average means Marine Insurance Policy (Cargo)
a) Age of the ship and its year of built a) Identification of vessel or conveyance
b) It is the average age of the ship in a fleet b) Type of contract between seller and buyer
c) It is a sacrifice in terms of cargo and freight incurred in times of the peril c) Invoice details issued by seller
of the sea to save the adventure.
d) Description of voyage or transit
d) None of the above
83. Seller's Contingency Policy cover can be issued in case of
77. In a Hull policy Freight is to be covered by the ship owner in any of the
a) CIF contract
following manner
b) FOB contract
a) Has to be insured separately
c) Either of the above (a) and (b)
b) To be included in the Hull policy itself
d) None of the above (a) and (b)
c) Both a & b
d) Freight cannot be insured at all
84. In case of CIF contract the Insurable Interest of the seller ceases
a) Once the goods leave the factory gate
78. Particular charge in a hull policy means
b) Once the goods are discharged at the port of discharge
a) Loss or damage caused by a sea peril insured against
c) Once the goods are put on board
b) It is a general sacrifice made in times of peril
d) None of the above
c) It is an expense in addition to sue and labour for the prevention of the
subject matter
d) None of the above 85. For an exporter having frequent exports which one of the following will
be more useful
a) Open policy
79. Which branch of insurance is codified by way of an Act in India
b) Open cover
a) Marine Hull
c) Open Declaration policy
b) Marine Cargo
d) Annual Marine Policy
c) Both (a) and (b)
d) None of (a) and (b)
86. In which of the following, war risk can be covered by paying extra
premium
80. In case of which of the following insurances, the stamp duty is borne by
a) Personal Accident Policy

314 315
 b) Health Insurance Policy b) Marine cargo policy
c) Marine Inland Transit Policy c) Marine hull policy
d) Marine Overseas Transit Policy d) Jeweler section under householder's policy

87. In India Marine Cargo Insurance was detariffed in the year 93. if the repair expenditure required to prevent actual total loss exceeds the
a) 1992 value, it would be known as
b) 1993 a) Actual total loss
c) 1994 b) Particular Average
d) 1998 c) Constructive total loss
d) General Average
88. Which of the following perils is not covered under ICC C Clause
a) Washing Overboard 94. In marine insurance, even a voluntary and deliberate loss can be paid
b) General Average Sacrifice under
c) Both a & d a) Total loss
d) Entry of sea, lake or river water into vessel b) Particular Average
c) No policy can cover voluntary and deliberate loss
89. In case of Marine Insurance, which one of the statement is correct with d) General Average
respect to GRT of the ship
a) Risk increases with the increase in GRT 95. With regard to stamp duty in marine cargo policy, which one of the
b) Risk decreases with the decrease in GRT following statement is correct?
c) Risk decreases with the increase in GRT a) Different for sea voyages and for other than sea voyages
d) The GRT does not play any role on risk b) Rate is same for all types of voyages
c) Rate for air voyage is different from road/rail
90. In case of Marine Insurance vessel approval is done by d) Rate is different for rail and road voyages.
a) GIC
b) GIPSA 96. For damage claim of CARGO monetary claim notice with the SHIP-
c) Individual Companies OWNERS should be lodged within
d) IRDA a) One month from the date of bill of lading
b) Fifteen days from the date of arrival of cargo
91. Which one of the exclusion gets deleted in case where the full shipload c) Seven days from the date of arrival of cargo
cargo is transported through duly 'approved' vessel d) Five days from the date of arrival of cargo
a) Loss/ damage/ expense caused by inherent vice or nature of the subject
matter insured 97. Theft peril is covered under
b) Ordinary leakage, ordinary loss in weight or volume or ordinary wear a) ICC C
and tear b) ICC A
c) Loss/damage/expense arising from insolvency or financial default of the c) ICC B
owner, managers, charterers or operators of the vessel d) ICC I
d) None of the above
98. Proximate Cause is
92. Which one of the following cannot be termed as the valued policy a) Remote cause
a) Fire Standard policy b) Indirect cause

316 317
 c) Active and Efficient cause d) None of the above
d) Other
105.Which of the following peril does not appear under ICC C
99. General Average arises when property involved in common Maritime a) Earthquake, Volcanic eruption or lightning
adventure b) Fire or explosion
a) The cost of vessel removal from one port to another c) Overturning or derailment of Land conveyance
b) Temporary repair of accidental damage effected during the course of d) Discharge of cargo at a port of distress
voyage
c) Cargo is discharged and or jettisoned to save the ship 106.The Marine Insurance Cover is available in the following forms
d) None a) Specific Policy
b) Cover Note
100.Recoveries from Third Parties under Marine Policy is based on the c) Open Policies/ Open Covers
principles of d) All of the above
a) Contribution
b) Subrogation 107.Which document in the absence of specific policy helps the bank to
c) Assignment authenticate the existence of insurance cover and relate it to the
d) Contribution & Subrogation documentary bill?
a) Certificate of Incorporation
101.What is not a Shipping document b) Certificate of Insurance
a) Bill of Lading c) Certificate of college
b) Bill of Entry d) None
c) Mate Receipt
d) Invoice 108.Which of the following statement is not correct
a) A valued policy is one, which specifies the agreed value of the subject
102.Bill of Entry is prepared for matter insured.
a) Excise duty b) The insured value is the amount specified in the policy as the value of the
b) Custom duty insured property
c) Sales Tax c) Sum insured is the total amount of the subscriptions of the insurers in the
d) OCTROI policy
103.What is not a Marine Insurance Clause? d) None of the above
a) Inchmaree Clause
b) Sue and Labour Clause 109.Which of the following does not form part of a marine adventure
c) Continuation Clause a) Ship
d) Cross Liability Clause b) Freight
c) Ship owner's liability to cargo owner
104.Which is not a General Average Claim? d) None of the above
a) When Fire Breaks out on board the ship and in order to extinguish it water
is poured on and chemicals are applied. 110. Which of the principal factors affect the rating of every cargo insurance
b) When there is a collision with another vessel or other casualty and the a) Vessel
cargo is discharged to enable the vessel to be repaired b) Nature of cargo
c) There is theft and missing of packages c) Conditions of insurance

318 319
 d) All the above b) Duty insurance can be granted to overseas seller
c) Duty insurance can be granted to bankers
111. Which loss or damage is not covered under institute cargo clause 'C' d) Duty insurance can only be granted to the holder of import license
a) Fire & Explosion
b) Overturning & Derailment of Land conveyance 118. Identify incorrect statement
c) Vessel or craft being stranded, grounded, sunk or capsized a) All marine policies are valued policies
d) Washing overboard b) Special declaration policies are valued policies
c) Duty insurance policy in marine is a valued policy
112. Which peril is covered under marine hull policy d) None of the above
a) Jettison
b) Fire & Explosion 119. Which of the following statements are relevant to underwriting of fishing
c) Piracy vessels
d) All the above a) Geographical features of area of operation
b) Classification by one of the major classification society
113. GRT means c) Proposal form
a) Gross Rare Tonnage d) All the above
b) Gross Report Tonnage
c) Gross Register Tonnage 120.State the correct statement among the following
d) None of these a) Marine cargo policy is transferred by way of payment of additional
premium
114. To whom marine policy cannot be issued b) Marine policy is transferred only after obtaining fresh proposal form
a) Purchaser of goods c) Marine policies are freely assignable
b) Seller of the goods d) None of the above
c) Transporter of goods
d) Bankers having financial interest 121.Which of the following statement is correct
a) Insurable interest should exist at the time of effecting marine insurance
115. Identify incorrect statement b) Insurable interest need to exist only at the time of loss
a) All marine policies are not freely assignable c) Insurable interest should be present throughout the currency of the policy
b) Special declaration policy (SDP) is not assignable d) None of the above
c) Marine policy is not assignable when goods are on high seas
d) Marine policy is not assignable when goods are in bonded warehouse 122.Identify the wrong statement
a) Constructive total loss is a total loss claim
116. Which of the following is not a term of sale in marine b) Constructive total loss is a loss occurred during the course of
a) C & F construction
b) CIF c) Notice of abandonment is necessary for a constructive total loss claim
c) FOB d) Constructive total loss is affected midway between actual total loss &
d) CFP partial loss

117. Identify correct statement 123.Which of the following is false in relation to marine cargo insurance
a) Duty insurance cannot be granted a) Claim survey fees are payable by insurers only if the claim is payable

320 321
 b) Under every marine policy for export shipments, a certificate of d) B only
insurance is issued
c) General average losses are covered only under Institute cargo clause (A) 129.Which of the following statements is false in relation to marine cargo
All risks insurance?
d) None of the above Statement A: The entire marine cargo tariff is governed by tariff or
market agreement.
124.Which of the following policies are freely assignable without the consent Statement B: Special storage insurance is granted in conjunction with
of insurers inland transit policy.
a) Marine cargo a) A only
b) Burglary b) B only
c) Marine Hull c) Both
d) Fire d) Neither

125.Which of the following risks are automatically covered without extra 130.Which of the following covers is suitable for regular export/import
premium under Institute Cargo Clause 'A' shipment?
a) Breakage only a) Open cover
b) Leakage only b) Special Declaration policy
c) Strikes riots and civil commotion c) Annual policy
d) Breakage & Leakage d) Duty insurance

126.If loss or damage is not apparent at the time of taking delivery from ocean 131.Which of the following insurances is not relevant to inland transit?
carriers written must be given to the carrier's representative within a) 'Increased value' insurance
___________ days of delivery b) Special storage risks insurance
a) 7 c) Special declaration policy
b) 30 d) Annual policy
c) 10
d) 3 132.Which of the following document is common to claims processing under
marine import policies and inland transit (Rail/Road) policies?
127.Which of the following General Exclusions under Institute cargo clauses a) Invoice
can be covered at extra premium under ICC (B) & (C) clauses b) Copy of protest
a) Malicious damage c) Bill of lading
b) Inherent vice d) Lost Overboard certificate
c) Ordinary leakage
d) Ordinary loss in weight 133.Which of the following statement(s) is true?
Statement A: Certificates of insurance are issued under both open covers
128.Which of the following statements is true? and open policies.
Statement A: Marine cargo policies are valued policies. Statement B: Certificates need not be stamped when the original policy is
Statement B: Marine Hull policies are valued policies. stamped.
a) Both a) Neither of the statements
b) A only b) Only statement A
c) Neither c) Only statement B

322 323
 d) Both statements

134.Which of the following documents provide evidence of loss of cargo

during loading operations?
a) Bill of entry
b) L.O.B. Certificate
c) Copy of protest by the master of the vessel
D) Ship Survey Report

Key Marine
1. C 28. C 55. A 82. C 109. C
2. D 29. C 56. B 83. B 110. D
3. C 30. A 57. A 84. A 111. D
4. D 31. D 58. C 85. B 112. D
5. C 32. B 59. B 86. D 113. C
6. C 33. A 60. D 87. C 114. C
7. A 34. C 61. A 88. C 115. C
8. C 35. A 62. B 89. C 116. D
9. C 36. B 63. A 90. C 117. D
10. B 37. A 64. A 91. C 118. C
11. D 38. B 65. D 92. A 119. D
12. D 39. A 66. D 93. C 120. C
13. D 40. D 67. A 94. D 121. B
14. C 41. A 68. C 95. A 122. C
15. D 42. A 69. D 96. D 123. C
16. D 43. B 70. D 97. B 124. A
17. C 44. C 71. A 98. C 125. D
18. C 45. C 72. B 99. C 126. D
19. D 46. A 73. A 100. D 127. A
20. D 47. A 74. B 101. D 128. A
21. D 48. C 75. B 102. B 129. A
22. D 49. D 76. C 103. D 130. A
23. C 50. C 77. C 104. C 131. A
24. D 51. D 78. C 105. A 132. A
25. B 52. A 79. C 106. D 133. D
26. D 53. B 80. C 107. B 134. C
27. D 54. D 81. D 108. C

324 325
 REINSURANCE

The direct underwriters seek insurance covers for their insurance Portfolio with
another insurer. This arrangement is known as Reinsurance. The direct insurer
becomes the reassured and the other insurer is known as Reinsurer. There are
various reasons, which prompt the insurers to go in for reinsurance arrangement.
Such reasons are given under:

NEED / BENEFITS OF REINSURANCE

• ACCEPTANCE OF LARGE RISK IS POSSIBLE:
To acquire increased capacity of the insurer with a view to accept large risks which
may not be possible within his financial limits, he may go in for reinsurance
protection.
Example: Insurers may wish to insure high valued risk like Madras Refineries
LTD or Bharath Petroleum or Bharath Heavy Electrical or Oil and Natural Gas
Corporation worth of more than 1000 crores and it may not be possible for an

REINSURANCE individual company to undertake entire risk within his own financial limits.
Therefore, he chooses to depend on reinsurance protection.

• ACCEPTANCE OF VARIETY OF RISKS IS MADE EASIER

They may underwrite more business of various natures than what could be
underwritten within their financial resource.
Example: The insurers may like to insure Aviation and also liability towards
passengers in addition to the cargo sent by air and also the storage of cargo in air
port areas or in Harbor areas. This could be possible only when they depend on the
reinsurance arrangements.

• EXPOSURE CAN BE LIMITED

The original insurers may like to limit their insurance exposure to any one loss or
occurrence, which he can bear within his financial limits.
Say for Example, Private Insurers in India are with an Authorized capital of just
Rs.100 Crores and they may not able to pay the claim more than the net earned
premium in one loss or one occurrence Nor they would desire to retain the claim
payment solely on their shoulders, which might destabilize their financial
position, and it would only affect their capital base. Maintaining the solvency ratio
within the prescribed by the IRDA is a condition precedent to sustain in the
insurance industry, otherwise, the insurer would be ruining their financial
base/networth, therefore, even established and experienced insurance companies
need to make such protection so that their financial position is stronger and have
326 327
the highest claim paying ability to fulfill the promise made.
Therefore, they will have to depend on rensurance arrangement.
• Stability and Viability can be further strengthened
The Original Insurer may like to stabilize their underwriting operating surplus.
Keeping the above purposes in view insurers desire to acquire reinsurance
products and try to position them in the market. The underwriters issue thousands
of policies covering property "Risks against wide range of perils for varying sum
insured". The concern of the underwriter is in the first place to take the possibility
of any one Risk being greater than it is prepared to withstand and that amount
which he fixed prudently is known as "Retention".
Certain terms used in reinsurance
Reinsured: He is the original insurer who seeks reinsurance from other insurers.
Even the reinsurer can become the reinsured when he selects to reinsure his own
portfolio of what he has reinsured. Reinsured is also known as cedant.
Reinsurer: The one who accepts the risk offered by the original insurers from their
portfolios insurance.
Treaty: Treaty means an agreement, which may be automatic with details or
without details to be submitted to the reinsurer. It can be sometimes blind treaty.
Net Retention: It is a level of sum chosen by the original insurer, which he thinks
can be limit of his own liability that can be borne from any one loss within his
financial limit.
Gross retention: The retention of the original insurer and share of the quota share
treaty reinsurer is known as gross retention.
Line: The retention limit may be net or gross that is "One line" in accordance with
the provision of the reinsurance treaty.
Deductible: Deductible is the sum selected by the insurer as a maximum monitory
amount that he is capable of retaining himself within his financial limit. This is
often known as excess point or deducible.
Cover Limit: It is sum, which is the maximum limit or reinsurer that he will bear
from any loss. This can be reinstated in the event of any loss in accordance with the
provisions of reinsurance contract.
Ultimate net loss: This is the net liability of the reinsurer after deduction towards
the salvage and recoveries.
Retrocession: this is an arrangement of reinsurance made by the reinsurer for their
reinsurance portfolios. It means a reinsurance arrangement for reinsurance.
Layers: Reinsurance arrangement can be made in layering. Mainly for
catastrophe risks
328
Commission: The Proportional reinsurer pays off the commission to the reinsured
slightly more than what they have incurred towards acquisition cost.
Profit commission: The reinsurers recognize the prudent underwriting capacity
of the reinsured and motivate them by giving them a fixed and agreed percentage
of profit made out of reinsurance contract.
Sliding Commission: The reinsurer may increase the percentage of profit
depending upon reduction in claim cost ration. A percentage of decrease in claim
ratio will have a corresponding and progressive increase in the percentage of
commission payable.
Say Example: 10% reduction in claim ratio may increase the percentage of
commission by 5% or so.
RETENTION
The insurer should identify a limit of his own liability, which he can conveniently
bear on his own without ruining his capital base. In other words, he should choose
a level of sum and fix it as a maximum monetary amount that he is capable of
retaining himself within his financial limits. This is very often called as Excess
point or amounts deductible in case of claim.
The Retention is determined based on risk classification
- Dwellings, offices, hotels, restaurants, etc.
- Light Engineering workshops where leather or plastic is not used
- Electronic goods manufactures and textile factories
- Furniture manufacturers.
- Chemical Factories and Para medical
- Petrochemicals
The insurer is aware that the some types of risk are more likely to have a fire hazard
than other because of the physical hazard associated with them and account of the
trade process, feature of construction and nature of goods utilized.
Example:
Saw Mills use different type of machinery, wood, wood shaving and other
inflammable materials which are susceptible to fire than most of the building used
for residence, office, restaurant and even for hotel purpose. It goes without saying
that likelihood of loss is dissimilar for both the risks. The insurers will always
shown lots of interest to retain a higher amount for his account for simpler risks
than more hazardous risk.
The retention amount selected by the insurers based on the sum insured for the
property would depend on classification of the risk underwritten, normally it is at
329
variance according to the perception of the hazards. Mostly the risks are classified The physical and moral hazard involved
according to the features like Proximity to fire brigades. Location and surrounding areas where insured property is situated
Presence of fire extinguishing appliance etc. The geographical area involved
The concept of the retention is very important from the point of view of The class of risk and its past experience
underwriters as it is only helps the underwriters to determine the amount of Classification and discrimination of risk
reinsurance products required. The probability of out brake of fire
In property insurance, the concept of EML and PML is felt more relevant with The susceptibility to damages
regard to Reinsurance arrangements. The extent of damages likely to be sustained
The possibility of extinguishment
ESTIMATED MAXIMUM LOSS (EML) The financial strength of the company in terms of the capital and Investments
EML means Estimated Maximum Loss. According to International Reinsurance The liquidity and the immediate realizable value of assets
Market, It is "An Estimated of Monetary Loss which could be sustained under a Financial Soundness and favorable solvency position of insurers
single risk as a result of a single fire or explosion considered by the insurer within The willingness of the insurers to part with their capitals to individuals and
the realm of a probability. series
It is fell by the insurers that the occurrence of an event will not endanger the entire The nature of market in which the particular insurer is operating
value of the property insured under fire insurance. Say for Example, the insurers The insurers' growth potentiality and the pattern of loss settlement
have underwritten a Building and the machinery worth or Rs.50, 00,000/- and the
The size of the risk that is being selected for reinsurance arrangements
possibility of this value getting affected in total in an event of fire may not be to the
Thus, the reinsurance depends on how much of the liability the insured can retain
extent of Rs.50, 00,000/- It may be to the extent of 50 to 60% of the value ranging
for his account. The concept of retention is very significant and it depends on the
from Rs.25 lacs to 30 lacs.
extent and type of reinsurance required.
They may assume that seeking reinsurance for full sum insured is not necessary
and therefore they may depend on the Maximum Estimated Liability of Rs.30 Lac
and seeks the reinsurance only for such sum. TREATIES
In other words the maximum liability of the insurers would be Rs.30 Lac which is The Forms of reinsurance those are applicable to property insurance
less than the sum insured. The insurers normally select the treaties to be used for property insurance from the
following options.
PROBABLE MAXIMUM LOSS (PML) Proportional Treaties
This insurers are under the compulsion to select the aggregation of the retention •Quota share treaty
that may be arising out of the losses to a variety of insured property such as houses, •Surplus treaty
office, manufacturing plant, petrol stations lots of other types of high value • Facultative treaty
property spread over the wide geographical area that may be affected by
Non-proportional treaties
catastrophe like STFI, earthquake, hurricane, cyclone etc.
•Excess of loss treaty of any one risk
The need arises to consider the Maximum Probable loss that may be likely due to
such a disaster by catastrophe and conflagrated risk. The insurer need to select the •Excess of loss of any one event
maximum Probable loss that the insurer could suffer in the event of such a natural •Stop loss ratio of any one event
calamity and decide a level of sum it could retain for its won account without
endangering its very solvency.
TYPES OF PROPORTIONAL TREATIES
•Factors that determine the retention limit: Quota share treaty:
The value of the property insured This is kind of reinsurance arrangement where the original insurer known as
330 331
Cedant agrees to cede each and every risk that he underwrites at a certain fixed pre
determined percentage subject to terms and conditions and upper limit embodied
in the contract of reinsurance.
Example if an insurer decides upon a 25% Quota share, then he would cede 25% of
all his business within his retention pattern and reinsurer would receive 25% of all
premiums on such business but pay 25% of all commission and 25% of all the
claims arising on such business subject tot he maximum limit. Quota share treaty
may incorporate an event or cession limit in the contract of insurance to contain the
losses arising from a single event.
Supposing the upper limit of the QTS is Rs.50 laces, when 25% of risk
underwritten reaches the amount of Rs.50 Lac, the original insurer needs to either
bear it on his own or seek additional reinsurance for the surplus amount.
Surplus treaty:
This is a kind of arrangement where the original insurer seeks reinsurance
arrangement for such risks which exceeds his retention limit or gross retention
limits of both his and his quota share treaty reinsurer. Since this arrangement is for
surplus of what is borne by him and met by the quota share treaty Reinsurance is
known as surplus treaty.
The capacity of the surplus treaty is always a multiple of ceding companies
retention. Further, multiples of the retention on lines can be added beyond the first
surplus treaty and second surplus treaty and so on. The premium and the claim will
be paid accordingly.
Facultative Obligatory treaty:
Under this arrangement the choice of ceding the risks is resting with the original
insurer and reinsurer cannot reject what is ceded to him subject to the parameters
of contract of reinsurance and similarly he cannot question in case reinsurer does
not cede any risk underwritten by him.
Facultative Reinsurance Treaty:
This is one of the oldest systems of reinsurance arrangements. Under these
methods, the reinsured needs to submit all the details of the risk to.
Reinsurer for their perusal and decide either to accept or reject. The option of such
decision is purely of reinsurer.
Therefore, this system proves to be unfavorable, cumbersome and
administratively theme consuming and uneconomic.
But, reinsured seeks reinsurance under this system where there is automatic
reinsurance, for such risks, or such risk fall outside the scope of the treaty
arrangements or sometimes limits under treaties are exhausted.
It is also possible that some of the high valued risk necessarily be covered under
facultative reinsurance.
332
REINSURANCE - PROGRAM
The reinsurance program of the insurer will depend upon the following factors
•Types of portfolios to be reinsured
The portfolios consisting of various sum insured: Quota Share Treaty or
Surplus Treaty or Excess of loss Treaty per risk is the most suitable
proportional reinsurance.
Where accumulation of risk is involved the program of reinsurance depends
on PML or EML, usually Excess of loss per occurrence is preferable.
Portfolios with unlimited liability Quota Share Treaty / Excess of loss Treaty
per occurrence is preferable
Portfolios subject to wide fluctuation Quota Share Treaty is preferable.
OBJECTIVES OF REINSURANCE PROGRAMS IN PROPERTY
INSURANCE
There should be an automatic reinsurance cover for the risk underwritten by
the insurer.
The treaty should have adequate capacity to cope up with the insurers
underwriting large risk and risk varying sum insured.
The reinsures offer sufficient scope of cover that can take care of the risk
undertaken by the original insurers.
The type of reinsurance taken would have its own economic advantage over
other type of reinsurance arrangement.
The reinsurance selected would extend the security and continuity of
reinsurance arrangements.
Proportional treaties like Quota Share Treaty, surplus treaty and obligatory treaty
are suitable to property insurance. Facultative method of reinsurance arrangement
is made when the treaty limited is exhausted and risk underwritten is not falling
under scope of treaties.
Commission
Normal Commission is paid under proportional treaties reinsurance arrangement
ranging between 2.5% to 20%. Usually this is being paid to take care of direct
insurers commission and administrative expenses and a small percentage of over
riders.
Supposing the direct insurer in case 17% of Gross premium income and resume
20% of commission from reinsurer, 3% will become over rider
Sliding Scale Commission
Sometimes reinsurer may offer a percentage of commission more than what is
given in particular year at the time of renewal to exhibit a kind of recognition by
333
way of incentive in order to reward the good claim experience during the currency Non-proportional reinsurance treaties:
of the contract of reinsurance. Unlike proportional treaties, non-proportional treaties are made based on loss
For example ½% increase in commission for 10% reduction in the claim ratio. experience. Sum insured is not the basis of reinsurance as done in proportional
1% increase for 20% reduction in the claim ratio. treaties. The premium is based on loss experience only. It may be a flat premium or
2% increase in commission for 30% reduction in the claim ratio fixed percentage of premium r based on incurred claim ratio known as burning
The upward revision in commission for reduction in claim ratio and downward cost ratio. Non-proportional reinsurance treaties are usually arranged in order to
revision in case of increase in claim ratio. This kind of system is known as sliding take care of Catastrophes and conflagrates risks.
scale commission. Catastrophe treaties are only useful to take care of perils of windstorm, hurricane
Profit Commission etc, which usually endanger and ruin wider area. These arrangements are done in
Usually the surplus treaty reinsurers offer to reward the good underwriting layers.
experience of direct insurer at the end of the year by sharing the percentage at a
certain agreed percentage which forms part of the terms of the RI contract. Types of Non-proportional treaties
There are three types of profit commission usually in practice. 1. Excess of loss treaty:
1. Pro-rata basis Under this reinsurance arrangement, the reinsures pre determines a level of sum
2. Three years average system that he can retain from any loss without ruining his capital base. Say for example:
3. Loss extinction basis he decides that he can bear only unto
Rs.10 laces per risk, he will make reinsurance arrangement for any loss in excess
of his limit of Rs.10 laces.
Example 1
Supposing a loss occurs and 10 numbers of shops are damaged by the insured peril
Three years average system
and claim reported in Rs.25 lacs by each insured.
Profit during the first year, say 2004 and 2005 = Rs. 300,000
The original insurer will retain Rs.10 lacs for each insured and claim Rs.15 lacs for
2005-06 = Rs. 600,000
each insured from the reinsurer and in which case he will be bearing a total amount
2006-07 = Rs. 1,200,000 of Rs.1 crore and receive Rs.1.5 crores from the reinsurance.
Agreed Profit Commission @ 15% The amount retained by the reinsured is known as deductible. And the amount
Three years average profit = (3+6+12)/3 = Rs.700, 000 borne by the reinsurer is known as the cover limit.
Profit Commission Payable @ 15% = 700000X15% = Rs. 105,000 In this arrangement the reinsured bears the loss of Rs.10 lacs per risk, as his
deductible and the Cover Limit of the reinsurer is Rs. 15 Lacs per risk.
Example 2 Therefore this excess of loss treaty arrangement is known as "Per risk cover" or
Loss Extinction basis "Working covers".
Profit during the first year, say 2004 and 2005 = Rs. Minus 300,000 The insurer knows well based on his past records and form the experience of others
2005-06 = Rs. Minus 600,000 as to how many claims will be more than his own account of deductible. The
2006-07 =Rs. 1,200,000 insurer will seek reinsurance for all losses exceeding his deductible of whatever
Agreed Profit Commission @ 15% sum he had mentioned in the scope of cover.
The losses of previous two years set off against the third year profit and the balance
profit works out to Rs. 300000 and 15% of profit commission works out to Rs. • Excess of Loss Treaty "Per Event Cover"
45,000/-. Under this system, the reinsured will bear only one deductible irrespective of the
This kind of commissions can be allowed only in case of professional reinsurance number of risks in the loss occasioned by an event. Say for example, if the
agreements. reinsurance has been on per event basis, in the above example the reinsured would
have borne only Rs.10 lacs and claimed from the reinsurer a sum of Rs.2.5 crores

334 335
minus his deductible of Rs.10 lacs, i.e. Rs.2.4 Crores.
Arrangement of reinsurance for catastrophe risks in layering
Example: Reinsured deductible Rs.50 lacs
Layering:
Rs.1, 00, 00,000/- Xs Rs.50, 00,000/- Reinstatement 2 at 50% of premium
Rs.2, 00, 00,000/- Xs Rs.1, 50,000/- Reinstatement 1 at prorate as to time
Rs.4, 50, 00,000/- Xs Rs.3, 50, 00,000/-
Rs.10, 00, 00,000/-Xs Rs.8, 00, 00,000/-
• Hours Clause
Hour's clause is being incorporated in the contract of reinsurance mainly to take
care of certain perils, which occur again and again. This clause is incorporated into
property treaties where weather perils are insured and which can affect property
over 1000 of square miles and last for several days as in the case flood, hurricane,
tornado and cyclone. The number of hours varies from peril to peril. 72 hours is
appropriate for earthquake and weather perils.
STOP LOSS RATIO:
This insurance cover is taken when annual result of the insurance company is
subject to volatile loss ratio.
This reinsurance is taken against hailstorm and crop insurance. This reinsurance
operates only after all other reinsurance recoveries are made.
Under this system reinsured usually shares with the reinsurer may be 10% or by a
monetary limit.
The purpose of this reinsurance is to restrict the annual aggregate losses to a pre
determined percentage of the annual net premium income of the original insurer
from his fire portfolio:
Example: M/s. Botham Companies underwrites a fire portfolio of Rs.100 crores.
They desire to make reinsurance arrangements with the Reinsures for losses that
exceed 60% of the net retained premium.
This arrangement is to be done in addition to all the other reinsurance arrangement
made by them.
Supposing they make a quota share of 25% inclusive of commission, the net
retained premium of the insurer is 75 crores.
Since the 60% of net retained premium income is 45 crores, any loss exceeding 45
crores will be a heavy burden on the premium account as well as assets. Therefore,
they have to make reinsurance arrangement for losses in excess of 45 crores. It is
practice that the insurers will share as a coinsurer with reinsurer at certain
336
percentage say 15% but such reinsurance arrangement will stop operating when
the loss exceeds a percentage of net retained income say 110 cores.
Therefore this reinsurance arrangement is known as STOP LOSS
• EXCESS RATIO
Sharing of premium and claims account amount non proportional treaty Insurers
Premium is paid based on loss experience. Therefore there is a formula for
calculating the premium wherever there is a past record.
Say, Incurred claims x 100
Gross Net Premium
The premium arrive on this formula is known as "Burning Cost Ratio". In addition
the Insurers increase the premium by a loading factor towards acquisition and
management cost.
Usually, it may be 100/70 or 100/80 or 100/85
Where the records of past experience are not available, the insurers may select the
payment or premium on a Flat Basis or a Fixed Percentage of the Gross net
premium income.
With regard to premium payment based on loss experience, the minimum and
maximum limit it agreed in the contract of reinsurance.
No. Commissions are payable under Non-proportional treaties Reinstatement of
sum insured
Based on the claim experience, the limit chosen by the reinsurer is reduced to the
extent of incurred claims and that sum can be reinstated by additional premium.
Claim Payment
The reinsurer will pay the claim upto his maximum limit once the loss reported to
exceed the deductible limit of the insurer. For major claims, then and there
settlement will be carried out that is called "Cash Loss Settlement" or otherwise
the net retained account will be submitted at the end of the year after adjusting the
deposits, if any.
Under non-proportional system, irrespective of the - claim, minimum premium
has to be paid.
• CONCLUSIONS
For property Insurance, both proportional and non-proportional are favorable.
But it is ideal if the insurer chooses non-proportional reinsurance for catastrophe
risks and quota share treaty if he is a new insurer. Besides, the payment of premium
is very less in Loss as compared to other Proportional treaties.
337
QUESTIONS •Occupancy
•Neighborhood
1. Write 10 points on basis and functions of RI. •Type of construction
• Reinsurance is insurance of insurance. •Period of cover
• Transfer of risk from insurance company to Reinsurance Company. •Perils covered
• Sharing of risk of insurance company. •Sum Insured (Block wise)
• Spread of risk internationally. •Rate deductibles
• It provides capacity to underwrite more business by proportional •Commission
reinsurance. •Retention
• It provides protection to net retention by XOL and Cat. XOL.
•Brokerage
• It stabilizes the results of insurance company by paying claim in bad
•Past claim experience
years.
•Other Insurance
• Provides guidance and technical expertise to insurance companies.
•Inspection reports.
• Helps in maintaining solvency margin by providing capital indirectly.
• Helps in getting global exposure. 4. Write characteristics of surplus treaty
• Take care of aggregate loses with smaller policies. • It is reinsurance treaty.
• Proportional method of re insurance.
2. What is facultative RI and describe advantages and disadvantages of
facultative. • Premium and claims are shared in the same proportion.
• Re Insurance of single risk. • It is obligatory and automatic capacity whenever there is surplus sum
• Optional for insurance com. And reinsurance co. to offer the risk or not insured it is compulsory to cede and accepted by re insurer.
and to accept the risk or reject. • Surplus treaty helpful growing business and accepting risks beyond
• The reinsurance may suggest modification in terms and conditions and retention.
insurance company may accept or reject the modification. • Maintain solvency margin.
• The risks which are outside the treaty or exceeding treaty limit are • Share catastrophe losses.
covered as facultative. • Can be arranged portfolio wise i.e. fire surplus treaty, marine hull treaty
• Hazardous and higher exposure risks are offered facultative. etc.
• Expertise and capacity of big reinsurance company is available. • High re insurance commission.
• Useful for hazardous risk. • Provision for profit commission.
• Useful for very large risk.
5. List same clauses (treaty wording) of proportional treaties :
• Time taking process and high administrative cost.
• Scope of contract
• Full disclosure of information of the risk to be made.
• Follow the fortune
• Negotiation at renewal.
• Loss portfolio
• No profit commission and very less re insurance commission.
• Commission
3. List out contents of a facultative slip. • Accounts
• Name of the Insurance Co. • Cash losses
• Name of the Insured. • Inspection of records
• Location. • Error and omission.
• Nature of business • Commencement and termination
• Age of the company • Disposal of balance
• Arbitration.

338 339
6. What is retention? • If losses exceeds the loss retention claim are payable by reinsurance
• Retention is an amount company would like to keep to its own account. company subject to upper limit.
• Two types of retention • Premium rating is also done on non proportional basis.
• Risk retention • Claims recovery under proportional method of reinsurance.
• Loss retention • Under facultative reinsurance a certain percentage of sum insured and
• Factors to decide retention premium is transferred and claims are also recovered in the some
• Share capital proportion.
• Reserve • Under quote share arrangement a fixed and pre determined percentage of
each and every policy is ceded and claims are recovered in the same
• Net worth
proportion.
• Portfolio premium
• Under surplus treaty the sum insured exceeding gross retention is ceded
• Portfolio profitability and claims are recovered in the same proportion.
• Management policy • Claim notice has to be given.
• Re insurance programme. • Brokers may also be informed.
7. Describe the nature of reinsurance contract • In case of big losses cash call may be made.
• It is a separate contract between insurance company and Reinsurance
• Cat. Loss also can be first recovered from the reinsurance company.
Company.
Records may be kept systematically for reinsurance companies' inspection.
• Insurance contract must precede reinsurance contract.
• It is contract of indemnity.
• The requirement of contract such as offer, accept, consideration, legality
are also applicable.
REINSURANCE TRADE QUESTIONS
• Consideration is premium package by insurance company to
Reinsurance Company.
• Utmost good faith as insurable interest is also equally applicable. 1. What percentage of Sum Insured of any Policy underwritten in India will be
Re- insured with the Indian Re-Insurer (GIC) compulsorily in the name of
• The contract may include clauses like follow the fortune error and “Obligatory Cession?”
omission etc. a. 20%
• If cut through clause is included the primary insured may claim from b. 15%
Reinsurance Company.
c. 25%
8. Characteristics of excess of loss treaties. d. 10%
• These are non proportional method of reinsurance.
• Profits retention 2. As per IRDA regulations, the objective of Re--insurance is not to
a. Maximize retention within the Country
• Types of XOL treaties.
b. Develop adequate capacity
• Risk XOL
c. Secure protection of catastrophic Losses
• Event XOL
d. Earn more profit.
• Cat. XOL
• Stop Loss 3. Which is not an objective under Re- insurance programme as per IRDA
• The insurance companies have to decide loss retention for each risk and (General Insurance Re-insurance) regulations 2000?
arrange risk XOL. a. Simplify the administration of business
• Similarly under event XOL the insurance company has to decide loss b. Maximize retention within the Country
retention under any event. c. Enhance Re-insurance on facultative basis
• Catastrophic loss retention under cat. XOL. d. Secure the best possible protection for the Re-insurance costs incurred.

340 341
4. Which of the following terms does not relate to Reinsurance? 11. As pr IRDA regulation on reinsurance the percentage of commission payable
a. Treaty. to ceding company for various classes of business is uniform
b. First Loss. a. True
c. Facultative b. False
d. Stop Loss.
12. Each Indian insurer should obtain the approval of their Re-insurance
programme from IRDA
5. Self Insurance may NOT be advantageous in:
a. True
a. Predicting accurately. b. False
b. Minimization of disputes.
c. Grouping of risks. 13. Reserve for unexpired risk is calculated on
d. Saving transaction costs. a. premium received including reinsurance ceded but excluding reinsurance
received.
6. In Sliding scale of commission arrangement b. including reinsurance ceded and reinsurance received
a. Commission payable varies in proportion to the loss ratio c. excluding reinsurance ceded and including reinsurance received.
b. Commission payable varies inversely to the loss ratio d. excluding reinsurance ceded and excluding reinsurance received.
c. Commission payable is not related to the loss ratio
d. None of the above 14. Without approval of IRDA insurer independently cannot place Re-insurance
7. In the Reinsurance market, a Re-insurance contract is evidenced by with Single Re-insurer more than
a.1% Re-insurance ceded outside India
a. Policy
b. 5%
b. Stamped Slip
c.10%
c. Endorsement d. 25%
d. Cover note
15. The statutory cession on each and every policy (subject to certain limits),
8. All General insurers in India --------- to GIC towards Re-insurance received by GIC is
a. Have to necessarily cede 15% of their business a. 66.66%
b. Have to necessarily cede 25 of their business b. 15%
c. Have an option to cede between 10 25% of their business c. 33.33%
d. Are not bound to cede any business d. 10%

9. In India, the minimum entry capital for a reinsurance company is 16. Absence of direct relationship between Re- insurer and insured is an essence
a. Rs. 50 crore of the Re-insurance concept. Which of the following clause is against this
concept?
b. Rs. 100 crore
a. Premium adjustment clause
c. Rs. 200 crore b. Claims cooperation clause
d. Rs. 300 crore c. Cut through clause
d. Follow the fortune clause
10. Indian regulations prescribe a minimum credit rating of ________ in respect
of Re-insurers outside India. 17. Which of the following is not relevant in facultative re insurance?
a. AAA a. Sessions
b. AA b. Retrocession
c. BBB c. Portfolio entry
d. BB d. Reinstatement

342 343
18. In an XL form of Re-insurance the top and drop method is not relevant in 24. When a reinsurer wishes to reduce its own liability on a particular risk, it does
which of the following case? so by arranging a
a. When there is more than one layer a. Cession.
b. When the number & amount of reinstatement is restricted b. Concession.
c. When there is a single Re-insurer c. Retrocession.
d. None of the above d. Treaty.

19. Facultative Re-insurance is 25. What amount would the reinsurer pay if the insurer has an excess of loss treaty
a. A kind of obligatory Re-insurance for Rs.10,000,000 excess of Rs.5,000,000 and as a result of a storm insurer
b. A Re-insurance arrangement administered by a faculty of insurance experts suffers a loss totaling Rs.7,000,000?
c. A method of Re-insuring risks on individual basis without any obligation a. 2,000,000
for compulsory cession. b. 7,000,000
d. A method of Re-insuring risks where insurer is obliged to cede a fixed c. 5,000,000
percentage of premium for all risks written by him. d. No payment would be made

20. In reinsurance terminology a cession is the

26. In Re-insurance, a treaty designed to limit the loss of an insurer to a specified
a. Amount of insurance a reinsurer cedes to another Re-insurer percentage of its annual premium income for all business or a class of
b. Amount of insurance an insurer keeps for its own account business is called a
c. Amount of insurance an insurer transfers to a Re-insurer a. Catastrophe Excess of Loss Treaty.
d. Maximum amount of insurance an insurer can write b. Excess of Loss Treaty.
c. Stop loss Treaty.
21. The most common way of using reinsurance to minimize the effects of large d. Surplus Treaty.
or catastrophic losses is by means of
a. Facultative Re-insurance
27. Surplus Re-insurance is a form of
b. Quota Share Treaties
a. Proportional Re-insurance
c. Surplus Treaties
b. Non-Proportional Re-insurance
d. Excess of Loss Treaties
c. May be either
22. An arrangement in which insurer and reinsurer agree that cessions will d. All the above
always be a single fixed percentage of each reinsured risk can be referred to as
a. per event excess of loss Re-insurance. 28. A Re-insurance contract is
b. per risk excess of loss Re-insurance. a. An extension of the original insurance contact
c. quota share Re-insurance. b. A guarantee for the original insurance contract
d. surplus Re-insurance. c. A separate and independent contract
d. None of the above
23. In reinsurance parlance which of the following is only found in non-
proportional treaty agreements? 29. The retention limit of the direct insurance is based upon
a. Accounts and Statistics Clause a. Capital
b. Attachment of Cessions Clause b. Risk profile of the portfolio
c. Follow the Fortunes Clause c. Regulatory considerations
d. Ultimate Net Loss Clause d. All the above

344 345
30. What is the amount of claim is payable under facultative Re-insurance 3) Only (c) above
arrangement if the total sum insured is 20,000,00 and the cover is for Rs. 4) Both (a) and (b) above
5,000,00 and claim is Rs. 4,000,00. 5)Both (b) and c) above
a. 4,000,00
b. 3,000,00 36. In reinsurance parlance, a single event that causes multiple losses is called
c. 2,000,00 a. Accumulation of losses
d. 1,000,00 b. Catastrophe
c. Accident
31. Under excess of loss if the cover is 10 crores in excess of 6 crores, then the 6 d. Cyclone
crores is known as
a. Cover limit 37. Which of the following is not a function of Re-insurance ?
b. Deductible a. Increasing the capacity of a Re-Insurer.
c. Franchises b. Minimizing the effects of catastrophes
d. Ultimate net loss c. Stabilizing the performance
d. None of the above
32. Under excess of loss if the cover is for 20 crores in excess of 10 crores then the 38. The contract where the distribution of the loss is based on the loss and not on
cover limit is the amount insured is called
a. 10 crores a. Proportional reinsurance
b. 20 crores b. Non-proportional Re-insurance
c. 30 crores c. Treaty Re-insurance
d. None of the above d. Facultative Re-insurance

33. The total sum insured of a property risk is Rs. 10 crores and retention is Rs. 39. Which of the following is / are not true with proportional facultative
One crore the treaty limit is Rs. 5 crores. If there is a claim of Rs. 50 lakhs the reinsurance?
Re-insurers will pay under surplus treaty
a. The Re-insurer shares a proportional part of the ceded insurance liability
a. Rs.50 lakhs
b. All the losses are to be transferred to the Re-insurer by the cedent
b. Rs.40 lakhs
c. The Re-insurer pays directly to the original insured
c. Rs.25 lakhs
d. Both (b) and (c) above
d. Rs.10 lakhs
40. Which of the following statement is /are true?
a. A cedent chooses facultative Re-insurance when it does not want to be
34. Insurance of an insured risk is called loaded with poor risk
a. Pooling of the risks b. Cedents normally choose facultative Re-insurance when there is not
b. Co-insurnace automatic Treaty at their disposal
c. Re-insurance c. Under facultative Re-insurance both cedent and the Re-insurer have an
d. Over-insurance option to accept or reject.
d. All of the above.
35. Which of the following contracts is not a contract of indemnity in the strict
sense? 41. What does the word “treaty” mean?
a. Re-insurance a. Single insurance policy
b. Property insurance b. Bulk of insurance policies
c. Life insurance c. An agreement between two parties
1) Only (a) above d. Reinsurance
2) Only (b) above
346 347
42. The contract under which a reinsured is obliged to cede a fixed percentage of 4) Both (b) and (c) above
the risks falling within the scope of the policy is called 5) All of the above.
a. Quota Share Treaty
b. Surplus Share Treaty 48. Which of the following statements is / re not true?
c. Excess of Loss Treaty a. Large claims normally are repetitive and frequent
d. Stop Loss Treaty b. In most of the cases, the risks undertaken generate a great number of small
risks, a few medium sized risks and very small number of large risks which
43. The kind of treaty where the cedent company retains the risks till a certain can be very severe.
limit and reinsures only the part that is above its net retention is c. The higher layers come into picture only in case of very large claims.
a. Quota share treaty 1) Only (a) above
b. Surplus Treaty 2) Only (b) above
c. Excess of Loss Treaty 3) Only (c) above
d. Stop Loss Treaty 4) Both (a) and (b) above
5) Both (b) and (c) above.
44. Which of the following is based on principles of both facultative and treaty?
a. Facultative cover 49. A computerized report that lists information for each and every claim is called
b. Quota share cover in reinsurance
c. Facultative obligatory cover a. Case reporting
d. Partial cover b. Summary reporting
c. Bordereau reporting
45. What does a 'premium bordereau' contain? d. Bulk reporting
a. Detailed list of policies
b. Address of the original insured. 50. “Probable Maximum loss” is an assessment by
c. Termination date a. The Cedent
d. all the above b. The Reinsurer
c. The Surveyor
46. Why is the concept of retention important to the underwriter? d. The Broker
a. Because it helps the underwriter to determine the amount of reinsurance
cover required. 51. Which of the following is not an advantage of the excess loss per occurrence
b. It helps the underwriter to know about the accumulation of risks. treaty?
c. To ensure that the insurance company is not exposed to unacceptable level a. It allows the companies to write some limits above the comfort level
of losses. b. It creates an extra capacity
d. All the above c. It covers the entire loss
1) Only (a) above
47. Why is it important for an underwriter to know about the risk environment 2) Only (b) above
prevailing in other parts of the world ? 3) Only (c) above
a. Because reinsurance is a business that goes beyond the boundaries 4) Both (a) and (b) above
b. Because reinsurance companies have to balance the possible adverse
impact of one region by the better experience of another. 52. Which of the following is / are true with regard to reinsurance underwriting?
c. To thwart competition. a. It involves selecting the accounts
1) Only (a) above b. It involves defining conditions and rates
2) Only (c) above c, Only (a) above
3) Both (a) and (b) above
348 349
 d. Only (b)above 59. One of the following is non proportional method :of reinsurance
e. (a) and (b) above a. Stop loss
b. Quota Share
53. As per IRDA regulation on reinsurance, each insurance company has to cede c. Surplus
20% (now 15%) of each and every policy as obligatory cession. These are: - d. Facultative
a. Quota share basis
b. Facultative basis 60. The automatic capacity of underwrite business beyond retention is arranged
through
c. Surplus basis
a. Excess of Loss
d. Excess of Loss basis b. Surplus Treaty
c. Stop loss
54. Quota share basis can be : d. Facultative
a. Reciprocal
b. Non-reciprocal 61. A line is
c. NM reciprocal a. Sum Insured under the policy
d. Both the above b. Risk retention to co's account
c. Cession to quota share
55. The Manager of Motor Insurance Third Party pool is from:
a. IRDA 62. As per IRDA regulations, the obligatory cession on quota share basis to GIC
by all General Insurance Co. is-
b. GIC
a.10%
c. New India
b.15%
d. United India c.20%
d.25%
56. The Manager of Re-insurance pool for terrorism risk is from
a. GIC 63. Facultative Re-insurance is the
b. IRDA a. Portfolio risk
c. General Insurance Council b. Single risk
d. None of the above c. Both the above
d. None of the above
57. The retention of an insurance company is protected by Reinsurance Treaty
such as: 64. Profit commission is normally paid in-
a. Quota share a. Facultative RI
b. Surplus b. Excess of Loss
c. Stop Loss
c. Excess of loss
d. Surplus Treaty
d. Facultative
65. A major portion of mega risk, after ceding to surplus treaty is reinsured
58. One of the following is -proportional method of reinsurance : through
a. Stop Loss a. Excess of Loss
b. Excess of Loss b. Stop Loss
c. Catastrophic excess of Loss c. Facultative
d. Surplus d. Catastrophic Excess of Loss

350 351
66. Stop loss is suitable for
a. Aviation risk
b. Mega risk
c. Hailstorm risk
d. Petrochemical risk

67. Following reinsurance companies are underwriting business in India:

a. Munich Re
b. Swiss Re
c. Axa Re
d. GIC Re

68. As per IRDA Regulations the share capital for Reinsurance Company is
a. 100 Cr
b. 200 Cr
c. 300 Cr.
d. None of the above

69. As per IRDA regulations while placing the Re-insurance programme, not
more than ____ percentage of cover should not be placed with one insurance
reinsurance company.
a. 5%
b. 10%
c. 15%
d. 25%
KEY REINSURANCE TRADE QUESTIONS
1. B 15. B 29. D 43. B 57. C
2. D 16. D 30. D 44. C 58. D
3. C 17. D 31. B 45. D 59. A
4. B 18. C 32. B 46. D 60. D
5. C 19. C 33. C 47. C 61. B
6. B 20. C 34. C 48. A 62. B
7. B 21. D 35. C 49. C 63. B
8. A 22. C 36. B 50. C 64. D
9. C 23. D 37. D 51. C 65. C
10. C 24. C 38. B 52. E 66. C
11. B 25. A 39. D 53. A 67. D
12. A 26. C 40. D 54. C 68. B
13. A 27. A 41. C 55. B 69. B
14. C 28. C 42. A 56. A

352 353
 FINANCE
ACCOUNTS, INVESTMENT, AUDIT & RELATED REGULATIONS
TRADE QUESTIONS

1. Compulsory investment by an insurer of its total assets, in Infrastructure and

social sector is
a. Not less than 10%
b. Not less than 7.5%
c. Not less than 5%
d. No such limit

2. Mark the most unlikely for calculation of solvency margin. Asset of Insurance
Company includes
a. Agent's balance amount
b. Realizable sundry debtors
c. Realizable advance
d. Furniture, Fixture, Dead stock and stationery

FINANACE 3. “No risk to be assumed unless the Prem. Is received in advance” the same has
been provided in
a. Section 41 of Insurance Act
b. Section 40 C of Insurance Act
c. Section 64 VB of Insurance Act
d. Section 64 UM of Insurance Act

4. State which of the following may not be a liability of Insurance Company

a. Provision for dividend declared or recommended
b. Reserve for unexpired risk
c. Estimated liability in respect of outstanding claim
d. Reserve for bad and doubtful debts

5. Solvency Ratio means

a. Available Solvency Margin Less required Solvency Margin
b. RSM less ASM
c. RSM/ASM
d. ASM/RSM

6. Who of the following can be members of Investment Committee of an insurer

constituted under IRDA Regulation?
a. The principal officer of the Company
b. The appointed actuaries
c. The IRDA chief

354 355
 d. The CVO b. The requirements of the IRDA Act, 1999
i. a, b, c, d c. The requirements of the Companies Act, 1956
ii. a, b and c d. All above
iii. a and c
iv. a and b 13. The Auditors shall verify that the investments in the Balance Sheet have been
valued in accordance with
7. Incurred Claim Ratio for direct insurance business means a. The provisions of the IRDA Act, 1999
a. Paid Claim/Prem. during any policy period b. The provisions of the IRDA Act, 1999 and IRDA Reg. on Accounts and
b. 3 years avg. claim/3 years avg. prem. Audit
c. Incurred claim/3 years avg. prem. c. The provisions of the Companies Act, 1956 and Accounting Standard
d. Incurred claim/ prem. during any policy period (AS) 13
d. Market Value
8. After formation of IRDA, Statutory Auditors of PSU Insurance Companies
are appointed by 14. The auditors express opinion on the accounting policies to the effect that
a. IRDA a. The Accounting policies are appropriate and in compliance with
b. CVC applicable Accounting Standards
c. CAG b. The Accounting Policies are appropriate and in compliance with
d. Board of Directors of respective Company. applicable Accounting Standards and IRDA Regulations
c. The Accounting Policies are appropriate and in compliance with IRDA
regulations
9. Which is correct pair?
d. The Accounting Policies are appropriate
a. Statutory Audit-Continuous Audit
b. Internal Audit-Periodical Audit
15. The auditor shall express their opinion that the Revenue Account gives
c. Government Audit-Continuous Audit
a. A true and fair view of the surplus or the deficit for the financial period
d. None of the above
b. A true and correct view of the surplus or deficit for the financial period
c. A fair view of the surplus or the deficit for the financial period
10. As per the Statutory Requirement the following may not be prepared for
Annual Financial Results by Insurance Company d. None of the above
a. Revenue Account
b. Trading Account 16. As per IRDA (Accounts and Audit) Regulation the auditors are required
c. Profit and Loss account a. To review the management report
d. Balance sheet b. To certify that they reviewed the management report
c. To certify that they have reviewed the management report and there is no
apparent mistake or material inconsistency with F S.
11. The auditors who are required to express their opinion on whether the balance
sheet gives a true and fair view of the insurers' affairs as at the end of the d. Not to certify or review the management report
financial year are
a. Internal Auditors 17. As per IRDA (Accounts and Audit) Regulation, the auditor's report shall
b. Statutory Auditors specify that
c. Govt. Auditors a. The actuarial valuation of liabilities is duly certified by the appointed
actuary
d. Auditor for Tax Audit
b. The valuation of liabilities is based on the assumptions for such
valuations
12. The auditors will verify that the financial statements are prepared in
c. Valuation in accordance with the guidelines and norms issued by ASI
accordance
d. Valuation is made in accordance with above all provisions
a. The requirements of the Insurance Act, 1938

356 357
18. For claim audit the auditor should look into the following aspect(s) c. Profitability of the company
a. Legal aspects d. All above
b. Technical aspects
c. Financial aspects 25. As per IRDA regulation each Indian insurer shall render its accounts in
d. All Above respect of obligatory cessions to Indian reinsure on
a. Monthly basis
19. For corporate underwriting audit, the internal auditor shall examine b. Quarterly basis
a. Underwriting Policy and practice c. Half-yearly basis
b. Risk Management Policy and Reinsurance Policy d. Annual basis
c. Underwriting results
d. All above 26. IBNR stands for
a. Insured before now reported
20. For investment audit, the Auditors look into the following aspects b. Insured before not reported
a. Verification and valuation of investments c. Incurred but now reported
b. Verification of Exposure Risks d. Incurred but not reported
c. Verification of performing and non-performing status of investments
d. All above 27. Reserve for unexpired risk is calculated at 100% of the net premium in the
following class of business
21. Accounts audit covers the following aspects a. Finance
a. Verification of Financial Statements b. Marine Hull
b. Recognition of Premium Income c. Misc.
c. Valuation of Assets and Liabilities and Solvency Margins d. Marine Cargo
d. All above
28. Reserve for unexpired risk is calculated on
22. For motor TP claims audit, the auditors need not consider the following a. Premium received including reinsurance ceded but excluding
aspects reinsurance received
a. The investigation Report and Income Statement b. Including reinsurance ceded and reinsurance received
b. Charge Sheet, Post-mortem Report and Police report c. Excluding reinsurance ceded and including reinsurance received
c. Policy particulars and 64 VB compliance d. Excluding reinsurance ceded and excluding reinsurance received
d. Premium charged and claim ratio
29. Unearned premium refers to the following
23. To verify the admissibility of FLOP claims, auditor shall first look into: a. 10% of the gross premium
a. The admissibility of Material damage claim in Fire Policy b. 20% of the gross premium
b. Whether the claim under Fire policy is payable c. 15% of the gross premium
c. The admissibility of FLOP policy claim with reference to its coverage, d. None of the above
exclusions, terms, conditions, clauses irrespective of the admissibility of
claim 30. The IRDA Regulation that deal with Audit Requirements is called:
d. None of the above a. IRDA (Preparation of Financial Statements and Auditor's Report of
Insurance Companies) regulation, 2000.
24. The auditor will examine the receipts and payments accounts (cash flow b. IRDA (Preparation of Financial Statements and Auditor's Report of
statement) to verify mainly: General Insurance Companies) regulation, 2000.
a. Liquidity of the company c. IRDA (Preparation of Auditor's Report of Insurance Companies)
b. Solvency of the company regulation, 2000.

358 359
 d. IRDA (Preparation of Auditor's Report of General Insurance Companies)
regulation, 2000.
31. The report of the Auditors on the Financial Statements of every insurance
company shall be inconformity with the requirements specified in schedule(s)
to the particular regulation thereof
a. Schedule A
b. Schedule B
c. Schedule C
d. All above
32. The Audit Committee in Insurance Company is constituted by one of the
following ways:
a. The specified provisions in the companies Act 1956 (As Amended)
b. The specified provisions in the Insurance Act, 1938 (As Amended)
c. The specified provisions in the IRDA Act, 1999 (As Amended)
d. The specified provisions in the specified IRDA Regulations
33. The Financial Statements of a general insurance company to be audited are:
a. The revenue account (Policyholder's Account)
b. The balance sheet and profit & loss account (Shareholders' Account)
c. The Receipts and Payments account (Cash Flow Statement)
d. All above
34. C & AG Audit of Government companies is carried out as per the provisions
a. The provisions Sec. 617 of the Companies Act 1956 (As Amended)
b. The provisions Sec. 618 of the Companies Act 1956 (As Amended)
c. The provisions Sec. 619 of the Companies Act 1956 (As Amended)
d. All above
35. For the purpose of PSU Audit Laws and regulations applicable are
a. The provisions of the Companies Act and the insurance act
b. The IRDA regulations and the Insurance principles
c. The Accounting Standards and the Auditing and Assurance Standards
issued by the Insurance Chartered Accountants of India
d. All above
36. The Audit Committee that oversees, reviews and evaluates the financial
results and their disclosures is constituted
a. Under the directives of the Controller & Auditor General of India
b. Under the provisions of the IRDA Act, 1999
c. Under the provisions of the Insurance Act
d. Under the provisions of Sec. 292A of the Companies Act, 1956 (As
amended)
360
37. The audit committee legally constituted is required to
a. Oversee, review and evaluate the financial results of the company
b. Examine the reporting process and disclosures of performance of the
company
c. Review the audit of all the offices of the company, discuss with the
statutory auditor and recommend the same to the Board.
d. All above
38. The Statutory Auditor of PSU Insurance Company is appointed by
a. The C&AG
b. Shareholders in AGM
c. The Board of Directors
d. The regulatory authority
39. The audited annual accounts of PSU Insurance Company is submitted to
a. The Lok Sabha of the Parliament U/S 619A & 619B of the Co's Act
b. The Rajya Sabha of the Parliament U/S 619A & 619B of the Co's Act
c. Both the Sabhas of the Parliament U/S 619A & 619B of the Co's Act
d. None of the above
40. In the audit report the auditor is required to comment on valuation of liabilities
to the effect that;
a. The actuarial valuation is true and correct
b. The actuarial valuation is true and fair
c. The actuarial valuation is proper and justified
d. The actuarial valuation has been certified by the appointed actuary and
the said certificate has been relied upon for their opinion
41. In the audit report the auditor is required to comment on Management Report
to the effect that
a. There is no apparent mistake or material inconsistency with the financial
statements
b. There is no mistake or inconsistency with the financial statements
c. Management is true and correct
d. None of the above
42. In the audit report the auditor is required to comment on Investment with:
a. Investments have been valued in accordance with the provisions of the
Insurance Act
b. Investments have been valued in accordance with the provisions of the
Insurance Act and the prescribed IRDA regulations
c. Investments have been valued in accordance with the prescribed IRDA
regulations
361
 d. None of the above c. 25% of total assets
d. 50% of total assets
43. The Statutory Audit Report of PSU Company is required to address to:
a. The Members 49. The minimum rating for investment in social sector and debt instrument
b. The Government should be
c. The IRDA a. AAA
d. The Board b. AA
c. +A
44. The certification on company's compliance of Sec. 40 (c) of the Insurance d. A
Act, 1938 in regard to debit of all management expenses to Revenue Account
is required to be done by:
a. The C&AG Auditor 50. When a listed equity instrument is traded in volume not below ten thousand
b. The Internal Auditor units in any session or trading value exceeds 10 lac in any session in past 12
months it is termed as
c. Statutory Auditor
d. Special Auditor a. Actively traded instrument
b. Liquid traded instrument
45. The Statutory Auditor comments on amortization of expenses on account of c. Actively traded and liquid instrument
Pension, Gratuity and Leave Encashment in accordance with the d. None
requirements of;
a. Accounting Standard 15 51. One of the exposure norms of IRDA sets the limit on investment as under
b. Accounting Standard 22 a. Limit per investor company
c. Accounting Standard 18 b. Limit per investee company
d. None of the above c. Limit per investor company & per investee company
d. None
46. Certificate to the effect that no part of the assets of Policyholders Funds has
been directly applied in the contravention of the Insurance Act, 1938 is given
52. In which of the following General insurance Companies in India invests
by
insurance funds:
a. The C&AG Auditor
a. Indian Central Govt. securities
b. The internal auditor
c. The Statutory auditor b. Govt. securities issued by foreign countries
d. The Special Auditor c. Shares issued by Private companies
d. Shares issued by public companies
47. The general insurers are required to invest and keep invested the following
minimum percentage of total assets in Govt. Securities and Guaranteed 53. General insurance companies are allowed to invest in Growth schemes of
Securities mutual funds
a. 10% a. True
b. 20% b. False
c. 30%
d. 40% 54. Approved securities/investments for non-life insurance companies are
prescribed in
48. For general insurer, investment in other than approved investment cannot a. Section 27A of Insurance Act
exceed b. Section 27B of Insurance Act
a. 10% of total assets c. Section 27A & B of Insurance Act
b. 15% of total assets
d. None of the above

354 355
55. Exposure norms for investment suggested for IRDA Regulations relating to D. Shares issued by public companies
a. Investee company a. Only A
b. Group Company b. Only A & B
c. Sector c. Only A & D
d. All of the above d. All of the above

56. The investment committee that reviews investment policy and supervises and 62. General Insurance companies are allowed to invest in Growth schemes of
controls all investments activities is constituted by mutual funds
a. Sec. 292A of the Companies Act, 1956 (As Amended) a. True
b. The Insurance Act, 1938 (As Amended) b. False
c. Sec. 9 of the IRDA (Investment) Regulation, 2000
d. None of the above 63. Approved securities/investments for non-life insurance companies are
prescribed in
57. The figure in financial statements are rounded off to the nearest a. Section 27A of Insurance Act
a. Rupee b. Section 27B of Insurance Act
b. Hundred rupees c. Section 27A & B of Insurance Act
c. Thousand rupees d. None of the above
d. Lac rupees
64. Exposure norms for investment suggested by IRDA Regulations relating to
58. Accounting of claim costs does not include a. Investee company
a. Survey expenses on claim b. Group company
b. Legal expenses on claim c. Sector
c. Investigation expenses on claim All of the above
d. Management expenses on claim

59. For accounting 'Investment Property' means land or building held ACCOUNTS MODEL QUESTIONS
a. For capital appreciation
b. For use in services 1. Accounting entry for Depreciation of Assets will be:
c. For administration purpose a. debiting depreciation crediting asset
d. All of the above b. debiting depreciation crediting P/L A/c
c. debiting depreciation crediting Accumulated depreciation
60. Short term Loan means loan repayable within d. debiting depreciation crediting loss on asset
a. 1 month
b. 3 months 2. Service Tax on Reinsurance Premium sent to foreign reinsurer will be paid by:
c. 6 months a. foreign reinsurer
d. 12 months b. domestic cedent
c. both
61. In which of the following, the General Insurance companies in India invests d. none
finds in:
A. Indian Central Govt. securities 3. Expenses of management other than those charged to P/L A/C are apportioned
B. Govt. securities issued by foreign countries to revenue A/C on the basis of GDP plus Reinsurance accepted Premium
C. Shares issued by private companies a. 75% marine business 100% fire and misc.
b. 50% marine 50% fire and misc.

356 357
 c. 25% marine 75% fire and misc 10. Gross Profit Ratio denotes:
d. 100% marine 75% fire and misc. a. Sales X 100 / GP
b. Net Profit X 100 /GP
4. Rate of service tax has been changed from 12% to 10% from c. Gross Profit X 100/ Sales
a. 1st February, 2009 d. Gross profit X100 / Purchase
b. 24th February, 2009
c. 20th February 2009 11. An Insurer shall prepare separate Revenue Account for:
d. 1st April, 2009 a. Fire, Cargo, Hull and Misc.
b. Fire, Marine, Motor and Misc
5. Depreciation on fixed asset is charged on WDV at the rate prescribed laid c. Fire, Marine, Motor and Misc.
down in: d. Fire, Marine and Misc.
a. companies Act, 1956
b. IT Rules 1952 12. Separate schedules shall not be prepared for:
c. Both a. Aviation
d. Higher of the two b. Personal Accident
c. Health
6. Terminal benefits paid are amortised over a period: d. Rural
a. five years
b. three years 13. Premium for rent shall include only
c. seven years a. Realized Rent
d. eight years b. Notional Ret
c. Outstanding Rent
7. For Assessment Year 2009-10 no income tax is to be levied for senior citizen d. Prepaid Rent
upto income of: 14. Claims Paid shall not include:
a. Rs. 3,50,000 a. IBNR
b. Rs. 2,25,000 b. Survey Fees
c. Rs. 1,25,000 c. Legal And Other expenses
d. Rs. 2,50,000 d. Claims settlement cost

8. Provision for gratuity, pension, leave encashment is made on actuarial 15. Short term loans shall include those, which are repayable within:
valuation 1n accordance with Accounting Standard: a. 12 months
a. AS 15 b. 24 months
b. AS 3 c. 6 months
c. AS 26 d. 3 months
d. AS 10
16. Earned Premium is:
9. Statutory Auditor appointed by the C &AG under: a. Direct Premium
a. 619 ( 1 ) b. Direct Premium + Reinsurance Accepted
b. 619 ( 2 ) c. Direct Premium + Reinsurance Accepted – Reinsurance Ceded
c. 619 (3) d. Direct Premium + Reinsurance Accepted – Reinsurance
d. 619 (4) Ceded + Adjustment for change in reserve for unexpired risk

358 359
17. Cash flow statement shall be prepared according to:
a) AS 3
b) Company Act
c) IT act
d) Insurance Act

18. The term of office of CMD shall be for a period:

a. not exceeding five years from the date of appointment
b. not exceeding three years from the date of appointment
c. Until his retirement
d. None of the above

19. Auditors in PSUs are appointed by:

a) CAG
b) Company Board
c) Head Office
d) Internal Audit Dept.

20. Combined Ratio is:

a) (Gross claims paid + expenses) *100/ Gross Premium
b) (Gross claims paid + expenses) *100/ Net Premium
c) (Net claims paid + expenses) *100/ Gross Premium
d) (Gross claims paid *100)/ Gross Premium INVESTMENT

360 361
INVESTMENT MODEL QUESTIONS •55%
•45%
Q.1. Insurance Regulatory and Development Authority (Investment) Regulation •30%
came into force and became applicable in the year –
• 1998 Q.7. Regulation 5 of IRDA (Investment) Regulation, 2000 specifies
• 2000 • Exposure / Prudential Norms of Investment
• 2002 • Approved Investment
• 2004 • Other Investment
• Returns of Investment
Q. 2. Insurance Regulatory and Development Authority came into force in the
year – Q.8. What percentage of Investment Assets is subject to Exposure / Prudential
• 1997 norms of Investment as prescribed by IRDA?
• 1999 • 50%
• 2000 • 60%
• 2005 • 70%
• 55%
Q. 3. Which of the following is the last amendment to IRDA (Investment)
Regulation, 2000? Q. 9. What minimum percentage of Investment Assets has to be maintained in
• Fourth Amendment Infrastructure category as prescribed by IRDA for General Insurance
• Third Amendment Companies?
• Second Amendment • 5%
• First Amendment • 10%
• 30%
Q. 4. When was IRDA (Investment) Regulation, 2000 last amended - - • 15%
• 2000
• 2005 Q.10. What minimum percentage of Investment Assets has to be maintained in
• 2007 Housing category as prescribed by IRDA for General Insurance
Companies?
• 2008
• 10%
• 15%
Q. 5. Regulation 4 of IRDA (Investment) Regulation, 2000 specifies ----
• 5%
• Pattern of Investment Assets of General Insurance Business
• 20%
• Pattern of Investment assets of Life Insurance Business
• Pattern of Investment Assets of Pension and General Annuity Business
Q.11. What percentage of Investment Assets has to be maintained in Central
• None Government Securities as prescribed by IRDA for General Insurance
Companies?
Q. 6. What minimum percentage of Investment Assets has to be maintained in • 20%
Mandated / Statutory Investment category prescribed by IRDA for General • 30%
Insurance Companies-?
• 10%
• 60%

362 363
 • 40% Investment assets
Q.12. What percentage of Investment Assets has to be maintained in Government •Lower of 15% of outstanding equity shares ( face value) or 10% of
Securities including State Government Securities as prescribed by IRDA for Investment assets
General Insurance Companies? •Lower of 20% of outstanding equity shares ( face value) or 10% of
• 20% Investment assets
• 30% •Lower of 15% of outstanding equity shares ( face value) or 15% of
• 40% Investment assets
• 15%
Q.18. General Insurance Company's Exposure in Debt and Loans of a company
allowed by IRDA is restricted to----
Q.13. What is the maximum percentage allowed for Investment in Other • Lower of 10% of Paid-up share capital, free reserves and debenture /
Investment category by IRDA for General Insurance Companies---
Bonds of the Investee company or 10% of Investment Assets
• 10%
• Lower of 15% of Paid-up share capital, free reserves and debenture /
• 20% Bonds of the Investee company or 10% of Investment Assets
• 25% • Lower of 20% of Paid-up share capital, free reserves and debenture /
• 30% Bonds of the Investee company or 10% of Investment Assets
• Lower of 15% of Paid-up share capital, free reserves and debenture /
Q.14. What is the minimum Credit Rating required for Instruments for investment Bonds of the Investee company or 15% of Investment Assets
to qualify for Approved Investment category—
• AA Q.19. General Insurance Company's GROUP Exposure in equity, preference and
• AA- convertible debentures of a company allowed by IRDA is subject to----
• A+ • Maximum up to 15% of Investment Assets
• A- • Maximum up to 10% of Investment Assets
• Maximum up to 20% of Investment Assets
Q.15. What is the minimum Credit Rating required to consider an Instrument for • Maximum up to 25% of Investment Assets
Investment by Insurance Companies—?
• AA Q.20. General Insurance Company's INDUSTRY Exposure in equity, preference
• AA+ and convertible debentures of a company allowed by IRDA is subject to----
• A+ • Shall not exceed 15% of its total investment exposure to the industry
sector as a whole
• A-
• Shall not exceed 25% of its total investment exposure to the industry
sector as a whole
Q.16. Fair Value valuation applicable to ---
• Shall not exceed 10% of its total investment exposure to the industry
• Equity sector as a whole
• Debenture • Shall not exceed 5% of its total investment exposure to the industry
• Preference sector as a whole
• All of the above
Q.21. Regulation 6 of IRDA (Investment) Regulation, 2000 specifies—
Q.17. General Insurance Company's Exposure in equity, preference and • Investment Returns to be submitted by the Insurer
convertible debentures of a company allowed by IRDA is restricted to---- • Pattern of Investment
• Lower of 10% of outstanding equity shares ( face value) or 10% of

364 365
 •Exposure Norms Q.28. The Classification of Industrial sectors has to be done in line with---
•Valuation of Investment • National Industry Classification (NIC)
• CMMIE
Q.22. Investment Returns to be filed with IRDA on --- • Capital Market
• Annual Basis • CRISIL
• Half Yearly Basis
• Quarterly Basis Q.29. Regulation 2(cc) of IRDA (Investment) Regulations, 2008 specifies—
• Monthly Basis • List of Approved Investments
• List of other Investments
Q.23. What is period within which the returns need to be submitted to IRDA—
• List Money Market Investments
• Within 55 days of the end of quarter
• List of Infrastructure Investments
• Within 70 days of the end of quarter
• Within 30days of the end of quarter Q.30. Section 27B of Insurance Act, 1938 deals in---
• Within 45 days of the end of quarter • Provisions regarding approved investments
• Provisions regarding Other Investments
Q.24. How many Investment Forms need to be filed with IRDA by General
• Provisions regarding Dividend
Insurers---
• 12 • Provisions regarding pattern of investment
• 11
• 10 Q.31. Section 27C of Insurance Act, 1938 specifies—
• 13 • Provisions regarding Approved Investments
• Prohibition for Investment of funds outside India
Q.25. Every Insurer shall review the Investment Policy on— • Prohibition of Investment in Pvt. Limited companies
• Yearly basis • All of the above
• Half Yearly basis
• Monthly basis Q.32. 'Accretion of funds' means---
• Quarterly Basis • Investment Income, Gains on sale / redemption of the existing
investment and operating surplus
Q.26. Investment Policy of an Insurer needs to be approved by its--- • Investment assets at the end of the period
• Board of Directors • Investment income for the period
• Investment Committee • All of the above
• Audit Committee
• Management Q.33. Investment Assets in the case of a General Insurer means---
• Total Assets of the company
Q.27. Schedule II of IRDA (Investment) Regulations, 2000 specifies--- • Total Operating surplus
• List of Other Investments • Shareholders funds representing solvency margin and Policy holders'
• List of Approved Investments funds at their carrying value as shown in its balance sheet as per IRDA.
• List of Money Market Instruments • Total Accretion during the period
• All of the above
366 367
INSURANCE LAW & REGULATORY FRAME WORK 7. Section 64 VC of insurance act provides
MODEL QUESTIONS a. No risk can be assumed without collection of Premium in advance
b. No insurer can open office at a new place without permission from the
authority
1. The Maximum number of whole time Members IRDA can have is
c. The controlling office has authority to waive advance collection of
a. 4
premium
b. 5
d. Insurers need not seek permission from any authority.
c. 7
d. None of the above
8. Insurance Ombudsman has come into existence due to
2. IRDA can have following part times members in addition to whole time a. IRDA Act
members: b. Redresses of Public Grievances rules 1998 under Insurance Act
a. 4 c. Public Liability Insurance Act 1991
b. 8 d. Consumer Protection Act
c. 6
d. None of the above 9. Under Sec 64 UM, of Insurance act 1938 the controller of Insurance
reserves the rights to
3. Tenure of the Chairman IRDA is 1) To appoint a second surveyor to reassess the loss
a. 3 years 2) Directs insurers to settle a claim at a figure less than or higher than that of
b. 5 years at which it was assessed originally
c. 4 years a. Both 1 & 2 are correct
d. None of the above b. Only 1 is correct
c. Only 2 is correct
4. Sec 40 C of Insurance Act stipulates about limits of expenses of d. Both are incorrect
management. In case of violation:
a. IRDA can cancel the license of the insurer
10. The minimum credit rating permitted of a re-insurer chosen by an Indian
b. Govt can cancel the license,
insurance company should be
c. Govt can relax the provisions
a. IAAA of Crisil
d. None of the above
b. BBB of S & P
c. Any Registered Reinsurance company of repute
5. Social Sector business includes all except d. A+ of AM Best
a. Unorganized sector
b. Informal sector
c. Economically vulnerable & backward classes 11. The powers of ombudsman
d. Rural sector 1) Non issuance of any insurance document to the customer after receipt of
premium
2) Any partial or total repudiation of claim by the insurer
6. The penalty for non-compliance of Social sector obligations, for the insurers
is 3) Any dispute in regard to premium paid or payable in terms of policy
a. Rs 5 lac per defaulting year and continuous failures, cancellation of 4) Only delay in settlement of claim
license a. All are correct
b. Every year fine of Rs 5 Lacs b. Only 1 & 2 are correct
c. Warning letters to be issued c. Only 4 is correct
d. None of the above d. Only 3 is correct

368 369
12. Ombudsman can take up the disputes between 18. To which of the following entities can not be issued Corporate Agency
a. Insurer and Corporate clients License?
b. Insurer and co-operative societies a. Private Limited Company the Memorandum /articles of Association is
c. Insurer and individual clients silent about insurance business
d. All of the above b. A Municipal Corporation
c. A scheduled Commercial Bank
13. A TPA has been licensed to perform its functions from 1.1 2006. It has to d. Primary Co operative Bank
renew its license on
a. On or before 1st January 2009 19. Which of the following relating limit of indemnity under Brokers
b. On or before 30th November 2008 Professional indemnity Policy is incorrect?
c. On or before 1st January 2010 a. 3 Times remuneration received at the end of every financial year subject
to a minimum limit of Rs.50 lacs for Direct Broker
d. On or before 1st January 2011
b. 3 Times remuneration received at the end of every financial year subject
to a minimum limit of Rs.2.50 Crores for a Reinsurance Broker
14. While sending the policy to the insured, the insurer is obliged to send the c. 3 Times remuneration received at the end of every financial year subject
following to a minimum limit of Rs.5 Crores for a Composite Broker
a. Claim Form d. 3 Times remuneration received at the end of every financial year subject
b. Name & Address of surveyor to a minimum limit of Rs.10 Crores for Composite Broker
c. Name and Address of Regional Office
d. Address of the Insurance Ombudsman
20. As per the Insurance act the General Insurance Business has been classified
into
15. For calculation of solvency Ratio of a non life insurance Company, The a. Fire, Motor, Miscellaneous, Marine
formula applied is b. Fire, Marine, Motor, Engineering
a. ASM is multiplied with RSM c. Fire, Marine, Health, Miscellaneous
b. ASM is divided by RSM d. Fire, Marine, Miscellaneous
c. RSM is divided by ASM
d. RSM over net premium/ Net Claims which ever is higher
21. As per the Insurance Act 1938 under Sec 40-C Companies have to operate at
Management Expenses ratio of
16. No General Insurer can open a new place of business or change the existing a. under 30%
place of business in India without the permission of b. under 25%
a. GIPSA c. under 15%
b. GIC d. under 20%
c. Govt. of India
d. IRDA
22. GIBNA was introduced for making
a. General Insurance affordable to people
17. Which of the following relating to Direct Brokers License Fee is incorrect? b. To help insurance grow in rural sector
a. At the time of being Licensed shall pay a License fee of Rs.25, 000/- c. To help Policy holders
b. 0.5% of the remuneration earned in the preceding financial year subject d. To Nationalize the General Insurance sector to make it meaning full to the
to minimum of Rs.25, 000/- and a maximum of Rs.1, 00,000/- on every masses
renewal.
c. 0.5% of the remuneration received subject to a minimum of Rs.75,000/-
23. Which one of the following is not correct for general insurance companies to
and Maximum of Rs.3,00,000/-
undertake in respect of social sector business, of the total gross premium?
d. The prescribed License fee shall be paid within 15 days from the date of
a. 2% of the total gross premium in the first financial year.
receipt of intimation of acceptance of the application.

370 371
 b. 3% of the total gross premium in the 2nd financial year. c. Not more than four part-time members
c. 5% of the total gross premium thereafter d. All the above.
d. 10% of the total gross premium every year.
30. What are the reasons by which the central government can remove any
24. Which one of the following is not incorrect minimum qualification for any Member of IRDA?
person to become an agent, where the population is less than 5000? a. Physically or mentally incapable
a 12th pass b. Has been convicted any offence which involves moral turpitude
b Degree from any recognized university c. Any time adjudged as insolvent
c 10th standard d. All the above
d None of the above.
31. What is the full form IRDA?
25. Which one of the following is not incorrect in case of approval for a. INSURANCE REGISTRATION & DEVELOPMENT ACT
appointment of Actuary in case of general insurance? b. INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY.
a. IRDA shall within 30 days approve or reject c. INSURANCE RURAL AND DEVELOPMENT AGENCY
b. IRDA shall within 60 days approve or reject. d. NONE OF THE ABOVE.
c. IRDA shall within 15 days approve or reject.
d. None of the above 32. CHAIRPERSON OF THE AUTHORITY CAN HOLD OFFICE UPTO
THE AGE?
26. Which of the following is correct in respect of reserve for unexpired risk? a. 62 YEARS
a. Fire 50%, Misc 50% b. 65 YEARS
b. Marine cargo 50 %, Hull 100% c. 60 YEARS
c. a & b are correct d. NO AGE LIMIT.
d. Only a is correct
33. WHERE IS THE REGISTERED OFFICE OF IRDA LOCATED?
27. Which one of the following is correct in respect of solvency margin? a. KOLKATA
a. Excess of value of liabilities over excess of value of assets. b. BANGALORE
b. excess of value of asset over liabilities; c. MUMBAI
c. Both the above are correct d. HYDERABAD
d. None of the above.
34. WHAT IS THE REQUIRED PAID-UP CAPITAL TO QUALIFY TO ACT
28. Which one of the following is correct in case of cancellation of registration AS NON-LIFE INSURER IN INDIA?
of general insurance company which defaults repeatedly to adhere to the a. Rs. 40 crore
code of conduct? b. Rs, 100 crore
a. No cancellation of registration is permitted as per IRDA. c. Rs. 35 crore
b. Penalty of suspension for a stated period, imposed by the IRDA. d. Rs. 75 crore
c. Impose penalty of cancellation of certificate of Registration.
d. Penalty coupled with cancellation of certificate of registration, by the 35. ACCORDING TO 'IRDA ACT' RURAL INSURANCE BUSINESS IN
IRDA NON-LIFE IS
a.2 % in first financial year
29. WHAT IS THE COMPOSITION OF IRDA? b.3 % in 2nd financial year
a. A Chairperson c.5% thereafter
b. Not more that five Whole-time Members d. all the above

372 373
36. ACCORDING TO IRDA REGULATION, SOCIAL SECTOR BUSINESS 43. Un-organized sector excludes
MINIMUM REQUIREMENT TO NON-LIFE IS AS UNDER EXCEPT a. bidi workers
a. 5000 lives in the first year b. handloom and khadi workers
b. 7500 lives in 2nd financial year c. gents tailor
c. 10000 lives in 3rd financial year d. rickshaw puller
d. 12000 lives in 4th financial year
44. Which one shall be considered as an advertisement as per IRDA
37. Who regulates Re-Insurance business in India? a. materials used by an insurance company within its own organization
a. IRDA b. communications with the policy holders other than materials urging them
b. GIC to purchase, increase modify a policy
c. Reinsurance Corpn of India c. General announcement sent by a group policy holder to a member of the
d. Govt. of India. eligible group
d. Materials used by an insurance company to distribute to the public.
38. Which one is not the criterion for appointment of Actuaries under IRDA
ACT? 45. If any insurer fails to maintain the required Solvency Margin, then he shall
a. A fellow member of the Actuarial Society of India be liable to a penalty by IRDA
b. Not over the age of 65 years a. not exceeding Rs. 5 lac
c. An appointed Actuary of another Insurer b. not exceeding Rs.10 lacs
d. A person who has not committed any breach of professional conduct c. not exceeding Rs. 4 lacs
d. no such penalty
39. The required minimum Solvency Ratio as per IRDA Act is
a.1.00 46. An important regulation by IRDA that was made in 2005 in the area of
b.1.20 a. Macro insurance
c.1.50 b. Micro insurance
d. none of the above c. Motor insurance
d. Re-insurance
40. Function of Actuaries is
a. Certification of pricing 47. Which is an un-approved investment as per IRDA
b. ensuring of solvency margin a. investment in secured loans
c. ensuring the accuracy & completeness of data b. investment in secured debt instruments
d. all the above c. investment in secured bonds
d. investment in short or long term loans with pvt. Ltd. companies.
41. Rural sector shall mean any place having population of
a. not more than 5000 48. Which one of these is not under the powers of Ombudsman to consider:
b. Density not more than 400 per sq. km. a. Delay in settlement of claims.
c. At least 75% of the main working population is engaged in agriculture b. Non-issuance of any insurance document to customers after receipt of
d. All the above premium.
c. Any dispute with regard to premium paid in terms of the policy.
42. Social Sector excludes d. Repudiation of a claim of a commercial firm.
a. un-organized sector
b. informal sector 49. Which of the following is not a disqualification for an individual to become
c. economically vulnerable an insurance agent (Sec.42):
d. formal sector a. He is a minor.
374 375
 b. He is of sound mind. Insurance Act.1938:
c. He is a known criminal. i.Voluntary; ii.By Court; iii.By Central Government; iv.By Shareholders
d. His connivance in a fraud is proved and Policyholders.
a. i., ii, and iii. only.
50. As per the IRDA guidelines one of the following is not mentioned as the b. ii., iii., and iv. only.
duty of an agent: c. All of the above.
a. To sell the insurance policy to the public. d. None of the above.
b. To pay the premium collected from the insured to the insurer.
c. To claim the remuneration from the insurer for the business procured from 56. A Corporation can be granted license to act as a Broker if it has in it's
the insured. employment minimum:
d. To disclose the material information about the insured to the insurer. a. One qualified person.
b. Two qualified persons.
51. To work as a Fresh Individual General Insurance Agent, number of hours c. 50% qualified persons.
training required is: d. 100% qualified persons.
a. 150 hours.
b. 100 hours. 57. Unlike an agent the duty of the Broker includes:
c. 50 hours. a. Advising the insured on products.
d. 25 hours. b. Advising the insured on rates.
c. Assisting in negotiation of claims.
52. Who can cancel an agency license? d. Assisting in filling the proposal.
a. Branch Manager.
b. Divisional Manager. 58. hich is relevant out of the following in connection with the Objective of
c. Designated Person. IRDA
d. Authorized Person. a. to protect the interests of holders of insurance policies
b. ensure orderly growth of the insurance industry to regulate, promote and
53. The insurance agent shall be obliged NOT to reveal the following: for matters connected therewith or incidental thereto
a. Disclose his license fee to the prospect on demand. 1) Both a and b
b. Disclose the scale of commission. 2) Only a
c. Disclose his commission income.
d. Requisite information on insurance products. 59. As per IRDA Act 1999 Internmediary or Insurance Intermediary means
a. Insurance and Re-insurance brokers, insurance consultants, surveyors
54. Which of the following is correct as per IRDA regulations about minimum and loss assessors
capital requirement with reference to insurance brokers: b. Agents
a. i. Direct Broker: Rs50 lakhs; ii.Reinsurance Broker: Rs.100 lakhs; c. Development Officers
iii.Composite Broker: Rs.200 lakhs. 4.Third Party Administrators.
b. i. Direct Broker: Rs100 lakhs; ii.Reinsurance Broker: Rs.200 lakhs;
iii.Composite Broker: Rs.250 lakhs. 60. The composition of IRDA shall include
c. i. Direct Broker: Rs50 lakhs; ii.Reinsurance Broker: Rs.200 lakhs; a. Finance Secretary
iii.Composite Broker: Rs.250 lakhs. b. Chairman of GIPSA
d. None of the above. c. Minimum of five whole-time members and a minimum of four part-time
members
55. An Insurance Company can be wound up in the following ways as per the d. Chairman of GIC

376 377
61. As per IRDA ACT out of five whole time members at least ____ members b. B Only
from Life and General Insurance or Actuarial Science c. Both A & B
a. 2 d. None of A & B
b. 3
c. 4 67. Composite Insurance Agent can sell
d. 5 a. Health Insurance Products and Micro Insurance Products only.
b. Micro Insurance Products only
62. Maximum percentage of paid up equity capital by a foreign company in c. Heath Insurance Products only
Indian Insurance Company is d. Any Life and General Insurance Product
a. 51
b. 49
68. Recently IRDA ( Licensing of Insurance Agents) Regulations 2000 has been
c. 26 amended, the amendments is with respect to
d. 74 a. Qualifications for Agents.
b. Practical Training for Agents.
63. Minimum paid up equity capital for a Reinsurance Company in India is c. Code of conduct of Agents
a. Rs.100 crores d. All of the above.
b. Rs.200 Crores
c. 20 Crores 69. Which one of the following statements is/are correct
d. None of the above Statement A
Available solvency margin means the excess of value of assets over the
64. Every insurer shall, in respect of the General Insurance business carried on value of liabilities
by him in India should deposit Statement B
a. Rs. ten crores with GIPSA Solvency Ratio means the ratio of the amount of available solvency margin
b. Rs.20 Crores with GIC to the amount of required solvency margin
c. Rs.10 Crores with Reserve Bank a. Statement A only
d. Rs.20 crores with IRDA b. Statement B only
c. Statement A & B both
65. Which one of the following bodies are covered / governed by IRDA ( d. None of the A & B
Insurance Advertisement and disclosures) Regulations 2000.
a. Insurer's 70. Which one of the following statement is/are correct
b. Intermediaries Statement A
c. a & b A cooperative Society registered under relevant Law can promote an
d. None of a & b insurance company in India
Statement B
66. Which of the following statements is/are correct. A Company formed under the Company's Act 1956 can promote an
Statement A :- insurance company in India
All communications made to policy holders are covered under IRDA a. Statement A only
(Insurance Advertisement and disclosures) Regulations 2000. b. Statement B only
Statement B:- c. Statement A & B both
Communications urging public to purchase Insurance policies only are d. None of the A & B
covered under IRDA (Insurance Advertisement and disclosures)
Regulations 2000. 71. Under IRDA regulation act 2000 Rural Sector shall not be any place
a. A Only a. Population of not more than 5000

378 379
 b. Density of Population is not more than 400 per sq km should be Rs. 1 crore , for the purpose of TPA license.
c. At least 75% of the male working population is engaged to agriculture a. Both the statements are correct.
d. Place which is Hilly areas. b. Only Statement I is correct.
c. Only Statement II is correct.
72. Social Sector does not include d. Both the statements are incorrect.
a. Economically vulnerable or backward classes
b. Un organized and informal sector 78. As per IRDA (Appointed Actuary) Regulations 2000 of IRDA Act 1999, a
c. Persons with disabilities person shall not be eligible to be appointed as an appointed actuary for an
d. Senior citizens insurer if he/she is
a. Not a fellow member of the Actuarial Society of India
73. Under IRDA ( Assets, Liabilities and Solvency Margin of insurers) b. An appointed actuary of another Insurer
regulations ,2000, the value of Computer equipment including its Software, c. Over the age of 70 years
is computed as under :- d. Not an employee of the insurer or a consulting actuary in case of general
a. 75% of its cost in the year of purchase. insurance business.
b. 50 % of its cost in the 2nd year.
c. 25% of its cost in the3rd year 79. I - An appointed actuary shall have access to all the information or
d. All the above. documents in possession, or under control, of the insurer if such access is
necessary for the proper and effective performance of the functions and
duties of the appointed actuary.
74. On receipt of any notice of loss arising under contract of insurance, the
II- An appointed actuary is entitled to attend all the meetings of the
General Insurer shall appoint a Surveyor
management except the Board meetings of the insurers.
a. Within 7 days from the receipt of intimation
As per IRDA (Appointed Actuary) Regulations 2000 which of the above
b. Within 7 hours from the receipt of intimation statement/s is/are correct
c. Within 24 hours from the receipt of intimation a. Statement I is correct
d. Within 72 hours from the receipt of intimation b. Statement II is correct
c. Both statements are correct
75. A general insurance policy need not state d. Both statements are incorrect
a. Policy terms, conditions and warranties
b. Full description of the property or interest insured 80. What is/are not the duties and obligations of an appointed actuary in
c. Any franchise or deductible applicable accordance to the IRDA (Appointed Actuary) Regulations 2000 of IRDA
d. None of the above Act 1999.
a. Rendering actuarial advice to the management of the insurer, in particular
76. Which is the most unlikely answer in the areas of product design and pricing, insurance contract wording,
a. Under special circumstances the Surveyor can seek an extension of time investment and reinsurance.
from the Insurer for submission of his Report. b. Complying with the provisions of the section 64VA of the act in regard to
b. The Insurer may request the Surveyor to submit an additional Report. maintenance of required solvency margin in the manner required under
the said sections
c. There is a fixed time limit for an Insurer to offer settlement of claim to the
Insured. c. Informing the authority in writing of his or her opinion, within a
reasonable time whether the insurer has contravened the act or any other
d. IRDA has recently relaxed the norms for payment of Interest by an Insurer
act.
in the event of delay beyond the stipulated period.
d. None of the above.

77. Statement I: At least two Directors of TPA shall be qualified Medical 81. What is not in code of conduct of an insurance agent appointed as per IRDA
Doctors registered with the Medical Council of India. (Licensing of Insurance Agents)Regulations 2000 of IRDA Act 1999.
Statement II: The minimum paid up capital of a Company in equity shares a. Indicate the premium to be charged by the insurer for the insurance

380 381
 product offered for sale 87. A compliance officer under file and use requirement should be
b. Render necessary assistance to the policyholders or claimants or a. General Manager Technical
beneficiaries in complying with the requirements for settlement of b. Chief Underwriter of the company
claims by the insurer. c. Appointed Actuary of the company
c. Disclose the scales of commission in respect of the insurance product d. A person who is not responsible for the underwriting function of the
offered for sale, if asked by the prospect. company
d. None of the above.
88. A moderator of the rates under file and use procedure of the IRDA can be
82. The provision that any Insurance Co-operative Society registered under Co- a. General Manager Technical
operative Societies Act can carry on General Insurance Business was
incorporated in the Insurance Act in the year b. Chief Underwriter
a. 1938 c. CEO of the Company
b. 2002 d. The Financial Advisor of the Company
c. 1950 89. No Insurer shall accept the business at a premium rate below the rates
d. None of the above indicated without the approval of moderator of rates
a. 1.0 %0
b. 0.1%0
83. Any Insurance Co-operative Society can transact Insurance Business if its
paid-up capital is minimum of c. 0.5%0
a. Rs.50 crs d. 1.5%0
b. Rs.100 crs
c. Rs.150 crs 90. What is not permissible under File and Use procedure of IRDA
d. Rs.200 crs a. Underwriting business at a loss
b. Experience rated pricing
84. The Paid-up Share Capital required for an Indian Insurer carrying on RI c. Exposure Rated pricing
Business is d. Chief Underwriting Officer acting as Compliance Officer
a. Rs.100 crs.
b. Rs.10 crs 91. Statement A: An aggrieved claimant whose petition is pending before The
c. Rs.200 crs State Consumer redressal Commission can also approach The Insurance
d. Rs.50 crs Ombudsman for speedy redressal of his grievance.
Statement B: A citizen of India whose claim for Rs.15 Lacs was denied by a
85. Which is condition precedent to filing a product for approval with IRDA Insurer can approach either Insurance Ombudsman or State Consumer
under File and Use Procedure Grievance Redressal Commission for remedy
a. Approval of the product by appointed actuary a. Only statement A is correct
b. Certification of the product by lawyer of the company b. Only statement B is correct
c. Approval of the underwriting policy of the company by the Board of the c. Both A and B are correct
company and its filing with IRDA d. Both A and B are incorrect
d. Filing copy of Policy and Endorsement wordings
92. While sending the policy to the insured, the insurer is obliged to send the
86. A product is required to be filed with IRDA under the signature of following
a. General Manager Technical a. Claim Form
b. Appointed Actuary b. Name & Address of surveyor
c. CEO or Designated authority c. Name and Address of Regional Office
d. By any one of the above d. Address of the Insurance Ombudsman

382 383
93. For calculation of solvency Ratio of a non life insurance Company, The c. IRDA's site
formula applied is d. GIPSA's site
a. ASM is Multiplied with RSM
b. ASM is divided by RSM 99. Till 1971 in total number of insurance companies operating in the insurance
c. RSM is divided by ASM market were;
d. RSM over net premium/ Net Claims which ever is higher a. 307
b. 207
94. Which of the following statements is true? c. 107
Statement A: As per IRDA Regulations, there is a legal obligation on the part d. None of the above
of insurers to issue a renewal notice to the insured
Statement B: Issue of a renewal notice means that the policy is automatically 100. Govt. took over the undertaking of all the companies in 1971 and brought
renewed, if the premium is paid. them under the Act called;
a. Neither of the statements a. The Insurance Act, 1938 (as amended)
b. Only Statement A b. The General Insurance Business (Nationalization) Act, 1972
c. Only Statement B c. The General Insurance Business (Nationalization) Act, 1971
d. Both Statements d. None of the above

95. While submitting a tender, a company insists for payment of Earnest Money 101. The Act or IRDA regulation which removed the prohibition existing in the
Deposited along with quotation GIBNA Act 1972 relating to formation of insurance companies other than
a. You will pay according to the terms of tender four PSU companies under GIC.
b. You will have to seek permission from you corporate office before a. The IRDA Act, 1999
depositing b. The Insurance (Amendment) Act,2002
c. You will not deposit as it is against the norms c. The IRDA (insurance and reinsurance) Regulations,2000
d. Before depositing, you seek the permission of IRDA d. None of the above

96 Whose certificate is not mandatory while filing a general insurance product 102. The players in the market are required to maintain required solvency margin
with IRDA as per the file and use guidelines? (RSM) based on
a. Certificate by the CEO of the company a. Gross Direct Premium
b. Certificate by the CVO of the company b. Gross Direct Claims
c. Certificate by the appointed actuary c. Net Premium and Net Claims
d. Certificate by the company's lawyer d. All above

97. What is the minimum share capital for a company to be a corporate agent of 103. The Corporate Agents as per the IRDA (Licensing of insurance Agents)
an insurance company? Regulations could be;
a. Rs.1 Lakh a. Firms, Companies, Co-op. Society
b. Rs.5 Lakhs b. Banks, Regl. Rural Banks, Co-op. banks,
c. Rs.10 Lakhs c. Local authorities, NGOs
d. Rs.15 Lakhs d. All above

98. A dissatisfied customer will lodge his/her grievance through the company's
104. As per code of conduct prescribed in the IRDA regulation an insurance
website by browsing
agent shall not to (Tick the right statement)
a. Company's own Grievance Redressal cell
a. interfere with any proposal introduced by any other insurance agent
b. Ombudsman
b. disclose his licence to the prospect on demand
384 385
 c. disclose the scales of commission in respect of the insurance products 110. The following is not considered as asset for solvency except
offered for sales a. Agents balance not realized in thirty days.
d. indicate the premium to be charged by the insurer for the insurance b. Agents balance not realized in sixty days
product offered for sale c. Agents balance not realized in ninety days
d. Agents premium not realized in fifteen days.
105. Regarding advertisement by Insurance intermediaries IRDA regulations
provide that 111. Which of the following persons cannot be appointed as an actuary
a. Only duly licensed intermediaries may advertise or solicit insurance a. Fellow of Actuarial Society of India
through advertisement b. A person against whom no disciplinary action is pending by Acturial
b. Agents or Intermediaries cannot advertise or solicit insurance through Society.
advertisement c. An employee of the insurer
c. Only duly licensed intermediaries may advertise or solicit insurance d. A person aged 75 years.
through advertisement if the insurer in writing approves it. 112. The value of computer equipments and software in the year of purchase after
d. None of the above. depreciation would be
a.100%
106. For the purpose of audit of financial statements, the auditor shall ensure that b.75%
a. Premium has been recognized as income over the contract period c. 50%
b. Premium has been recognized as income over the period of risk d. 25%
c. Premium has been recognized as income over the contract period or the
period of risk, whichever is applicable 113. Solvency Ratio means the ratio of
d. Premium has been recognized as and when collected a. available solvency margin to premium base
b. required solvency margin to premium base
107. The Auditor shall verify that real estate-investment property has been c. Available solvency margin to required solvency margin
measured d. required solvency margin to available solvency margin
a. At historical cost
b. At historical cost less accumulated depreciation 114. Under “protection of policy holder's interest” on receipt of a claim
c. At historical cost less accumulated depreciation and impairment loss intimation the General Insurer will respond within
d. At market value a. 24 hours
b. 48 hours
108. In General Insurance business the Actuarial advice is to ensure the c. 72 hours
following d. 100 hours
a. the rate is fair
b. the wage is fair. 115. Under 'PPI' regulation the Surveyor has to submit his report ordinarily
c. the tariff is fair within
d. the tax is fair a. 15 days
b. 30 days
109. For the purpose of determination of solvency the following asset is placed c. 45 days
with zero value except d. 60 days
a. Sundry debt not realizable
b. Advances not realizable. 116. The Laws which specifically regulate insurance business in India are :
c. Pre paid expenses. a. The LIC Act 1956
b. The Insurance Act 1938
d. Furniture, fixtures, stationery.
c. The GIB (Nationalistaion) Act 1972

386 387
 d. The IRDA Act 1999 123. Insurance companies are registered under :
e. All of the above a. Insurance Act 1938
b. Marine Insurance Act 1963
117. The Indian Marine Insurance Act 1963 is based on c. Companies Act 1956
a. The Fatal Accidents Act 1885 d. IRDA Act 1999
b. The Workmens' Compensation Act 1923
c. The UK Marine Insurance Act 1906 124. The 'Date of Notification' of General Insurance Business Amendment act is
d. None of these a. 01.07.2001
b. 07.08.2002
118. Which of the following is not a stipulation in the IRDA Guidelines about c. 01.04.2002
advertisement by Insurers? d. 03.10.2001
a. Advertisement should disclose full particulars of the insurer 125. Right to Information Act 2005 come in to force on
b. The name and address of the Chief Marketing Officer of the company a. 01.04.2005
should be published in the advertisement. b. 15.11.2005
c. Display the registration / licence numbers on their websites. c. 02.10.2005
d. A copy of the advertisement should be filed with the IRDA d. 12.10.2005

119. Which of the following is not a parameter specified by IRDA in defining 126. The first fully Indian Owned Insurance Company of India is
“Rural Area” ? a. United India Insurance Company Ltd
a. AT least 75% of the male working population is engaged in agriculture b. The Oriental Insurance Company Ltd
b. Population of the area not to exceed 5000, according to the last census c. National Insurance Co. Ltd
c. Each household must own at least two heads of cattle. d. New India Assurance Co. Ltd
d. The density of population must not exceed 400 per square km.
127. The R.T.I Act, 2005 does not extend to the following state
120. The institution of “Insurance Ombudsmen” came in to effect in the year a. Nagaland
a. 1988 b. Arunachal Pradesh
b. 1999 c. Jammu & Kashmir
c. 1997 d. Uttaranchal
d. 2001
128. As per IRDA regulations (without prejudice to section 27 % 27 (b) of the
121. Insurance “Ombudsman” are appointed and administered directly by: Act), every insurer carrying General Insurance Business shall in must and at
a. The Union Finance Ministry all times keep invested his total assets in Central Govt. securities.
b. The IRDA a. upto 5%
c. The GIC and LIC of India together b. upto 12.50%
d. The General Body of Insurance Councils c. not less than 20%
e. None of the above d. upto 13.66 %

122. Institutions have accountability and responsibility to : 129. A person can apply for and be granted licence to act as an agent for
a. Its shareholders only a. One general insurer only
b. Its shareholders and stakeholders only b. One life insurer only
c. The Govt. Authorities only c. Either 1 or 2 above
d. Entire society d. Both 1 & 2 above

388 389
130. The minimum qualification to act as an agent residing in urban area is IFORMATION TECHNOLOGY TRADE QUESTIONS
a. 8th pass
b. 10th pass 1. In computer hardware specification, we see a term like 1 GB RAM or 512 MB
c. 12th pass RAM or something like this. What does RAM mean?
d. Graduate a. Read and manage
b. Randomly Arranged Memory
c. Random Access Memory
131. For renewal of Agency Licence the agent has to complete practical training
for a minimum of d. Read and Memorise
a. 25 hours
b. 50 hours 2. You want to write a letter to be sent to your valued customers. What software
will you use for creating and editing the letter?
c. 100 hours
a. A word processor
d. 150 hours
b. A spreadsheet software
132. As per IRDA norms a Corporate Agents portfolio should not have premium
c. An internet browser
from one person/organization/group of organization exceeding
d. A COBOL compiler
a.10%
b.25%
3. Which of the following device is an input device that can be used for inputting
c. 50% data or instruction to the computer
d.75% a. Monitor
b. Keyboard
133. An Agent, whose licence has been cancelled, cannot apply for fresh licence c. Printer
for d. Speaker
a. 1 year
b. 2 years 4. For preventing unauthorized usage of computing facilities, authorized users
c. 3 years are given unique user-id and password. A password should be
d. 5 years a. Simple and easy to remember
b. Complex and be made known to as many persons as possible to minimize
loss of time in case one forgets his password
134. Required solvency margin in respect of premium income is _____ % of
gross adjusted premium or net premium whichever is higher. c. Complex and be changed time to time
a. 10% d. Same password should be given to all the users
b. 20%
c. 25% 5. Which is the odd man out?
a. 80 GB
d. 50%
b. 512 MB
c. 1 GHz
135. Required solvency margin in respect of claim is _____ % adjusted gross d. 2 KB
incurred claim or net incurred claim whichever is higher.
a. 10%
6. A computer with 160 GB HDD will be about two times faster than a computer
b. 20% with 80 GB HDD in doing same set of operations, remaining configuration
c. 30% remains same.
d. 40% a. The statement is wrong
b. The statement is right
390 391
 c. It depends on set of operations b. Can not do anything
d. It depends on volume of data being used c. Rename the file
d. Delete it and create it with the preferred name.
7. Which of the following is the most common way of spreading a computer
virus 14. In data structure, stack is a list of data following
a. By installing a hardware in the network a. First in first out (FIFO)
b. Through attachments in e-mails containing malicious codes b. Last in first out (LIFO)
c. Through application software having malicious codes c. In from one end and out from other end
d. Through data files containing malicious data d. None of these.

8. A spreadsheet software like Ms. Excel is normally used for 15. If n devices are to be connected in network using ring topology, what is the
a. Editing photographs number of cable links required?
b. Preparing presentations a. n
c. Doing data analysis b. n-1
d. Sending e-mail c. n(n-1)
d. 2n
9. Bits per second (bps) is a common unit of
a. bandwidth 16. A file with the extension pps is used for
b. resolution of monitor a. Creating an e-mail
c. typing speed b. Making presentations
d. none of the above c. Preparing graph
d. Storing large volume of data
10. Open source software is one which
a. doesn't require installation of source code 17. Out of the following, which statement is correct
b. can work without any hardware a. Same user-id can be used by different users by assigning different
c. has no licensing policy passwords
d. source codes are available to all for use and modifications. b. Primary key value can be same for more than one record in a table
c. Arithmetic operations can be done with alphanumeric data
11. When a file is saved d. Data can be stored in ascending as well as descending order
a. it is stored in RAM of the computer
b. it is stored in ROM of the computer 18. If the premium collection in a branch in month 2 decreases by 20% compared
c. it is stored in the secondary storage device of the computer to month 1, and again goes up by 20% in the month 2, then
d. it gets printed a. Month 1 premium collection is same as month 3 collection
b. Month 1 premium collection is less than month 3 collection
12. Out of the following, which is an advantage of using a database management c. Month 1 premium collection is greater than month 3 collection
system?
d. it depends on the premium amount
a. controlling redundancy
b. data isolation
19. User acceptance testing should be done by
c. data manipulation
a. Those who are involved in programming
d. none of this
b. Likely users of the new systems
c. Software vendor
13. If you don't like the name of the file what would you do?
d. Third Party
a. Save it with different name

392 393
20. For using an application software effectively a person should be trained on b. Bar chart
a. Programming language in which software is developed c. Pie chart
b. Features of the hardware on which the software is to be used d. Line Graph
c. Functional features of the software
d. Soft skills 27. What is the importance of phone number 1551 in India?
a. It's a toll free number dedicated to farmers in India
21. Business Intelligence Software are such software b. It's a toll free number for getting medical assistance
a. That make human being intelligent c. It's a toll free number for getting Insurance related information
b. That enables the transactions to happen in faster way d. It has no significance
c. That uses statistical techniques to show useful patterns in the data
d. That integrates various functional systems 28. Data related to a variable having high level of uncertainty will have
a. High average
22. Oracle is commonly understood as a b. High variance
a. Database system c. Low average
b. Programming language d. low variance
c. ERP
d. Operating Sytem 29. An Insurance company targets to double its premium collection in next two
years. But in the first year it could increase by only 25%. What is the %
increase required in the 2nd year to meet the initial target?
23. Malware are software
a. 25%
a. Used by stock exchange
b. 75%
b. Developed to do harm to the computer or network
c. 100%
c. Used by cyberforensic experts to identify the cybercriminals
d. 60%
d. None of the above
30. Out of following, which is not necessary for starting a corporate website?
24. Firewall is a. Domain name
a. An antivirus software b. Web Space
b. is an internet browser c. Internet Connection
c. Both of the above d. Web Pages
d. None of the above
31. As per the Information Technology Act 2000 in India, Network Service
25. 1 KB is equal to Providers are fully liable for the data made available through that service
a. 1024 bytes a. The above statement is wrong
b. 1000 bytes b. The above statement is right
c. 100 bytes c. The IT Act 2000 doesn't have any section for network service providers
d. None of the above d. There is no Information Technology Act in India

26. You have data related to premium collection in various regions of your
organization in different months. You want to get relative idea about the rate
of increase/decrease in premium collection. What kind of report should be
preferred?
a. Tabular report
32. Any electronic record can be legally authenticated by
a. Putting the company logo in the document
b. Including the name of the directors in the document
c. Affixing digital signature
d. None of the above

394 395
33. A data warehouse in an Insurance company should not be used for c. System testing
a. Data analysis d. System implementation
b. Insurance Policy Administration
c. Data mining 40. For best results in information processing from a tabular report, the number of
d. None of these columns should be
a. As many as can be accommodated in the report
34. The Disaster Recovery site for information system should be located b. About ten
a. In the same premises to minimize time of recovery from disaster c. About 5
b. In a nearby premises d. At least 15
c. In the DR manager's house
d. None of these 41. Out of the following, which biometric template will have largest size in terms
of computer memory required
35. Data mining is not used for a. Fingerprint
a. Updating transaction records b. Retina
b. Finding patterns in existing data c. Signature
c. Associating new data with existing group d. Voice
d. Clustering the existing data
42. Out of following, which has lowest cost per storage unit
36. In managing an IT implementation project, the project completion time is a. RAM
mostly b. ROM
a. Equal to the sum of all the activity times c. Hard disk
b. Less than the sum of all the activity times d. Magnetic tape cartridge
c. Greater than the sum of all the activity times
d. They are not related 43. A branch collected half of its annual premium target at a rate of Rs. 1 crore per
month and remaining half at the rate of Rs. 50 Lakhs per month. What was the
37. While allocating resources in any project, we should give priority to activity annual target?
having a. Rs. 9 crores
a. Highest activity time b. Rs. 8 crores
b. Lowest activity time c. None of the above
c. Highest delayed time d. Require more information to get it.
d. Lowest float time
44. A branch collected half of its annual premium target at a rate of Rs. 1 crore per
38. Which is more harmful to the information security in an organization month and remaining half at the rate of Rs. 50 Lakhs per month. What is the
average premium collected per month?
a. Giving multiple user-id to same person
a. Rs. 2/3 crores per month
b. Giving same user-id to many persons
b. Rs. 75 lakhsper month
c. Both are equally harmful
c. None of the above
d. They have nothing to do with info security
d. Require more information to get it
39. In a System Development Life Cycle, end users have least role to play during
45. Let h1, h2….h20 be heights of 20 persons and d1, d2....d15 be depth of water
a. System requirement determination at 15 points across the river bed. They have to cross the river by walking. The
b. System development decision maker computes the average of heights and water depth. He finds

396 397
 that the average height of persons is more than the average depth of water. He 51. What are the links generally available, in a company's website:
decides that group should cross the river. Did he use correct analysis for a. Our office, our people, our work
decision-making? Choose the most appropriate answer from following b. About us, FAQ, home
a. Yes c. First page, address, details
b. No d. none of the above
c. He should have collected depth of water data at more number of points
d. Flow of current is also important 52. What do we understand by the term 'http'
a. Hypo test transmission programme
46. While sending an e-mail if you write address of a person in Bcc (blind carbon b. Hyper text transfer protocol
copy) c. Higher text transfer provision
a. The person will not receive the mail d. Hard text transport promotion
b. He will receive the mail but wouldn't get the attachment if any
53. What stands for 'www' generally prefixed before a website address:
c. He will not know about other recipients of the mail
a. World wide workgroup
d. Other recipients of the mail will not know about him b. World wide web
c. World wide wan
47. If you are sending a document file to your colleagues and want that they d. World wide wall
should not be allowed to make changes in that, you will in normal
circumstances 54. Which programming language is used while designing a website:
a. Make it a read-only file a. Cobol
b. Make a PDF and send that b. Fortran
c. Both the above options will serve the purpose c. Html
d. None of the above options will serve the purpose d. Http

48. You have a file of about 5MB size which is requiring by many of your 55. In the Web Site of an Insurance Company which of the following normally is
colleagues. What option from following will be the best not displayed?
a. Sending the file as attachment to all who need that a. Company profile
b. Storing in a folder and share that with all who need that b. Annual reports
c. Product Profiles
c. Storing in some free web space and inform them about the URL
d. Employee profile
d. Copying the file on machine of all who need that
56. The common language used in Web site architecture is:
49. Most significant advantage of OLAP implementation is that a. XML
a. IT department can generate the standard reports with greater convenience b. HTML
b. Users can do analysis of data online c. SQL
c. Business transaction becomes faster d. None of the above
d. Need of taking back up gets eliminated
57. During business negotiation with a corporate client, the financial
50. Why should large files be compressed before attaching in an e-mail? performance of your company is requested by their finance director to be
a. It makes the file secured presented authentically. The most impressive way to do it is
a. To take the relevant portion of your lap-top presentation
b. It will get automatically deleted after some pre-decided time
b. To ask for the office to show the last year's balance sheets
c. Compression makes the file virus free c. To show Brochures
d. It creates lesser load on communication infrastructure d. To open company's web site

398 399
58. The ID of all the websites starts with 'www', what is the full form BULLET QUESTIONS
a. World wide workgroup
b. World wide web 1. Enumerate various functions covered by the Estate Department - Bullets
c. World wide wan • Lease or Purchase of Immovable property for Office
d. World wide wall • Lease or purchase of property for Residence of Employees
• Renewal / Negotiation for Lease of premises
• Maintenance and Repair of the properties
59. PSU Insurance company websites do not have the following details for the
public • Renovation and Structural changes in the properties
a. Right to information Act • Empanelling of Architects / Civil Contractors after following CVC
guidelines
b. Various Insurance policies
• Budgetary Control and maintenance of documents related to property
c. Registration number allocated by the IRDA
• Dealing with Litigation matters / overstay / illegal occupation of
d. The promotion policy for the employees of the company Company's properties
• Appointment of Estate Officers / liaison with them for eviction of
60. An employee of Public Sector Insurance company can view the promotion unauthorized occupants
results
a. By logging on to his Co's website using his/her ID and Password 2. INTERNAL AUDITING, ITS NEED AND ESSENTIALS DESIRED FOR
b. By going to company's web site EFFICIENT AUDITING
c. By going to GIPSA's website • A continuous, critical review of financial and operational activities,
conducted by a staff of auditors functioning as fulltime salaried
d. By going to NIA website employees
• An extension of internal check & control introduced by the management
61. Which of the following areas does not come under obligation in the formation to supervise the effectiveness of such int. control
of Company's website • Auditors to be conversant with rules and practices
a. Downloading system • To refrain from creating any fear psychosis in the mind of auditee
b. Hindi Version of Contents • To report a constructive appraisal of operation and on protection of
c. Contents of RTI Act business
d. Contact Address • To appraise and review the existing internal check & control system
• To render specialist service especially when any operational Office is
62. From the customer point of view which one is not the most inappropriate concealing any unhealthy situation for fear of exposure
information one should have in the Company's website • Critical examination of functions and activities within particular
a. Product information department or any individual or a responsibility centre
b. Financial health of a company • To bring out effectiveness / success or shortcoming in the system and
operation in vogue
c. Number of hyperlinks provided in the Home page
• To report on remedial measures or on improvement of the system and
d. Bilingual presentation operation
• To report without any fear or favour
63. Which should be the most important feature for any Company's website
a. Scrolled information 3. Discuss the technical aspects of Reinsurance Audits
b. Number of links • Check RB/NRB Classification of some depts. of some D.O./R.O
c. Time taken to access • Check sample cession derivations for Outward Treaties
d. Visitor's status • Tally Dept. wise premium and claim figures from Tech Dept. to R/I with
TB figs.
400 401
 •Check accounting of Outstanding Claims Provisions
•See whether TP/OD claims out of one accident advised for XL recovery
and not accounted as NRB.
•Check if 10% limit prescribed by IRDA exceeded
•Check whether Net Retention schedule has yielded expected results
•Check if documentation of all arrangements esp. facultative is available
•Check balance of treaties net outgo or income? 6.
•Check declined / cancelled treaties if accepted later, reasons for same
4. Mention major kinds of Audits conducted in an insurance company.
• Statutory Audit which is conducted by Chartered Accountants as per the
provisions Sec.224 to Sec. 233 of the Companies Act'1956 (as amended)
has to be carried out annually for reporting the maters specified in the
schedule C of the IRDA (Preparation of Financial Statements and
Auditor's Report of Insurance Companies) Regulation, 2000.
• C&AG Audit is conducted by an auditor appointed by or reappointed by
the Controller and Auditor General of India under Sec.619 of the
Companies Act for the Govt. Company as defined by Sec.617 of the
Companies Act,1956
• Regulatory Audit is an audit, checking, examination and verification of
books of accounts, investments of funds, margin of solvency, efficiency
in the conduct of business of insurance companies by the Regulatory for
the purpose of promoting, regulating and ensuring orderly growth of
insurance business as per provisions of sec.14 of the IRDA Act, 1999
• Special Audit is an audit conducted by a Chartered accountant or 7.
Company's Auditor under the directives of the Central Govt. as per
provisions of Sec.233A of the Companies(Amendment) Act 1960 in
certain cases where the affairs of any company are not being managed in
accordance with sound business principles.
• Technical Audits are sometimes conducted by the company under
directives of the Regulator, who examine the technical audit reports
• Internal Audit/ Management Audit is conduced by the company's internal
auditor or others in the following forms
s Underwriting Audit
s Claims Audit
s Accounts Audit
s System Audit
s IT Audit
s Investment Audit
5. Specify the major roles of Internal Audit;
• Detective Role. Detection of errors, frauds and irregularities is the first
and foremost objective of internal audit and check system of an entity.
• Preventive Role is the most important one which makes an internal 8.
auditor to suggest ways and measures to improve the systems so that
errors and frauds don't recur.
402
•Corrective Role enables the auditor to provide the measures to rectify the
already committed
•Directive Role
•Boundary Role
•Recovery Role
Discuss the major areas of Directive Roles of the internal auditor
• To suggest the risk management methods and techniques of new and
critical risks
• To suggest the measures for prompt and proper settlement of pending
claims
• To suggest the methods and techniques of rating the risks right
• To suggest the major considerations for adding a new line of business in
underwriting policy
• To suggest the methods and techniques of analysis of risk exposure in
investment functions
• Suggest the internal control and check system to avoid financial
irregularities.
• Suggest the methods or techniques for the effective reinsurance
programming in view of the performance or result of last reinsurance
programme
• Suggest the techniques in loss prevention measures in case of high
probability and high severity of risks.
Discuss the principal steps in analysis of Solvency margins
• Determination of Available Solvency margin I,e excess of value of
assets over the value of liabilities.
• For this purpose total value of assets and the total value of liabilities are to
be ascertained as per guidelines prescribed by the Regulator.
• Every insurer shall prepare a statement of the value of assets in the
prescribed form IRDA Assets AA specified in schedule 1.
• The insurer shall prepare a statement of liabilities in accordance with the
schedule 11-B.
• to determine the required solvency margin in view of the nature and
volume of business and the respective incurred claim as RSM-1 and
RSM-2
• RSM = Higher of RSM-1 and RSM-2
• RSM-1 = Based on Net Premium
• RSM-2 = Based on Incurred Claims
• Solvency Margin = ASM / RSM
Discuss the major steps in Corporate underwriting audit:
• Underwriting Audits are generally classified into two types- Audits for
403
 Corporate Underwriting and Line Underwriting\
•Line Underwriting audits are carried out at operational level while
Corporate Underwriting audit is carried out to review the performance of
Underwriting policy of the corporate management.
•Corporate Underwriting also covers Solvency Margin Analysis and
Corporate Governance aspects as specified by IRDA
•To Review the Underwriting Policy on acceptance of Small, Large and
Complicated risks
•To review of risk management policy for acceptance of large and
complicated risks
•To Review of Corporate Management decision on adding a new line of
business or deleting loss-oriented business.
•To review the Reinsurance Programming and Methods
•To review of Underwriting Results in respect of growth, profitability and
solvency
•To review the risk-based fund management
•To Regulatory Compliance
9. Highlight the major Considerations of claim audit:
• Claim Audit broadly covers Legal, Technical and Administrative
Aspects
• Legal Aspects include considerations of the fundamental legal principles
of insurance such as Principle of Indemnity, Principle of Insurable
Interest, Principle of subrogation and Contribution.
• The legal aspects in liability claims also include the provisions of the
Motor Vehicles Act 1988 for Motor TP Claims, PLI Act1991 for Public
Liability claims under Act policy, Companies Act. 1956 (as amended) for
D&O Claims and so on.
• Legal aspects in liability claims further include careful considerations of
proper defenses in the court of law to avoid or reduce the third party legal
liability of the insured.
• Technical Aspects include considerations of deductibles, warranties, SI
limit or Indemnity limits, Warranties, Proof for admissibility of claims
and supporting for assessment of claims such photographs, valuation
report, invoice etc
• Technical aspects in legal liability include determination of the liability
of the insurer as per the terms, conditions and indemnity limits in the
liability policy
• Liabilities in Liability policy are of two types- Liability of the Insured
and that of the insurer.
• The liability of the insured is decided by the court of law where proper
legal defences are required to be taken as per terms of the policy “Duty to
defend” or “Right to defend” with reference to Common Law or the
Specific Statutes as the case may be.
404
•The administrative aspects include proper authorization or approval as
per financial limits.
•Consideration of internal control and check system in regard to
registration, processing and settlement of claims
10. Discuss the major provisions in the Companies Act in regard to C&AG Audit
• Article 148 to Article 151 of the Constitution of India lays down the
Authority of the CAG of India to function as the Supreme Audit
Institution of the Country.
• The Govt. Companies are audited by the C&AG under the provisions of
Sec 619 and 619 (a) of the Companies Act.
• The Government Companies are defined under section 617 of the
Companies Act.
• The nature of audit of the CAG may be classified as .Regularity Audit
(Financial), Regularity Audit (Compliance), The regularity audit
(Compliance) may be further sub-classified as Transaction Audit and
Performance Audit, Information Technology/Systems Audit
• In Regulatory audit auditors should analyze the financial statements to
establish whether acceptable accounting standards for financial
reporting and disclosure are complied with.
• Performance audit to see that Government programmes have achieved
the desired objectives at lowest cost and given the intended benefits.
• The Information Technology Audit is the audit of the Information System
under operation in the Entity.
• The scrutiny of the Annual Accounts and the Audit Reports thereon is
done by the Parliament
• Thus the audit Reports and Annual Accounts are referred to the Public
Accounts Committee of the parliament and the Committee on Public
Undertakings (COPU)
• The reports of the CAG are deliberated upon by the Public Accounts
Committee and commercial reports are examined by the Committee on
Public Undertakings
11. Specify the matters that the report of the auditor in a general insurance
company shall deal with as per IRDA Regulation
• The report of the auditors on the financial statements of every insurer
shall deal with the matters specified herein:
• That they have obtained all the information and explanations, which, to
the best of their knowledge and belief were necessary for the purposes of
their audit.
• Whether proper books of account have been maintained by the insurer so
far as it appears from an examination of those books;
• Whether proper returns, audited or un-audited, from branches and other
offices have been received and whether they were adequate for the
purpose of audit;
405
 •Whether Balance Sheet, Revenue Account, Profit& Loss Account and •FORM 2 Statement of Downgraded Investments
the Receipts & Payments Account are in agreement with the books of •FORM 3B Statement of Investment
account. •FORM 4 Exposure and other norms quarterly compliance certificate
•Whether the actuarial valuation of liabilities is duly certified by the •FOR 4A (Part A,B,C) Statement of Investment subject to Exposure
appointed actuary. Norms - Investee company, Group and Industry
•Whether the balance sheet gives a true and fair view of the insurer's •FORM 5 Statement of Investment Reconciliation
affairs as at the end of the financial year/ period;
•FORM 5 A Statement of Mutual Fund
•Whether the revenue account gives a true and fair view of the surplus or
•FORM 6 Certificate under sections 28(2A), 28(2B) and 28B(3) of
the deficit for the financial year/ period;
Insurance Act, 1938
•Whether the profit and loss account gives a true and fair view of the profit
•FORM 7 Confirmation of Investment Portfolio
and loss or the financial year/ period;
•FORM 7A Statement of Non-Performing Assets
•Whether the receipts and payments account gives a true and fair view of
the receipts and payments for the financial year/ period;
•Whether financial statements rae prepared in accordance with the KEY- ACCOUNTS TRADE QUESTIONS
requirements of the Insurance Act, 1938, the Insurance Regulatory and 1 A 14 B 27 B 40 D 53 B
development Act, 1999 and the Companies Act, 1956. 2 D 15 A 28 A 41 A 54 B
• Investments have been valued in accordance with the provisions of the 3 C 16 C 29 D 42 B 55 D
Act and these Regulations. 4 D 17 D 30 A 43 A 56 C
5 D 18 D 31 C 44 C 57 C
12. INTERNAL AUDITING, ITS NEED AND ESSENTIALS DESIRED FOR 6 D 19 D 32 A 45 A 58 D
EFFICIENT AUDITING 7 D 20 D 33 D 46 C 59 A
• A continuous, critical review of financial and operational activities, 8 C 21 D 34 C 47 C 60 D
conducted by a staff of auditors functioning as fulltime salaried 9 D 22 D 35 D 48 C 61 C
employees 10 B 23 A 36 D 49 C 62 B
• An extension of internal check & control introduced by the management 11 B 24 A 37 D 50 C 63 B
to supervise the effectiveness of such int. control 12 D 25 B 38 A 51 C 64 D
• Auditors to be conversant with rules and practices 13 B 26 D 39 C 52 C
• To refrain from creating any fear psychosis in the mind of auditee
• To report a constructive appraisal of operation and on protection of
KEY- ACCOUNTS MODEL QUESTIONS
business
• To appraise and review the existing internal check & control system 1. C 5. D 9. B 13. A 17. A
• To render specialist service especially when any operational Office is 2. B 6. A 10. C 14. A 18. A
concealing any unhealthy situation for fear of exposure 3. A 7. B 11. D 15. A 19. A
• Critical examination of functions and activities within particular 4. B 8. A 12. D 16. B 20. A
department or any individual or a responsibility centre
KEY- INVESTMENT MODEL QUESTIONS
• To bring out effectiveness / success or shortcoming in the system and
operation in vogue 1. B 8. C 15. C 22. C 29. C
• To report on remedial measures or on improvement of the system and 2. B 9. B 16. A 23. B 30. A
operation 3. A 10. C 17. A 24. C 31. B
• To report without any fear or favour 4. D 11. A 18. A 25. B 32. A
5. A 12. B 19. B 26. A 33. C
13. The following forms are required to be filed with IRDA by General Insurers: 6. C 13. C 20. C 27. B
• FORM 1 - Statement of investment assets 7. A 14. A 21. A 28. A

406 407
KEY INSURANCE LAW AND REGUALTORY FRAMEWORK MODEL QUESTION
1. B 28. C 55. C 82. B 109. D
2. A 29. D 56. B 83. B 110. D
3. B 30. D 57. C 84. C 111. D
4. C 31. B 58. C 85. C 112. B
5. D 32. B 59. A 86. C 113. C
6. A 33. D 60. C 87. D 114. C
7. B 34. B 61. A 88. D 115. B
8. B 35. D 62. C 89. B 116. E
9. A 36. D 63. B 90. D 117. C
10. B 37. A 64. C 91. X 118. B
11. A 38. B 65. C 92. D 119. C
12. C 39. C 66. B 93. B 120. A
13. B 40. D 67. D 94. C 121. D
14. D 41. D 68. B 95. C 122. D
15. B 42. D 69. C 96. B 123. C
16. D 43. C 70. C 97. D 124. B
17. C 44. D 71. D 98. A 125. D
18. A 45. D 72. D 99. C 126. D
19. D 46. B 73. D 100. B 127. C
20. D 47. D 74. D 101. A 128. C
21. D 48. D 75. D 102. D 129. D
22. D 49. B 76. D 103. D 130. C
23. D 50. C 77. C 104. A 131. A
24. C 51. C 78. B 105. C 132. C
25. A 52. C 79. A 106. C 133. D
26. C 53. C 80. D 107. C 134. B
27. B 54. C 81. D 108. A 135. C
KEY INFORMATION TECHNOLOGY TRADE QUESTION
1 c 14 d 27 a 40 c 53 b
2 a 15 a 28 b 41 d 54 c
3 b 16 b 29 d 42 d 55 d
4 c 17 d 30 c 43 b 56 b
5 c 18 c 31 a 44 a 57 d
6 a 19 b 32 c 45 b 58 b
7 b 20 c 33 b 46 d 59 d
8 c 21 c 34 d 47 c 60 a
9 a 22 a 35 a 48 b 61 a
10 a 23 b 36 b 49 b 62 a
11 c 24 d 37 d 50 d 63 a
12 a 25 a 38 b 51 b
13 c 26 d 39 b 52 b

408 409
 CORE BENEFITS AS PER SCHEME/S NOTIFIED
BY THE CENTRAL GOVERNMENT

PAY SCALES AND STAGNATION INCREMENTS OF CLASS

I EMPLOYEES

PAY SCALES (BASIC PAY)

Scale VII Rs.52210-1400(2)-55010-1500(1)-56510-1640(1)-58150-1700(1)-
59850
Scale VI Rs.46610-1400(5)-53610
Scale V Rs.41660-1200(3)-45260-1350(2)-47960
Scale IV Rs.34460-1200(7)-42860

HR--PERSONNEL & VIGILANCE Scale III Rs.28160-840(1)-29000-910(6)-34460-1200(4)-39260

Scale II
Scale I
Rs.23120-840(7)-29000-910(6)-34460
Rs.17240-840(14)-29000-910(4)-32640

STAGNATION INCREMENTS: AN ADDL. INCREMENT PAYABLE

TO AN OFFICER
– who has reached the max. of his scale of pay
– for every 3 completed years of service after reaching such maximum
– equal to the last increment drawn by him
• For scale I- Maximum of 3 such increments
• For scale II- Maximum of 5 such increments
• For scale III- Maximum of 2 such increments
• For scale IV- Maximum of 1 such increment
Stagnation increment is to be released subject to satisfactory performance and
vigilance clearance.

PAY SCALES AND STAGNATION INCREMENTS OF CLASS

II EMPLOYEES

PAY SCALES (BASIC PAY)

Development Officer Grade I: Rs.12175-755(8)-18,215-780(9)-25,235-
820(2)-26,875-840(4)-30,235
Development Officer Grade II: Rs.8,280-540(3)-9,900-615(4)-12,360

420 421
STAGNATION INCREMENT: AN ADDL. INCREMENT IS PAYABLE HOUSE RENT ALLOWANCE:
ONLY TO A DEVELOPMENT OFFICER GRADE I (FOR ALL CLASSES OF EMPLOYEES)
- who has reached the maximum of his scale of pay,
- an amount equal to the last increment drawn by the employee Place of posting Rate per month (Cl I) Rate per month (Cl II) Rate per month (Cl III/IV)
Sl. (1) (2) (3) (4)
- Maximum three such increments can be paid every three years
Stagnation increment is to be released subject to satisfactory performance and 1. Cities of Mumbai, 10% of pay 10% of pay 10% of pay
vigilance clearance. Navi Mumbai, subject to subject to subject to
Kolkata, New maximum of maximum of minimum of
Delhi, Faridabad, Rs.3,200/- per Rs.3,200/- per Rs.700/- &
PAY SCALES & STAGNATION INCREMENTS OF CLASS Ghaziabad, month month maximum of
III/IV EMPLOYEES N O I D A , Rs.3,200/- per
G u r g a o n , month
PAY SCALES (BASIC PAY) C h e n n a i ,
Ahmedabad,
Sr.Asstt./Steno: Rs. 10,670-755(4)-13,690-840(15)-26290
Hyderabad,
Assistant: Rs.7640-440(1)-8,080-480(2)-9,040-540(5)-11,740-625(2)- Bengalaru, Pune
12,990-760(3)-15,270-790(2)- 16,850-840(5)-21,050
Record Clerk: Rs.7085-305(2)-7695-325(5)-9320-350(1)-9670-390(2)- 2. C i t i e s w i t h 8% of pay subject 8% of pay subject 8% of pay subject
10450- 430(3)-11740-480(5)-14140-530(9)-18910 population to maximum of to maximum of to minimum of
Driver: Rs.7085-305(2)-7695-315(14)-12105-350(2)-12805-390(9)- exceeding 12 lacs Rs.2,700/- Per Rs.2,700/- Per Rs.600/-&
16315 except the cities month month maximum of
Sub-staff: Rs.6180-250(5)-7430-265(8)-9550-315(1)-9865-325(2)- mentioned at Rs.2,700/- Per
10515-390(9)-14025 serial number 1, month
Gandhinagar and
all cities in the
STAGNATION INCREMENT: AN ADDL. INCREMENT PAYABLE TO State of Goa
AN EMPLOYEE
- who has reached the maximum of his scale of pay,
- an amount equal to the last increment drawn by the employee
3. All other places 7% of pay subject 7% of pay subject 7% of pay subject
For Sr.Asstt/Steno - Maximum of 6 such increments, every 3 years
to maximum of to maximum of to minimum of
For Asstts- Maximum of 7 such increments, every 2 years Rs.2,600/- per Rs.2,600/- per Rs.570/- &
Stagnation increment is to be released subject to satisfactory performance and month month maximum of
vigilance clearance. Rs.2,600/- per
month

DEARNESS ALLOWANCE
• Based on the All India Average Consumer Price Index for Industrial
Workers (In the series 1960 = 100 ) as published in the Indian Labor
Journal or the Gazette of India
• Revision on quarterly basis for every four points rise or fall.
• For every four points in the quarterly average over 2944 points- 0.15 % of
Basic Pay.

422 423
 CITY COMPENSATORY ALLOWANCE :

Note : The revised FPA as shown in Column 3 above, shall not qualify for any allowance or any benefit or terminal benefits.
However, increment portion of FPA as shown in column 4 above, shall rank for P.F and Pension. The said increment portion
along with the DA as on 1.11.1993, as shown in column 5 shall rank for calculation of Gratuity and Encashment of Earned
FPA pre-revised (in Rs.)
(FOR ALL CLASSES OF EMPLOYEES)

DA Portion of
Sl. Place of posting Rate per month (Cl I) Rate per month (Cl II) Rate per month (Cl III/IV)

10.08

18.68
12.74
18.68
12.74
(1) (3.1) (3.2) (3.3)

7.56
6.30
6.30
5.80

9.80
No.

(5)
1. Cities of Mumbai, 3% of pay subject 3% of pay subject 3% of pay subject
Navi Mumbai, to a maximum of to a maximum of to minimum of
Calcutta, New Rs.800/- per Rs.675/- per Rs.205/- &
Delhi, Faridabad, month month maximum of
Ghaziabad, Rs.635/- per
N O I D A , month

pre-revised FPA (in Rs.)

Gurgaon, and

Increment portion of
C h e n n a i ,
Ahmedabad,
Hyderabad,

400
300
250
250
230
230
130
230
130
100
(4)
Bengaluru &
Pune
2. C i t i e s w i t h 2.5% of pay 2.5% of pay 2.5% of pay

Rs.800/- per month for Class I & Rs.275/- per month for Class III/IV employees
population subject to subject to subject to

Fixed Personal Allowance for various classes and cadres of employees:

exceeding 12 lacs, maximum of maximum of minimum of
except cities Rs.760/- Per Rs.625/- Per Rs.170/-&
month month maximum of
mentioned in

Revised F.P.A.
Transport Allowance (For Class I and Class III/IV):
Rs.595/- Per
serial number 1, month

(in Rs.)

1700
1400
1350
1200
Gandhinagar and

910
840
615
840
530
390
(3)
all cities in the
State of Goa4

3. C i t i e s w i t h 2% of pay subject 2% of pay subject 2% of pay subject

Sr. Assistant/Steno/Assistant etc.

population of 5 to maximum of to maximum of to minimum of

Driver/Other Subordinate Staff

lacs and above but Rs.590/- per Rs.545/- per Rs.125/- &

Development Officer Gr. II

Development Officer Gr. I
not exceeding 12 month month maximum of

of pay as on 1.11.1993
Rs.510/- per

Employee in the scale

lacs, State capitals
with population month
not exceeding 12
lacs, Chandigarh,

Record Clerk
Scale IV/III
M o h a l i ,

Scale VII

Scale II/I
Panchkula,

Scale VI
Scale V
Pondicherry, Port

Leave.
Blair
(2)
No.

10.
(1)
Sl.

1.
2.
3.
4.
5.
6.
7.
8.
9.
424 425
 HILL STATION ALLOWANCE: ALLOWANCE FOR TECHNICAL QUALIFICATIONS
FOR CLASS I. II AND III/IV EMPLOYEES FOR CLASS II & III/IV EMPLOYEES:
Height of place of Sl. Allowance for Technical
Sl. posting Rate for No. Examination Qualification per month
Rate for Class I Rate for Class II
No. (Above Mean Class III/IV (in Rs.)
Sea Level) (3) (4)
(1) (5)
(2) (1) (2) (3)
1. 1500 meters and 2.5% of pay 2.5% of pay 2.5% of pay 1. i) LIII or LCII 180
over. subject to a subject to a subject to a ii) AIII or ACII 490
maximum of maximum of maximum of iii) FIII or FCII 820
Rs.460/- per Rs.370/- per Rs.370/- per
month month month 2. Institute of Actuaries: 180
On passing each subject
2. 1000 meters and 2% of pay subject 2% of pay subject 2% of pay subject
3. Institute of Chartered Accountants or
over but less than to a maximum of to a maximum of to a maximum of
Institute of Cost and Works Accountant:
1500 meters. Rs.370/- per Rs.290/- per Rs.290/- per
on completion of
Mercara and month month month
i) Intermediate Examination 350
places which are
ii) Final Group A or Group B 600
specifically
iii) Final Group A & Group B 820
declared as “Hill
Stations” by the 4. On completion of MBA from a 820
Central and State recognized (by UGC) (this is applicable only to
Governments for University or Institution Class III & IV employees)
their employees (AICTE Approved course)
3. Not less than 750 2% of pay subject 2% of pay subject 2% of pay subject FUNCTIONAL ALLOWANCE PAYABLE
meters and to a maximum of to a maximum of to a maximum of TO CLASS III/IV EMPLOYEES:
surrounded and Rs.370/- per Rs.290/- per Rs.290/- per
accessible only month month month Amount (in Rs.)
through hills with Sl. Cadre-Functions Payable as
a height of 1000 No. Functional
meters and over Allowance
per month
KIT ALLOWANCE: 1. Subordinate Staff engaged in either as Key Holder or
Payable to Class I and III/IV employees if they are transferred to a hill station for carrying cash to or from Bank, as his regular and 375
where HSA is paid. main function, where the amount of cash carried during
a calendar month is ordinarily Rs.25,000/- or more
Rs 4,000/- (One time) for officers and Rs.1000/- for Class III/IV employees. The
Kit Allowance shall not payable for transfer from one hill station to another, to 2. Other Subordinate Staff working as Liftmen, Machine
Class III/IV employees, if the same was drawn any time during the preceding three Operators, Head Peons, Jamadars, Daftaries, AC Plant 165
years. Operators and Heavy Vehicle Drivers, who were
assigned these functions before 1.1.2006
3. Assistant (Sr. Assistant in the event of non-availability
PARADEEP PORT ALLOWANCE: of Assistant) engaged in handling cash in an office, as
Rs 110/- per month shall be paid to confirmed employees of all classes and cadres, his regular and main function, where the amount of 800
as long as he/she is posted in the company's office in Paradeep port. This allowance cash transaction during a calendar month is ordinarily
shall not be treated as Basic salary for any purpose. Rs.25,000/- or more

426 427
 Amount (in Rs.)
LEAVE ENCASHMENT (DURING SERVICE) :
Sl. Cadre-Functions Payable as Current block 2010-11(for all classes of employees)
No. Functional
Allowance Class I & II Class III & IV
per month
Basic Pay, Pre-revised Basic part of Basic Pay, Pre-revised Basic part of
4. Telex Operators, Punch Card Operators, Unit Record FPA & all other allowances drawn by FPA, DA, HRA & CCA.
Machine Operators and comptists, who were assigned 60 All other allowances are EXCLUDED
the employee
these functions before 1.1.2006
5. Stenographers to CMDs, Scale VII & VI and EXCLUDING officiating allowance,
equivalent positions 75 transport allowance & entertainment
6. Employees performing the functions of Audit allowance
Assistants 460
•Encashment of EL maximum 15 days may be availed of in a block of two
NON-CORE BENEFITS LEAVES: calendar years.
12 days (can avail 5 full days of CL at a stretch & Half day
CL {1st half or 2nd half} can be availed max. 6 times in a •No carry forward of block
Casual Leave (CL) year). Further intervening holiday{s} & Saturdays/ Following components of salary are considered for this purpose
Sundays falling between two CLs would not be counted as
CL.
2 days this can be selected by each employee from a list of TA/DA ON TOUR :
Restricted Holiday Restricted Holidays provided at the beginning of each a) AC II tier train fare, to & fro, for Scale I, II & III.
year. b) Scale IV & Above by Economy class Air fare
33.2/11 days (on every 11 working days 1 day accrued) c) Actual Conveyance expenses – residence to Airport, Railway/Bus
Casual Leave (CL) Max. accumulation 240 days. It cannot be clubbed with Station & back, both at Headquarters & place of tour.
Casual Leave. It can be sanctioned for minimum 6 days
and maximum 120 days. d) Incidental charges – If tour exceeds 12 hr., @ ½ of Halting Allowance
applicable to 'C' Class cities for each journey i.e. outward & inward.
Earned Leave (EL) 30 days on half pay basis are accumulated at the end of
every year Maximum accumulation 240 days (h/p)
Hotel Charges Scale I Scale II & III Scale IV & V Scale VI & VII
180 days for each confinement On maximum 2 occasions
Sick Leave (SL) during entire service period may be allowed to female
Major cities 1000 1500 2500 4000
employees, having less than 3 living children.

Maternity Leave It is granted for the day of the examination irrespective of Area I 750 1000 1500 2000
the examination is in the forenoon or afternoon.

Examination Leave Cities of Mumbai, Navi Mumbai, Kolkata, New Delhi, Other Cities 500 800 1300 1750
(For I.I.I. exams) Faridabad, Ghaziabad, NOIDA, Gurgaon, Chennai,
Ahmedabad, Hyderabad, Bengalaru, Pune
Special Sick Leave 180 days (half pay basis) on major diseases HOTEL CHARGES:
Maximum two months leave or till the adopted child
(Standard Breakfast charges along with taxes thereon can be allowed during stay
Adoption Leave reaches the age of one year, whichever is earlier, may be
granted for adoption of a child through legal process, only in the same hotel. Taxes on hotel charges are allowed on actual basis over & above
once during service career and for one child only such charges)

428 429
 DAILY HALTING ALLOWANCE (W.E.F. 1.12.2010) CLARIFICATIONS
Sl. Category of the employee A Class B Class C Class
No. City(Rs.) City(Rs.) City(Rs.) (a) i. Officers who are entitled to travel by air shall be entitled for
1 Class I (Scale IV, V, VI & VII) 1000* 800 700 reimbursement of full air fare for 3000 kms.(economy class) of surface
2 Class I (Scale I, II & III) 800** 700 600 distance each way for one block subject to the ceiling of twice the eligible
class standard air fare of Air India for Delhi-Trivandrum route. The
3 DO Gr. I/ Sr. Asstt./ Stenographer 500 375 300
benchmark fare would stand revised as & when Air India revises its fare
4 DO Gr. II/ Asstt./Record Clerk 375 275 225 for the said sector.
5 All Class IV employees 325 225 175 ii. For employees posted in North East: When an officer eligible to travel
* Rs.1200 for Kolkata, Delhi, Chennai & Mumbai by air undertakes journey by air in full or part LTS journey, the distance
**Rs.1000 for Kolkata, Delhi, Chennai & Mumbai covered by air journey shall be the aerial distance of the journey
undertaken by him. If he undertakes the balance journey by any other
LTS (LEAVE TRAVEL SUBSIDY): mode, that part of journey shall be calculated as per the surface rail
distance and in such cases the actual amount incurred by him on fare will
Current Block – (Two calendar years) be reimbursed provided such amount does not exceed this fare of the
entitled class by train.
For Class-I – 2011-12
iii. However, where the surface distance between the place of origin of
For Class -II & III/IV – 2010-11
journey and the destination is within 3000 kms. but no direct flight is
If not availed during one particular block, the same may be carried forward to the
available, the officer shall be allowed travel by the shortest air
immediate next block e.g. LTS for Block 2009-10 may be availed during 2011 –
connectivity available in that sector if in such cases aerial distance does
12. Subsidy for two blocks together may also be availed of.
not exceed 3000 kms. This relaxation would apply only to officers who
Individual employee, spouse & dependent children/parents are eligible to avail are eligible for LTS by air.
LTS. (b) If an officer does not travel by air at all but travels by other modes viz, train,
bus, taxi, etc. then the reimbursement would be limited to train fare of eligible
Train fare by AC II tier or by Rajdhani or Duronto Express up to 3000 km (wef class for 3000 kms. of surface distance or actual amount spent whichever is
8th Dec., 2010) each way per individual for each block may be reimbursed. less.
Officers in the cadre of Scale IV & above are entitled to Air travel up to 3000 km (c) Where an officer travel partly by other entitled modes of travel i.e.
(wef 8th Dec., 2010) each way. railway/roadways, the reimbursement shall be made as under –
Scale V & above are entitled to AC 1st Class if they travel by train. (i) Full air fare for distance traveled within the permissible limit of 3000
kms. by air either onward and / or return journeys plus
A newly promoted AO who did not avail LTS in pre-promoted cadre can avail of (ii) Actual expenses limited to the fare for the entitled class by train for the
the same for un-availed block(s) up to the end of the block period as per his/her balance distance traveled.
previous entitlement. For example, a Cl. III employee who has been promoted to (d) When travel by air is combined with travel in train by the entitled class, the
Scale I in 2010 and has not availed LTS for 2008-09 and 2010-11, in the earlier order of reimbursement would be first for the distance traveled by air
cadre may avail such Blocks till 31.12.11, as per previous entitlement. Thereafter, irrespective of the order of air travel i.e. whether it precedes or follows rail
the promotee would be eligible to avail LTS in AO cadre for 2011-12 and onwards. travel. The reimbursement for the balance, if any, admissible is to be
(HO Pers. Dept. Circular dt. 8.6.2009) calculated as per (c) above.

430 431
FOREIGN TRAVEL
•For class III / IV, Development Officers, and Officers not entitled to
travel by Air:
All confirmed employees will be allowed Foreign LTS. For one block, the
entitlement per eligible person shall be two times the entitled class fare for
3000 kms or actual expenses incurred, whichever is less. The journey can be
made by any mode of travel. When the blocks are clubbed they will be entitled
for twice the permissible amount mentioned above.
•For Officers entitled to Air travel :
The officials are allowed to undertake Foreign LTS. For one block, the
entitlement per eligible person shall be two times the economy class air fare
for 3000 kms. (on the basis of surface distance) by Air India on domestic route
i.e. Delhi-Trivandrum route. The journey can be made by any mode of travel.
When the blocks are clubbed they will be entitled for twice the permissible
amount mentioned above.
•General Clarifications:
i. Foreign tour under LTS, as per prevalent Income Tax rules, may attract
Income Tax and in such cases, the tax liability shall be borne by the
employees themselves.
ii. Travel to foreign destination should be by shortest route from the place of
posting and the fare will be limited to his eligibility in India as per this
rules or the actual fare whichever is lower.
iii. In case of employees / officers availing themselves of either Single Block
or two blocks for Foreign LTS, only one trip to foreign country will be
allowed and the balance unexhausted amount of the rail fare / air fare, if
any, will lapse.
iv. Foreign journeys performed by Ship are admissible within the overall
entitlement.
v. Passport / Visa charges are not payable.
vi. Air – port tax is payable within the overall ceiling on production of ticket
/ receipt.
To counter the problem arising from the phenomena of Seasonal Fares (Peak
Season Fare and Lean Season Fare) by the Railways, the Peak Season Fare may be
432
reckoned for this purpose; irrespective of the season in which the journey is
undertaken. The increased limits will also be effective for LTS for un-availed
previous block years as well as for combining thereof with current block years'
LTS for journey undertaken on or after 8th December 2010.
TRANSFER BENEFITS FOR OFFICERS :
i) One month's basic pay, as on date of taking charge on transfer plus
pre-revised basic part of monthly FPA, as transfer grant
ii) Train/ Air Fare – As per Tour entitlement (If transferred on promotion,
this would be as per entitlement in promoted cadre)
iii) Baggage allowance – charges for transporting up to 60 (for scale I, II
& III)/90(for scale IV & Above) quintals by Rail (Revised)
iv) Packing charges – Rs.1500/- for scale I to III Rs. 1800/- for Scale IV
& V and Rs.2500/-for Scale VI & VII
v) Forwarding charges–Rs.500/-(at each end)
vi) Joining Leave – 6 days (can be taken in one or two installments)
vii) Halting allowance during journey period as per tour rules
viii)2nd trip for shifting family/household effects within 6 months or start of
next academic session of children, whichever is later. GM(P) may
further allow extension for another 6 months on receiving such
request.
ix) Maximum 30 days halting allowance as per tour rules at the new
headquarters, if residential accommodation is sought but could not be
provided there within 30 days.
COMPANY ACCOMMODATION:
a) If Company flat is available, the same may be provided according to the
existing allotment procedure.
b) If Company flat is not available, the accommodation on Company lease
or Personal Lease (in rare cases) may be considered as per the officer's
entitlement shown in one of the following slides.
c) 6 months adjustable rent advance may be allowed in favor of the
Landlord
d) Deduction from salary : 1.20% of the Basic Pay at the minimum of the
scale of pay. HRA will not be paid
433
 TELEPHONE FACILITY (AT RESIDENCE):

Revised
Limit

3300

3500

4200

4750

4750

NA

NA
Category Limits

C Class Cities
1 CMD, GM & DGM/CRM Actual
2 All other Entitled Officers Fixed annual limit to be quarterly

Existing
(CM/MGR/SDM/DM/ reimbursed on declaration basis as

Limit

2500

2500

3305

3305

3400

NA

NA
SBM/BM ETC.) per HO circular dt. 3.6.09.
REVISED RENT LIMITS FOR ELIGIBLE/ENTITLED OFFICERS W.E.F. 1.1.2009

In addition, non-entitled Officers in HO, ROs & DOs may be allowed residential
telephone facility for which quotas are as under:
Revised
Limit

HO-10, RO-4 each, DO – 1 each.

4500

4750

5300

5750

5750

NA
*
B Class Cities

Such non-entitled Officers, if extended the facility are reimbursed expenses on

declaration basis subject to stipulated limits (as provided in HO Personnel Dept.
circular dt. 3.6.2009 appended below:)
Existing
Limit

2950

2950

3575

3575

4025

4825

NA
REVISION OF REIMBURSEMENT IN TELEPHONE EXPENSES
The existing system of reimbursement of telephone expenses (land line) which is
linked with number of permissible calls, is replaced by a system of reimbursement
Revised

on declaration basis.
Limit

7500

8000

9000

9500

9500

NA
*
A Class Cities

In order to adopt to the new system, the existing system linked with the number of
permissible calls has been suitably amended to monetary limits as approved by
the Competent Authority as detailed under:
Existing
Limit

3490

3490

4470

4470

5365

6040
TELEPHONE

NA
FACILITY BROAD MOBILE
(LAND LINE) BAND PHONE
CATEGORY OF TOTAL
Amount(Rs) (per ( per
OFFICERS No. of Rs
per annum annum) annum)
Revised

10000

10500

12000

13000

13000

calls
Limit

(Including Rs. Rs.

*

Per annum Rental )

Metros

Scale-I & II AOs(D) &

AMs(D). *Applicable
Existing

only in cases where

Limit

3965

3965

5080

5080

6095

6855

6855

telephone facility has *6600.00 3000.00 6000.00 15600.00

*2750
been provided in terms of +S.T. + S.T. + S.T. +S.T
Para 6 page no. 181 of
Scale III & IV

Part II, Personnel

Branch I/C)
Scale I & II
(other than

(other than

Scale VII
Manager

Scale VI
Scale V

Manual.
Branch

SDM)
Cadre

SDM

Officer-In-Charge of
BO/DO (Scale, II, III & 6600.00 3000.00 7200.00 16800.00
2750
+ S.T. + S.T. + S.T +S.T
IV)

434 435
Scale III & IV officers REIMBURSEMENT FOR PURCHASE OF
with marketing BRIEFCASE/LEATHER BAG TO
assignment at RO/HO
*Applicable only in cases OFFICERS & DEVELOPMENT OFFICERS (OTHER THAN
*6600.00 3000.00 7200.00 16800.00 ADMINISTRATION)
where telephone facility *2750
+S.T + S.T. + S.T +S.T
has been provided in The limit of reimbursement and other conditions would be as under:
terms of Para 6 page no.
181 of Part II, Personnel Sl.No. Cadre Limit (in Rs.)
Manual. 1. Scale VI & Above 2500
6600.00 3000.00 9600.00
Scale IV (Admn.) 2750 Nil 2. Scale IV & V 2150
+S.T + S.T. +S.T
7500.00 3000.00 12000.00 22500.00 3. Scale II & III 1850
Scale-V excluding CRM 3150
+ S.T. + S.T. + S.T. +S.T 4. Scale I 1500
Regional underwriters 5. Development Officers 1500
3000.00 7200.00 10200.00
posted at Regional Office Nil Nil (other than Administration)
+ S.T + S.T. +S.T
below the rank of Scale V
Other Officers 1. Reimbursement may be allowed to all Class Iofficers, including promotees
performing special and probationers and all confirmed Development Officers (other than
duties (Non-entitled Administration)
officers) *Applicable 2. The frequency of reimbursement will be once in three years from the date of
only in cases where *6600.00 6600.00 last reimbursement.
*2750 Nil Nil
telephone facility has + S.T. +S.T
3. The limit of reimbursement shown above shall be inclusive of sales tax and
been provided in terms of
other Supplementary taxes, if any.
Para 6 page no. 181 of
Part II, Personnel 4. The above limits for Class I officers are effective from 1.11.2006 and that for
Manual. the Development officers (other than Administration) is w.e.f. 1.4.2009.

The new scheme shall be effective from 1st January 2009 and the reimbursement
shall be on quarterly basis i.e. on 1st July, 1st October, 1st January and 1st April in VEHICLE LOAN:
respect of 1st quarter, 2nd quarter, 3rd quarter and 4th quarter of every financial year. Two wheeler:
i) Rs. 50,000/- for Cl-I & Rs.25,000/- for CL-III & IV (maximum)
REIMBURSEMENT OF EXPENDITURE ON NEWSPAPER ii) No. of installments – 60
& PERIODICALS FOR CLASS-I OFFICERS iii) Minimum eligibility – 3 yrs. & can be taken 3 time in Class-III cadre
The above expenses shall also be reimbursed on declaration basis for Class-I & 3 times in Class-I cadre
officers (half yearly basis i.e. on 1st July and 1st January in respect of 1st and 2nd half iv) Reimbursement of Ins. premium by the Company during loan recovery
respectively of the calendar year) period.
i) For officers up to Scale III : Rs. 200/- per month v) Rate of interest – 5% p.a. on reducing balance
ii) For officers in Scale IV &V : Rs. 400/- per month and
iii) For officers in Scale VI and VII : Rs. 500/- per month Four wheeler:
iv) The new scheme shall be effective from 1st January 2009 on half yearly basis I) Non-entitled Scale III & IV are entitled to this facility up to Rs. 2.5 lacs
i.e. on 1st July and 1st January in respect of 1st and 2nd half respectively of the II) No. of repayment installment – 120
calendar year. The necessary implementation of the above revision be
effected against submission of requisite declaration as per prescribed formats. III) Rate of interest – 5% p.a. on reducing balance

436 437
 IV) Reimbursement of Insurance premium by the Company during loan Basic Pay Eligible Sum Insured
recovery period.
Less than Rs. 22,730/- Rs.70,000/-

DOMICILIARY MEDICAL BENEFIT: Rs. 22,730/- to Rs. 29,000/- Rs.1,00,000/-

Class III & IV: Rs. 29,001/- & above Rs.1,55,000/-
Rs.4,000/- paid in July every year for the period Service Tax to be charged on each share of premium as per prescribed rate.
– July of that year to June of following year.
d) Coverage available to self, spouse, dependent children, parents &
parents-in-law.
Class I: e) Additional coverage beyond the entitled sum insured up to
Rs.5,00,000/- per member/ individual may be opted but at own cost.
Basic Salary as on 1 January
st
Entitlement (Amount in Rupees) Benefit under the Scheme:
Up to Rs. 31,725/- Rs.8,000/- A ) Domiciliary Hospitalisation
Above Rs. 31725/- Rs.12,000/- Minimum period – exceeding 3 days
Maximum period – 60 days
Class II Maximum payable amount – 20% of the total Sum Insured
B) Maternity Benefit
Basic Salary as on 1 January
st
Entitlement (Amount in Rupees) Cover is automatic.
Rs. 25,235/- and above Rs.8,000/- Admissible for normal delivery & caesarian cases
Admissible for first 2 children only
Below Rs.25,235/- Rs.5,000/- Maximum Sum Insured– Rs.50,000/-
C) Hospitalisation Benefits
Officers promoted from Class-III would be entitled to lump sum amount
Minimum Period – 24 Hrs.
applicable to Officers on a pro rata basis from the 1st day of the month following
Pre-hospitalization benefits – 30 days.
their date of promotion. Similarly, recovery on pro rata basis from the lump sum
Post hospitalization benefits – 60 days or till declared fit, whichever is
amount if already paid in Class-III cadre.
earlier
Lump sum domiciliary medical benefit, in a nut shell (This period is unlimited in respect of specified major diseases.)
For Officers :
Basic Up to Rs. 31,725/- Rs. 8,000/- Payable in December GROUP PERSONAL ACCIDENT (GPA):
Basic > Rs. 31,725/- Rs. 12,000/- Payable in December If any employee sustains injury causing death/disablement, the Company will
reimburse the following:-
For Dev. Officers:
Basic Rs. 25,235/- & above Rs. 8,000/- Payable in December a) Death Capital Sum Insured
Basic < Rs. 25,235/- Rs. 5,000/- Payable in December
b) Loss of two limbs, two eyes or Capital Sum Insured
one limb and one eye
For Clerical & Subordinate Staff : Rs. 4,000/- Payable in July
c) Loss of one limb or one eye 50% of the capital Sum Insured
MEDICLAIM d) Permanent total Disablement from Capital Sum Insured
a) Coverage starts next month after confirmation, in case of new recruits. injuries other than those named
above
b) Enrolment form for members to be covered is to be submitted to
concerned RO/HO, Personnel Departments. Company contributes a part e) Permanent Partial Disablement Specified percentage of the Capital
of premium (66.67% for Class-I & 75% for Class III & IV) up to the Sum Insured depending on the
under mentioned eligible sum insured as per following Basic Pay slabs:- extent of Disablement.
438 439
Note: Capital Sum Insured is 36 times of the monthly basic salary of the employee CONVEYANCE SCHEME FOR ELIGIBLE CLASS I
or Rs.3,00,000/- whichever is lower. OFFICERS (CONVEYANCE SCHEME 2002)
HOUSING LOAN
•The office will book the vehicle under this scheme
Scheme Loan & Supplementary Loan are available are as under: •The vehicle will be purchased, owned and registered in the name of the
company
Cadre Scheme Loan Supplementary Loan •The User Officer will enter into an agreement as per prescribed standard
(Int. @ 5% per annum) (Int. @ 7.5% per annum) draft for the use of the vehicle
•The limit of the cost of the vehicle would be as underL
Scale I & II 3.25 lacs 3.75 lacs
scale III 3.65 lacs 4.35 lacs Cadre of the Officer Limit in Rs.
Scale IV/V 4.00 lacs 4.50 lacs Scale VII & VI 5 lacs
Scale VI 4.00 lacs 5.00 lacs Scale V & IV 4 lacs
Scale VII & Above 4.00 lacs 6.00 lacs Scale III, II & I 3 lacs

REFUNDABLE/NON-REFUNDABLE •Running expenses (Fuel limit) would be as under:

LOANS FROM PROVIDENT FUND:
Category Quarterly Limit
1) Refundable Loan : CMD No limit
Maximum 6 times of Basic Pay + DA + FPA (basic) + Special F.A.@ interest Scale VII 375 Lts.
1% more than the interest paid by Trust per annum on reducing balance. Scale VI/CRM 300 Lts.
Scale V other than CRM 250 Lts.
Repayable in 48 installments (maximum) for marriage purpose.
For other purpose maximum 24 installments. Officers-in-charge of DOs/BOs, Metro 250 Lts
Scale IV In-charge of RNTB & A Class City 225 Lts.
2) Non-refundable Loan :
Marketing Department at RO, B Class City 180 Lts.
i) After 10 yrs. of service Officers-in-charge of DTC C Class City 150 Lts.
ii) Max. 2 times in service career
iii) Up to 90% of own contribution •The period of usage of car under this scheme will be 8 years.
iv) Only for housing purpose & not for 2nd property •After the car shall be transferred in the name of the Officer concerned by
recovering an amount equal to the written down (Depreciated) value of
Other Loans & Advances: the car determined as per rules in force from time to time
•Cost of Tyres and tubes shall be borne by the company in full after 32,000
•Festival-Interest free advance
Kms. run of the vehicle. Reimbursement will be made subject to
•Class I -1 month's Gross Salary Or Rs.13,000, whichever is less production of bills/receipts.
•Class II/ III/ IV 1 month's Gross Salary Or Rs.11,000, whichever is •If retreading of tyres is required, the cost of such retreading shall be borne
less by the company after the car has run 16,000 Kms.
•Regular PTS - 1 month's Basic+ D A (on pro rata basis) Or Rs.5,500, •The cost of batteries shall be borne by the company in full after 18 months
whichever is less of date of purchase of the vehicle and after every 18 months thereafter
•Flood etc.-Interest free advance Rs. 15,000 for affected areas subject to production of bills/receipts.

440 441
TERMINAL BENEFITS Retirement Death Vol. Resignation
Retirement
As per scheme:
Gratuity
For Class III & IV
Provident Fund For 15 years and
Pension above:
Group Term Insurance Scheme (GTIS) Last drawn basic
pay (including Pre-
Group Savings Linked Ins. Policy (GSLIP) revised FPA) X 15
Encashment of Earned Leave up to 15 years of
service.
G RAT U I TY Additional 1 month
basic pay for each
Retirement Death Vol. Resignation year of service
Retirement
beyond 15 yrs.
Gratuity as per Same as Retirement. Same as C a l c u l a t i o n i s subject to max of
Act/Scheme (Death certificate Retirement S a m e a s total 20 months)
Under Act: along with Gratuity Retirement.
(Basic+DA+Pre- Nomination Form, However, Gratuity P E N S I O N
revised FPA+DA on is reqd. to be sent. In is payable after
FPA ) x 15/26 x No. of absence of Gratuity minimum of 5 Retirement Death Vol. Resignation
yrs. of continuous nomination form, years of service Retirement
qualifying service, s u c c e s s i o n Pension Formula Same as retirement. S a m e a s Not eligible
subject to maximum certificate would be 50% of last 10 GTIS death claims Retirement for Pension.
of Rs.10 lacs necessary for month's average form, last six (Notional benefit
(enhanced w.e.f. settlement of basic pay + Pre- month's pay slip of service up to five
24.05.2010) Gratuity.) revised FPA (Basic (Xerox), death years (Maximum)
Part only) X No. of certificate, GTIS can be given to
As per scheme: As per scheme: Same as S a m e a s yrs. of service /33 original option form those who had
For Class I Retirement r e t i r e m e n t . (full pension is to be sent to pension total 33 or more
For 15 years and 1 to 11 yr. 50% of last However, gratuity admissible on cell and all other years of full
above: Last drawn drawn basic pay X is payable only on completion of 33 yrs. relevant papers as service)
basic pay (including no. of yrs. Of service. completion of of service) reqd. for retirement
Pre-revised FPA) X minimum of 5 yrs. cases.
15 + (50% of last 12 yrs. 60% of last service
drawn basic pay X drawn basic pay, GROUP TERM INSURANCE SCHEME
no. of yrs. Of service
beyond 30 years) 13 yrs. 70% of last In case of death whilst in service, of an employee who had opted for pension,
drawn basic pay and the commutation of pension is not payable to the legal heirs. The above
Scheme was introduced to protect the “commutation value of pension” to
14 yrs. 80% of basic some extent, in case of death of a pension optee, by LIC. In the event of death
pay. of the pension optee, a fixed amount, as per the basic pay of the employee, is
paid by LIC to the legal heirs, for which a monthly premium is deducted from
For service of 15 yrs. the employee's salary and deposited with LIC. The following chart would
and above, same as show the basic pay–wise rate of monthly premium as well as the amount of
retirement sum assured for individual employee:

442 443
 CAT E G O RY (in Rs.) GI (CDA) RULES, 1975
Sum Assured Monthly Premium
Short title, Commencement and Application
I (Basic Pay Rs.49,411/- and above) 7.0 lacs 164
• These rules are called General Insurance (Conduct, Discipline and
II (Basic Pay Rs.35,661/- to Rs.49,410-) 5.6 lacs 131 Appeal) Rules 1975.
III (Basic Pay Rs.25,45/1- to Rs.35,660/-) 4.2 lacs 98 • These are applicable to every person appointed to any post by the
Company including Part-timers on Company's roll.
IV (Basic Pay Rs.13,691/- to Rs.25,450/-) 2.8 lacs 65
V (Basic Pay Rs.7,391/- to Rs.13,690/-) 2.0 lacs 47
General Rules
VI (Basic Pay up to Rs.7,390/-) 1.1 lacs 26 • Every employee shall at all times
i) maintain absolute integrity
GSLIP
ii) maintain devotion to duty
In case of untimely death of employee, family members are protected by this iii) do nothing unbecoming of a public servant
Scheme up to sum insured PLUS savings portion (75% of deposited amount) iv) conform to all rules of the Company & obey all orders of superiors in
with interest. course of official duty.
75% of the deposit along with interest is payable after Retirement / Vol.
Retirement & Resignation.
Basic Pay-wise category vis-à-vis sum insured and monthly deduction of • Every employee shall ensure integrity & devotion to duty of all
premium are shown in the following chart: employees under his control.

• No employee shall in the performance of his official duties, act otherwise

Category I (Basic II (Basic III (Basic IV (Basic V (Basic VI (Basic
Pay Pay Pay Pay Pay Pay than in his best judgement & when acting under superior's direction shall
Rs.49411 Rs.35,661 Rs. 25,451 Rs.13.691 Rs.7,391 Below obtain the direction in writing wherever practicable.
& above to 49410) to 35,660 to 25,450) to 13,690) Rs.7,390)
SUM Rs.7 lacs 5.6 lacs 4.2 lacs 2.8 lacs 2 lacs 1.1 lac Misconducts (List is not exhaustive)
INSURED • Theft, fraud, dishonesty in official matters
Monthly • Bribery
deductions
• Disproportionate assets
Savings Rs. 492 393 294 195 141 78 • Furnishing false information about self which are germane to
Premium Rs. 164 131 98 65 47 26 employment.
• Acting prejudicial to the interest of the Company.
Total. Rs. 656 524 392 260 188 104
• Willful insubordination.
ENCASHMENT OF EARNED LEAVE AT THE TIME OF EXIT • Absence without leave/overstayal of sanctioned leave beyond 4days
• Habitual late attendance.
Retirement Death Vol. Resignation
Retirement • Neglect of work
• Damage to Company's property.
Basic+DA+Pre- Same+HRA+CCA Same as Not eligible
revised FPA (Basic (excluding Retirement for • Drunkenness/riotous behavior/gambling in Company's premises.
portion only and Transport & Encashment • Sleeping at work place.
DA payable on that Washing allowance) • Criminal offence including moral turpitude.
basic part)

444 445
 • Absence from work place without permission.
• Attempt at any act which amounts to misconduct.
Prohibitions
• Rule-5: The whole time of an employee shall be at the disposal of the
Company unless it is otherwise distinctly provided.
• Rule-6: No employee to seek, solicit or accept any outside employment
even on honorary basis without Company's permission.
• Rule-7: No employee shall undertake any outside part time work or
accept fees therefor without sanction of the Competent Authority.
• Rule-8: Every employee during service or after resignation/ retirement is
obliged to maintain official secrecy.
• Rule-9: No employee to give evidence in any enquiry without permission
of the Company. This is not applicable to any enquiry ordered by
Govt./Parliament/State legislature or any judicial/ Departmental
enquiry.
• Rule-10: No employee can take part in election to any legislature or local
authority.
• Rule-11: No employee to engage in any demonstration that involves
incitement to an offence nor abet any sort of strike.
• Rule-12: No employee can conduct or participate in any activities
pertaining to press/radio/TV/newspaper without permission from the
Company.
• Rule-13: No employee should accept or permit any member of his family
to accept any gift from any other person having official dealings with
him.
• Rule-14: No employee shall without sanction of the Company engage
directly or indirectly in any trade, business or profession nor allow any
dependent member of the family to undertake any agency/ profession
having links with Company's business.
Penalties
• Rule-15: Speculation in any stock, share or investment is prohibited.
• Rule-16: No employee save in ordinary course of business with a bank or
with a Public Limited Company shall himself or through any family
member lend or borrow money as a principal or as an agent.
• Rule-18: No employee can absent from duties without having permission
of the Competent Authority.
• Rule-19: No employee shall absent from his station overnight without
prior sanction of the Competent Authority.
Rule-16A:
• Submission of property returns in prescribed formats by all employees
on annual basis by 30th April each year for the period ending 31st March
immediately preceding.
446
Suspension (Rule-20)
• The appropriate authority may place an employee under suspension
a) where a disciplinary proceeding is contemplated or is pending.
b) where a criminal offence against him is under investigation or trial.
c) where he is detained in custody, whether on a criminal charge or
otherwise, for a period exceeding 48 hours.
• Subsistence Allowance during suspension
a) at the rate of 50% of gross salary (basic, DA, CCA, HRA, Hill
Station Allowance, qualification pay, special pay, personal pay etc.)
during first 6 months.
b) at the rate of 75% after 6 months if delay in proceedings is not
attributed to him.
c) at the rate of 25% after 6 month if period of suspension is prolonged
due to reasons attributed to him.
• Treatment of period of suspension
a) if honorably acquitted, full pay which he was entitled to during
period of suspension less amount of subsistence allowance will be
released to him.
b) otherwise, such proportion of pay & allowances during the period of
suspension as may be allowed by the Competent Authority, will be
admissible with adjustment of subsistence allowance received.
c) if a case falls under (a) above, period of suspension will be treated as
spent on duty. Otherwise it will be treated as not spent on duty.
• Minor Penalties
a) Censure
b) withholding of one or more increment for a specified period.
c) Recovery towards pecuniary loss caused to the Company.
d) withholding of one or more increments permanently.
e) Reduction to a lower service or post or to a lower time-scale or to a
lower stage in the time-scale.
f) Compulsory retirement.
g) Removal from service which shall not be a disqualification for
future employment.
h) Dismissal.
447
 Procedure for imposing Major Penalties (Rule-25)

ADMINISTRATION

CHAIRMAN-CUM-
CHAIRMAN-CUM

CHAIRMAN-CUM

CHAIRMAN-CUM
UNDER RULE 40

OF THE BOARD
PERSONNEL &

COMMITTEE
• No order imposing any major penalty shall be made without holding formal

-MANAGING

-MANAGING

-MANAGING
AUTHORITY

MANAGING
MEMORIAL

DIRECTOR

DIRECTOR

DIRECTOR

DIRECTOR
enquiry proceedings into allegations/charges.

BOARD
• Steps in holding major penalty proceedings
a) framing of charge sheet by the disciplinary authority & its service on the
delinquent employee.
b) on receipt of written statement from the employee, appointment of
IO/PO by the disciplinary authority. On total admission of charges in the
ADMINISTRATION

CHIEF MANAGER
OF THE BOARD
PERSONNEL &
written statement, no formal enquiry through IO/PO will be necessary.
COMMITTEE
AUTHORITY
APPELLATE

(SCALE-VII)

(SCALE-VI)

MANAGER
(SCALE-V)

(SCALE-V)
c) holding of preliminary proceedings, inspection of documents by the

D.G.M.
C.M.D.

CHIEF
SCHEDULE OF AUTHORITIES UNDER GI(CDA) RULES 1975

G.M.
employee, submission of a list of defense assistant, defense witnesses,
additional documents if any to be submitted by the employee.
d) holding of enquiry proceedings by way of examination/cross-
examination of management/defense witnesses, recording of
oral/documentary evidences.
CHAIRMAN-CUM

ASST. MANAGER
G.M (SCALE-VII)

e) submission of brief by PO to IO on conclusion of enquiry.

DISCIPLINARY

-MANAGING
AUTHORITY

(SCALE-VI)

(SCALE-IV)

(SCALE-III)
MANAGER

MANAGER
DIRECTOR

(SCALE-II)
DEPUTY
D.G.M.

Finalization of Enquiry Report by IO & its submission to Disciplinary

Authority, containing the following
a) gist of charges.
b) gist of defense taken by the employee.
c) assessment of evidence.
CHAIRMAN-CUM

G.M (SCALE-VII)
APPOINTING

-MANAGING
AUTHORITY

d) findings on each charge with specific conclusions.

(SCALE – V)
(SCALE-VI)

(SCALE-IV)

(SCALE-IV)
MANAGER

MANAGER

MANAGER
DIRECTOR

D.G.M.

CHIEF

• A copy of the enquiry report is forwarded to the employee by the disciplinary

Authority inviting his representation, if any, before taking action on the
enquiry report.
• Action on Enquiry Report
a) if not satisfied, the disciplinary authority may remit the case for further
enquiry recording reasons therefor.
CHIEF MANAGER (SCALE-V)

ASST.MANAGER (SCALE-II)/
DY. MANAGER (SCALE-III) /

ADMN. OFFICER (SCALE-I)

b) if convinced with the enquiry report, disciplinary authority may pass an

SR. ASSISTANT & EQUIV.

order imposing penalty commensurate with gravity of the charges

MANAGER (SCALE-IV)

ASSISTANT & EQUIV.

established. If charges are not established, the disciplinary authority may

SUPERINTENDENT /

pass an order exonerating the employee.

GM (SCALE-VII) /
DGM (SCALE-VI)

RECORD CLERK
DEV. OFFICER /
CATEGORY OF
EMPLOYEES/

Procedure for imposing Minor Penalty (Rule-27)

SUB-STAFF
OFFICERS

CADRES/

• The employee shall be informed in writing of the alleged misconduct & given
CADRES

an opportunity to submit written statement within 15 days. The defense

statement vis-à-vis alleged misconduct shall be taken into consideration
before passing of any order by the disciplinary authority.

448 449
Communication of orders (Rule-28)
• to be served personally on the employee if he is attending Office
• otherwise by registered post with A/D & under Certificate of Posting in his
last known residential address in the office record.
• otherwise to be affixed on the notice Board of the Office where the employee
is posted.
Appeal (Rule-31 to 37)
• Every delinquent employee has a right to appeal against any penalty order
served on him within a period of 3 months from the date of receipt of the order
by him.
• Every person submitting an appeal shall do so separately & in his own name.
Appeal should be addressed to whom it lies & shall contain material statement
& arguments. Appeal is to be submitted through the authority who made the
order appealed against. A copy of the appeal may be directly submitted to the
appellate authority.
• In case of an appeal against any penalty order the appellate authority
considers
a) whether the procedures of enquiry have been complied with
b) whether findings of IO are justified
c) whether penalty imposed is excessive, adequate or inadequate & may
pass orders confirming, reducing or enhancing the p e n a l t y .
Enhancement of penalty can only be made after giving an opportunity to
the employee.
Memorial (Rule-40)
• An employee whose appeal has been rejected by an appellate authority who is
subordinate to CMD, may address a memorial to CMD in respect of the
relevant matter within a period of 6 months from the date of receipt of the
order of the appellate authority by him.
Provided all eligible officers belonging to same batch have to be included in the
zone consideration, even if the total No. exceeds the above proportion
Canvassing or outside influence (Rule-41)
• No employee shall bring any political or outside influence for any matter
pertaining to his service.
Interpretation (Rule-42)
Any question relating to interpretation of these rules shall be referred to the Board
whose decision shall be final.
450
PROMOTION POLICY FOR OFFICERS- 2006
• Promotion Policy for Officers was first introduced in 1990
• The 1990 Policy was in place till 2006 Promotion Exercise
• 2006 Policy replaced the 1990 Policy
• The Policy is applicable for promotion to all cadres up to and including
Scale VII (GM)
• Promotions from Scale V to VI and from Scale VI to VII are held within 4
GIPSA member cos. And GIC taken together, based on a common
seniority list for Scale V & VI officers for all the five companies
• Other promotions within the company up to Scale V are based on all
India Seniority lists of officers in Scale I, II, III & IV cadres.
• Vacancies are determined on the basis of norms/guidelines adopted by
the companies from time to time based on organizational needs.
• While promotion to Scale VI & VII is based on the sole criterion of Merit,
the other promotions are held based on the various criteria for measuring
merits and seniority.
• To become eligible for promotion to Scale VI & VII minimum 2 years
service is required.
• However, the committee of CMDs may decide the actual zone of
consideration for promotion by restricting the No. of eligible officers to
certain multiple of vacancies and/or up to a particular batch to which they
belong.
• To become eligible for promotion to other cadres, minimum 3 years
service is required
• However, the zone of consideration for promotion would be as follows :
5 times the No. of Vac. For prom to Scale V
4 times the No. of Vac. For prom to Scale IV &
3 times the No. of Vac. For prom to Scale II & III
• The officers included for promotion to Scale VI & VII are required to
appear before a screening committee of 4/5 outside experts in different
fields, which would submit their assessment/ recommendation to the
Promotion Committee for final consideration.
• The other officers empanelled for promotion to various cadres up to scale
V, have to write a test conducted by a professional examining authority
(like NIA) and pass such test (qualifying marks 50) before being included
in the further process of selection.
451
AMENDMENTS IN PROMOTION POLICY FOR OFFICERS (d) An Officer eligible to participate in the Fast Track Channel of Promotions and
desirous of the same shall have to apply for it against a Notice to be published
“14A. Fast Track Promotions:-
by the Company for this purpose.
Notwithstanding anything contained in this policy, starting from the Promotional
(e) An Officer applying for the Fast Track Channel of Promotions shall be
Exercise for the year 2011-12, for promotion of Officers upto Scale IV in the
required to appear in the Written Test held under the provisions of para 9.2.1
Company, there shall be, in addition to the already existing channel (to be referred
of this Policy and secure a minimum of 60 (54 for SC/ST Officers) or more
to as the “Normal Channel”) of promotions under this policy, another channel of
marks before being included in further process of selection under this
promotions, to be known as “Fast Track Channel”, with the following provisions:-
paragraph.
(a) 20% (fraction of 0.5 and above being taken as 1) of vacancies as determined
(f) In case the number of officers qualifying the Written Test for promotion to any
under para 6 of the Policy for a financial year for promotion to Scale II, Scale
cadre under this Channel is less than 02 times the number of vacancies
III and Scale IV in the Company shall be earmarked for being filled up
available for that cadre, the number of vacancies so available shall be suitably
through Fast Track Channel, the remaining vacancies being available for the
reduced so as to ensure that the officers available after qualifying the written
Normal Channel.
test are not less than 02 times the number of such reduced vacancies and the
(b) Taking out 20% of the total vacancies for Fast Track Channel shall, however, vacancies so released, as also any vacancy remaining unfilled under this
not affect the constitution of the zone of consideration for Normal Channel Channel, shall be added to the vacancies available under Normal Channel for
under para 8.2 of the Policy and the same shall continue to be related to the that particular cadre.
total vacancies (i.e. including these 20% taken out for Fast Track Channel).
(g) Officers qualifying the Written Test under the Fast Track Channel as per (e)
(c) To be eligible to participate in the Fast Track Channel, an Officer should have above, shall be subjected to assessment under the parameters of Qualification,
completed minimum three years of continuous service from the date of Work Record, Score in the Written Test and Interview carrying the following
st
selection to the existing cadre, as on 31 March of the year prescribed for the scheme of weightage:-
purpose of para 8.2 from time to time, besides possessing the qualification of,
Parameters Scale I to II Scale II to III Scale III to IV
(i) Associate of Insurance Institute of India or equivalent for promotion to
Scale II or Scale III, and Written Test 40 40 40
Qualification 5 5 Nil
(ii) Fellow of Insurance Institute of India or equivalent for promotion to
Work Record 40 40 40
Scale IV:
Interview 15 15 20
Provided however, for the Promotional Exercises for the years 2011-12 and 2012-
Total 100 100 100
13, to be eligible to participate in the Fast Track Channel, an Officer should have
completed minimum four years of continuous service from the date of selection to (h) Within the Scheme of Weightage as indicated in (g) above, allocation of
the existing cadre, as on 31st March of the year prescribed for the purpose of para marks under various parameters shall be as follows:-
8.2 from time to time, irrespective of his possessing the qualifications specified in
(i) and (ii) above. (i) Written Test:- For every mark scored in the Written Test, a score of 0.40 in
the scheme of weightage shall be allotted. For example, for a score of 60
452 453
 in the Written Test, the Officer shall be allotted 24 marks out of 40 in the or exaggerated remarks, as may be observed from the confidential reports /
above scheme of weightage. work records of the officers concerned. Thereafter, the total marks shall be
suitably moderated and recorded by the Committee, taking into account the
(ii) Qualification:- Scale I & Scale II Officers possessing the qualification of
marks secured in interviews.
Fellow of Insurance Institute of India or equivalent shall be allotted 5
marks for the same while no other marks shall be allotted in the scheme of (k) The Committee shall thereafter rank the Officers in descending order of total
weightage. marks obtained under the reckoning parameters and from the top of the said
list a number equivalent to the number of vacancies available under the Fast
Work Record:- The work record shall be assessed through the annual
Track Channel shall be taken out to constitute the Promotion List under this
confidential reports as per the annual performance appraisal system in
Channel.
force, after applying an appropriate factor so as to translate the score from
the Normal Channel level of weightage to the Fast Track level of (l) The Committee shall then forward the Promotion List so prepared under this
weightage. (For example, for promotion to Scale II, the weightage for Channel to the Appointing Authority. Such selection of officers for promotion
Work Record under Normal Channel is 30 and under Fast Track Channel by the Committee shall be final.
40. In such a case, the score of Work Record assessed under Normal
(m) The Appointing Authority for promotion shall cause simultaneous
Channel as per the annual performance appraisal system in force shall be
publication of the Promotion Lists both under the Normal Channel and the
multiplied by a factor of 40/30 to arrive at the score of Work Record under
Fast Track Channel so as to ensure maintenance of inter-se seniority of the
Fast Track Channel.)
Promotees under the 02 Channels in the promoted cadre.
(iii) Interview:- Interview Committee(s) each comprising of one GM as
(n) Only 2 attempts shall be allowed for promotion to a particular cadre under the
Chairman, 2 DGMs and one SC/ST representative, to be constituted by
Fast Track channel, which shall be counted within the overall 03 attempts
the Chairman-cum-Managing Director of the Company, shall interview
(including those availed under the Normal Channel) for the purpose of
candidates and allot appropriate marks, the maximum being 20 for
determining “supercession” within the meaning of the paragraph 17 of the
promotion to Scale IV and 15 for promotion to Scale II / III.
Promotion Policy.
(I) The Promotion Committee and Appointing Authority for promotions under
(o) Instance of an Officer refusing promotion under Fast Track Channel shall
Fast Track Channel shall be the same as that for promotions under the Normal
result in counting of his participation in the Fast Track Channel of promotions
Channel for the respective cadre indicated in para 12 & para 16 respectively.
as an attempt within the limits of 03 attempts for the purpose of determining
(j) The Chairman of the Interview Committee shall submit the details of the “supercession” within the meaning of para 17, notwithstanding his having
marks allotted to various candidates in the Interview to the Promotion qualified in the Written Test.
Committee (herein after called 'the Committee'), which shall thereafter
(p) Officers eligible under the Normal Channel of promotion and applying
examine the information about the officers who have qualified the Written
for the Fast Track Channel of promotions, if selected for promotion under
Test under the reckoning parameters contained in the summary sheets and
both the Channels, shall be retained only in the Promotion List for the Normal
also give suitable weightage either plus or minus for the inconsistencies and /
Channel of promotions.”

454 455
 Criteria for promotion up to Scale V and Inter-se seniority : 0.01 mark is added in the ascending order starting with 0.00 for
scheme of weightage to various parameters the last officer in the list of a particular batch, if there is more than one batch in the
Sl. No. Parameter Scale I Scale II Scale III Scale IV zone of consideration. This is to ensure weightage on seniority within the batch
to II to III to IV to V
Interview : For promotion to Scale V, the Promotion Committee compulsorily
1. Written Test 30 30 30 25 interviews all the candidates. Maximum marks for interview is 15.
2. Insurance Qualification 5 5 - -
Promotion Committee :Promotion committees for various promotion would be as
3. Work Record 30 35 45 45 under :
4. Seniority 35 30 25 15
• Promotion Committee :Promotion committees for various promotion
5. Interview - - - 15 would be as under :
6. Total 100 100 100 100
Written Test: weightage given for promotion Promotion to Scale Committee Members
up to Scale IV - 30% VI & VII CMDs of GIPSA Companies and GIC, besides
& to Scale V - 25% one Govt. of India Nominee
of total marks scored in the test
V CMD of the company, one Director on the
Insurance Qualifications: Marks are allotted only for promotion to Scale II & III, Board of the Company, General Manager (Pers.),
as under: one SC/ST Representative & one outside expert.
II, III & IV CMD of the co., two GMs of the co. {including
AIII or ACII – 2 & FIII or FCII – 5 GM(Pers.)}and one SC/ST Representative
No marks are allotted for LIII

Work Record: Marks are allotted on the three parts of Annual CR as under, Promotion to Scale VI & VII :
for different cadres and mean of total marks allotted for last three years' CRs Empanelled officers after being screened by the Screening Committee appear
are taken as marks on work record.III. before the Promotion Committee for a personal interview.
The committee, after taking into account
Part of CR Scale I to II Scale II to III Scale III to IV Scale IV to V
i) the assessment/recommendations of the Screening Committee,
Trait 10 10 10 10
ii) overall merit, suitability, Growth Potential, length of service, qualifications,
Performance 12.5 12.5 17.5 17.5 service experience in various functional areas as may be assessed from
Growth Potential 7.5 12.5 17.5 17.5 appraisal records and
iii) performance in the personal interview, would draw a list of officers selected
Total 30 35 45 45
for promotion, equal to the no. of vacancies
Seniority: For the first three completed years of service, no marks are allotted For Such list is published in order of inter-se seniority in the existing cadre and
each completed year of service in the existing scale, beyond first three years, the this list would be final.
marks on seniority are allotted as per following table:
Scale Marks for each completed yr. of service Maximum Promotion to Scale II, III, IV & V
beyond first 3 years Marks
Promotion committee takes into consideration the marks secured in various
I to II 5 35 criteria (including the weightage on marks of Written Test) by the empanelled
II to III 3 30 officers, who succeed in the Written Examination and draw a list in descending
order of aggregate marks to the extent of 75% of the total no. of vacancies for
III to IV 3 25
selection for promotion.
Iv to V 2 15
456 457
 Thereafter, the remaining officers are re-ranked in descending order of total
marks, excluding the marks obtained in Written Test and from the top of the
list, no of officers equal to the balance 25% of the vacancies are taken to
constitute the 2nd part of the promotion list.
Both the lists are then amalgamated and the final select list against 100%
vacancies is published in order of inter-se seniority in the existing cadre.
Special Provision for SC/ST
• Probation on Promotion : Officers promoted to the cadre of Scale V and above
shall be on probation for a period of one year.
• Seniority in promoted cadre : Seniority in the promoted cadre is reckoned
from the date of selection maintaining the inter-se seniority in the pre-
promoted cadre, regardless of the date of taking charge, provided, however,
the officer joins the higher post before 31st March of the promotion year.
Promotion, however, takes effect from the actual date of taking charge in
the higher cadre at the stipulated place of posting.

In accordance with the instructions received from time to time from OPT, PROMOTION POLICY FOR SUPERVISORY,
Govt. of India regarding this matter, the provisions are implemented. CLERICAL AND SUBORDINATE STAFF, 2008

No reservation is as yet made for Class I Promotion. The Promotion Policy for SCS Staff was first introduced in 1978 and then it was
revised in 1990-91
Thereafter, a few amendments were made in the policy.
Appointing Authority for Promotion:
However, the previous policy appeared to fall short of the expectations of the
organization and in the changing scenario, it was felt that a new policy should be
Cadre Appointing Authority introduced which would be able to take care of the career prospects of the
Scale VI & VII CMD employees and would also address the changing requirements of the company.
Scale IV & V GM Against the above backdrop the new policy has been introduced in 2008 replacing
the previous one.
Scale II & III DGM
From the date of introduction of this new policy, there has been promotion to only
3 cadres i.e. AO (Scale I), Sr. Assistant & Assistant.
Effect of CDA/Vigilance cases on promotion
While AO and Assistant, are considered as entry-cum-promotional cadre, Sr.
Assistant is exclusively a promotional cadre.
In case any action under CDA Rules is pending against any employee at the time of
considering his promotion, his case would be dealt with in terms Sealed Cover
Guidelines, which are issued by DOPT from time to time. For promotion to various cadres, the country has been divided into various
geographical zones, as under:

Where, however, any case is concluded and any penalty has been imposed, the
promoting authority would examine various aspects of the case, such as gravity of Name of Prom Zone State(s)/UT covered
the offence, penalty imposed, period elapsed etc. and would take a decision, as to for Sr. Asstt.
whether the employee should be considered for promotion. Northern Zone I J&K, HP, Punjab and Chandigarh
Northern Zone II Haryana and Delhi
• Effect of Supersession : Officers superseded in three consecutive promotional
Northern Zone III UP & Uttarakhand
exercises, shall not be included in the zone of consideration in in two
immediately succeeding promotional exercises. Northern Zone IV Rajasthan
• Effect of Non-acceptance : When an officer declines to accept promotion, Eastern Zone I Bihar & Jharkhand
such refusal shall be recorded and taken into account while considering
his/her case for subsequent 2 yrs. Eastern Zone II W.B & Sikkim

458 459
 Name of Prom Zone State(s)/UT covered PROMOTING AUTHORITIES AND
for Sr. Asstt. PROMOTION COMMITTEES
Eastern Zone III Orissa For
promotion to Promoting Authority Promotion Committee
Eastern Zone IV Assam, Tripura, Nagaland, Mizoram,
Manipur, Meghalaya, Arunachal Pradesh An Officer not below the An officer not below the rank of
AO rank of Scale VI (DGM), Scale V to act as Chairman and two
Southern Zone I Andhra Pradesh
(Scale I) to be nominated by CMD other officers not below the rank of
Southern Zone II Tamilnadu & Puducherry Scale IV
Southern Zone III Karnataka An officer not below the An officer not below the rank of
Sr. rank of Scale V to be scale IV to act as Chairman and two
Southern Zone IV Kerala
Assistant nominated by the O-I-C of other officers not below the rank of
Western Zone I & II To be carved out by CMD comprising the HO Pers. Dept. Scale III, as members.
offices in Maharashtra and Goa An officer not below the An officer not below the rank of
Western Zone III MP & Chattisgarh Assistant rank of Scale IV to be scale III to act as Chairman and two
nominated by the other officers not below the rank of
Western Zone IV Gujarat, Dadra & Nagar Haveli , Regional In-charge Scale II, as members.
Daman & Diu
N o t e:
One member of the Promotion Committee shall be from Personnel
Name of the States & Uts covered Department and one member shall be an officer from SC/ST Community
Prom. Zone for AO Promotion Committee shall be the Interview Committee, wherever interview
Northern Zone J&K, HP, UP, Punjab, Haryana, is prescribed.
Uttarakhand, Rajasthan, Chandigarh
and Delhi Declaration of Vacancies:
Norms shall be adopted from time to time for determination of vacancies for
Eastern Zone Bihar, Jharkhand, WB. Sikkim, Orissa,
promotion to different cadres, based on organizational needs.
Assam, Tripura, Manipur, Mizoram,
Nagaland, Meghalaya & Arunachal Pradesh
Preparation of Panels:
Southern Zone Andhra Pradesh, Tamilnadu, Karnataka, 5 times the no. of vacancies, based on the total marks on seniority and
Kerala and Puducherry qualifications, as allotted in terms of promotion policy, provided all employees are
Western Zone Maharastra, Gujarat, Goa, included in the panel who secure identical total marks at the cut off point,
Madhya Pradesh, Chattisgarh, Dadra regardless of increase in the size of the panel beyond five times.
& Nagar Haveli and Daman & Diu
Impact of Below Average Rating in CR
If any applicant for promotion is found to have received Below Average Rating in
For promotion to Assistant : any of the last three years' CRs, the promoting authority would examine overall
aspect of the report and arrive at a decision whether the employee would be
1) Prom. Zone will be RO Area considered for promotion or not in that particular year.
2) If any RO covers more than one state, Promotion zone will be
State; and Impact of Actions under CDA Rules/Vigilance Cases:
In case any action under CDA Rules is pending against any employee at the time of
3) If there is more than one RO situated in one centre, all such ROs
considering his promotion, his case would be dealt with in terms Sealed Cover
would be clubbed to form a Promotion Zone.
Guidelines, which are issued by DOPT from time to time.

460 461
Where, however, any case is concluded and any penalty has been imposed, the SCHEME OF WEIGHTAGE FOR VARIOUS CRITERIA:
promoting authority would examine various aspects of the case, such as gravity of Criteria For Prom to For prom to For Prom to
the offence, penalty imposed, period elapsed etc. and would take a decision, as to AO(Scale I) Sr. Assistant Assistant
whether the employee should be considered for promotion.
Seniority 30 40 50
PROMOTION TO AO (SCALE I): Qualifications 30 30 30
Departmental Channel: Work Record 25 30 20
Only Sr. Assistants & Stenos are eligible to apply. Eligibility criteria are based on Interview 15 - -
period of service rendered in the present cadre & the Insurance &/or professional
Total 100 100 100
qualifications acquired.
Selection is based on seniority, qualification (academic and Marks on seniority:
insurance/professional), work record and interview. Two marks for each completed year of service (in the cadre, for prom. to AO under
para 13.1 and Sr. Asstt. & in the company for promotion to AO under para 13.2.
Competitive Channel: and Assistant) as on 31st December of the year preceding the year of promotion are
All employees with 50% marks in Graduation/Post-graduation (40% for SC/ST) allotted.
or FIII (AIII for SC/ST) ACA, ACWA, MCA, MBA etc. are eligible to write the
competitive examination not more than four occasions in the entire service career. Period of 6 months and more is considered as one year and less than 6 months
Qualifying marks in the competitive examination is 60 % (50% for SC/ST) for period is ignored.
being considered in the further process of selection.
MARKS ON QUALIFICATIONS:
Selection under this channel is based on seniority, qualification (academic and
insurance/ professional), work record, interview and the marks in the competitive ACADEMIC QUALIFICATIONS:
examination. Below SSCE 0
Promotion to Senior Assistant: SSCE 5
All employees in the scale of Assistant who are FIII or who have completed at least HSC/Intermediate 7
7 years in the cadre or who have reached the ceiling of the scale are eligible for this
promotion. Graduate 12
Post/double Graduate 15
Employees with LIII or AIII qualifications, are considered only after putting in at
least 5 years and 3 years service in the cadre, respectively.
TECHNICAL QUALIFICATIONS:
Selection is based on seniority, qualifications (academic and insurance) and work
LIII or one subject of Institute of Actuaries or PG
record
Diploma (one yr. duration) in Computer 5
Applications or Business Administration
Promotion to Assistant:
Record Clerks and Class IV full time employees are eligible for this promotion,
provided they have requisite academic qualifications for direct recruitment of AIII or ACII or three subjects of Ins. of Actuaries 10
Assistant in the company or they pass the departmental test with 50% marks (40%
for SC/ST) and also pass the computer literacy test

Record clerks with at least 5 years service and Subordinate Staff with 10 years FIII or FCII or 5 subjects of Ins. of Actuaries or
MBA or MCA or PGDBM (two yr. duration) 15
service and who have qualified at least VIII std. examination are eligible to write
the departmental examination

462 463
Marks on work record:
Past three years CRs are to be rated by the Promotion Committee as per the scheme
of rating and 3 years average shall be taken as marks on work record.
Marks in Interview:
Promotion Committee shall give marks to the candidates for promotion to AO on
the basis of their performance in the personal interview before the committee.
None shall be included in the Ranking list without appearing in the Interview.
Selection and Ranking:
Ranking of the candidates shall be made in the descending order of total marks
secured on various criteria as per the scheme of weightage and selection of No. of
candidates for promotion, shall be equal to the no. of vacancies, from top of the list,
so ranked.
To be included in the ranking list a candidate has to secure at least 40 marks in the
aggregate of all criteria (30 marks for SC/ST). This proviso would, however, not
apply to promotion to AO under paragraph 13.2
Special provision for SC/ST and persons with disability:
15% and 7-1/2% vacancies are reserved for SCs and STs for various promotions
under this policy. Rosters for reservation of vacancies are maintained promotion
zone-wise for each promotion.
3% reservation is also made for persons with disability.
In addition, under paragraph 13.2 and 15, certain relaxations are provided to the
SC/ST employees in eligibility criteria, No. of chances to appear in the
Competitive Examination (Under paragraph 13.2 )and qualifying marks in the
written tests.
Publication of Ranking List:
On receipt of the recommendation of the Promotion Committee, the Promoting
Authority would cause the publication of the Ranking List showing the No. of
vacancies declared and the names of those candidates with other details necessary
for proper identification, who have been selected for promotion against such
declared vacancies.
464
Posting from the Ranking List:
The employees who are included in the Ranking List are offered promotion by the
Promoting Authority by means of a promotion letter.
Posting of the employee can be made at any office of the company commensurate
with his designation and the organizational requirement, irrespective of the period
of stay of the employee at his/her present place of posting.
However, such posting shall always be within the boundary of the respective
promotion zone.
Effect of non-acceptance of Promotion:
No employee has a right to reject the offer of a promotion involving transfer. If an
employee is unable to accept the offer due to involvement of transfer, he/she has to
make a representation in writing within 7 days from the date of receipt of the offer.
Promoting Authority may allow the employee to forego the promotion and his
name would be deleted from the Ranking list. Further he would not be considered
for promotion in the next two promotional exercises.
Against this decision the employee may appeal before GM(P), which may be
considered by him depending on the merit of the case and dispose it of in
appropriate manner.
Seniority in the Promoted Cadre:
Promotion shall take effect from the date of taking charge in the promoted cadre at
the place of posting stated in the offer letter, from which date all benefits in the
higher cadre, including fixation of pay would be admissible to the employee.
However, such date will not affect his seniority, which shall be counted from the
date of publication of the ranking list.
Fixation of Pay on promotion:
On promotion, basic pay shall be initially fixed at one stage above the stage in the
higher scale, which is next above his basic pay in the lower scale.
Provided, however, where his basic pay is a stage in the higher scale, the fixation
shall be made in the next higher stage in higher scale.
Provided further that basic pay shall be fixed at the bottom of the higher scale,
where such fixation results in an increase in the basic pay equal to at least one
grade increment at the minimum of the higher scale.
465
Note: The employee can opt any date for fixation ranging between the dates of his
taking charge in the higher cadre and the date of his next annual increment in the
lower scale.
Assured career progression scheme (ACPS)
Record Clerks, Drivers & Sub-staff who fail to qualify for promotion, would be
placed in the respective higher scale of pay, on completion of continuous 12
months service from the date of their reaching the maximum (ceiling) of their
present scale, subject to vigilance clearance.
While the employee would continue in the existing cadre, he/she would draw
salary in the higher scale, till superannuation.
Except monthly salary, no other facility/benefits which may be applicable to the
higher cadre, would be admissible to such employees on placement in the higher
scale under ACPS.
This facility is available to an employee only once in entire service career,
One promotion in life time for Assistants
Assistants not below the age of 55 yrs. and who have completed at least 25 yrs. Of
service in the company without receiving any promotion are eligible for
promotion to Sr. Assistant, under this clause.
The promotion is subject to vigilance clearance and would be based on the marks
on the criteria of Seniority, qualifications and Work Record, provided the
employee not found unfit for promotion. Weightage on seniority is given @ 3
marks per year, over and above 25 years.
Past service of the ex-servicemen, before joining the Co. is counted up to
maximum of 5 years, for determining the eligibility for promotion which is
minimum of 25 years of service as Assistant
Power to clarify, modify and relax any provision of the policy
CMD is the competent authority to modify or relax any provision of the policy in
any individual cases, by recording the reasons therefor and to issue any
clarifications, in case of any doubt in any matter under this policy.
466
TRANSFER AND MOBILITY POLICY - CLASS I
Ø
Objectives
• To ensure balanced manpower distribution for Client servicing
• To groom up Officers
• To provide opportunity for self-development & improvement in
competency.
• To attain overall Organizational goals.
Ø
Applicability
• It came into existence since 17/10/2002.
• Applicable to all officials up to the rank of Scale IV
• Not applicable to officials on deputation to other Organizations & to
local transfers.
• NORMAL PERIOD OF POSTING (NPP) AT A CENTRE IS 5 YRS.
• ON COMPLETION OF NPP, TRANSFER FROM THE EXISTING PLACE
FOR SCALE I & II, WITHIN TAC ZONES/ADJOINING STATES.
FOR OTHERS, ANYWHERE IN INDIA .
• TRANSFER EVEN BEFORE COMPLETION OF NPP BY THE
MANAGEMENT ON OFFICE EXIGENCIES.
• POWER OF CMD TO PHASE OUT SUCH SHIFTINGS FROM A CENTRE
ON LENGTH OF POSTING BASIS WHERE NO. IS HIGH.
REVOLVING PLAN
• ONCE TRANSFERRED TO A PLACE, OTHER THAN ON REQUEST
MAY BE ELIGIBLE FOR TRANSFER TO ONE OF THE 3 PLACES
OF CHOICE AFTER 4 YRS., SUBJECT TO AVAILABILITY OF
VACANCY & REPLACEMENT
SENSITIVE ASSIGNMENT
• ROTATION FROM SUCH ASSIGNMENT AFTER 3 YRS.
• SHIFTING TO ADMN. SIDE ON COMPLETION OF CONTINUOUS
10 YRS. AS DO/BO INCHARGES. ONCE SHIFTED, AGAIN ELIGIBLE
FOR POSTING AS INCHARGES AFTER 3 YRS. ON ADMN. SIDE
REQUEST TRANSFER
• NO REQUEST ORDINARILY CONSIDERED BEFORE COMPLETING
3 YRS. IN ONE CENTRE. HOWEVER, BOARD/PERSONNEL. &
ADMN.COMMITTEE OF THE BOARD MAY CONSIDER
EXTREME HARDSHIP CASES BEFORE 3 YRS.
• MAX. NO. OF REQUEST TRANSFERS = 3 ( TO BE COUNTED FROM
01.03.1990 )
467
•REQUEST CONSIDERED AFTER 5 YRS. IN ONE PLACE TREATED AS TRANSFER AND JOB ROTATION POLICY –
COMPANY TRANSFER. SUPERVISORY, CLERICAL AND SUBORDINATE STAFF
•CASES OF SPOUSE JOINING, PHYSICALLY HANDICAPPED &
DIFFICULT AREAS MAY BE GIVEN PREFERENTIAL/SYMPATHETIC •Employees retiring in 3 years / Physically handicapped / suffering from major
CONSIDERATION diseases (including family members) not to be transferred but liable for job
rotation
OFFICERS DUE FOR RETIREMENT WITHIN 2 YRS. •All employees on promotion to be transferred (within promotion zone) from
• CONSIDERATION OF REQUESTS FOR TRANSFER TO THEIR one office / station to another irrespective of period of stay.
DECLARED HOMETOWNS/PLACE OF CHOICE
JOB ROTATION
TRANSFER BENEFITS
• FOR OUTSATION TRANSFER, AS PER GUIDELINES TIME TO TIME. •After three years of continuous working in a particular Department, an
employee is liable to undergo job rotation and he/she can be posted in another
• FOR LOCAL TRANSFERS, NO BENEFIT
department within the same office
• FOR REQUEST TRANSFERS under TMP BEFORE 3 YRS., NO
•After five years of continuous working in one office, an employee is liable to
BENEFIT
undergo job rotation and in this situation he can be posted in another office
• JOINING TIME FOR TRANSFER within the same station.
1) NORMALLY 30 DAYS OR THE DATE SPECIFIED
•Number of job rotation cases shall not exceed 25% of the strength of
2) FURTHER MAX. EXTENSION FOR 30 DAYS MAY BE ALLOWED
employees in that office
O N M E R I T O F T H E G R O U N D S TAT E D I N T H E
•Minimum one transfer from each office on account of job rotation is to be
REPRESENTATION.
made
POWER TO MODIFY/RELAX THE PROVISIONS
TRANSFER AND MOBILITY
WITH BOARD OR PERS. & ADMN. COMMITTEE OF THE BOARD
COMPETENT AUTHORITIES FOR TRANSFER •CMD is empowered to determine requirement in offices at various stations
•Requirement to be fulfilled through judicious deployment of work-force by
1) FOR CHIEF MANAGERS & ABOVE — CMD making necessary transfers
2) UPTO SCALE IV LEVEL WITH — GM(P) + GM(MKTG) •After 10 years of continuous stay in one station, an employee is liable for
DEV. FUNCTION + OVERSEEING EXEC. transfer to another station.
•Discretion to limit transfers to 25% of total class-wise strength
3) UPTO SCALE IV LEVEL ON — GM(P)+CONCERNED •Distance shall be ordinarily restricted to a radius of 150 kms. from present
ADMN.SIDE WITHIN HO GM/DGM OF THE HO
place of posting. However, such distance may be increased up to 250 Kms.
DEPTT.
also, with the approval of CMD
4) UPTO SCALE IV INTER — GM(P) + CONCERNED •May be transferred to earlier or choice station after stay of at least three years
REGION, ON ADMN.SIDE OVERSEEING EXEC. •Entitled to all transfer benefits as per rules, on such transfer
UPTO SCALE IV WITHIN RO, — GM(P) + O/S Executives concern
PROCEDURE
TRANSFER DUE TO CDA/VIG. CASES
•Department-wise, Office-wise & Center-wise lists in descending order of
NOT RESTRICTED BY ANY OF THE ABOVE PROVISIONS
period of posting for each Department / Office / Station.
REMOVAL OF DOUBTS & CLARIFICATIONS •Transfers from top of such lists
•Allowances linked to functions to be withdrawn on rotation
BY CMD •No special provision for Office Bearers of Unions / Associations

468 469
BULLET QUESTIONS
1. The misconduct of an Employee was investigated by Company's
Vigilance Dept. and misconduct is established. What are the subsequent
procedures to be followed/ steps to be taken-
•A charge-sheet will be framed leveling the charges and the same will be
issued by the Competent Authority to the Delinquent Employee along
with memorandum, Article of charges, Imputation of Charges, List of
Management Witnesses and List of Documents. In the same charge -
sheet, the charged Employee will be advised to send his representation
within 30 days of receipt of the charge-memo.
•Not being satisfied with the representation of the Charged Employee, the
CA will, thereafter decide to initiate Inquiry proceedings and
accordingly will appoint Inquiring Authority and the Presenting Officer.
•After fixing the date of the Preliminary Hearing, the Inquiring Authority
will issue summon to the Charged Employee and the Presenting Officer.
2.
•In the Preliminary hearing, the CE will be allowed to go for inspection of
the listed documents. If the CE wants copies of all listed documents, the
same will have to be provided to the Charged Employee by the
Presenting Officer.
•The IO will ask the PO as well as the Charged Employee to
introduce/bring any additional document/defense documents/witnesses
respectively, if yes, the name of the Document to be spelt out specifying
therein how the documents are related with the Specific Charges as well
as the other names and details.
•If IO satisfies about relevancy of additional document/defense
documents, he will allow the same. The IO will put question to CE
whether he admits the charges or deny.
•The IO will advise CE to give name and other details of the Defense
Assistant who will defend the defense case.
•If the CE denies the charges, the regular hearings would be commenced
and the IO will issue summon to PO, CE with an advise to appear in the
RH's with Management Witness/es as well as Defense Witness/Defense
Assistant.
•In the regular hearing, “listed documents” exhibited by the PO will be
marked. Similarly, the defense documents submitted by the defense side
will also be marked. Management Witnesses will be examined by the PO
and cross- examined by the DA of the CE. IO may allow the PO to re-
examine the MWs. After re-examination, the DA will cross examine the
470
MWs on the questions put by the PO. Management side will thereafter,
will be over.
•Defense case will commence when the DWs will be examined by the
DA and cross -examined by the PO. DWs can also be re-examined by the
DA/cross examined (on re-examination) by the PO.
•Finally, Inquiry proceedings will be concluded and the I O will advise P
O to submit his Written brief within 30 days time.
•On receipt of P O's Written Brief, a copy of the same will be sent to the
CE with an advise to submit the Defense Brief within 30 days time.
•IO, thereafter, will submit his report to the CA on the strength of the
depositions of the witnesses/documents. Stating therein whether the
Charges have been proved or not.
•The CA will finally will issue order to the CE imposing Penalty what he
will think appropriate.
Suggest Measures To Minimise Workplace Negativity
•Every organization has some negative Neds and Nellies who do not like
their jobs, bosses, company and even think customers as worthless.
•The best way to combat negativity is to keep it from occurring in the first
place by providing opportunities to people to make decisions about and
/or influence their own job
•Make opportunities available for people to express their opinion about
work place policies and procedures.
•Treat people as adults with fairness and consistency by developing and
publishing workplace policies and procedures that organize work
effectively
•Do not create rules for all employees when just a few people are violating
norms.
•Help people feel like members of the in crowd with quick effective and
constant communication and providing the context for decisions.
•Afford people the opportunity to grow and develop through training.
Lateral moves, promotion etc.
•Provide appropriate leadership and strategic framework including
mission, vision, values and goals.
•Provide appropriate rewards and recognition to make people feel that
their contribution is valued.
•Hardcore. Persistent, baseless and unwarranted negativity may be dealt
with by disciplinary actions
471
3. Employees performance depends upon how well they are motivated.
Explain.
•Let us always think they are good people
•Their opinions and views are welcomed and properly accommodated
•They are publicly praised for every good work done
•They are conveyed that they are the cause and source of ,in achieving
the Organizational goals and objectives
•They are made to feel that they form part of the important decisions in
the Organization
•They are encouraged for their free and candid suggestions
•They are conveyed every policy and strategic decisions taken at
Corporate level
•The Organization has a feeling for care and concern for them
•Employees are encouraged in their career development and
advancement
•Superiors periodically should coach and counsel for their overall
development
4. HR interventions are needed for a dynamic and vibrant organization
•An organization is judged and rated by the index of the quality of
people it has
•An Organization becomes vibrant and dynamic through prudent and
well defined HR policies
•A comprehensive HR policy fulfilling their basic needs to self
actualization
•Motivate the people to a stage what they can do for the organization
•An objective performance appraisal system with open assessment be
brought in
•A proud feeling of association with the organization be promoted
amongst the employees
•Career development opportunities are made available and
appreciated
•Continuous succession planning be periodically reviewed
•Right person at a right place –Philosophy should be the buzz word and
belief
•A transparent job description and profile is need of the hour
472
•Training and retraining be promoted and recognized as an intervention
for overall development
•Honesty is never a bad policy
5. You have been transferred and posted as the in charge of an office where
office staff are not inclined to accept any changes in the existing system
and are difficult to work with. How will you tackle the situation?
•First focus on reasons which lead to opposition to any change
•There is no gainsaying the fact that every individual has his own way of
looking at an issue
•The moment any body comes out with any new idea or procedure it is,
more often than not, met with a degree of confrontation
•Out right criticism of an existing system or mind set of people will
definitely hurt the sentiments of the officials concerned and will only
aggravate the situation
•At the initial stage there should be appreciation of the positives of the
existing system and the efforts put in by the officials
•We can then tell them that considering their competence and efficiency,
new systems can be taken up as a challenge and thereby motivate them
•Training should be imparted to some officials, wherever felt necessary,
so that confidence level goes up
•We, as In-charge, have also to work diligently with the officials so that the
spirit of team-work and camaraderie becomes discernible
•We, as In-charge, should not only have a participative approach but
should also be considerate vis-à-vis colleagues and sub ordinates
•Finally when objectives start getting met due credit ought to be given to
the entire team so that they continue their concerted efforts in the
direction of change with renewed vigor.
6. Abuses of Job Rotation Policy
• Before 2000 the GIPSA companies allowed individuals to retire in one
line and one location
• The individuals developed vested interests overriding organizational
interest
•In order to prevent this Job rotation policy was introduced
•However, without succession planning the individuals continue to be
indispensable
473
 •Moreover, the present policy defines only stationed tenure and not Mgt.
Region or Zone tenure •They are responsible for tactical decisions
•Thus the favored were accommodated within 30 kilometers and others •Lower level management ensures that the decisions and plans taken by
shunted 300 Kms. other two levels are carried out
•In the absence of rotation in line Management exposure and experience is •Lower level manager's decisions are generally short term ones.
limited stunting individual and organizational growth.
•Job rotation pre supposes identification of talent, Job profiling and
9. Key functions of Human Resource Management
succession planning
•Recruitment Strategy Planning
•It should also be based on station, regional and zonal tenure
•This would help right distribution of Manpower and its optimal •Hiring processes
utilization •Performance Evaluation and Management
•Promotions
7. MANY SOURCES OF AUTHORITY – FOR MASTERING OTHER
•Redundancy
PEOPLE AT YOUR WORKPLACE.
•HIERARCHICAL: Power derived from position in management or •Industrial & Employees Relations
organization structure. •Record Keeping of all personal data
•INFORMATION: Information or Knowledge other does not posses. •Compensations, pensions etc in liaison with payroll
•EXPERTISE: possessing a particular skill set or range of experience. •Confidential advise to internal customers in relation to problem at work
•REPUTATION: The power you acquire from your track record and past •Employees organizations relationship
performance.
•CHARISMA: The so called magic ingredients – personality, voice,
10. Influencing factors on Employee engagement in productivity
appearance, energy, warmth, presence etc.
•Employee perceptions of job importance.
•POSITIONAL: Unique nature of role. Key position in a critical
communication network. •Employee clarity of job expectations
•COERCIVE: Power to punish and impose sanctions on others. •Career advancement/improvement opportunities
•Regular feedback and dialogue with superiors.
8. Different Levels of Management & Functions •Quality of working relationships with peers
•Top Level, Middle Level & Lower Management
•Quality of working relationships with superiors
•Top-level managers require an extensive knowledge of management
•Quality of working relationships with subordinates.
roles & skills
•They have to be aware of external factors such as markets •Perceptions of the ethos and values of the organization.
•They are responsible for strategic decisions •Effective Internal Employee Communications
•Their decisions are generally of long-term nature
11. Areas of Workforce Management
•Mid-level mangers have a specialized understanding of certain
managerial tasks •Payroll & Benefits
•They are responsible for and carrying out the decisions made by top-level •H R Administration

474 475
 •Time & Attendance • Situational Harasser
•Career & Succession Planning 14. Bureaucratic Organisation is governed by the following principles
•Talent Management •Official business is conducted on a continuous basis
•Applicant Tracking •Official business is conducted with strict accordance to the rules
•Learning Management •The duty of each official to do certain types of work is delimited in terms
of impersonal criteria
•Training Management
•The official is given the authority necessary to carry out his assigned
•Performance Management functions
•Forecasting & Scheduling •The means of coercion at his disposal are strictly limited and conditions
of their use strictly defined
12 Job rotation in Senior Management & Lower Management Levels •Every official's responsibilities and authority are part of a vertical
•An individual is moved through a schedule of assignments hierarchy of authority, with respective rights of supervision and appeal

•Designed to give him or her breadth of exposure to the entire operation. •Officials do not own the resources necessary for the performance of their
assigned functions but are accountable for their use of these resources
•Senior management levels, job rotation - frequently referred to as
•Official and private business and income are strictly separated
management rotation
•Offices cannot be appropriated by their incumbents (inherited, sold, etc.)
•Tightly linked with Succession Planning
•Official business is conducted on the basis of written documents
•Developing a pool of people capable of stepping into an existing job
•Goal is to provide learning experiences
15. Consciences Decision Making Process - Structure
•Facilitate changes in thinking a. Discussion of the item
•Perspective equivalent to the "horizon" of the level of the succession b. Formation of a proposal
planning. c. Call for consensus
•Lower management levels job rotation has normally promotability d. Identification of concerns
•Otherwise for skill enhancement e. Addressing of concerns
f. Modification of the proposal
g. Arrive at consensus
13. Sexual Harassment – Types of Harassment
•Power-player
16. All the PSU insurers have specific H R policies and these are brought to
•Mother/Father Figure the notice of the employees in the form of circulars/manuals. Some of the
•One-of-the-Gang areas covered in these manuals are
•Serial Harasser •Formation of the organization

•Opportunist •Acts governing the Organization

•Organization Structure and functions
•Pest
•Recruitment procedures for various classes of employees
•Bully
•Pay & allowances of employees
•Great Gallant
•Working Hours and leave rules
•Confidante

476 477
 •Employees Benefits
•Employees welfare provisions
•Employees career planning policies
•Performance Appraisal System
17. Performance Appraisal Methods & Uses
•Performance Appraisal is inevitable , universal & structured system is
used to judge the work performance
•Modern Appraisal System helps to determine reward outcomes and also
poor performers
•Ideal system may not be possible, near perfection possible
•Setting up key performance areas and proposed achievement at the
beginning of the period
•Review of the areas of Key performance at the end of the period
•Reasons for achievement /short fall analyzed
•Motivation & Satisfaction ,if the system is transparent
•Training and Development system improves
•Recognition of skills and redeployment of employees
18. Cordial work environment, if appraiser and appraisee have common
goals and target achievements. Employee's performance depends upon
how well they are motivated-Explain? BULLET UNANSWERED QUESTIONS
•Let us always think they are good people
1.
•Their opinions and views are welcomed and properly accommodated
•They are publicly praised for every good work done
•They are conveyed that they are the cause and source of ,in achieving the
Organizational goals and objectives 2.
•They are made to feel that they form part of the important decisions in the
Organization 3.
•They are encouraged for their free and candid suggestions
•They are conveyed every policy and strategic decisions taken at
Corporate level
•The Organization has a feeling for care and concern for them
•Employees are encouraged in their career development and advancement 4.
Explain
§ An organization is judged and rated by the index of the quality of people
it has
§ An Organization becomes vibrant and dynamic through prudent and
well defined HR policies
§ A comprehensive HR policy fulfilling their basic needs to self
actualization
§ Motivate the people to a stage what they can do for the organization
§ An objective performance appraisal system with open assessment be
brought in
§ A proud feeling of association with the organization be promoted
amongst the employees
§ Career development opportunities are made available and appreciated
§ Continuous succession planning be periodically reviewed
§ Right person at a right place –Philosophy should be the buzz word and
belief
§ A transparent job description and profile is need of the hour
§ Training and retraining be promoted and recognized as an intervention
for overall development
§ Honesty is never a bad policy
•Superiors periodically should coach and counsel for their overall
development
If the Unions of a company join hands and give notice of “Work to Rule” on
various issues pending for management's attention, discuss the best possible
solution for this crisis and the immediate steps to be taken to diffuse the crisis.
What steps would you suggest to improve the working atmosphere at office?
Why is it necessary for public sector general insurance companies to be
subjected to the following audits
CAG Audit
Statutory Audit
Internal Audit
Discuss the role of the vigilance in Public sector general insurance companies

19. HR interventions are needed for a dynamic and vibrant organization. 5. If the unions of a company join hands and give “notice” of “work of rule” on

478 479
 various issues pending for management's attention , discuss the best possible HRD / VIGILANCE MODEL QUESTIONS SET “A”
solution for this crisis and the immediate steps to be taken to diffuse the crisis.
6. What steps would you suggest to improve the working atmosphere at office 1. As per Leave Rules, two types of leave from amongst the following cannot
be availed in conjunction
7. What steps should the company take to adopt a contemporary HRM a. Earned leave with Casual leave
framework to mange its workforce more efficiently b. Earned leave with Sick leave
c. Casual leave with Sick leave
d. Quarantine leave with Sick leave
8. What are the areas for skill mapping or creating a resourceful skill inventory

2.
9. Elucidate the key parameters for performance measuring
10. Detail the necessary steps for collaboration, team work and relationship
building in the working environment
11. Elucidate how to enhance verbal and non-verbal communication at work
12. Define steps for a middle level line manager for internal crisis management
3.
13. Types of skill enhancement training that could be given to junior and senior
managers for role development in our industry
14. Give salient points on workforce planning for a general insurance company
As per LTS rules for officers in Scale IV, where the entitlement is by air and
the employee has traveled partly by air and partly by rail in AC Ist class total
travel not exceeding 1900 kms, what will be the basis of reimbursement
a. Full reimbursement by air for 1900 Kms
b. Full reimbursement by rail AC II tier fare for 1900 Kms
c. Full reimbursement by rail AC Ist Class fare for 1900 Kms
d. Prorata reimbursement by air on actuals and balance on AC II tier basis
for rail journey.
If the services of a person who has opted for pension, is terminated by way of
imposing a major penalty, which of the following benefits are not payable?
a. Provident Fund
b. Voluntary Provident Fund
c. Pension
d. None of the above

15. How do we map the workforce for effective succession and career planning 4. Qualification pay is granted for the following qualifications in case of
supervisory and clerical staff
16. Mention strategic importance of rewards and incentives to achieve corporate a. A.I.I.I.
goals b. F.I.I.I.
c. M.B.A
17. Ideal leadership qualities of a senior manager in the present work d. All of the above
environment
5. Hill Station Allowance is payable for the cities having mean sea level above
18. Give 10 types of authorized absence of duty ( special causes) a. 1000 mts
b. 1200 mts
c. 1500 mts
19. Name at least 10 types of allowances payable to employees ( all classes)
d. 2000 mts
20. Give exclusions to the Medical Benefit Scheme for employees
6. In Encashment of earned leave, which of the following allowance is not paid
a. Basic Pay
21. List the payable benefits under the different tables of the Group Mediclaim b. Dearness Allowance
policy c. HRA
d. Conveyance Allowance

480 481
7. Which of the following does not constitute misconduct under CDA rules? 14. Uniform is provided to
a. Sleeping in office during office hours a. Sweeper and sub staff
b. Taking bribes b. Clerical employees
c. Accepting gifts valued Rs. 250/- at a time. c. Part-time sweepers
d. Accepting a watch valued at Rs. 1000/- d. Casual Labourers

8. Which of the following does not constitute a major penalty under CDA rules?
15. Which of the following does not constitute misconduct under CDA rules?
a. Termination from service
b. Withholding of one increment permanently a. Habitual late or irregular attendance
c. Withholding of one increment for 2 years b. Absence from employee's appointed place of work without permission or
d. Compulsory Retirement sufficient cause.
c. Commission of any act amounting to criminal offence involving moral
turpitude
9. Which one of the following is not a minor penalty under CDA rules?
d. Absence from duty for one day without permission.
a. Censure
b. Withholding one increment for 6 months
c. Reduction in time scale 16. General Insurance (conduct, discipline & appeal) rules were frame in which
d. Recovery of pecuniary loss caused to company from salary year.
a. 1973
10. Dismissal from services order can be issued by b. 1975
a. Officer in charge c. 1976
b. Competent Authority for imposing major penalty d. 1978
c. Appellate Authority
d. The Appointing Authority
17. CDA Rules are not applicable to
a. Class I officers
11. Leased Accommodation for a Scale III officer in Metro cities is allowed
b. Class III & IV Employees
upto
a. 2000 c. Class I Officers on deputation from Govt. Sector
b. 3000 d. P.T.S.
c. 4000
d. ……… (Answer to be filled) 18. Which of the following Act of Omission & Commission shall not be treated as
misconduct?
12. An employee under suspension is entitled to a. Taking/ Giving bribes
a. Living allowance b. Sleeping on duty
b. Subsistence Allowance c. Gambling within office
c. Dearness Allowance d. Occasional late attendance
d. Family Allowance
19. An employee may be suspended under the following circumstances except
13. Briefcase allowance is made for officers once after a period of
a. Contemplating Disciplinary Proceeding
a. 2 years
b. Criminal offence under investigation/ ___
b. 3 years
c. 4 years c. Detained in custody for more than 48 hours
d. 5 years d. Smoking in office premises

482 483
20. The following are treated as Minor Penalties except 27. LTS for Class I Officers can be granted for a block of two years on
a. Suspension from duty a. Even to odd years
b. Censure b. Odd to even years
c. Withholding one or more increments for a specified period c. Both are correct
d. Recovery from pay the pecuniary loss to the company d. Both are incorrect

21. Leave rules permit leave on following grounds, except one 28. LTS for Class III & IV employees can be granted for a block of two years on
a. C.L. a. Even to odd years
b. E.L. b. Odd to even years
c. S.L. c. Both are correct
d. Paternity leave d. Both are incorrect

22. Special leave is 29. Encashment of E.L. for officers can be granted for 15 days once in a block of
two years
a. Home Guard duties
a. Even to add years
b. Appearing in Ins. Institute Exams
b. Odd to even years
c. Trade Union Activities
c. Both are correct
d. All three above
d. Both are incorrect

23. Casual Leave admissibility per Annum is 30. D.H.A. permissible under T.E. rules for a period less than six hours is
a. 15 days a. 30%
b. 22 ½ days b. 40%
c. 12 days c. 60%
d. 10 days d. 20%

24. Accrual of one day Earned Leave is based on duties spent on 31. C.V.C. guidelines stipulate Bids for acquiring office premises on lease/
a. 10 days purchase as under:
b. 15 days a. Technical Bid
c. 11 days b. Financial Bid
d. 14 ½ days c. Preliminary Scrutiny
d. Both (a) & (b)
25. Types of leave which can't be given in conjunction with
a. C.L. & Exam 32. Carpet area prescribed for Divisional office is
b. E.L. & S.L. a. 3000 sq. ft. + 10%
c. E.L. & Quarantine b. 2500 sq. ft. + 10%
d. C.L. & S.L. c. 3500 sq. ft. + 10%
d. 2000 sq. ft. + 10%
26. Leave Travel Subsidy can be availed for a block of
a. One year 33. Carpet area prescribed for Branch office is
b. Three years a. 1000 sq. ft. + 10% Addl
c. Four year b. 1500 sq. ft. + 10%
d. Two years c. 850 sq. ft. + 10%
d. 1200 sq. ft. + 10%

484 485
34. Regional office premises committee constitution requires the following SELF ASSESMENT QUESTIONS
minimum members to complete the quorum
a. Officer from Estate Dept., officer from A/cs Dept., officer from
Technical Dept. 1. Source and Designation of CVOS in PSU Insurance Companies are
b. Officer from Estate Dept., officer from IA & ID Dept., officer from a) From Ministry and equivalent to DGM
Technical Dept. b) From LIC and equivalent to GM
c. Officer from A/cs Dept., officer from Technical Dept., officer from c) From other PSU Insurance Companies and equivalent to DGM
Personnel Dept. d) From the same company
d. All the above three options

2. Vigilance department works in close * with

35. For a work/ purchase valued at more Rs. 2 lacs can be done by calling
a. 5 quotations a) Institute of Chartered Accountants of India
b. 3 quotations b) Central Vigilance Commission
c. Sealed tenders c) Central Bureau of Investigation
d. Open tenders d) Ministry of Finance and Economic Affairs

36. Officers on transfer are permitted to have residential accommodation except 3. CDA Rules of General Insurance stands for
a. Company owned accommodation a) Central Department of Appraisal Rules
b. Company leased accommodation b) Character Discipline * Rules
c. Self leased accommodation c) Conduct Discipline Approval Rules
d. Employee's own property on self leasing d) Confidential Departmental * Rules

37. Purchase of briefcase to officers is reimbursed on the expiry of

4. Officer depending on behalf of the company in department enquiry is
a. 2 years
a) Presiding officer
b. 3 years
c. 4 years b) Enquiry officer
d. 5 years c) Defending officer
d) Defaulting officer
38. In the following sequence for acquiring company property, tick the odd
choice 5. In departmental enquiry and after major penalty is imposed, the defaulting
a. Agreement for sale officer may go for memorial to
b. Sale deed a) TG overseeing GM
c. Mutation b) CVO
d. Registration of property
c) CMD of the company
d) President of India
39. Domestic enquiry under vigilance comprises of all except one
a. Preliminary learning
6. A suspended employee is eligible for * allow maximum up to what percentage
b. Regular learning
of his salary
c. Defense proceedings
a) 25%
d. Enquiry by C
b) 50%
486 487
 c) 75% b) Misappropriation
d) 100% c) Wrongful loss to
d) All of the above
7. Casual leaves cannot be tagged up with
a) Holidays 13. Perquisite Tax is not applicable in
b) Privileged Leaves a) Reimbursement of fuel for the use of vehicle on company's loan
c) Sick Leaves b) on a leased accommodation
d) Examination Leaves c) Subsidized housing loans
d) Leave travel subsidy
8. Maximum how may days CLs can be taken at a time.
14. If one employee received a gift item, above what price of the gift he is required
a) 4
to intimate company
b) 5
a) Rs. 500/-
c) 6
b) Rs. 1500/-
d) 7 c) Rs. 2500/-
d) Rs. 5000/-
9. Who is not free from CDA rules in our company 15. On promotion to which cadre one officer will be on probation
a) CMD a) AM
b) GM b) Dy. Manager
c) Non Executive Director c) Manager
d) d) CMD

10. For which benefit it is * to take leave 16. In which cadre delegation of formal authority is not required
a) Leave travel subsidy a) Manager
b) Leave encashment b) Dy. Manager
c) Transfer benefit c) AM
d) Hospitalization Expenses Reimbursement d) Vigilance Officer

11. If one employee is having only 25 days of PL in his account. Maximum how 17. For suspending an employee which condition is to be fulfilled
many days leave encashment he can avail a) He is charge sheeted by company
a) 20 b) He is arrested by police
b) 15 c) He is under * for more than 48 hours
c) 10 d) He is convicted by a Court
d) Nil
18. Which cadre is outside the purview of Transfer of Morbidity Policy
12. Under Preventing Corruption Act, a servant can be prosecuted for a) AM
b) Dy. Manager
a) Wrongful gain

488 489
 c) Manager 24. Which one of the following cities, does not fall under the category A for travel
d) CM rules
a) Mumbai
b) New Delhi
19. For entitlement to avail retirement pension minimum how many years service
has to be completed c) Bangalore
a) 10 years d) Patna
b) 15 years
c) 20 years 25. Which * is not a dependent on the employee for the consideration of Leave
d) 25 years Travel Subsidy
a) Son below 18 years
b) Father above 60 years earns below Rs. 1000/-
20. For entitlement of benefit of Gratuity minimum how many years of service
c) Daughter unmarried
has to be completed
d) Widowed sister
a) 10 years
b) 15 years
HR PERSONNEL AND VIGILANCE TRADE QUESTIONS SET “B”
c) 20 years
d) 30 years
1. Which is correct sequence as per CDA Rules?
a. Investigation-Domestic Enquiry-Charge Sheet-Office order
21. Maximum how many days PL can be encashed at the time of retirement b. Investigation- Charge Sheet-Domestic Enquiry-order
a) 6 months c. Domestic Enquiry- Investigation- order-Charge Sheet
b) 8 months d. Domestic Enquiry-Charge Sheet- Investigation-order
c) 10 months
d) No limit 2. Penalties for leakage of confidential electronic data of clients without the
22. Notional extension of service for compensation of pension for VRS optees knowledge of the insured (by employees or otherwise) can be made a subject
under Pension Schemes matter of insurance under
a) 5 years a. Electronic Equipments policy
b) Maximum 5 years b. Errors and omissions policy
c) Maximum 7 years c. Cyber liability insurance policy
d) 10 years d. Directors and officers liability policy

3. What action is appropriate in respect of an employee going abroad with

23. Which of there is not a minor penalty
a) Sensor
b) With holding one or more increment for a specified period
c) With holding one or more increment permanently
d) Recovering from pay or the amount as may be due to him of the while or
part of precautionary loss caused.
490
sanctioned EL for 90 days, thereafter staying there itself, and not returned?
a. To wait till his arrival, take leave application and ratify the leave
b. To recall him by issuing letters, telegram to his last known address.
c. To issue him show cause notice to his last known address and wait for
reply
d. Issue show cause notice, initiate enquiry proceeding as per CDA rules
and terminate him from the services.
491
4. What procedure is to be followed for acquiring office premises on rent as per c. Appointing Authority
CVC Guidelines? d. All the above
a. Advertisement in the news paper
b. Placing the advertisement on the website of the company
9. The authority competent to impose the penalty of “reduction to a lower
c. Putting the advertisement on the notice board of the company service”
d. All the above a. Will always be competent to impose the penalty of “removal from
service”
5. An employee placed under suspension will not get subsistence allowance as b. Will always be competent to impose the penalty of “Dismissal”
mentioned below, under any circumstances c. Both a & b
a. 25% d. Neither A nor B
b. 50%
c. 75%
10. Statement I – In case a domestic enquiry is instituted against an employee, the
d. None of the above competent authority may himself conduct the inquiry proceedings
Statement II – In case a domestic enquiry is instituted against an employee,
6. What is not taken into consideration while calculating the subsistence the Inquiry officer may conduct the enquiry proceedings
allowance? a. Only statement I is correct
a. CCA b. Only statement II is correct
b. HRA
c. Both the statements are correct
c. Hill Station Allowance
d. Both the statements are incorrect
d. None of the above

11. Which is the most appropriate in respect of cases pertaining to public sector
7. Statement I – Major penalty may be imposed on an employee against whom a general insurance companies?
major penalty charge sheet has been issued.
a. Only an officer of the insurance company can conduct domestic enquiry
Statement II – Minor penalty may be imposed on an employee against whom a proceedings
minor penalty charge sheet has been issued.
b. A public servant may conduct domestic enquiry proceedings
Statement III – Minor penalty may be imposed on an employee against whom
a major penalty charge sheet has been issued c. Only a Central Government Officer can conduct domestic enquiry
Statement IV – Major penalty may be imposed on an employee against whom proceedings
a minor penalty charge sheet has been issued d. None of the above
Encircle the most appropriate option
a. Only statements I,II,III are correct 12. As per general insurance employees' pension scheme, no departmental
b. Only statements I & II are correct proceedings, if not initiated while the employee was in service, shall be
instituted in respect of a cause of action which arose or in respect of an event
c. Only statements II, III, IV are correct which took place more than ___________ before such institution
d. All statements are correct
a. One year
b. Two years
8. An assistant can be placed under suspension by
c. Three years
a. Head of the department
d. Four years
b. Disciplinary Authority

492 493
13. In case CBI seeks sanction for prosecution of an employee of a public sector 3. mentoring programs
general insurance company and the competent authority does not intend to 4. career workshops
accord sanction, which would be the most appropriate option
a. only 1 & 2
a. CBI would initiate action against the Competent Authority b. Only 3&4
b. The CVO of the company will resolve the dispute between the CBI and c. All are wrong
the Competent Authority by taking final decision regarding the course of
action d. All are correct
c. The matter will be reported to CVC and the competent authority will take
further action after considering CVC's advice 18. Pick out the right statement
d. None of the above 1. HR Manager are generally staff managers
2. The managers for production and sales are generally line managers
14. Chief Technical Examiner's Organization functions under the administrative 3. HR managers have no authority and responsibility for advising the
control of production managers in areas such as recruiting, hiring and
compensation
a. CPWD
4. Managers may move from line to staff positions and back over the course
b. GIPSA of their careers
c. IRDA a. All are correct
d. CVC b. Only 3 are incorrect
c. All are incorrect
15. Human Resource Management does not include d. Only 1 & 4 are correct
a. Job analysis
b. Planning labor needs and recruiting suitable candidates 19. Which one of the following is inappropriate for any big, progressive, growing
c. orienting and training new employees HR proactive organization?
d. managing wages and salaries a. People and product oriented systems
b. Organization creating value for shareholders
16. HR Management practices are followed by managers because they don't want c. Organization creating wealth for Board of Directors
d. Designations/Job title based on Hierarchy rather than function of
1. To hire the wrong person for the job
position
2. To experience high turnover on costing
3. To find employees not doing their best 20. Which of the following is not a characteristic feature of an effective manager
4. To allow lack of training to undermine the Organization's effectiveness in a MNC
a. Only 1 & 2 a. Courage, Solid nerves and capacity to handle stress
b. Only 3&4 b. Ability to learn, open mindedness
c. All are wrong c. National experience and understanding of markets
d. All are correct d. The way the organization treats its employees

17. Many successful organizations do use HR practices to help employees 21. Which of the following is appropriate response for secret of success of a
become more productive. These practices include: business organization?
1. leadership training a. The profit made by the organization
2. technical training b. Efficiency and Effectiveness with which business is being run

494 495
 c. The way recruitment is carried out in an organization SAMPLE BULLET QUESTIONS
d. The way the organization treats its employees
Q1. Suggest ways to change Conflict into Collaboration.
22. Executive turn over is increasing at a higher rate than the sales turn over. •Try hard to understand the other persons points of view
Which one of the following is not a relevant reasons Listen reflectively to what they are saying
a. Better prospects Look for common ground or “vision”
b. Bad Boss Acknowledge their expertise
c. Organization Climate Focus on interests rather than positions
d. Health grounds Separate the people from the problem
Look for solutions that take into account needs of all parties
23. Choose the type of leave not available to PSU General Insurance employees •Appreciate that there will be differences
a. Restricted Holiday •Make Regulatory and Institutional frameworks transparent for all to
b. Half day casual leave acknowledge how these support or hinder collaboration.
c. Trekking leave •Identify and propogate the skills necessary for collaborative environment,
eg.negotiation/ interpersonal skills.
d. Study leave
•Be patient, since it takes time to develop trust and relationships.

24. Which one of the following is correct in respect of special sick leave due to
major sickness Q 2. Identify 5 advantages and 5 Pitfalls in Auto-Tieups.
ADVANTAGES ;
a. 90 days in the entire period of service
•One point purchase and single window service for the customer
b. 120 days in the entire period of service
c. 240 days in the entire period of service •Huge premiums available for Insurers from a single source
d. None of the above •Opportunity for cross-selling of other products
•Cashless service at dealerpoints throughout the Country
KEY – HR & VIGILANCE MODEL QUESTIONS SET “A”
•Standardisation of various processes of delivery of Insurance services, and
1. A 9. C 17. C 25. D 33. A maintainance of Quality.
2. D 10. D 18. D 26. D 34. B PITFALLS :
3. C 11. D 19. D 27. B 35. C
•Sometimes the greater payouts to dealers at the cost of policyholders is seen
4. D 12. B 20. A 28. A 36. D
as a bane.
5. A 13. B 21. D 29. A 37. B
6. D 14. A 22. D 30. A 38. C •Tieups appear to be more beneficial to dealer than customer
7. C 15. D 23. C 31. D 39. D •Repair costs are fixed and often on higher side—less room for negotiation
8. C 16. B 24. C 32. D •Conflicts in interpretation of policy conditions may create dispute affecting
customer
KEY - HR PERSONNEL AND VIGILANCE TRADE QUESTIONS SET “B”
•Cover is often seen as a maintenance cover by customer.
1 B 6 D 11 B 16 D 21 D
2 C 7 A 12 D 17 D 22 D Q 3. What is Multitasking and how is it relevant to our Industry ?
3 D 8 D 13 C 18 B 23 B
•Multitasking refers to doing more than one thing at a time. It is a word
4 D 9 D 14 D 19 C 24 D
5 D 10 C 15 C 20 D coined to denote various functions that a system/computer can perform.

496 497
•Multitasking has become necessary in view of costly manpower and system
driven packages
•In insurance, too, recruitment is limited and existing personnel are called
upon to do different tasks
•Multitasking helps to reduce dependence on specific personnel, specialy in
our Public Sectors where leaves are abundant.
•An officer who can do underwriting, claims as well as customer relations is
an asset
•Multitasking skills allow an organization to downsize manpower
requirements.
•In our industry, cadres like Dev Officer and RCs are “run-off” cadres and
requires existing personnel to fill the gaps of their roles.
•It is necessary to impart regular training as well as motivation for persons to
be adept at various functions.
•Insurers are aware of the compulsions and are providing thrust to training
requirements of it's employees
•Overall objective is to bring seamless delivery services available to
customers
Q 4.
Business Process Reengineering includes establishment of Central
Claim Processing Hubs. State some positive and negative points for
such an initiative.
•Better and more optimum utilization of Human resources
•Focussed responsibilities and specialization
•Single window service for customers
•Uniformity in approach, as opposed to different systems in different
operating offices
•More effective utilization of surveyors
•Elimination of multiple hierarchy in claim settlement
•Greater perceived objectivity in claim settlement
•Hubs are hampered if proper Infrastructure is not provided
•Systems need to be upgraded so that time lag in transactions between
Operating Offices and Hub is minimized.
•Though there is uniformity, sometimes the extra emphasis required for very
important clients is not forthcoming, as would be in operating offices.
Q 5. Role and types of Communication within an Organisation.
498
•Communication is the sharing of information for a variety of purposes
including informing, persuading, motivating or influencing.
•Communication can be 'Formal' and 'Informal'
•Formal communication is organized and managed information that is
shared with relevant individuals to secure coordinated action.
•Formal Communication channels are dependent on individuals role in the
organization.
•Typically formal communication flows “downward” in the form of
'instuctions or directives' and “Upward” in the form of feedback and
reports, usually in set formats.
•Formal Communication is well established and planned, and needs to clear
for them to be actionable by the implementers.
•Informal Communication, on the other hand, caters to satisfy social and
emotional needs within the Work environment
•These are not necessarily based on one's 'position ' in the Organisation.
•Informal communication often helps to spread information quickly and
may help in reducing stress and anxiety. But such 'grapevine' should be
effectively managed to ensure that the wrong message is not spread.
Q 6. Discuss the types of Insurance frauds and suggest some measures to
tackle them.
•Any deliberate deception perpetrated against or by Insurances Cos to make
unwarranted financial gain, can be termed as an Insurance fraud.
•Deliberate attempt to 'stage' or invent an accident ,injury, theft, arson etc, to
claim under policies is termed a Hard Fraud, whereas Soft Frauds , often
called Opportunity Fraud, is where genuine claims are exaggerated, or even
when false declarations are given whilst taking the cover.
We can take measures like :
•Improving underwriting processes by online record keeping of proposals
•Improving claim settlement procedures to make it system based
•Strict laws to tackle Insurance Frauds
•Recording all crimes with NCRB
•Sharing of information amongst all insurers about incidence and claim
ratios
•Maintaining detailed customer profiles viz KYCs, their businesses,
products etc.
•Implementing policies of disclosure and transparency
•Encouraging proper Audit and internal checks and controls
499

Q 7.
Assume that your organization is considering Lateral Entry of
personnel. How will this impact the Co, and what precautions should
Management take for smooth implementation ?
•All organizations go through the phases of life cycle such as infancy,
growth, maturity and decay.
•In order to keep he organization vibrant the Management needs to
constantly innovate, reinvent and reposition itself to remain relevant to
changing environment
•Similarly, the organization needs to develop new ideas with talent within
the industry and also from collateral industries
•Lateral entry will enable infusion of new blood into the organization, which
could lead to 'Out of the Box' thoughts and ideas.
•New entrants can supplement the in-house talent of professionals within,
by bringing in their experience from respective fields.
•It could also result in planning and implementing new strategies without
carrying the biased insurance perspective
•Existing employees will be disgruntled and thus have to be nurtured, and
the need for lateral entry has to be communicated properly, since it is a very
delicate issue.
•Promotions within the existing ranks should be more rapid , so that the
sense of alienation is not felt.
•Lateral entry should be strictly need-based and restricted to very specific
professionals with wide experience, and whose skills can be employed in
specialized areas of Insurance.
•Lateral entrants should be assigned to tasks that are not being currently
done by existing personnel, more as a support structure in the day –to-day
working.
Q 8.
Discuss the RTI Act as one of the means of improving Insurance
Services. Give some examples
•The RTI Act is designed to promote transparency in governance and
administration and to keep discretion in check
•Over the years Insurers have taken unilateral decisions of various sub
processes of insurance delivery, viz claim amount, proposals, requirements
for claim etc.
•Through RTI, policyholders are empowered to seek information for
processes, which can lead to standardization and uniformity in delivery.
•The fear also induces insurers to maintain records of deviations and
500
discretion, and exercise caution for decisions
•Perception of customer rather than actual value of services delivered is
important, and the Act serves to reinforce this.
•Insurers have to be wary, however that immaterial information which is
often sought for by the complainant is tactfully or through Act provisions,
declined to them
Some examples of using RTI to get desired services :
•Duty to provide proposal as part of policy document
•Duty to settle claims within a specified period of receipt of documents
•Identifying common set of papers required for processing claims, in one go.
•Buden of paying interest above market rate for delayed claim settlements
Q9. It is often said that, for the customer, the Insurance Ombudsman is a
better platform to handle grievances than a Consumer Court. Discuss.
•All Public service organizations now have the Ombudsman as a system of
grievance redressal.
•The Ombudsman negates the necessity of going to Court
•There is no requirement of advocates or Court fees
•It is not necessary to follow the strict law of evidence or legal procedure
•Only one hearing can be sufficient to adjudicate the case, so the time lag is
not there.
•Decision of Ombudsman is binding on Insurer,
•It is not binding on the Claimant who has recourse to other Forums
•The Ombudsman is usually one who is acquainted with the Industry
Practices and therefore has a better understanding of both points of view.
•It is seen to be a more acceptable forum to the insurers, who are then likely
to take a more sympathetic view of the issue in dispute
•Ombudsman often gives both the insurer and claimant reasonable time to
sort out the issue, leading to a more amicable settlement of the dispute.
Q 10. You are designing a Feedback-cum-Performance Appraisal Form for
Motor surveyors. List out 5 points you wish the insured to complete,
and 5 for the Dept.
Insureds questions :
•Did the surveyor inform you before proceeding to the workshop ? :Yes/No
•Are you aware of the settlement discussions held with the repairer? :
Yes/No
•Was the surveyor courteous in his behaviour ? : Very/ Moderately so/ Not
501
 curteous
•Did the surveyor bring to your notice all the formalities required for
assessment at one go? : Yes/No
•Any other information you would like to place for improvement
Deptt observations :
•Was survey carried out in time after information by the Co : Yes, within
___(hours). / No, after ___ (days)
•Did the surveyor give his preliminary assessment within 24 hours?: Yes /
No
•No of days taken for submission of report : ____ days
•Quality of assessment : Excellent / Good /Fair / Poor
•Whether all relevant documents were attached with report : Yes / No, but
reasons provided / No.

Q 11. Utilisation of In-House surveyors for losses below 20000/- has yielded
mixed responses and experience for the Organisation. Discuss some of
them.
•In –house surveys were mostly done for small motor losses and property
claims eg Householders Policy
•By and large, the concept was based on the premise that greater care would
be taken for keeping Cos interest in mind
•Also the large pool of Human resources was being put to alternative use
•Experience shows that claims assessments were curtailed and amicably so.
•Expense on Survey fees was a major saving for the Organisation
•However, not all In-House surveyors are technically qualified—selection
issues remain
•Sometimes personal interest clashes were evident
•Absence from office during working hours created a problem
•Adjusting time for surveys often created delays, much to the insured's
dissatisfaction
Conveyance paid to In-House surveyors created heartburn amongst other
colleagues , in view of quantum of work given to In-house personnel

502