Insurance

I
 Indian Contract Act 1872
A contract:
• Agreement(offer & acceptance)
• Legal Consideration
• Competent to make contract
• Free consent
• Legal object
 Principle of Indemnity
• Insured would be compensated only to the
extent of loss occurred to him
• Not applicable to life insurance because the
value of loss due to death cant be ascertained
Doctrine of subrogation
 Warranty
A warranty is that by which the assured
undertakes that some particular thing shall be
done or not or that some conditions should be
fulfilled(by insured). If he doesn’t then the
insurer is not liable to pay
Insurable Interest
 Proximate Cause
• Effective cause which causes loss
• Insurer pays only if the loss has been insured
• In case of a life insurance, the insurer is bound to
pay the amount of insurance irrespective of the
reason of death
• Insurer need not pay in following cases:
1. War- risk
2. Suicide
• In case of accident benefit, if the person gets
killed,double the policy amount is to be paid
Annuities
Mortality table
Premium and Bonus
• Single Premium
• Level Premium-higher in the early part &
lower in the later parts
• Limited Premium
• Flexible Premium
 Computation of Premium
• Risk Premium: risk of death covered
• Net Premium: interest rate yields included
• Office Premium: operating or administrative
expenses included
• Tabular Premium
• Every company adopts a basis of premium.
Eg:monthly,annually,quarterly
• Any person whose frequency is more than this
basis,he has to pay loading factor.
 Loading
LIC
- Yearly mode: rebate @ 3% of the tabular
premium
- Half- Yearly mode: rebate @ 1.5% of the
tabular premium
- Quarterly mode: none
- Monthly mode: loading @ 5% of the tabular
premium
 Loading (contd…)
TATA-AIG
- Yearly mode: none
- Half- Yearly mode: loading @ 1.5% of the
tabular premium
- Quarterly mode: loading @ 2.5% of the
tabular premium
- Monthly mode: loading @ 5% of the tabular
premium
 Valuation
• Premium is fixed keeping following in mind:
- mortality
- interst
- expense
 Bonus
• With Profit & without profit policies
• Types
-Simple revisionary
-Compound revisionary
-Terminal or final additional
- Cash
- Interim
 Surrender value
• Amount of premiums paid which is returned to the
policy at the time of surrendering the policy- surrender
value.
• Surrender value= full reserve – surrender charges
• Not applicable for term and endowment policies.
• Any of these conditions to be fulfilled to get back the
surrender value:
- premiums paid at least for 2 years
- premiums paid at least 1/10th stipulated in the policy
provided it is more than 1 yr. premium.
 Bases for calculation surrender
value
• Accumulation approach
• Saving approach
Investment of funds
 Needs of Investment
• Payments of claims
• To avoid financial deficit
• National interest
 Sources of Funds
1. Premiums:
2. Interest:
3. Capital Gains: sale n purchase of shares
4. Savings and Expenses:
5. Non Payment of Claims in term payments
 Problems of investments
• Trusteeship of policy-holders’ money
• Sufficient funds to pay claims
• Sufficient funds to pay expenses
• Faith of customer
• Proper risk-return
 Principles of investments
• Safety
• Profitability
• Liquidity
• Diversification
• Social objective
- Better standard of living
- Less deaths
- Less premium
- More business
 Suitability of various types of
investments
• Govt securities-less risky
• Industrial securities :more risk-more return
- shares
- debentures
• Mortgages
• Policy loans
• Real assets
 Bases for formulation of
investment policy by a life insurer
• Basic principles- safety, liquidity, profitability
• Outlook of management
• Investment portfolio
Basic principles of marine
insurance
 Definition
• A contract between insurer and insured
whereby the insurer undertakes to indemnify
the insured in a manner and to the interest
thereby agreed, against marine losses incident
to marine adventure
 Classification of marine insurance
• Hull insurance: vessels and its equipments
• Cargo insurance: maybe of any description like wares,
merchandise, property, goods etc
• Freight insurance: freight is paid for using the vessel/
carrier. It is unable to earn freight if the goods or
property( cargoes) are not safely transported
• Liability insurance
- all the ocean & inland perils mentioned will be insured
- eg: non-compliance to to regulations
- collision
 Elements of marine insurance
1. Features of general contract
2. Insurable interest
3. Utmost good faith
4. Doctrine of indemnity
5. Subrogation
6. Warranties
7. Proximate cause
8. Assignment & nomination
9. Return of premium
 Features of general contract
• Proposal
- every marine insurance is different from the other. So there
is no common proposal form
- original slip with material information is prepared by the
broker
• Acceptance: original slip is presented to an underwriter.
• Consideration : proposal is assessed and premium is paid at
the time of the contract. The premium is called consideration
to the contract.
• Issue of policy
Basic principles of fire insurance
Insurance Act 1938
Life Insurance Act 1936
Marine Insurance Act 1936
General Insurance Act 1972
IRDA act 1999
Advertisement Regulation of
IRDA
Marketing of Insurance product
guidelines
Registration of Company
Protection of policyholder’s
interest
Tariff Advisory Committee
Mid-Term
LIC policy classification: ULIP,
Pension plans
Policy condition of Life Insurance
Annuity and claim settlement