You are on page 1of 187

1

The following chart is a consolidated figure on the percentage (%) of
multiple choice questions derived from respective chapters :
Chapter 30
Chapter 29
Chapter 28
Chapter 27
Chapter 26
Chapter 25
Chapter 24
Chapter 23
Chapter 22
Chapter 21
Chapter 13
Chapter 12
%
Chapter 11
Chapter 10
Chapter 9
Chapter 8
Chapter 7
Chapter 6
Chapter 5
Chapter 4
Chapter 3
Chapter 2
Chapter 1
0 1 2 3 4 5 6 7 8 9

Hot exam topics 2

Chapter 1
Introduction to Insurance

3

• What is Insurance? • How does Insurance work? • Why is Insurance important? • Functions of Insurance • Classes of Insurance • A brief history • What is your role as an Insurance agent? 4 .

disability Fortuitous: Happening by chance.g. coming or occurring by accident. 5 . seeks to provide protection Insurance against financial loss caused by fortuitous events e. or without any known cause. Fortuitous events Insurance. as an organisation. death.

Accumulate An economic funds for claims institution Only certain risks Principle of are insurable mutuality 6 .An arrangement where individual losses are shared by members of a group facing similar risk exposures. This loss-sharing arrangement is called insurance.

Claim People with the same risk Pooling of Risks exposure Life Fund Person facing loss Law of Large Numbers 7 .

loss events Even sources of income are at risk of being affected by events out of our control. Insurance protects against financial loss caused by unfortunate events or risks. 8 . Risks Financial Unfortunate Everyone is exposed to losses.

Primary Function To equitably distribute the financial losses of a few whom are insured among the many insured 9 .

Stimulates business Cost stabilisation for enterprise business enterprise Provides Secondary employment Source of capital Functions of investment Insurance Peace of mind Reduction of losses Means of saving 10 .

Covers Human Life Anything other than human life • Premature death Insurance • Loss/damage to property • Retirement income • Legal liability caused by • Sickness / disability products sold • Death/injury (3rd party) by accident 11 .

Financial relief to aggrieved dependents Financial relief for property loss Other related services Inculcate habit of saving 12 .

Chapter 2 Nature of Risk and Its Management 13 .

• Some related concepts • How do you measure risk? • Categories of risk • Methods of handling risk • Risk management • Characteristics of Insurance risk 14 .

PERIL Cause of Loss (Fire) LOSS Reduction / Disappearance of Economic Value HAZARD (Property. lives) Condition that Increases the chance of loss RISK (Wind blowing) Uncertainty regarding Loss (House on Fire) 15 .

individual that increases the chance of loss. Physical Hazard Moral Hazard A physical chance that A character defect in an increases the condition of loss. carelessness. Dishonesty. working condition 16 . unreasonableness Wooden building Car in poor etc.

17 . Judgmental Based on the judgment of the person Probability predicting the outcome. Priori Determined when the total number of Probability possible events is known Empirical Determined on the basis of historical Probability data.

Pure tal & & Speculati- Particular ve Risk Risk 18 .Fundamen.

Fundamental Risk Particular Risk Affects the entire economy Affects individuals and not or large number of person / the entire community or groups within the economy country. 19 .

loss or no no loss. Pure Risk Speculative Risk Exists when there is the Exists when there is the possibility of either loss or possibility of profit. Pure Risk Speculative Risk Loss No Loss Loss No Loss Gain 20 . loss.

Severity High Low Risk Loss Probability High Avoidance Control Low Risk Risk Transfer Retention 21 .

Risk Avoidance Involves avoiding the property. 22 .1. person or activity which produces the risk.

2. Loss Control Aims to reduce the total amount of loss. The frequency and severity of losses influence the total amount of loss. Loss Reducing the Prevention frequency of loss Loss Control Loss Reducing the severity Minimization or amount of loss 23 .

When risk retention is planned.3. risks are retained deliberately. 24 . Risk Retention Losses are borne by the party retaining the risks.

4. Insurance Contract Risk 2 ways to Non Insurance Contract transfer risk 25 . Losses will be paid by the organisation or individual to whom it was transferred. Risk Transfer Involves transferring risks to an organisation or individual.

Identifying loss exposures Evaluating potential losses The Risk Management Process Selecting Implementing the risk techniques of Controlling the risk management program management risk handling program 26 .

Financial Value Reasonable Large number premium of similar risks Legal & not against public Pure risk Insurable policy only Risk Insurable No catastrophic interest No catastrophic Fortuitous losses losses losses Fortuitous losses 27 .

Chapter 3 The Basic Principles of Insurance and An Introduction to Takaful 28 .

• Principle of Insurance • Introduction to Takaful Insurance • Formation of Takaful companies • Syariah supervisory council • Principles of Takaful operation • Aspects of Takaful operation 29 .

Insurable Interest Principle of Utmost Good Faith Assignment Indemnity Principle of Proximate Cause Principle of Principle of Subrogation Contribution 30 .

IA 1996) 31 . What? When? The legal right to insure • General Insurance: arising from the legitimate Upon entering and at financial interest which time of loss an insured has in a • Life Insurance: Only at subject matter of the inception insurance. (Subsection 152(1).

My Spouse My Child or ward “I have insurable interest in…” A wholly or partly My Employee dependent person 32 .

My insurer has Thanks! Now i have all the consented to this rights and liabilities from assignment! this contract Insurance Contract Assignor Assignee (Insured) (New Owner) 33 .

The insured CANNOT assign his right in the policy to another unless
prior consent from the insurer has been obtained.

Exception to the rule:
• Marine policies
• Life policies
• Transfer by will or operation
of law

34

The insured has to disclose fully and accurately all
material facts, whether asked or not.
Material facts: a fact which will influence a prudent underwriter in deciding the
acceptance of the risk or the premium to be charged

1. Disclose matters that affect the rate,
terms, and acceptability of risk.

2.Disclose matters that a reasonable
person would know to be relevant. INSURER

35

NON-DISCLOSURE MISREPRESENTATION

Breach of Utmost Good
Faith

Voidable
Contract

36

Requires that the insurer restores the insured to the same financial position as he had enjoyed immediately before the loss 37 .

Insured suffers loss due to 3rd party and Insured cannot claims from insurer claim from 3rd Party again Insured Insurer claims from 3rd Party 3rd Party INSURER 38 .

2 or more policies Policies cover of indemnity in common interest force Conditions for Contribution Involves a common Policies cover common subject matter peril (cause of the loss) (covered by the policies) 39 .An insurer may ask other liable insurers to pay for the same loss.

DOMINANT cause of Cause of Cause of loss: Proximate Cause Cause of Loss Loss Loss 40 .•It is the dominant cause of loss amongst many causes of losses •When a loss occurs. the insured must prove that it was caused by an insured peril.

Perils Insured Perils Uninsured Perils Excluded Perils Perils are expressly Perils are not mentioned in the Perils have been covered by a policy policy & are not covered unless expressly excluded they occur as a result of an from the policy insured peril Insurers are NOT LIABLE for uninsured and excluded perils! 41 .

Formation of Takaful Companies Takaful Syariah Supervisory Council Insurance based on Syariah Principles Principle of Takaful Operation Family General Aspects of Takaful Operation Takaful Takaful 42 .

43 . Advise on all operations to ensure that Takaful Syariah Supervisory there are no elements contrary to the Council Syariah’s approval Company SYURA Ruling Decisions of the council must be mutually agreed by all members.

2 Important Concepts TABARUK MUDHARABAH • Means ‘to donate’ • AQAD (agreement) is achieved to • Means ‘Trustee Profit Sharing’ donate contributions into a risk • Contractual agreement between fund. 44 . capital provider and entrepreneur • Fund is used to assist in financial for business ventures. losses.

Covers business and pure risks Takaful Co. as asset Not a contractual manager and profit/loss transfer of risk distributor Aqad of helping and Contribution as cooperating donation 45 .

Chapter 4 The Insurance Industry In Malaysia 46 .

• The insurance market • Organization structure • Centralization vs. Decentralization • Insurance related institutions 47 .

Main Components of The Insurance Market Buyers Intermediaries The Insurance Market Insurance Brokers Insurance Agents Sellers 48 .

most insurance companies are organised on the basis of functions performed Administration Agency Sales Electronic Data Marketing Processing Underwriting Accounting INSURANCE COMPANY Claims Investment Actuarial Customer Service 49 . In Malaysia.

GENERAL INSURANCE Motor Insurers Bureau (MIB) Insurance Mediation Bureau (IMB) Unplaced Motor Pool Persatuan Insurans Am Malaysia (PIAM) Insurance Broker Association of Malaysia (IBAM) Association of Malaysian Loss Adjusters (AMLA) 50 .

Life Insurance Association of Malaysia (LIAM) • Established 1974 • Promote and represents 18 life insurance companies in Malaysia National Association of Malaysian Life Insurance and Financial Advisors (NAMLIFA) • Established 1978 • Safeguards the interests of those engaged in life insurance selling and sales management 51 .

Actuarial Society of Malaysia (ASM) • Founded in 1978 • Promotes the study and research into the Actuarial subjects. Malaysian Insurance Institute (MII) • Established in 1985 • Conducts courses and professional examinations in insurance related discipline. 52 .

Chapter 5 Consumer Protection and Statutory Regulation 53 .

1965 54 .• Insurance industry and the consumer • Self regulation • Statutory regulation • The Companies Act.

The International Consumer Movement says that customers have the following rights: To Satisfaction To be Heard Consumer To Redress To Information Rights To Consumer To Choose Education To Basic Goods To a Safe & & Services Clean Environment 55 .

protection to insurance consumer. 56 .Instill discipline and promote Provides some element of healthy competition.

General Insurance Insurance Brokers Association of Malaysia Association of Malaysia (PIAM) (IBAM) Association of Malaysia Life Insurance Loss Adjusters (AMLA) Association of Malaysia (LIAM) 57 .

Bureaucratic back up required to enforce laws. 3. 58 . 3. Statements of practice are 4. Instill self-discipline 1. compared to legislation. Insurers view consumer needs from their own perspective. Faster response to changing needs interpreted by insurers. No need to introduce legislation 2. 2. Laws are interpreted by court. No power of law. Advantages: Disadvantages: 1.

Insurance Regulation 1996 Protection of Public Promotion of Fairness Interest & Equity Purpose of Regulation Fostering of Playing a Competence Developmental Role 59 . Scope of Regulation: Insurance Act 1996.

Chapter 6 The Insurance Contract 60 .

• Law of contract 61 .

Intention to Create Legal Legal Capacity to Contract Relationship Offer & Acceptance Consideration Consent – Legality of the Contract Consensus Ad Idem 62 .

Defective Contracts Void Contracts Voidable Unenforceable Contracts Contracts Totally invalid Valid until Non compliance voided with legal formalities 63 .

Chapter 7 Law of Agency 64 .

Table of Contents • Legal provisions governing the law of agency • Duties of an agent • Rights of an agent and obligations of the principal • Termination of agency • Characteristics of insurance agents 65 .

AGENT PRINCIPAL Person who acts on Person whom the behalf of another agent represents person 66 .

Middlemen – insurance The relationship between the agents and brokers agent and the principal – the agent can affect principal’s relationship with 3rd parties 67 .

Express Authority Apparent / Ostensible Authority Implied Authority Ratification Usual Authority AUTHORITY OF AN AGENT 68 .

The THREE classes of agent: Special Agent General Agent Universal Agent Appointed to do a Acts for principal Unlimited authority specific act within limits of to act for principal authority 69 .

70 .

The relationship may be terminated as follows: 71 .

Chapter 8 Marketing & After Sales Services 72 .

• Marketing • Market-oriented agent • Consumers buying decision process • Selling process • After-sales services 73 .

anticipating. What Does the Marketing Department Do? Planning & Controlling Pricing Market Identification Select Distribution Channel Product Development Promotion 74 . and satisfying customer requirements profitably.Marketing Defined: The management process responsible for identifying.

Help develop new products Coordinate Satisfy strategies The Market. customers – based on Oriented Agent make profit market analysis 75 .

Product Knowledge Knowledgeable Market- Oriented Agent Selling Market Techniques Knowledge 76 .

77 .

78 .

Why provide after-sales service?  Minimise chance of loss  Recognise new insurance needs  Enhance reputation 79 .

Chapter 9 Introduction to Medical and Health Insurance 80 .

• Overview of Medical & Health Insurance (MHI) • Principles and Practices Applicable to MHI • Guidelines Applicable to MHI • Duty of Disclosure • Categories of MHI • Claim Payment Does Not Terminate Coverage • MHI Risk Increases With Time • Cost Containment Measures • Cashless Hospital Admission 81 .

MHI eases financial burden Adverse changes in health Administered through the Accident and Health Department / Group Insurance Department Of an insurance company 82 .

Medical Expenses Hospitalization
Critical Illness Cash Benefit

Health Insurance
comprises

Ill Heath Related
Disability Income 83

Principles Practices

Insurable Interest Offer and Acceptance
Utmost Good Faith Underwriting
Proximate Cause Policy Processing
Indemnity Claim Administration
Contribution Reinsurance
Subrogation

84

Fraudulently conceal a
Make a statement
material fact
which is
misleading, false
or deceptive,
whether Use sales brochure
fraudulently or or sales illustration
otherwise not authorised by
the insurer

Where a person is induced to enter into a contract in a manner
as described above, the contract shall be voidable & the person
shall be entitled to rescind it!
85

g.:.g.:. 1 2 Indemnity Policies Benefit Policies It places the insured in the Pays a pre-determined sum of same financial position as money if an insured event before occurs during the policy period E.Hospitalisation cash surgical insurance benefit plans.Hospitalisation & E. critical illness insurance & disability income insurance 86 .

except in the event of a death claim 87 . the contract is not terminated by the payment of claim. further claims can be made within the period of the contract for the balance of the sum insured The payment of a claim does not terminate a policy. the Overall Annual Limit or Lifetime Limit is not exhausted. Provided the Per Disability Limit.

The morbidity risks (probability of a disability resulting from an accident or illness) Increase with age Other external factors such as occupation and environmental factor also affect the risk 88 .

• Admission to a panel hospital is by the issuance of a letter of guarantee & the hospital deposit may be eliminated • The claimant only pays for non-reimbursable charges 89 .

Insurers may undertake the following methods to contain costs Inner Limits Co-payment for upgraded rooms Schedule of Surgical Procedures Deductibles Maximum Period of Compensation Panel of Hospitals Timeframe during which expenses are payable 90 .

Chapter 10 Types of Medical and Health Insurance 91 .

• Types of Medical & Health Insurance (MHI) • Medical Expenses Insurance • Hospitalisation and Surgical Insurance • Major Medical Expenses Insurance • Basis of Insurance Coverage • Group Medical & Health Insurance • Hospitalisation Cash Benefit Insurance • Critical Illnesses Insurance • Disability Income Insurance 92 .

Individual policy premiums  with age Group Policies issued to group of 3 or more persons 93 .

1 2 Medical Expenses Insurance Hospitalization Cash Benefit Insurance 3 4 Critical Illness Insurance Disability Income 94 .

A Percentage (10% of eligible expenses) or A Combination (10% of all eligible expenses. or paid by the insurer • This deductible may be in the form of A Fixed Amount (RM 300). subject to a max/min of RM 500) 95 . 2 Expense Participation Methods Deductibles Co-payments • Policyholder to pay a pre-agreed • Sharing of expenses amount first before the balance between the policyholder of eligible expenses are reimbursed & the insurer.

 A stand-alone policy or rider which pays a pre-agreed amount for each day the insured person is hospitalised 96 .

 A stand-alone policy or rider that pays a lump sum to the insured upon being diagnosed any one of the specified critical illnesses  Also known as Dread Diseases Insurance 97 .

disease or injury 98 . Also known as Permanent Health Insurance  A periodic payment is made when the insured is unable to work as a result of illness.

 It imposes Per Disability Limits & Overall Annual Limits. 99 . Comprehensive Hospitalisation & Surgical Insurance called “As Charged” pays the actual amounts charged.

g. degree of occupational hazard 100 . average age. All eligible members can be covered by a group policy. regardless of age or physical condition. Based on group PREMIUM characteristics e.

Chapter 11 Underwriting Medical & Health Insurance 101 .

• Overview of Underwriting • Risk Selection Process • Sources of Underwriting Information • Underwriting Decision • Issuing Modified Coverage • Renewal of MHI • Payment of Premium • Termination of a Policy 102 .

Terms & selection of risks Conditions Underwriting 103 . Determination of Assessment & Premium.

insurer has to:- Guard against n ANTI- Anti-Selection SELECTION Charge a premium that is commensurate with the risk transferred 104 .To ensure sufficient funds to pay for claims.

moral character & habits 105 . Medical problems disability & accident medical Mortality in males & expense coverage Morbidity in females Other factors : Aviation Risks. 4 Main Categories of Health Insurance’s Risk Selection Medical Financial Basic indicators of the Key to determine probability of the amount & types future problems of coverage available Occupational Age & Sex To determine premium rates on Age . insured’s avocations.

Medical Underwriting Medical History Current Physical Condition Family History Financial Factors 106 .

 Morbidity rates increase with the increasing of age  Probability of a person’s injury due to accident & the Length to recuperate generally increase with age 107 .

Application Agent’s Form Statement Hospital Medical or Medical paramedical Records examinations Attending physician statements (APS) 108 .

Underwriting decisions can be categorized under Standard Issue Decline Substandard / Modified Issue 109 .

3 methods to address sub-standard risks:- (A) Exclusion Endorsement (B) Extra Premium (Premium Loadings) (C) Change of Benefit (Modified Benefits) 110 .

• It may be issued on “cash-before-cover” basis or 60 days
premium warranty.

• If the premium is not paid before the end of the warranty
period or the grace period, the policy lapses.

111

• Terminated on the earliest happening of the following
events:-
(i) On the death of an Insured Person
(ii) On the policy anniversary of the insured’s
maximum eligibility age
(iii) Total benefits paid exceed the maximum limit

112

Chapter 12
Policy Administration

113

• Overview of Policy Administration • Proposal Form • Policy Form • Endorsements • Renewal Notices • Documents for Tax Relief 114 .

Documents used in the conduct of insurance business :- Proof of MHI Premium Renewal Payment Endorsement Notice for Tax Policy Proposal Relief Form Form 115 .

Chapter 13 Medical and Health Insurance Claims 116 .

• Notification & Proof of Loss • Checking Coverage & Investigation of a Claim • MHI Claim Forms • Repudiation of Liability by Insurers • Disputes 117 .

OCCURRENCE OF Write to Insurer Produce PROOF LOSS within 30 days of LOSS / CLAIM DISABILITY BENEFITS HOSPITAL & MEDICAL BENEFIT Written proof of loss within stipulated time Affirmative proof of hospital confinement within timeframe of the date of loss 118 .

Chapter 21 Life Insurance Preliminaries 119 .

• What is a life insurance contract? • History • Characteristics of Life Insurance Products • Risks Covered by Life Insurance 120 .

Aleatory Contract Long term Rely on Principle contract with of Good Faith level premium Cease upon Can’t be cancelled payment of by insurer claim 121 .

Covered Risks Premature Death Permanent Disability Temporary Disability Retirement Benefits Financial Guarantees 122 .

Chapter 22 Life Insurance Products 123 .

• Introduction • Description of Contracts • Family Takaful Business • Types of Family Takaful Business • How It Works 124 .

Insurer can’t invalidate contract unless: • Non-payment of premium • Contested policy – suppression of facts POLICY INSURER HOLDER Policyholder agrees to pay: • Regular sum. periodically • Lump sum at inception 125 .

2 Product Categories: Non-Participating Participating Contracts Contracts 126 .

Description of Contracts Term Whole Life Endowment Ordinary Life Decreasing Limited Term Payment Whole Life Whole Life Level Term Endowment Guaranteed Insurability Guaranteed Convertibility 127 .

Description of Contracts Level Life Annuity Dread Disease Contracts Covers Single Life Immediate Investment Linked Guaranteed Immediate Policies Deferred Joint Life Group Insurance Last Survivor Reversionary Permanent Health Annuity Certain Insurance (PHI) 128 .

Description of Contracts Supplementary Miscellaneous Benefits Policies Accidental Death Joint Life Benefits Disability Benefits Children’s Insurance – protected educational policies Sickness Benefits Children’s Insurance – children’s deferred assurance 129 .

Term Insurance a) Level Term Insurance Sum Assured payable only in event of death b) Decreasing Term Insurance Sum Assured decreases in amount at periodic intervals 130 .1.

b) Limited Payment Whole Life Policy Pay premiums for limited number of years c) Whole Life Endowment Policy Option to withdraw guaranteed cash bonus 131 . payable upon death.2. Whole Life Assurance a) Ordinary Life Policy Protection for whole duration for life.

3. Endowment Assurance Payable upon death. 132 . Pays full face amount at end of term Anticipated Endowment – Insurer will pay policyholder in installments at regular intervals till end of term.

Level Life Annuity Contracts Annuity Contract Description Single Life Immediate Periodic payment starts immediately for remainder of lifetime Guaranteed Immediate Guaranteed payments over fixed period and thereafter till death Deferred Annuitant pays lump sum at entry.4. Joint Life Provides specified amount of income for two or more persons 133 . the office will pay an annuity of a specified amount until death. At a specified age.

4. Level Life Annuity Contracts (continued) Annuity Contract Description Last Survivor Payment until last death among covered lives Reversionary Commences at death of Life Assured provided the annuitant is then alive Annuity Certain Periodical payments for a number of years and not dependant on death or survival of annuitant 134 .

Dread Disease Pays out a lump sum upon diagnosis of any Covers specified disease 7. Group Insurance Insure lives in large groups at lower premiums 135 . Permanent Health Provides income during periods of sickness or Insurance disability on a long term basis 6.Other Types of Contracts… Contract Description 5. Investment Linked Benefits on maturity are related to value of Policies underlying investments held in account of policy holder 8.

Supplementary Benefits Contract Description Accidental Death Includes Personal Accident benefit cover and Benefits Double Accident benefit cover Disability Benefits Covers permanent disability event before 60 yrs old Sickness Benefits Includes hospitalisation and surgical benefits 136 .9.

10.Provides for education and for starting a child in life when he reaches age of majority Children’s Deferred Assurance . Miscellaneous Policies Contract Description Joint Life Insurance Covers two or more lives. Payable on death. Children’s Insurance Protected Educational Policies .To start a permanent insurance program for a child at a low premium rate 137 .

What is a Family Takaful Plan? • Long term protection & investment • Mutual financial assistance Supplementary Benefits: • Permanent Total Disability • Personal Accident • Hospitalisation Benefit 138 .

Types of Family Takaful Plans Different Terms Health & Education Medical (10-35 yrs) Mortgage Plans Group 139 .

Participants Special Account 140 . Participants Account Tabaruk FAMILY TAKAFUL FUND 2. Sign Takaful contract based on Mudharabah TAKAFUL COMPANY Credit instalments into fund Decide Takaful instalments and 1.

Chapter 23 Policy Conditions 141 .

• Definition of a Policy
• Privileges and Conditions
• Policy Transactions

142

CONTRACT Intangible, legally binding agreement

Written document that embodies the
POLICY agreement

Privileges
POLICY
Restrictive Conditions
CONDITIONS
Conditions Explaining the Contract

143

PRIVILEGES

Days of Grace Policy Loans Reinstatement Non-Forfeiture
Condition Conditions

Surrender
Value Paid Up
Policy

Extended Term Automatic Premium
Assurance Loan

Paid Up Policy

144

the insurer can’t deny liability on a policy Most policies don’t on the grounds of Foreign Travel and impose this restriction misrepresentation or non- Residence disclosure alone. 145 . If insured commits suicide within stated Suicide Clause period. policy becomes Additional premium void may be charged Occupation and RESTRICTIVE Incontestability Dangerous Clause Hobbies CONDITIONS Unless proven.

Chapter 24 Practice of Life Insurance New Business – Selection of Lives and Other Issues 146 .

• Risk Management • The Risk Factors – Mortality • Selection of Lives To Be Insured • Commencement of Risk • Loading Letter & Backdating of Commencement Date • New Business Premium Accounting • Life Insurance and Income Tax 147 .

Factors that influence mortality: AGE FOREIGN RESIDENCE ETHNICITY AVOCATION SEX PERSONAL HABIT SOCIAL STATUS MARITAL STATUS OCCUPATION GEOGRAPHICAL LOCATION 148 .

Objective of Selection: To decide whether the risk is: STANDARD Within limits / acceptable SUB STANDARD Below average / acceptable DEFERRED Below average / maybe acceptable later DECLINED Below average / not acceptable 149 .

The total relief allowable for all insurance premiums on the life of the individual or his/her spouse and EPF contribution in the basis year is: 150 .

Chapter 25 Practice of Life Insurance New Business – Premium Rating 151 .

• Quantifying The Risk • Costing The Risk • Premium Rates Calculations • Other Considerations • Adjustments to Gross Premiums • Numerical Rating System 152 .

The Past forms a Guide to the Future 153 .

Others 154 . renewal. and termination expenses THE RISK Financing and reinsuring Tax costs. bonus loading etc. Standard mortality tables Mortality Expenses Investment COSTING Returns Initial.

Premium increases constant interest and expense and with age expense elements interest are better Basic principle is than expected. age the difference will benefit all. 155 . How are premium rates calculated? If the experience Premium remains Takes into account of mortality.

A satisfactory premium rate structure is: Adequate Consistent Competitive Profitable Equitable 156 .

Chapter 26 Practice of Life Insurance Monitoring The Insurance Fund 157 .

• Purpose of Valuation Exercise • Valuation of Liabilities • Valuation of Assets • Surplus 158 .

To test whether the company is solvent To determine the amount of surplus for distribution To test the adequacy of the existing premium scales To determine if any changes in the company’s operation are necessary To comply with the statutory requirements 159 .

Future Premiums Payable Payable 160 .The liabilities of a life insurance company are its contractual obligations to its policyholder Present Present Present Value of = Value of Benefits + Value of Expenses .

A/C book Market Value – Value which the assets can be sold in the open market 161 . The assets of a life insurance company are the investments from the premiums. less claims and expenses Methods of Valuing Assets: Cost Price – Price at which the asset was acquired Book Value – the value placed on the assets in the co.

INTEREST MORTALITY EXPENSE SOURCES 162 . Surplus is the difference between the value of the assets and the value of the liabilities Main sources of SURPLUS: MISC.

Methods of Distributing Surplus Simple Maturity / Reversionary Terminal Bonus Bonus Compound Interim Bonus Reversionary Bonus Guaranteed Cash Bonus Bonus 163 .

Chapter 27 Practice of Life Insurance – Policy Documents 164 .

• Sources of Information for Risk Assessment • Policy Form and Its Structure • Endorsements 165 .

Obtained from several sources: Agent Proposal Form Medical Report / Attending Agent’s Previous Special Physicians Report Reports Examinations Report 166 .

limit and enlarge scope of contract 167 . The policy document must be easily understood Main Sections of the Policy Contract Heading Name and address of insurer Preamble Introduction. States the parties involved Operative Clause States the events that initiate a claim Proviso Proposal is the basis of the contract Schedule Vital information about the policy Attestation Company officers signatures Conditions & Privileges Clauses that explain.

Chapter 28 Practice of Life Insurance - Claims 168 .

• Introduction • Death Claims • Maturity Claims • Claims Arising Under Sickness and Permanent Health 169 .

A claim will arise on… Death of the Maturity of the Insured Policy Claims under Sickness or Supplementary Disability Claims Contract 170 .

DEATH of Policy holder Contact Insurer NOTIFICATION of PROOF of TITLE PROOF of DEATH PROOF of AGE DEATH & OWNERSHIP 171 .

172 . the insurer must pay a minimum compound of 4%. Insurance Act 1996 If a claim is not paid within 60 days of receipt of intimation of the claim. Section 161.

MATURITY of POLICY INSURER NOTIFICATION to PROOF of SETTLEMENT POLICYHOLDER CLAIMS OPTIONS 173 .

174 .The insured must prove his claim to the satisfaction of the insurer and comply with all other conditions of the contract. For PERSONAL ACCIDENT policies. the doctrine of PROXIMATE CAUSE is important. CLAIMS REGISTER Every insurer shall maintain an up to date register of all insurance claims immediately upon the insurer becoming aware of it.

Chapter 29 Some Mathematics 175 .

• Calculation of Age • Calculation of Premium • Interest Charges • Guaranteed Surrender Value Calculations 176 .

Common methods for arriving at the age of an individual: Please refer to the MII textbook for calculations 177 .

obtainable after detailed underwriting Please refer to the MII textbook for calculations 178 . The tabular premiums in the rate book only apply to standard lives Sub-standard lives may be subjected to extra premium.

Policy loan repayments REINSTATEMENT of LAPSED POLICY Provide evidence of good health Pay outstanding premium with interest Please refer to the MII textbook for calculations 179 . Interest charges arise out of: 1. Outstanding premium charges 2.

Policies which have a GUARANTEED SURRENDER VALUE would incorporate such values in their schedules. 180 . the determination of such values requires actuarial considerations. When surrender values are NOT GUARANTEED.

Chapter 30 Practice of Life Insurance – Ethics and Code of Conduct 181 .

• Guidelines on Code of Conduct • Life Insurance Selling • Statement of Life Insurance Practice 182 .

7 UNDERLYING PRINCIPLES 1 To avoid conflict of interest 2 To avoid misuse of position 3 To prevent misuse of information 4 To ensure the completeness and accuracy of relevant records 5 To ensure the confidentiality of transactions 6 To ensure fair treatment of all policyholders 7 To conduct business with utmost good faith and integrity 183 .

184 .GENERAL SALES PRINCIPLES The intermediary shall NOT: ⓧ Make inaccurate or unfair criticisms ⓧ Attempt to persuade the prospect to cancel any existing policies TWISTING : To discontinue a policy or to have a NO TWISTING! policy made paid-up and then to effect a new one.

a prominently displayed statement should be included in the form POLICY AND ACCOMPANYING DOCUMENTS – Must indicate whether there are rights to a surrender value 185 .The aim is to reduce the formalities involved in the issue of new policies and payment of a claim. CLAIMS – An insurer may not unreasonably reject a claim PROPOSAL FORMS – If disclosure of material facts is required.

186 .Insurers will ensure that information contained in the sales materials / advertisements is correct and truthful and thus not misleading to the public.

187 .