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Insurance Capsule for NIACL Assistant Mains 2018

Insurance Capsule for NIACL Assistant Mains 2018

What is Insurance? establishment of Triton Insurance Company Ltd., in the year
An arrangement by which a company or the state undertakes 1850 in Calcutta by the British. In 1907, the Indian
to provide a guarantee of compensation for specified loss, Mercantile Insurance Ltd, was set up. This was the first
damage, illness, or death in return for payment of a specified company to transact all classes of general insurance
premium. business.

What is Insurance Premium? 1957 saw the formation of the General Insurance Council, a
An insurance premium is the amount of money that an wing of the Insurance Association of India. The General
individual or business must pay for an insurance policy. The Insurance Council framed a code of conduct for ensuring fair
insurance premium is considered income by the insurance conduct and sound business practices.
company once it is earned, and also represents a liability in
that the insurer must provide coverage for claims being In 1968, the Insurance Act was amended to regulate
made against the policy. investments and set minimum solvency margins. The Tariff
Advisory Committee was also set up then.
History of Life Insurance
In 1972 with the passing of the General Insurance
1818 saw the advent of life insurance business in India with Business (Nationalisation) Act, general insurance business
the establishment of the Oriental Life Insurance Company in was nationalized with effect from 1st January, 1973. 107
Calcutta. This Company however failed in 1834. In 1829, the insurers were amalgamated and grouped into four
Madras Equitable had begun transacting life insurance companies, namely National Insurance Company Ltd., the
business in the Madras Presidency. 1870 saw the enactment New India Assurance Company Ltd., the Oriental Insurance
of the British Insurance Act and in the last three decades of Company Ltd and the United India Insurance Company Ltd.
the nineteenth century, the Bombay Mutual (1871), The General Insurance Corporation of India was
Oriental (1874) and Empire of India (1897) were started in incorporated as a company in 1971 and it commence
the Bombay Residency. business on January 1st 1973.

In 1914, the Government of India started publishing returns

of Insurance Companies in India. The Indian Life Assurance
Companies Act, 1912 was the first statutory measure to
regulate life business. In 1928, the Indian Insurance
Companies Act was enacted to enable the Government to
collect statistical information about both life and non-life
business transacted in India by Indian and foreign insurers
including provident insurance societies. In 1938, with a view
to protecting the interest of the Insurance public, the
earlier legislation was consolidated and amended by the
Insurance Act, 1938 with comprehensive provisions for
effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished

Principal Agencies. However, there were a large number of
insurance companies and the level of competition was high.
There were also allegations of unfair trade practices. The
Government of India, therefore, decided to nationalize
insurance business. In 1993, the Government set up a committee under the
An Ordinance was issued on 19th January, 1956 chairmanship of RN Malhotra, former Governor of RBI, to
nationalising the Life Insurance sector and Life Insurance propose recommendations for reforms in the insurance
Corporation came into existence in the same year. The LIC sector.The objective was to complement the reforms
absorbed 154 Indian, 16 non-Indian insurers as also 75 initiated in the financial sector. The committee submitted its
provident societies—245 Indian and foreign insurers in all. report in 1994 wherein, among other things, it
recommended that the private sector be permitted to enter
History of General Insurance the insurance industry. They stated that foreign companies
General Insurance came to India as a legacy of British be allowed to enter by floating Indian companies, preferably
occupation. General Insurance in India has its roots in the a joint venture with Indian partners. |||

Insurance Capsule for NIACL Assistant Mains 2018
 Licensing and establishing norms for insurance
Following the recommendations of the Malhotra intermediaries.
Committee report, in 1999, the Insurance Regulatory  Promoting professional organisations in insurance.
and Development Authority (IRDA) was constituted as an  Regulating and overseeing premium rates and terms of
autonomous body to regulate and develop the insurance non-life insurance covers.
industry. The IRDA was incorporated as a statutory body in  Specifying financial reporting norms of insurance
April, 2000. The key objectives of the IRDA include companies.
promotion of competition so as to enhance customer  Regulating investment of policyholders’ funds by
satisfaction through increased consumer choice and lower insurance companies.
premiums, while ensuring the financial security of the  Ensuring the maintenance of solvency margin by
insurance market. insurance companies.
 Ensuring insurance coverage in rural areas and of
In December, 2000, the subsidiaries of the General vulnerable sections of society.
Insurance Corporation of India were restructured as Head Office- Hyderabad
independent companies and at the same time GIC was Chairman- Subhash Chandra Khuntia
converted into a national re-insurer. Parliament passed a bill
de-linking the four subsidiaries from GIC in July, 2002. Indian Insurance Market
The insurance industry of India consists of 53 insurance
companies of which 24 are in life insurance business and
Know About IRDAI 29 are non-life insurers. Among the life insurers, Life
Insurance Regulatory and Development Authority (IRDAI) Insurance Corporation (LIC) is the sole public sector
regulate the Indian insurance industry to protect the company.
interests of the policyholders and work for the orderly
growth of the industry. Out of 29 non-life insurance companies, there are six public
sector insurers, which include two specialised insurers
Background namely Agriculture Insurance Company Ltd for Crop
1991: Government of India begins the economic reforms Insurance and Export Credit Guarantee Corporation of India
programme and financial sector reforms for Credit Insurance. Moreover, there are 5 private sector
1993: Committee on Reforms in the Insurance Sector, insurers are registered to underwrite policies exclusively in
headed by Mr. R. N. Malhotra, (Retired Governor, Reserve Health, Personal Accident and Travel insurance segments.
Bank of India) set up to recommend reforms. They are Star Health and Allied Insurance Company Ltd,
1994: The Malhotra Committee recommends certain Apollo Munich Health Insurance Company Ltd, Max Bupa
reforms having studied the sector and hearing out the Health Insurance Company Ltd, Religare Health Insurance
stakeholders. Company Ltd and Cigna TTK Health Insurance Company Ltd.

Birth of IRDAI In addition to 53 insurance companies, there is sole

Insurance Regulatory and Development Authority (IRDA) set national re-insurer, namely, General Insurance Corporation
up as autonomous body under the of India. Other stakeholders in Indian Insurance market
IRDA Act, 1999 include approved insurance agents, licensed Corporate
IRDAI’s Mission: To protect the interests of policyholders, Agents, Brokers, Common Service Centres, Web-Aggregators,
to regulate, promote and ensure orderly growth of the Surveyors and Third Party Administrators Servicing Health
insurance industry and for matters connected therewith or Insurance claims.
incidental thereto.
Insurance Laws (Amendment) Act, 2015 provides for
IRDAI’s Activities enhancement of the Foreign Investment Cap in an Indian
Frames regulations for insurance industry in terms of Insurance Company from 26% to an Explicitly Composite
Section 114A of the Insurance Act 1938 From the year 2000 Limit of 49% with the safeguard of Indian Ownership and
has registered new insurance companies in accordance with Control.
regulations.Monitors insurance sector activities for healthy
development of the industry and protection of policyholders’ Types of Insurance
interests Life Insurance
Health Insurance
Functions and Duties of IRDAI Motor Insurance
Section 14 of the IRDA Act, 1999 lays down the duties, Property Insurance
powers and functions of IRDA. Travel Insurance
 Registering and regulating insurance companies. Group insurance
 Protecting policyholders’ interests. |||

Insurance Capsule for NIACL Assistant Mains 2018
1. Life Insurance 5. Travel Insurance
Life Insurance is a financial cover for a contingency linked Travel Insurance offers insurance protection while you
with human life, like death, disability, accident, travel. Travel Insurance may be called by different names by
retirement etc. Human life is subject to risks of death and insurance companies. It is important for you to check and
disability due to natural and accidental causes. When human understand whether the policy covers domestic travel or
life is lost or a person is disabled permanently or overseas travel or both. Travel Insurance protects you
temporarily, there is loss of income to the household. and/or family against travel related accidents, unexpected
medical expenditure during travel, losses such as baggage
2. Health Insurance loss, loss of passport etc and interruption or delays in flights
The term ‘Health Insurance’ relates to a type of insurance or delayed arrival of baggage etc.
that essentially covers your medical expenses. A health
insurance policy like other policies is a contract between an 6. Group insurance
insurer and an individual / group in which the insurer agrees Another kind of insurance is group insurance. In group
to provide specified health insurance cover at a particular insurance, schemes are offered by insurance companies to
“premium” subject to terms and conditions specified in the provide certain classes of individuals, the benefit of
policy. insurance coverage at moderate cost.

3. Motor Insurance ULIP (Unit Linked Insurance Plan)

Motor insurance gives protection to the vehicle owner ULIP is a life insurance product, which provides risk cover
against (i). damages to his/her vehicle and (ii). pays for any for the policy holder along with investment options to invest
Third Party Liability determined as per law against the in any number of qualified investments such as stocks, bonds
owner of the vehicle. Third Party Insurance is a statutory or mutual funds. As a single integrated plan, the investment
requirement. The owner of the vehicle is legally liable for any part and the protection part can be managed according to
injury or damage to third party life or property caused by or specific needs and choices.
arising out of the use of the vehicle in a public place. Driving
a motor vehicle without insurance in a public place is a Introduction:- In Unit Linked Insurance Plans(ULIP), the
punishable offence in terms of the Motor Vehicles Act, investments made are subject to risks associated with the
1988. capital markets. This investment risk in investment portfolio
is borne by the policy holder. Thus, you should make your
investment choice after considering your risk appetite and

Charges, fees and deductions in a ULIP

ULIPs offered by different insurers have varying charge
structures. Broadly, the different types of fees and charges
are given below. However it may be noted that insurers have
the right to revise fees and charges over a period of time.

Premium Allocation Charge-

This is a percentage of the premium appropriated towards
charges before allocating the units under the policy. This
charge normally includes initial and renewal expenses apart
from commission expenses.

Mortality Charges-
4. Property Insurance These are charges to provide for the cost of insurance
Insurance of property means insurance of buildings, coverage under the plan. Mortality charges depend on
machinery, stocks etc against Fire and Allied Perils, number of factors such as age, amount of coverage, state of
Burglary Risks and so on. Goods in transit via Sea, Air, health etc.
Railways, Roads and Courier can be insured under Marine
Cargo Insurance. Hulls of ship and boats can be insured Fund Management Fees-
under Marine Hull Insurance. Further, there are specialized These are fees levied for management of the fund(s) and are
policies available such as Aviation Insurance Policy for deducted before arriving at the Net Asset Value (NAV).
insurance of planes and helicopters. Thus Property
Insurance is a very vast category of General Insurance and Policy/Administration Charges-
the type of cover that you need depends upon the type of These are the fees for administration of the plan and levied
property you are seeking to cover. by cancellation of units. This could be flat throughout the
policy term or vary at a pre-determined rate. |||
Insurance Capsule for NIACL Assistant Mains 2018
Kuala Lumpur) and 1 representative office in Moscow. It
Surrender Charges- also has 2 foreign subsidiaries (GIC Re South Africa and
A surrender charge may be deducted for premature partial GIC Re India Corporate Member Ltd. in UK).
or full encashment of units wherever applicable, as The authorized capital is Ra.1000 crore while the paid-
mentioned in the policy conditions. up equity capital of the company is Rs.430 crore.
Head office- Mumbai
Fund Switching Charge- Chairman and Managing Director (CMD)- Alice G.
Generally a limited number of fund switches may be allowed Vaidyan
each year without charge, with subsequent switches, subject
to a charge. The New India Assurance Company Limited
The company was founded by Sir Dorabji Tata on July
Service Tax Deductions- 23rd, 1919 and nationalized in 1973 with merger of
Before allotment of the units the applicable service tax is Indian companies.
deducted from the risk portion of the premium. The company provides insurance services to the
Investors may note, that the portion of the premium after customers having over 170 products catering to almost
deducting for all charges and premium for risk cover is all segments of general insurance business.
utilized for purchasing units. The authorized capital and paid-up equity capital of the
company is Rs.300 crore and Rs.200 crore respectively.
Head Office- Mumbai
Know About Public Sector Insurance Companies Chairman cum Managing Director- G Srinivasan
 Life Insurance Corporation of India (LIC)
 General insurance corporation of India (GIC) United India insurance company limited
 The new India assurance company limited (NIACL) United India Insurance Company Limited was
 United India insurance company limited (UIIC) incorporated in 1938.
 The oriental insurance company limited (OICL) With the nationalization of General Insurance business
 National insurance company limited (NICL) in India, 12 Indian Insurance Companies, 4 Cooperative
 Agriculture insurance company of India limited (AICIL) Insurance Societies and Indian operations of 5 Foreign
Insurers, besides General Insurance operations of
Life Insurance Corporation of India southern region of Life Insurance Corporation of India
LIC of India was incorporated on 1st September, were merged with United India Insurance Company
1956 by amalgamating 243 Companies by the Act of Limited.
Parliament called Insurance Act, 1956. The company provides insurance services to the
LIC is governed by the Insurance Act 1938, LIC Act 1956, customers catering to almost all segments of general
LIC Regulations 1959 and Insurance Regulatory and insurance business.
Development Authority. The authorized capital and paid-up equity capital of the
The Corporation has Branch Offices in Fiji, Mauritius company is Rs.200 crore and Rs.150 crore respectively.
and United Kingdom. Head office- Chennai
Head Office- Mumbai
Chairman- VK Sharma Oriental Insurance Company Limited
Oriental Insurance Company Ltd was incorporated in the
General insurance corporation of India year 1947.
The General insurance industry was nationalized in In 2003 all shares of the company held by the General
1972 and 107 insurers were grouped and amalgamated Insurance Corporation of India were transferred to the
into four Companies – National Insurance Co. Ltd., The Government of India.
New India Assurance Co. Ltd., The Oriental Insurance Co. The company provides insurance services to the
Ltd. and United India Insurance Co. Ltd. customers catering to almost all segments of general
The GIC was incorporated in the year 1972 and the other insurance business.
four companies became its subsidiaries. The authorized capital and paid-up equity capital of the
In November 2000, GIC was notified as the Indian company is Rs.200 crore.
Reinsurer, and its supervisory role over its subsidiaries Head Office- New Delhi
was brought to an end. Chairman cum Managing Director- A V Girija Kumar
From 21 March 2003, GIC's role as a holding company of
its subsidiaries also came to an end and the ownership of National Insurance Company Limited
the subsidiaries was transferred to the Government of The Company was incorporated in the year 1906. After
India. nationalization it was merged, along with 21 foreign and
The Corporation has its head office in Mumbai and 3 11 Indian companies, to form National Insurance
liaison offices in India (Delhi, Kolkata and Chennai), Company Ltd.
3 branches in foreign countries (London, Dubai and |||
Insurance Capsule for NIACL Assistant Mains 2018
The company provides insurance services to the  Assets- The items on a balance sheet showing the value
customers catering to almost all segments of general of property owned.
insurance business.  Assuming Company- An insurance company that
The authorized capital and paid-up equity capital of the accepts the risk transferred from another insurance
company is Rs.200 crore and Rs.100 crore respectively. company in a reinsurance transaction.
Head Office- Kolkata  Billing Clerk- Person responsible for revenue billing.
Chairman cum Managing Director- Tajinder  Broker- Represents the interests of the insured in
Mukherjee searching for insurance coverage at the lowest cost and
highest benefit to the insured. The broker may also be an
Agriculture Insurance Company of India Limited agent of the insurer for purposes of policy collection and
‘Agriculture Insurance Company Of India Limited’ (AIC) delivery of the policy.
was incorporated to exclusively cater to the insurance  Catastrophic- Event An event that causes loss to many
needs of the persons engaged in agriculture and allied people at once. Also called catastrophe, several examples
activities in India under the Companies Act, 1956 on are tornados, hurricanes and plane crashes.
20th December 2002.  Cede- To transfer to a reinsurer all or part of the
General Insurance Corporation of India (GIC), NABARD insurance or reinsurance written by a ceding company.
and four public sector general insurance companies have  Ceding Company- The company that transfers its risk to
contributed towards the share capital of the Company. a reinsurer. Also called the Cedant.
The Authorized Share Capital of the Company is Rs. 1500  Claim Adjuster- The person who investigates insurance
crore with initial Paid-up Equity Share Capital of the claims for losses and recommends an effective
Company of Rs. 200 crores. settlement.
The Company having received approval from Insurance  Claim Service Representative- Also called CSR; they
Regulatory & Development Authority (IRDA) are responsible for clerical completion of all claim files.
commenced its business operations w. e. f. 1st April,  Clause- A section of an insurance policy dealing with
2003. various coverages, exclusions, duties of the insured,
Head Office- New Delhi locations covered and conditions that terminate
Chairman cum Managing Director- Alamelu T coverage.
Lakshmanachari  Combined Ratio- The sum of the loss ratio and the
expense ratio.
 Commercial Lines- Insurance for businesses,
professionals and commercial establishments.
 Compulsory- Mandatory or enforced.
 Contract- Legally binding agreement between two
parties who wish to exchange some sort of consideration
(anything of value, e.g. money or goods).
 Coverage- The insurance afforded under a contract of
 Declaration- Part of the insurance policy that identifies
the named insured, policy period and limit of insurance.
 Deductible- The amount of money the policyholder
must pay on a loss.
 Direct Loss- A loss which is a direct consequence of a
 Disability Insurance- Covers wage loss for the disabled
 Earned Premiums- The portion of the premium for
Glossary of Insurance Terms which protection has been provided. If an insured has an
 Actuary- A professional trained in the mathematics of annual premium and makes monthly payments, each
insurance and risk management, including the month the insurer earns 1/12th of the premium.
calculations of premiums, policy reserves and other  Endorsement- A written agreement attached to the
values. insurance policy which alters the provisions of the
 Agent- The insurance company representative who sells contract.
policies on behalf of the insurer. An independent agent  Exclusion- A provision in the insurance policy that
represents more than one company; a captive agent indicates what is denied coverage.
represents only one company.  Expense Ratio- The ratio of all operating expenses
 Applicant- Prospective policyholder; completes and divided by the premiums written.
signs the insurance application.  Exposure to Loss- The policyholder’s possibility of loss. |||

Insurance Capsule for NIACL Assistant Mains 2018
 Fire Insurance- The foundation of today’s property  Loss Reserve- Money set aside to pay losses.
insurance. Covers loss to property caused by a fire or  Marine Insurance- Covers loss or damage to ships,
lightning. cargo or injuries to ship crew members.
 Flood Insurance- Insurance to reimburse property  Moral Hazard- Dishonesty or character defects that
owners from loss due to the peril of flood. increase the chance of loss.
 Fortuitous Losses- Unintentional loss occurring by  Morale Hazard- Carelessness or indifference to a loss
accident or chance. because of the existence of insurance.
 Frequency of Loss- Refers to the actual numbers or  Negligence- Failure to use that degree of care which an
times the same or similar loss occurs. ordinary person of reasonable prudence would use to
 Frequency-Severity Matrix- Matrix used to determine protect others from harm.
which type of risk treatment is appropriate for a risk.  P&C- Property and Casualty Insurance.
 General Liability- Insurance to protect an owner or  Peril- A cause of loss.
operator of a business from a wide range of liability  Physical Hazard- A physical condition that increases
exposures. the chance of loss.
 Hazard- A condition that creates or increases the chance  Policy- The written insurance contract that may include
or severity of a loss due to a peril. all clauses, riders and endorsements.
 Homeowners- Policy Insurance against property and  Policy Service Representative- Also called PSR; they
liability perils to which a homeowner or renter is are responsible for premium rating and issuing policy
exposed. files.
 IBNR- Incurred but not reported losses. This is for losses  Policyholder- The insured protected in case of a loss or
which have occurred during a stated period, usually a claim.
calendar year, but have not yet been reported to the  Pooling- The method by which each member of an
insurer. insurance pool shares in every risk written by other pool
 Indemnification- insurance principle which states that members.
the insured, after a loss, should be restored in whole or  Premium- The price of insurance protection, paid by the
in part by payment, repair or replacement by the policyholder to the insurer.
insurer.  Premium Auditor- Person that reviews charges to
 Independent Adjuster- An adjuster hired by the ensure that the premium paid is fair for the coverage
insurer to investigate and settle claims on behalf of the furnished.
insurance company.  Private Insurance- Voluntary programs that are
 Indirect Loss- A loss resulting from a peril but not available from the government or private firms.
caused directly by that peril.  Proximate Cause- The immediate or actual cause of loss
 Insurance- Economic device whereby the individual or or damage.
business pays a cost (premium) in exchange for  Public Adjuster- Hired by the insured, an adjuster who
protection against financial loss. The agreement is a operates independently from insurance companies to
contract also known as an insurance policy. investigate and settle claims.
 Insured- The policy holder protected in case of a loss or  Re-Inspector- Person who double-checks the work of
claim. the original adjuster.
 Insurer- The party who pays for losses in an insurance  Reserves- The funds an insurance company sets aside to
arrangement. pay for reported but outstanding claims.
 Law of Large Numbers- States that the larger the  Rider- An endorsement to an insurance policy that
number of risks or exposures, the more closely the modifies its clauses and provisions, including or
actual loss experience will approach the expected loss excluding certain conditions from coverage.
experience.  Risk- The uncertainty concerning the occurrence of a
 Legal Hazard- Characteristics of the legal system that financial loss.
increase the frequency or severity of losses.  Risk Avoidance- Avoiding the risk altogether
 Legislated- Determined by law.  Risk Control- Techniques used to control the frequency
 Liability- The obligation of financial responsibility that and magnitude of losses.
may arise by negligence, contract or tort committed.  Risk Control Consultant- A person with expertise in
 Liability Insurance- Protects the policyholder against a risk management techniques that reduce the frequency
suit or claim for another’s bodily injury and property and severity of losses.
damage.  Risk Management- The identification of loss exposures
 Loss- An undesired and unplanned reduction of financial and treatments for those exposures.
value.  Risk Retention- Retaining or bearing the risk.
 Loss Control- The process of identifying and acting  Risk Transfer- Transferring the financial consequences
upon situations which may lead to losses. of a loss to another party, such as an insurance company.
 Loss Ratio- A formula used by insurers to relate loss  Severity of Loss- Refers to the size or cost of the loss to
expenses to earned premiums. the organization. |||
Insurance Capsule for NIACL Assistant Mains 2018
 Tort- An injury or wrong committed against an  SEZ- Special Economic Zone
individual.  GIPSA- General Insurance Public Sector Association Of
 Umbrella Policy- Insurance policy over and above a India
basic liability policy.  BIFR- Board for Industrial and Financial Reconstruction
 Underwriter- The professional responsible to assess  FDI- Foreign Direct Investment
the merits of each risk and decide a suitable premium for
 GNP- Gross National Product
accepting all or part of the risk.
 Underwriting- The process of scrutinizing a risk to  PLI- Public Liability Insurance
determine whether or not to insure that risk.  EEI- Electronic Equipment Insurance
 Underwriting Assistant- Assists the underwriter. Also  ULIP- Unit Linked Insurance Plan
called underwriting technician or underwriting  LIC- Life Insurance Corporation
associate.  GBIC- Governing Body of Insurance Council
 Waiver- Relinquishment of a legal right to act.  IIB- Insurance Information Bureau of India
 Workers’ Compensation- Benefits paid to an employee  IGMS- Integrated Grievance Management System
as a result of occupational injury.  IBAI- Insurance Brokers Association of India
 Written Premiums- The total premiums on all policies  IIRM- Institute of Insurance and Risk Management
written by an insurer during a specified period of time,
 UHIS- Universal Health Insurance Scheme
regardless of what portions have been earned.

Abbreviations related to Insurance Industry

 IRDA- Insurance Regulatory and Development
 NCLT- National Company Law Tribunal
 TPA - Third Party Administration
 TRAI- Telecom Regulatory Authority of India
 FDA- Food and Drug Administration
 FII- Foreign Institutional Investor
 TRIM- Trade Related Investment Measures
 NSDL- National Security Depository Limited
 NAV- Net Asset Value
 SEBI- Securities and Exchange Board of India
 NASSCOM- National Association of Software and
 NDS- Negotiated Dealing System
 CRISIL- Credit Rating Information Services of India
 IPO- Initial Public Offer
RashtiyaSwasthiyaBimaYojana (RSBY) Beneficiaries need to pay only Rs. 30/- as registration
RSBY (RashtriyaSwasthiyaBimaYojana) has been fee while Central and State Government pays the
launched to provide health insurance coverage for premium to the insurer selected by the State
Below Poverty Line (BPL) families. Government on the basis of a competitive bidding.
The objective of RSBY is to provide protection to BPL
households from financial liabilities arising out of health Employment State Insurance Scheme (ESIS)
shocks that involve hospitalization. Employees’ State Insurance Scheme of India, is a
Beneficiaries under RSBY are entitled to hospitalization multidimensional social security system tailored to provide
coverage up to Rs. 30,000/- for most of the diseases socio-economic protection to worker population and their
that require hospitalization. dependants covered under the scheme. Besides full medical
Government has even fixed the package rates for the care for self and dependants, that is admissible from day one
hospitals for a large number of interventions. Pre- of insurable employment, the insured persons are also
existing conditions are covered from day one and there entitled to a variety of cash benefits in times of physical
is no age limit. distress due to sickness, temporary or permanent
Coverage extends to five members of the family which disablement etc. resulting in loss of earning capacity, the
includes the head of household, spouse and up to three confinement in respect of insured women, dependants of
dependents. insured persons who die in industrial accidents or because of |||

Insurance Capsule for NIACL Assistant Mains 2018
employment injury or occupational hazard are entitled to a and compensation due to loss of earning of the earning
monthly pension called the dependants benefit. member @ Rs.50/- per day upto maximum of 15 days.
The Universal Health Insurance Scheme (UHIS) has been
Central Government Health Scheme (CGHS) redesigned targeting only the BPL families. The
The “Central Government Health Scheme” (CGHS) premium subsidy has been enhanced from Rs.100 to
provides comprehensive health care facilities for the Rs.200 for an individual, Rs.300 for a family of five
Central Govt. employees and pensioners and their and Rs.400 for a family of seven, without any reduction
dependents residing in CGHS covered cities. in benefits.
Started in New Delhi in 1954, Central Govt. Health
Scheme is now in operation in many cities of India. Pradhan Mantri Fasal Bima Yojana (PMFBY)
It provides comprehensive healthcare to the CGHS India is the land of farmers where the maximum proportion
Beneficiaries in India. of rural population depends on agriculture. Hon'ble Prime
The medical facilities are provided through Wellness Minister Shri Narendra Modi unveiled the new scheme
Centres (previously referred to as CGHS Dispensaries) Pradhan Mantri Fasal Bima Yojana(PMFBY) on 13th
/polyclinics under Allopathic, Ayurveda, Yoga,Unani, January, 2016.
Sidha and Homeopathic systems of medicines.
Highlights of PMFBY-
There will be a uniform premium of only 2% to be paid
Aam Aadmi Bima Yojana(AABY) by farmers for all Kharif crops and 1.5% for all Rabi
AamAdmiBimaYojana, a Social Security Scheme for
crops. In case of annual commercial and horticultural
rural landless household was launched on 2nd October,
crops, the premium to be paid will be only 5%.
The head of the family or one earning member in the The premium rates to be paid by farmers are very low
family of such a household is covered under the scheme. and balance premium will be paid by the Government to
The premium of Rs.200/- per person per annum is provide full insured amount to the farmers against crop
shared equally by the Central Government and the State loss in any natural calamities.
Government. There is no upper limit on Government subsidy. Even if
The member to be covered should be aged between 18 balance premium is 90%, it will be borne by the
and 59 years. Government.
a) On natural death- Rs 30,000 Earlier, there was a provision of capping the premium
b) On death due to accident/on permanent disability
rate which is low claims being paid to farmers. Now this
due to accident (loss of 2 eyes or 2 limbs)- Rs 75,000
is removed and farmers will get claim against full sum
c) On partial permanent disability due to accident (loss
of one eye or one limb)- Rs 37,500 insured without any reduction.
The use of technology will be encouraged to a great
Note: extent. Smart phones, Remote sensing drone and GPS
A separate fund called "AamAdmiBimaYojana Premium technologies will be used to capture and upload data of
Fund" has been set up by Central Govt. to pay the Govt. crop cutting to reduce the delays in the claim payment.
contribution. Fund is maintained by LIC. A free add-on
benefit in the form of scholarship to children is also available Pradhan Mantri Suraksha BimaYojana (PMSBY)
under the Scheme. PradhanMantriSurakshaBimaYojana is Indian
Government’s accidental insurance cover which was
JanashreeBimaYojana announced in the 2015 Budget.
JanashreeBimaYojana (JBY) was launched on 10th August This scheme was launched to provide personal accident
2000. The Scheme replaced Social Security Group Insurance insurance to the high risk category such as mechanics,
Scheme (SSGIS) and Rural Group Life Insurance Scheme labourers, truck drivers which involves a lot of
(RGLIS). travelling. It is also one of the cheapest insurance cover.
The scheme also covers both partial and permanent
Universal Health Insurance Scheme (UHIS) disability cover.
The four public sector general insurance companies This scheme is available to those between the ages of 18
have been implementing Universal Health Insurance and 70 years and they must have a bank account. The
Scheme for improving the access of health care to poor annual premium of the scheme is Rs.12 excluding the
families. service tax.
The scheme provides for reimbursement of medical The premium amount is automatically debited from the
expenses upto Rs.30,000/- towards hospitalization bank account of the scheme holder. Rs.2 lakh is paid to
floated amongst the entire family, death cover due to an the nominee if the subscriber dies in an accident or if he
accident @ Rs.25,000/- to the earning head of the family is fully disabled. |||

Insurance Capsule for NIACL Assistant Mains 2018
If the subscriber meets with an accident and suffers 15. Which type of insurance gives protection to the vehicle
partial permanent disability, then Rs.1 lakh is paid. owner against damages to his/her vehicle?
Answer- Motor Insurance
Important One-Liners for NICL AO Mains 2017 16. Insurance of __________ means insurance of buildings,
1. An arrangement by which a company or the state machinery, stocks etc against Fire and Allied Perils,
undertakes to provide a guarantee of compensation for Burglary Risks and so on.
specified loss, damage, illness, or death in return for Answer- Property
payment of a specified premium. It is callled? 17. Name the insurance, which offers insurance protection
Answer- Insurance. while you travel?
2. An insurance ________ is the amount of money that an Answer-Travel Insurance.
individual or business must pay for an insurance policy. 18. _________ schemes are offered by insurance companies to
Answer- Premium. provide certain classes of individuals, the benefit of
3. In which year the Life Insurance sector and Life insurance coverage at moderate cost.
Insurance Corporation came into existence? Answer- Group Insurance
Answer- 1956 19. ________ is a life insurance product, which provides risk
4. In 1993, the Government set up a committee under the cover for the policy holder along with investment
chairmanship of ____ former Governor of RBI, to propose options to invest in any number of qualified investments
recommendations for reforms in the insurance sector. such as stocks, bonds or mutual funds.
Answer- RN Malhotra Answer- ULIP.
5. In which year the formation of the General Insurance 20. ULIP stands for?
Council, a wing of the Insurance Associaton of India? Answer- Unit Linked Insurance Plans.
Answer- 1957 21. ________ is a percentage of the premium appropriated
6. IRDA was constituted as an _________ to regulate and towards charges before allocating the units under the
develop the insurance industry. policy.
Answer- autonomous body. Answer- Premium Allocation Charge
7. IRDA stands for- 22. NAV stands for?
Answer- Insurance Regulatory and Development Answer- Net Asset Value.
Authority. 23. _________ charge may be deducted for premature partial
8. In which year, the IRDA was incorporated as a statutory or full encashment of units wherever applicable, as
body? mentioned in the policy conditions.
Answer- April 2000 Answer- Surrender Charge
9. Name the organisation, which is regulate the Indian 24. Life Insurance Corporation of India (LIC) is which type of
insurance industry to protect the interests of the insurance company?
policyholders and work for the orderly growth of the Answer- Public sector insurance company.
industry. 25. LIC of India was incorporated on-
Answer- Insurance Regulatory and Development Answer- 01st September 1956.
Authority (IRDAI) 26. Where is the head office of LIC?
10. What is the mission of IRDAI? Answer- Mumbai
Answer- To protect the interests of policyholders, to
regulate, promote and ensure orderly growth of the
insurance industry and for matters connected therewith
or incidental thereto.
11. Frames regulations for insurance industry in terms of
Section ________ of the Insurance Act 1938 From the year
2000 has registered new insurance companies in
accordance with regulations.
Answer- section 114A
12. How much percent FDI in insurance sector?
Answer- 40 percent
13. __________is a financial cover for a contingency linked with
human life, like death, disability, accident, retirement
Answer- Life insurance.
14. The term __________ relates to a type of insurance that
essentially covers your medical expenses.
Answer- Health Insurance |||
Insurance Capsule for NIACL Assistant Mains 2018
Important Topics Related to Insurance Awareness
Types of Health Insurance What is an ‘insured peril’?
The purpose of insurance is to compensate you for a loss
A Hospitalization policy covers, fully or partly, the actual caused by an insured perils. If your stocks are destroyed in a
cost of the treatment for hospital admissions during the fire, the cause of loss is fire which is payable under a fire
policy period. This is a wider form of coverage applicable policy. If the stocks are stolen, the loss is not payable under a
for various hospitalization expenses, including expenses fire policy as “Burglary” is not a covered peril.
before and after hospitalization for some specified
period. What is the meaning of Co-Insurance?
Another type of product, the Hospital Daily Cash Benefit Corporate clients, who want to oblige more than one insurer,
policy, provides a fixed daily sum insured for each day of or benefit from the competitive forces among insurers, place
hospitalization. There may also be coverage for a higher their insurance business with more than one insurance
daily benefit in case of ICU admissions or for specified company. While doing so, they select one company as the
illnesses or injuries. “Leader” who is given higher share of premium and others
A Critical Illness benefit policy provides a fixed lumpsum are given lesser share. Client deals only with the “Leader”.
amount to the insured in case of diagnosis of a specified The leader will share the premium (in the ratio decided by
illness or on undergoing a specified procedure. This the client) as well as claims with other participating insurers
amount is helpful in mitigating various direct and who are called Co-insurers.
indirect financial consequences of a critical illness.
Usually, once this lump sum is paid, the plan ceases to What is a TPA and what are its functions?
remain in force.
A TPA is a Third Party Administrator. They are commercial
There is an exclusive section of the Income Tax Act
entities duly licensed by IRDA. Their services are utilised by
which provides tax benefits for health insurance, which
Insurance Companies, both Life and Non-Life, to render, on
is Section 80D, and which is unlike the section 80C
their behalf, post-sales services to health insurance
applicable to Life Insurance wherein other form of
investments/ expenditure also qualify for the deduction.
Currently, purchasers of health insurance who have
purchased the policy by any payment mode other than Insurance Ombudsman
cash can avail of an annual deduction of Rs. 15,000 from Insurance Ombudsman scheme was created by the
their taxable income for payment of Health Insurance Government of India for individual policyholders to have
premium for self, spouse and dependent children. For their complaints settled out of the courts system in a
senior citizens, this deduction is higher, and is Rs. cost-effective, efficient and impartial way.
20,000. There are at present 17 Insurance Ombudsman in
'Any one illness' would mean the continuous period of different locations and any person who has a grievance
illness, including relapse within a certain number of days against an insurer, may himself or through his legal
as specified in the policy. Usually this is 45 days. heirs, nominee or assignee, make a complaint in writing
Family Floater is one single policy that takes care of the to the Insurance ombudsman within whose territorial
hospitalization expenses of your entire family. The jurisdiction the branch or office of the insurer
policy has one single sum insured, which can be utilised complained against or the residential address or place of
by any/all insured persons in any proportion or amount residence of the complainant is located.
subject to maximum of overall limit of the policy sum The Ombudsman will receive and consider complaints or
insured. disputes relating to—

(a) delay in settlement of claims, beyond the time specified in

What is Utmost Good Faith?
the regulations, framed under the Insurance Regulatory and
Utmost Good Faith is one of the principles that insurance is Development Authority of India Act, 1999;
based on. It denotes a positive duty of the person seeking (b) any partial or total repudiation of claims by the life
insurance to voluntarily disclose accurately and fully, all insurer, General insurer or the Health insurer ;
facts material to the risk being proposed whether requested
(c) disputes over premium paid or payable in terms of
or not.
insurance policy; |||

Insurance Capsule for NIACL Assistant Mains 2018
(d) misrepresentation of policy terms and conditions at any passes an Award within 3 months from the date of receipt of
time in the policy document or policy contract; all requirements from complainant.
(e) legal construction of insurance policies in so far as the
dispute relates to claim; Are there any fees / charges payable for lodging a
(f) policy servicing related grievances against insurers and complaint?
their agents and intermediaries; No fees / charges are required to be paid.
(g) issuance of life insurance policy, general insurance policy
including health insurance policy which is not in conformity Is there any appeal against an Award of Insurance
with the proposal form submitted by the proposer; Ombudsman?
(h) non-issuance of insurance policy after receipt of In case a complainant is not satisfied with the Award of an
premium in life insurance and general insurance including insurance Ombudsman he can exercise his right to take
health insurance; and etc. recourse to the normal process of law against the insurance
The complaint shall be made in writing on a plain, duly company. However, the award of Insurance Ombudsman
signed by the complainant and shall state clearly the shall be binding on the insurers.
name and address of the complainant, the name of the
branch or office of the insurer against whom the Is there any time limit for Compliance of Award by
complaint is made, the facts giving rise to the complaint, Insurers?
supported documents if any, the nature and extent of the The Insurer shall comply with the Award within 30 days
loss caused to the complainant and the relief sought from the date of receipt of the Award and intimate of its
from the Insurance Ombudsman. compliance to the Insurance Ombudsman.

What is Insurance on Personal Lines?

Insurance on personal lines means an insurance policy taken
or given in an individual capacity, e.g. life insurance, personal
accident insurance, medi-claim insurance, insurance of
personal property of the individual such as motor vehicle,
household articles, etc.


Insurance regulator IRDAI has raised the minimum

insurance cover for owner-driver to Rs. 15 lakh for a
premium of Rs. 750 per annum, a move to provide some
succour to road accident victims. Currently, the capital
sum insured (CSI) under this section for motorised two-
wheelers and private cars/commercial vehicles is Rs. 1
lakh and Rs. 2 lakh, respectively.
State-owned India Post Payments Bank (IPPB) and
Important Points related to IO Private Life Insurer Bajaj Allianz Life Insurance Co Ltd
Financial Jurisdiction of an Insurance Ombudsman (BALIC) entered into a strategic partnership to provide
Ombudsman can, life insurance solutions, especially at the doorstep of
award any compensation up to the loss suffered by the every household in the country.
complainant as a direct consequence of the cause of The Employees’ State Insurance Corporation (ESIC) has
approved a new scheme- Atal Bimit Vyakti Kalyan Yojna
action; or
for Insured Persons covered under the Employees’ State
award compensation not exceeding Rs Thirty lakhs Insurance Act. This scheme is a relief payable in cash
(including relevant expenses, if any). directly to their Bank Account in case of unemployment
and while they search for new engagement.
Within what time shall the Ombudsman dispose of the Tajinder Mukherjee has taken over as the Chairman and
complaint? Managing Director of National Insurance Company
In case both parties agree for mediation, the Ombudsman Limited (NICL). Prior to joining NIC, she was posted as
General Manager and Chief Underwriting Officer of New
gives his Recommendation within 1 month; otherwise, he
India Assurance. |||

Insurance Capsule for NIACL Assistant Mains 2018
The government has incorporated provision of penalties Jeevan Jyoti Bima Yojana’ (PMJJBY), a government-
for States and Insurance Companies for the delay in backed life insurance scheme. The alliance will leverage
settlement of insurance claims under the Pradhan Airtel Payments Bank’s vast network to reach deep rural
Mantri Fasal Bima Yojana (PMFBY). According to the pockets and serve the under-insured. With this, Airtel
new guidelines, the farmers will be paid 12% interest by Payments Bank also becomes the first payments bank in
insurance companies for the delay in settlement claims India to offer the Government of India-backed life
beyond two months of prescribed cut-off date. insurance scheme.
HDFC Life appointed Vibha Padalkar as its new With an aim to provide country’s poor access to quality
managing director and CEO for a period of three years. and affordable healthcare, government on announced
The position had fallen vacant after Amitabh Chaudhry the launch of Ayushman Bharat (now Jan Aarogya
resigned to head Axis Bank. Abhiyan) on September 25, covering 50 crore people.
Axis Bank announced that Amitabh Chaudhry has been Nearly 10 crore families will get health cover worth Rs 5
appointed as its managing director & CEO from January lakh each year under the scheme.
1, 2019, for a period of three years. Mr. Chaudhry, the Bajaj Allianz General Insurance has entered into a
MD & CEO of HDFC Standard Life Insurance Company at bancassurance deal with Vijaya Bank. This corporate
present, will take the charge at India’s third largest agency agreement will enable distribution of Bajaj
private sector bank after incumbent Shikha Sharma Allianz General Insurance products through the bank’s
steps down on December 31, 2018. network of 2,129 branches across the country.
The Government has decided to make the Pradhan Public sector non-life insurance firm United India
Mantri Jan Dhan Yojana (PMJDY) an open-ended scheme Insurance Company announced the appointment of S
and added more incentives to encourage people to open Gopakumar as its Director and General Manager with
bank accounts. The Finance Minister Arun Jaitley stated immediate effect.
that the overdraft facility has been doubled from Rs. Insurance regulator Insurance Regulatory and
5,000 to Rs. 10,000 under the Yojana. Development Authority of India (IRDAI) has constituted
HDFC ERGO, India's third-largest non-life insurance a 16-member committee to examine motor third party
provider in the private sector, announced the launch of insurance pricing aspects and make recommendations
'E@Secure', a Cyber Insurance Policy for individuals. on the premium rates for 2019-20. IRDAI Member P.J.
This policy aims at providing comprehensive protection Joseph has been appointed as the Chairman of the
to individuals and their families against any cyber- committee.
attacks, cyber frauds or digital threats that could lead to The board of Life Insurance Corporation of India (LIC)
a financial loss and or reputational loss. has approved the proposal for the insurer to hold a 51%
The Union Cabinet has approved the signing of an MoU stake in IDBI Bank. The announcement was made by
between IRDAI and the Federal Insurance Office, USA. Subhash Chandra Garg, Secretary, Department of
The MoU provides a framework for cooperation and Economic Affairs.
coordination, including for the exchange of information IRDAI has formed a panel to review the regulations
and research assistance with respect to each Authority’s pertaining to insurance marketing firms. The committee
overview and other lawful responsibilities. is headed by Suresh Mathur, Executive Director
NABARD All India Financial Inclusion Survey (NAFIS), (insurance marketing firms), IRDAI, with nine more
conducted by National Bank for Agriculture and Rural members.
Development (NABARD), was released by Dr. Rajiv
Kumar, Vice Chairman, NITI Aayog in New Delhi. The
report revealed that farm households register higher
income than the families solely dependent on non-farm
livelihood activities in rural areas.

Highlights of NAFIS 2016-17 (Insurance and Pension):-

About 26% of agricultural households and 25% of non-
agricultural households reported to have been covered
under one or the other type of insurance
Among agricultural households who reported to have
taken any loan for agricultural purposes in the last one
year [2015-16] from institutional agencies, 6.9%
reported being covered under crop insurance.
The coverage under any type of pension was reported to
be about 18.9 % for non-agricultural households as
against 20.1 % for agricultural households.
Bharti Axa Life Insurance and Airtel Payments Bank
entered into an alliance to offer the ‘Pradhan Mantri |||